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HR / Finance Interactions
Financial Systems Authority (FSA) Office of the Comptroller General
(OCG)
fmi*igf PD Week, Le Francophile
2009-11-26
HR / Finance Interactions Project
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Presentation Objectives
• Review the background, objectives and scope for the Control
Framework for Human Resource/Finance Interactions Project
• Provide an overview of project results and its value to departments
and agencies:
– The Pay Administration Model
– “Other” HR/Finance Interactions Model
– The Pay Administration Control Framework
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Vision
Financial Systems Authority's (FSA) Vision, Mandate & Goals
Strategic decision-making through superior financial
management
To build effective and integrated business processes, data
and systems, while advancing community developmentMandate
GoalsStandardized
Business
Processes
Knowledgeable
Systems
Community
Responsive
Systems
Consistent
Information
... supporting strategic decision making through excellence in financial management
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The Common Financial Management Business
Process Initiative
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Using knowledge to perpetuate
process excellence
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Common Financial Management Business
Processes (FM-BP) Initiative
Six pillars or ―domains‖ have been identified. HR/Finance Interactions was the first
to be reviewed.
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The HR/Finance Interactions Domain
• Run by OCG Financial Systems Authority (FSA) in collaboration with
both HR and Finance communities from multiple TB sectors, Public
Works and Government Services Canada (PWGSC) and departments
• Goal: to clarify operational roles, responsibilities and develop a control
framework to support the development of improved linkages between
Human Resource and Financial data, processes and systems.
• Deliverables – Guidelines and tools to the Directive on Financial
Management of Pay Administration
– HR/Finance Delivery Models
• for pay-related processes
• for other processes (non-pay-related)
– Control Framework for pay-related processes
• Potential follow on activities:
– Policy instruments supporting the control framework and delivery models
– Control Frameworks for other processes
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Focus on Pay to:
Provide greatest return
Prove value
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The HR/Finance Interactions Domain Background
• Complement and provide results to horizontal projects including:– PWGSC: Payroll Modernization
– Treasury Board:
• Chief Information Officer Branch (CIOB): Service Oriented Architecture - Bridge project: HR
Linkages, ERP Strategy
• Office of Chief Human Resource Officer (OCHRO): Common HR Business Processes
• Corporate Administrative Shared Services
• Provide a better understanding of the data and process interactions
between HR and Finance
• Provide a formal, common approach to HR/Finance controls for the Pay
Administration business process to support requirements under:– Auditable Financial Statements
– Federal Accountability Act
– Office of Comptroller General Policy Renewal (e.g., Policy on Internal Control)
• Address needs of all departments and agencies– Independent of financial and human resource management systems
– Can be adapted to include department specific and detailed processes, detailed roles,
responsibilities and organizations, and mapping to financial and human resource management
systems7
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Timeline, Approach and Deliverables
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Strategic Points from the HR/Finance Interactions
Domain
• Processes, Roles & Responsibilities last documented
in 1970’s
• Current policy and legislative requirements reflected • Practices may vary department to department and more formality
may be required in educating, communicating and applying
controls, for example, Pay Pre-Payroll processes (Compensation)
• Improved awareness of the activities and
responsibilities in processes and control between
Finance and HR Communities• Finding: Finance not always aware of existing HR processes &
controls and visa versa
• No major gaps found, however there is room for
improvement in collaboration between HR and Finance
HR/Finance Interactions Model
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•Roles & Responsibilities
•Context
•Pay Administration Flow
•RACI Analysis
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HR/Finance Interactions Roles and Responsibilities
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Pay Administration Context
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Pay Administration Flow
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Planning, Budgeting, Forecasting
Revenue & Accounts Receivable
Expenditure & Accounts Payable
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“Other” HR/Finance Interactions Context
Planning, Budgeting, Forecasting• Integrated Planning and Reporting•Salary Management & Forecasting•Alignment of Organizational Structures & Authorities
Revenue & Accounts Receivable•Non-pay amounts due from an employee•Employee Separations•Transfers and Assignments (out/recovery)•Taxes
Expenditure & Accounts Payable•Non-pay amounts due to an employee• Interdepartmental settlements related to Workers Compensation•Garnishments or other court-ordered payments•Employee Separations•Transfers and Assignments (in/payment) •Benefits Accruals•Pay and Pay-related liabilities•Taxes
Materiel/Finance Interactions• Issuance• Retrieval• Inventory
Foundational analysis for
other domains of the FM-BP
initiative
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Sample: HR/Finance Interactions RACI Diagrams
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Pay – Pre-Payroll Processes
HR/Finance Touch
PointsRelated Data Responsible Accountable Consulted Informed
Authoritative
Source
Employee
information
• Name
• Start Date
• End Date
• Attributes
COMP COMP EE
MGR
PAY, FIN,
HR
HRMS
• Pay Office COMP PAY FIN,
HR, MGR
RG-CS
• Pay List
• Increment Date
COMP COMP PAY, FIN,
HR, MGR
HRMS
• Entitlements 1
(includes Base Pay)
COMP COMP MGR
HR
HR, FIN
PAY
HRMS
• PRI COMP PAY EE EE, HR,
FIN
MGR,
PAY
RG-CS
(Central
index)
Position Information • Financial coding 2 MGR /
COMP 3MGR FIN HR, PAY,
FIN
DFMS
• Classification /
BUD Code
• Attributes 3
• Position number
HR / COMP 3
HR MGR COMP
FIN
HRMS
See end of presentation for explanation of abbreviations
27 RACI diagrams were developed
Pay Administration
Control Framework (PACF)
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• Sample Control Framework
• The PACF Processes
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Approach to PACF Development
Analytical Framework– The Committee of Sponsoring Organizations (COSO) of the Treadway
Commission developed the Internal Control — Integrated Framework (the
COSO Framework).
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Control objectives
Organizational levels of
responsibility
Control
components
• Monitoring,
Information &
Communications out
of scope
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The PACF Control Processes
1. Create, implement and maintain departmental
policies and procedures to manage the
interaction among operational planning,
commitment control and salary management.
2. Create, implement and maintain departmental
policies and procedures to manage the
delegation of financial authorities.
3. Create, implement and maintain departmental
policies and procedures to manage HR
delegations.
4. Create, implement and maintain departmental
policies and procedures for compliance to S.34.
5. Create, implement and maintain procedures to
ensure that authority under section 33 of the
FAA is exercised in accordance with the FAA
(including mechanisms to verify the legality of
the payment and the availability of funds).
6. Create, implement and maintain procedures to
ensure prompt initiation and accurate
completion of pay related requests.
7. Create, implement and maintain controls,
editing and rejection of payroll
transactions
8. Create, implement and maintain
departmental policies and procedures to
identify and address potential
overpayments, based on pre-determined
criteria (prior to the release of payment)
9. Create, implement and maintain criteria
for initiating recall/intercept
10. Create, implement and maintain
procedures to promptly correct erroneous
payments and ensure recovery action is
initiated.
11. Create, implement and maintain standard
processes for undelivered payments.
12. Create, implement and maintain month
end and year-end reconciliation and
reporting of departmental pay
expenditures and payroll control
accounts.
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Sample: Pay Administration Control Framework
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HR Pre-Payroll Processes
Control
Process
Control
Activity
Responsible Accountable Control Objective Control Risks ID
Create,
implement and
maintain
departmental
policies and
procedures to
manage the
delegation of
financial
authorities
Corporate
Finance
Deputy Head Compliance All pay related action
requests are
authorized by persons
delegated the required
financial authorities.
Employee pay is in
error, incomplete and/or
fraudulent and pay-
related processes occur
without the necessary
financial authority.
B-1
Create,
implement and
maintain formal
delegation of
authorities
matrix
Corporate
Finance
Minister and
Deputy Head
Compliance All pay related action
requests are
authorized by persons
delegated the required
financial authority
Pay related processes
occur without the
necessary financial
authority
B-2
Create,
implement and
maintain
appropriate
division of
financial
responsibilities.
Corporate
Finance
Minister and
Deputy Head
Compliance All pay related action
requests are
authorized by persons
delegated the required
financial authorities.
Employee pay is in
error, incomplete and/or
fraudulent.
B-3
51 control activities were identified
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For More Information
Check us out at : http://www.gcpedia.gc.ca/wiki/FM-BP
Or Contact: Mark Huard CGA
Director, Financial Business Processes and Renewal
Transformation Management, Capacity Building and Community
Development Sector
Office of the Comptroller General
613-946-4626
Huard.Mark@tbs-sct.gc.ca
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Simplified
Reconciliation
Project Value
Improved Results Management and Accountability
Control:
Objectives
Risks
Activities
Manage:
Overlap
Duplication
Control
Framework
Authoritative
Sources
Roles,
Responsibilities,
Accountabilities
Interoperability
Sharing
Integration/
Interfacing
People:
Functional
Owners &
Stakeholders
Data
HR/Financial Information
Accurate
Linked, Reliable & Relevant
Project Scope Enabled Results
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Key Functional Owners
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Project Linkages
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RACI Diagrams: Acronyms & Abbreviations
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HRMS Human Resource Management System – could be one or multiple departmental systems that handle
data related to areas such as HR Planning, Classification, Staffing, Learning and Development,
Compensation, Leave, Time and Reporting System, and Staff Relations.
DFMS Departmental Financial Management Systems – could be one or multiple systems that handle data
related to Finance, Material and Salary Planning.
RG-CS Receiver General (RG) and Compensation Systems (CS) at PWGSC defined as Regional Pay
System (RPS) including On-line Pay System (OLP), Standard Payment System (SPS), Payroll
System - General Ledger (PS-GL), Receiver General - General Ledger (RG-GL), Central Financial
Management Reporting System (CFMRS), and the Central Index. Note only PWGSC systems that
are relevant to the HR/Finance Interactions scope are listed here.
Authoritative Sources
EE Employee
MGR Manager
COMP Departmental Compensation function
HR All other departmental Human Resource functions
PAY PWGSC Compensation Sector
FPAD PWGSC Financial and Payroll Accounting Division (owner of PS-GL/Dept 79) and part of PWGSC
Compensation Sector
CAR PWGSC Central Accounting and Reporting
BCMS PWGSC Banking and Cash Management Sector
FIN Departmental Financial Services
CF Departmental Corporate Finance
MM Departmental Materiel Management
Roles Sources
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RACI Diagrams Notes
Notes
1. Employee “Entitlements” include any amount paid to the employee, including base salary, due
to his/her status or achievements. Examples include base pay, bilingual bonus, and
supervisory differential.
2. Financial coding assigned to position (Responsibility Centre (RC), Program Activity (PA),
Project, etc.) may or may not be included in the detailed pay expenditure file. If the financial
coding is included in the detailed pay expenditure file, Compensation inputs this data into RPS.
3. Position attributes refers to characteristics of the position that affect pay once the position is
encumbered. Examples of these attributes are: exclusion status, geographic region (for certain
classifications) specific additional pay entitlements associated with a position (e.g., isolation
pay)
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Approach to PACF Development
Policy Foundations and Context• TBS Policy on Internal Control (July 2008 draft)
– TBS Integrated Risk Management Framework (March 2004)
– TBS Policy on Internal Audit (2006)
• Documentation from the Committee of Sponsoring Organizations (COSO) of the Treadway Commission including:
– Enterprise Risk Management (ERM) – Integrated Framework (September 2004)
– Internal Control – Integrated Framework, Guidance on Monitoring Internal Control Systems, Volume II – Guidance (June 2008 draft)
• OCG’s Internal Audit Sector’s Core Management Controls (Draft November 2007)
• Comptrollership Policy on Pay Administration
– Appendix B, Delegation of financial authorities to human resource personnel –Elements of a control framework (April 1997)
• Key Definitions extracted from TBS Policy on Internal Control and OCG Core Management Controls and consistent with COSO definitions
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HR Pre-Payroll Processes
Control
Process
Control
Activity
Responsible Accountable Control Objective Control Risks ID
Approach to PACF Development (cont’d)
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COSO Control
Components
COSO
Organizational
Responsibilities
COSO Control
Objectives
COSO
Control
Components
Pay Administration
Model Context