Archived - Audit of Administrative Controls over the Foreign Debt Portfolio and Foreign Currency Asset Reserves

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Summary

The objectives of the audit were to:

  • Assess the extent to which administrative controls surrounding the foreign debt and foreign asset currency reserve portfolios are in compliance with relevant legislation, Treasury Board Secretariat polices and Generally Accepted Accounting Principles (GAAP);
  • Assess the extent to which management control mechanisms are in place and operating effectively; and
  • Document, for current and future use, the key activities, accountabilities and control points in foreign debt and foreign asset administration.

The audit focused on the efficiency, effectiveness and completeness of the administrative controls in place over the financial recording and reporting of the transactions and balances that comprise the Foreign Debt portfolio. As issuances of foreign debt liabilities are supported by purchases of foreign assets, the audit examined administrative controls in the Department of Finance over both foreign liabilities and foreign assets. The audit team worked primarily with personnel in the Financial Operations and Accounting Services Division and the Financial Markets Division and would like to thank both areas for the time and support they provided to the audit.

The audit examination conducted found that key portions of the liability transactions were accounted for correctly. On the program side of foreign debt and assets, a comprehensive management framework has been developed and is being adhered to. A number of opportunities were identified, however, to strengthen procedures and reduce the residual risk currently associated with the foreign debt and asset administration programs.

Recommendations

The report details 9 specific recommendations to enhance the overall management control framework of the foreign currency asset reserves and debt portfolios. A Management Action Plan is provided in Appendix B. However, three main recommendations are at the basis of the overall realignment. The Department of Finance should consider the following:

  • Reassessment of the level of its reliance on the Bank of Canada for the processing, recording and reporting of activity and performance of the foreign assets and the foreign assetsliabilities matching program. Consideration should be given to establish substantiation processes for the foreign currency asset reserves;
  • Enhance performance reporting that will communicate evidencebased performance information and support decisionmaking, accountability, due diligence and transparency. The reporting should integrate all benefits and costs of the assetliability matching program in order to adequately evaluate performance; and,
  • Strengthen financial analysis resources with experienced professional accountants that will provide the Financial Markets Division with appropriate, relevant information for decisionmaking and accurate performance reporting.

The report also notes a number of specific recommendations for strengthening effective and efficient processes and procedures and to ensure compliance with Government of Canada policies.