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ARCHIVED - Audit of the Treasury Board of Canada Secretariat's Management Control Framework of the Public Service Pension Plan


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Assurance Statement

The Internal Audit and Evaluation Bureau has completed an audit of the Public Service Pension Plan. The objective of the audit was to assess the adequacy and effectiveness of the plan's management control framework within the Treasury Board of Canada Secretariat (the Secretariat).

We conclude with a reasonable level of assurance that the management control framework currently in place is adequate and effective in most respects and serves to ensure that legislative and policy requirements for the Public Service Pension Plan are being met. Specifically:

  • The Secretariat's roles and responsibilities in this area are generally well understood and communicated, despite the limited extent to which they are formally defined;
  • Oversight, monitoring and reporting mechanisms are in place and working effectively;
  • A formal and systematic approach for identifying and assessing risks and mitigation strategies is in place in the Secretariat's Pensions and Benefits Sector and is working effectively; and
  • Knowledge is adequately managed in the Pensions and Benefits Sector in support of the pension plan.

Notwithstanding the above conclusions, attention is required to continue to formally define the Secretariat's roles and responsibilities, in particular, its oversight role and financial advisory role. Opportunities also exist to improve the Pensions and Benefits Sector's otherwise sound risk, planning and knowledge management practices.

The audit approach and methodology followed the Internal Auditing Standards for the Government of Canada and the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing.

The examination was conducted during the period of October, 2010, and June, 2011, and covered the framework in place up to March 31, 2011. The audit consisted of interviews, a facilitated focus group session and documentation review and analysis. The audit evidence that has been gathered is sufficient to provide senior management with reasonable assurance of the results derived from this audit.

In the professional judgment of the Chief Audit Executive, sufficient and appropriate audit procedures have been conducted, and evidence has been gathered to support the accuracy of the opinion provided in this report. The opinion is based on a comparison of the conditions, as they existed at the time of the audit, against pre-established audit criteria. The opinion is only applicable for the entities examined and for the time period specified.

Executive Summary

What we examined

The Public Service Pension Plan is a defined benefit pension arrangement that pays out a source of lifetime retirement income for retired and disabled Public Service Pension Plan members. Membership is compulsory for all eligible employees of the federal public service.

The Secretariat, as the administrative arm of the Treasury Board, supports the President of the Treasury Board, who has responsibility for the overall management of the Public Service Pension Plan. While responsibility for supporting this pension plan is shared among several organizations, the Secretariat's responsibilities include strategic direction, program and policy advice, financial analysis, development of legislation and communication with pension plan members.

We examined the adequacy and effectiveness of the Secretariat's management control framework of the Public Service Pension Plan. The management control framework, for the purpose of this audit, is defined as the set of controls (i.e., processes and procedures) over the following:

  • Roles and responsibilities;
  • Oversight, monitoring and reporting;
  • Risk management and strategic and operational planning; and
  • Knowledge management.

We assessed whether appropriate controls were in place and how well they were working.

Why it is important

The Public Service Pension Plan is a significant part of the overall compensation for public service employees. In terms of size, it is the largest pension plan in Canada. In recent years and in an environment of increasingly limited resources and expanding requirements, there is pressure to ensure that there are appropriate management standards and practices in place for effective public administration.

What we found

We found that the management control framework currently in place is adequate and effective in most respects and serves to ensure that legislative and policy requirements for the Public Service Pension Plan are being met.

Roles and Responsibilities

The Secretariat's roles and responsibilities in this area are generally well understood and communicated, despite the limited extent to which they are formally defined.

We found that the Secretariat's roles and responsibilities are defined at a high level in the Financial Administration Act, whereas they are not specifically addressed in the pension enabling legislation. At the operational level, key sectors that support the plan have generally articulated their roles and responsibilities at a high level, and we found this to be sufficient in most cases. Within the Secretariat, employees generally had a clear understanding of their roles and responsibilities, with some areas needing further clarification. External organizations that collaborate with the Secretariat in meeting key legislative and policy requirements also had a common understanding of shared roles and responsibilities.

Further clarification is required for certain roles, specifically, the Secretariat's oversight and financial advisory roles. The nature and extent of the Secretary's oversight role is not formally documented, and we found that it is not clear. We also found that the nature of the Chief Financial Officer's role over the pension plan is unclear given the requirements of the Treasury Board's Policy on Financial Management Governance.

Oversight, monitoring and reporting

Notwithstanding the need to further clarify the Secretariat's oversight role, adequate and effective oversight, monitoring and reporting mechanisms are in place. We found evidence of external and internal environmental scans, as well as mechanisms for ongoing reporting and communication with the President of the Treasury Board; the Public Service Pension Advisory Committee (which is mandated to provide advice to the President on matters relating to the plan's administration, benefit design and funding); and the Public Sector Pension Investment Board (which is the exclusive provider of investment management services to the Public Service Pension Plan for the assets set aside to fund the post-2000 pension obligations).

Risk management and strategic and operational planning

The Secretariat's Pensions and Benefits Sector follows a formal and systematic approach for identifying and assessing risks and mitigation strategies. Opportunities exist to enhance risk identification and mitigation strategies.

Knowledge Management

The Pensions and Benefits Sector adequately manages knowledge in support of plan-related roles and responsibilities. Opportunities exist to enhance its knowledge transfer and succession plan.

Recommendations

We recommend that the Secretariat continue to formally define its roles and responsibilities, with particular emphasis on the Secretariat's oversight and financial advisory roles. We also recommend that management address the opportunities for improvement identified in this report with respect to the Pensions and Benefits Sector's otherwise sound risk, planning and knowledge management practices.