We continue our theme from previous reports, that boards and audit committees of Alberta’s post-secondary institutions must hold management accountable for implementing and maintaining effective processes and internal controls. We make recommendations to Alberta’s colleges, technical institutes, and Grant MacEwan and Mount Royal universities.
We also include a report card on their internal controls over financial reporting. Following are highlights from our work. This report does not include the University of Alberta, University of Calgary, University of Lethbridge or Athabasca University.
Grant MacEwan University significantly improved its internal controls through several initiatives. The University implemented financial reporting processes to close its financial records every month. After every month-end, the University made further improvements, which resulted in accurate and timely financial statements at year-end. The University also defined roles and responsibilities, trained staff and continues to resolve outstanding deficiencies in its enterprise resource planning system. It also implemented two of our prior years’ recommendations. These improvements produced a better overall report card.
Lakeland College, Lethbridge College and Portage College improved their internal controls over financial reporting, which resulted in better overall report cards.
Alberta College of Art + Design, NorQuest College, Northern Lakes College and Olds College still need to significantly improve their processes and internal control environments. In the individual sections that follow, we explain the outstanding problems as well as new ones we found. A list of outstanding recommendations, in our October 2012 Report (pages 159–183), includes other recommendations these institutions have not yet implemented. Many of our recommendations relate to basic internal controls in areas such as financial reporting and risk management. The Minister should continue to hold boards accountable, who in turn must hold management accountable to implement effective internal controls.
Internal controls—a report card
To govern effectively, boards need accurate and timely financial information throughout the year, not just at year-end. To manage effectively, management needs the same information. We see a direct correlation between the ability to prepare quality financial information throughout the year and a strong year-end process to prepare financial statements.
We evaluated the following key indicators of effective financial processes and internal controls:
- the time it took institutions to prepare complete and accurate year-end financial statements
- the quality of draft financial statements we received, including the number of errors our audit found
- the number and type of current and outstanding recommendations
Following are the results from this year’s assessment, together with comparative assessments from 2011. An institution could have a yellow or red ranking, yet still receive an unqualified audit opinion, as management can correct errors and disclosure deficiencies during the audit process. The number of errors and disclosure deficiencies we find in the draft financial statements indicates how effective financial controls are for preparing accurate financial statements.