2003/04 Annual Service Plan Report -- Ministry of Finance

Goal 3: Effective and efficient financial and risk management

The Ministry of Finance is responsible for the Government's overall financial and risk management framework. This involves the establishment of appropriate legislation, policies, procedures and training and reporting at a corporate level to ensure the province's resources and obligations are appropriately managed in support of effective service delivery. The framework reinforces individual and corporate accountabilities for outcomes, maintains the corporate standards for stewardship of resources, management of liabilities and risk, and the collection and disbursement of public funds.

Key activities include financial, procurement and accounting policy development, internal audit and advisory services, risk management, and compliance monitoring. The policies are risk-based to ensure they add value and are consistent with the risks they are intended to address. Programs focus on areas of greatest risk with a goal of making broad systemic change to improve performance. This ensures that finance and administration functions are provided using the optimal mix of resources and funding.

Goal 3: Effective and efficient financial and risk management.

Objective 3.1: Implement a risk-based approach to managing government resources

Key Strategies

Core Business Area

1. Expand the mandate of the government's self-insurance program to the broader public sector

Risk Management and Financial Governance Accounting and Reporting

2. Develop and implement risk management strategies for government including:

• Enterprise-wide Risk Management and related Internal Audit Frameworks

• Post-payment reviews

Achievements

Risk Management expanded its coordination of public sector self-insurance programs to include a number of new programs and service offerings. By assuming the role of a traditional insurer for investigating, defending and paying claims risks rather than transferring them at a premium to third parties, the province, and participating programs, saved significantly more than was anticipated.
The government's audit program is now prepared on a risk-based approach to better target potential areas of vulnerability and opportunity. Over the past year 100 per cent of the corporate audit plan and 40 per cent of ministries' audit plans were based on an initial risk assessment.
Post-payment review was fully integrated into the financial control framework. Within the past year, the ministry has completed post-payment reviews of lower risk accounts payable transactions for travel expenses, petty cash reimbursements and other types of payments to employees. The infrastructure is in place to expand post-payment review to higher risk payments, and controls have been established within the Corporate Accounting system to monitor contracting processes and procurement processes.
A comprehensive Enterprise-wide Risk Management program, focused on education and interactive workshops, was expanded. This initiative built upon best practices and emphasized collaboration and communication between ministries and other public sector entities.
Provided risk management consulting services to public-private partnership projects, ASD projects, 2010 Olympic Games, Public Safety Authority, the Consumer Protection Authority and the Motor Dealer Council of BC.
An Enterprise-wide Risk Management program was also implemented within the ministry to better identify and manage key risks at the ministry, program and operational levels.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance
Annual savings from self-insurance (5 year rolling average)	N/A	$30.1 Million	$32.1 Million	$43.1 Million	Exceeded by $11 Million
Selection Rationale: Since 1986 self-insurance programs have saved the province more than $600 million. These cost savings allow participating ministries, hospitals, health care agencies, school boards and social service agencies to direct their resources to the delivery of core services rather than insurance costs.
Variance: Commercial insurance premiums have increased sharply, starting about three years ago, and as a result self-insurance has generated substantial savings.

Performance Measure

2001/02 Actual

2002/03 Actual

2003/04 Target

2003/04 Actual

2003/04 Variance

Potential average annual benefits realized from utilizing a risk-based approach for post-payment monitoring of expenditures and by management implementing Internal Audit and Advisory Services recommendations

N/A

$5.7 Million

$5.2 Million

$13.8 Million

Exceeded by $8.6 Million

Selection Rationale:

Post-payment Monitoring: Both public and private sector organizations have found that a pre-payment review of every accounts payable transaction is not cost-effective. Instead, best practices have found that a stringent process of statistically valid sampling and review of the transactions provides a comparable level of assurance and identifies opportunities for improvement — all at less cost.

Internal Audit and Advisory Services (IAAS) Recommendations: IAAS provides interested provincial public sector organizations with independent and objective audit and management review services. The resulting recommendations identify areas of greatest risk and provide specific actions to improve controls, realize new efficiencies and reduce costs. The objective of this measure is to focus on the cost savings element of IAAS work, and to show that the average annual cost savings exceed the cost of IAAS operations.

Variance: During fiscal 2003/04, two audits identified potential savings of approximately $4.5 million each. The audit identified the potential for significant savings in telecommunication costs by aggregating requirements for network services. Rather than many small organizations arranging their own network services, savings could come from aggregating the demand into one larger client base, increasing the network size and negotiating longer-term contracts.

Objective 3.2: Improve the government-wide responsibility and accountability framework for financial management

A shift is underway to make financial management a joint responsibility of both financial and program managers. Program managers are taking on additional accountabilities for procurement and financial decision making within their programs, so the accountability framework needs to be updated to clarify roles, responsibilities and accountabilities. This requires changes to all elements of the framework including legislation, policy and procedures, along with staff training to clarify how responsibilities have changed.

Key Strategies	Core Business Area
1. Revise management policy manuals and consolidate in an electronic form	Financial Governance Accounting and Reporting
2. Establish effective procurement governance
3. Establish a new Auditor General Act

Achievements

A comprehensive internal review was conducted in order to streamline policies and procedures, improve performance and clarify roles, responsibilities and accountability. Government's Core Policy Manual was consolidated through focusing on the truely core policy requirements needed to achieve government's objectives and the integration of procedure with associated policy. The final manual resulted in a 70 per cent reduction in policy volume and a 54 per cent reduction in procedural volume. The complete manual is available to all staff electronically, eliminating printing costs and ensuring that the material provided is current and consistent.
The Financial Administration Act was revised to incorporate a clear responsibility on the part of all government staff to report any perceived inappropriate transactions to the Comptroller General.
Several initiatives were completed supporting the development of an effective procurement framework including the creation of a government vendor complaint review process which provides vendors with a mechanism to raise issues on government's procurement processes. Work also commenced on the creation of a comprehensive training program for procurement staff in government and a framework for monitoring and reporting on compliance with procurement policy.
The Auditor General Act was passed in March 2003. This placed British Columbia in a leading edge position for this type of legislation.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual¹	2003/04 Variance
Stakeholders' satisfaction with the policy framework for financial management	N/A	N/A	Determine Baseline	Pending	N/A
Selection Rationale: Government is transitioning from a control framework based on "command and control" to one based on performance measurement and personal accountability for results. Ensuring that the policy framework provides sufficient guidance to managers while avoiding an overly prescriptive approach is essential. Accordingly, survey results from managers and other stakeholders will provide information for improving the framework and its implementation.


¹	This performance measure has been revised in the current Service Plan 2004/05 – 2006/07 to include procurement governance. As a result, the scope of the measure has been increased and the results of the updated stakeholder survey will not be available until August 2004.