SUMMARY
DEPARTMENT
There are no new recommendations to the Department of Innovation and Advanced Education in this report.
Innovation
We recommend that the Alberta Innovates—Energy and Environment Solutions improve its financial reporting processes—see page 159
Alberta Innovates—Technology Futures implemented our 2011 recommendation to improve its governance practices for the Corporate Information Systems project—see page 160
Advanced Education
Athabasca University implemented our recommendations on implementing an enterprise risk management framework, and developing a conflict of interest policy—see pages 160 and 161
University of Alberta implemented our recommendation to improve controls over bookstore inventory—see page 161
University of Lethbridge implemented our recommendation to enhance controls over its information technology—see page 162
POST-SECONDARY INSTITUTIONS
This report includes an update on the report card on four universities’ internal controls over financial reporting, together with comparative assessments from our 2013 and 2012 audits. Our February 2014 report included the results of our audits at the colleges, technical institutions, MacEwan University and Mount Royal University.
Organizations with effective internal controls and processes over financial reporting are critical to reporting reliable financial information to Albertans. Post-secondary institutions are challenged with establishing and sustaining strong internal controls regardless of the unexpected changes that may occur in their operations annually. The Minister of Innovation and Advanced Education, through the department, must ensure the boards of governors of post-secondary institutions hold management accountable for sustaining strong internal control environments and improving identified control weaknesses in a reasonable period of time.
Consistent with our prior report cards, 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
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 a strong year-end process to prepare financial statements and the ability to prepare quality financial information throughout the year.
A university could have a yellow or red ranking, yet still receive an unqualified opinion on the financial statements, 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.
Effective control environments include clear policies, well-designed processes and controls to implement and monitor compliance with policies and secure information systems to provide timely and accurate financial and non-financial information to manage and govern the institutions. Recommendations that are not implemented on a timely basis erode the effectiveness of the institution’s control environment. Weak control environments impact the quality of decisions made by management and the board of governors. This can result in an institution not achieving its goals by operating in a cost effective manner and managing operating risks.