Alberta Advanced Education - Report on Post-secondary Institutions 2020
This report compiles the status of recommendations from our 2020 financial statement audits of post-secondary institutions. It also includes a report card on each institution’s financial reporting processes and internal controls with comparative assessments from our 2019 and 2018 audits.
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. Strong, sustainable processes improve management’s decision-making ability and provide opportunities to use results analysis to communicate to Albertans about the institution’s performance and accountability for results. The Minister of 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 reporting processes and internal controls for each institution:
- the quality of draft financial statements prepared for the board, as evidenced by the number of differences from public sector accounting standards our audit found
- the time it took management to prepare complete and accurate year-end financial statements
- the number, age, and nature of current and outstanding recommendations
A post-secondary institution could have a yellow or red status yet still receive an unqualified audit opinion on its financial statements, as management can correct errors and financial statement disclosure deficiencies during the audit process. The number of errors and disclosure deficiencies we find in the draft financial statements indicates how effective internal controls are for preparing accurate financial statements.
We occasionally make observations to management at the end of our financial statement audits. The observations usually relate to less significant control weaknesses that do not require immediate remediation like recommendations do. We would consider noting a caution in the report card, typically over financial statement accuracy, if we make more than two observations to a particular institution.
Effective control environments include clear policies, well-designed processes and controls to implement and monitor compliance with policies, and secure information systems. Such control environments help provide timely, accurate financial and non-financial information to manage and govern the institution.
Our conclusion on the status of outstanding recommendations considers not just the number, but also the age and nature of the outstanding recommendations. See “Post-secondary Institutions: Summary of Recommendations” on page 13.