Quarterly Financial Report for the quarter ended September 30, 2018

1.1 Authority, Mandate and Departmental Results

Indigenous Services Canada (ISC) works collaboratively with partners to improve quality of life and access to high quality services for Indigenous Peoples. Our vision is to support First Nations, Inuit and Métis to design, manage and deliver services to their communities.

The Minister of Indigenous Services is responsible for this organization.

Further details on ISC's authority, mandate and department results can be found in Part II of the Main Estimates and the Departmental Plan.

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the department's spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates for the 2018-19 fiscal year and new spending announced in Budget 2018. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts, or through legislation in the form of statutory spending authority for specific purposes.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

3.1 Risks and Uncertainties

As a federal department delivering a complex mandate in a geographical area that truly encompasses the whole of populated Canada, Indigenous Services Canada is influenced by many factors. These include political situations, societal and historical contexts, as well as broader economic and environmental conditions and internal departmental factors. These factors expose the department to a variety of risks: legal, HR capacity, environmental, indigenous relations, implementations, external relationships, information for decision making and government partnership are all areas of risk. Risk management and risk-based decision-making are a critical component in the way the Department prioritizes and conducts its business. Resource allocation decisions are informed by risk and the Department's key corporate risks are discussed systematically by the senior management committee, which contributes to the better allocation of resources and ultimately better results. Corporate and financial risk mitigation activities, reflected in the Department's Corporate Risk Profile, are monitored by senior management on a semi-annual basis and modified as required.

The Department continues to monitor its risk exposure and take action as needed to mitigate the risk of not achieving anticipated results or to deal with emerging pressures. Achievement of ISC's core responsibilities and delivery of programs is dependent on timely access to appropriate authorities and funding levels.

In terms of transfer payment program and transfer payment recipient risk, the Department transfers funds to recipients each year, while balancing program and recipient risks to deliver on its mandate. The Department undertakes risk assessments on new, existing and reformed programs as well as an annual general assessment of each recipient to identify areas of risk. The Department also includes a risk section of each of its performance information profiles.

Internal Services expenditures are currently accounted under CIRNA at Q2. At year end, all Internal Services will be allocated between ISC and CIRNA. Until then, there is a risk that expenditures will not be properly allocated and tracked and that Internal Services expenditures will be inaccurately allocated between departments. In order to mitigate this risk, ISC and CIRNA are running monthly checks to ensure that Internal Services expenditures are properly entered and tracked for future allocation.

The Department is managing its budget by aligning resources to needs and through rigorous monitoring against both financial and human resource targets. Management proactively and systematically manages and responds to risks to minimize adverse impacts and capitalize on opportunities. Budget and expenditure trends are monitored regularly, including a review and challenge function, through monthly financial status reports to senior management.

In order to ensure effective controls, transparency and accountability, a diversity of regional approaches are used to confirm that recipients have met planned program results and that the funds were used for the intended purposes. In addition, the conduct of recipient and project audits, under the terms of their funding agreements; provides a further opportunity to ensure that First Nations have appropriate management, financial and administrative controls in place.

The Department has put in place practices to detect, monitor and report over/under payments of employees affected by the Phoenix Pay system. Through the Phoenix Response Team and a pilot project with Public Service Pay Centre (PSPC), the Department is able to offer priority payments to employees who have been underpaid or overpaid as a result of a Phoenix error. In addition, by working with PSPC, the Department has obtained full compensation accesses for Departmental Liaison Officers which allows assessment of accuracy and completeness of pay information by employee.

To minimize the risks associated with RO and ESDPP (programs from former INAC transferred to ISC) and FNIHB (program from HC transferred) operating out of two distinct financial systems, the Chief Financial, Results and Delivery Officer is continuously monitoring the financial situation of both entities to ensure that controls are in place and that authorities are being respected.

In line with the above, ISC is currently working to integrate the First Nations Inuit Health Branch (FNIHB) from Health Canada (HC) into its financial system. Until the two are integrated into one financial system, resources are being managed across two distinct financial systems and financial information must be consolidated to report as one department. In addition to the creation of ISC, during the transition, there is an increased need to ensure proper control and coordination in the management of common funding agreements between Crown-Indigenous Relations and Northern Affairs Canada (formerly named INAC) and Indigenous Services Canada.

The Department has conducted a risk assessment of its fraud risks and is implementing a risk mitigation plan which includes training in fraud prevention.

Table 1: Statement of Authorities (unaudited)

Table 2: Departmental budgetary expenditures by Standard Object (unaudited)