Alberta Advanced Education - Report on Post-secondary Institutions 2019
This report compiles the status of recommendations from our 2019 financial statement audits of post-secondary institutions. It also includes a report card on each institution’s internal controls over financial reporting with comparative assessments from our 2018 and 2017 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 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 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 financial 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.
Numerous observations would be a strong indication that the institution’s overall financial processes and internal controls may not be sustainable. 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 12. Two of the 12 outstanding recommendations to institutions are older than three years.
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. Recommendations not implemented promptly erode the effectiveness of the institution’s control environment. Weak control environments impact the quality of management and the board of governors’ decision making and can result in an institution not achieving its goals by operating in a cost-effective manner and managing operating risks.