Funds Management Governance Framework

Table of contents

This document describes the governance framework for managing the Government of Canada’s financial assets and liabilities.

Responsibility for strategic planning and the operational management of the federal government’s financial assets and liabilities is jointly borne by the Department of Finance and the Bank of Canada (as fiscal agent of the government). This document describes the funds management governance framework used by the Department of Finance and the Bank of Canada in carrying out these functions.

The Funds Management Governance Framework has been designed to:

• maintain a focus on accountability to the Minister of Finance and Parliament;
• facilitate strong and effective strategic direction and policy making;
• set out clear and transparent assignment of roles and responsibilities of officials within the Department of Finance and the Bank of Canada;
• ensure operational and strategic decisions comply with relevant legislation, authorities, policies, guidelines, and accepted practises;
• ensure performance is reviewed, and plans amended, as necessary.

Funds management activities are guided by several fundamental objectives.

Funds management of the Government of Canada’s financial assets and liabilities encompasses issuance of debt, management of liquidity, and investment of financial assets. It is separated into two key functions: Financial Asset and Liability Management, and Risk Management. Activities under each of these two functions are guided by a set of overarching key principles.

• Efficiency and Effectiveness: Assets and liabilities should be managed as efficiently as possible with a view to maximizing value to taxpayers.
• Transparency and Accountability: Information on financial asset and liability management plans, activities and outcomes should be made publicly available in a timely manner. Information on borrowing costs, investment performance and material exposures to financial risk should be actively monitored and evaluated.
• Risk Management: Risk monitoring and oversight should be independent of financial asset and liability management operations.
• Fiscal Prudence: Financial assets and liabilities should be managed in a cost-effective manner that mitigates the potential negative impact of market risks on the Government’s fiscal position.

Objectives

The fundamental objective of wholesale debt management is to raise stable and low-cost funding to meet the needs of the Government of Canada.

Associated objectives are to maintain a well-functioning market in Government of Canada securities, which helps to keep debt costs low and stable and is generally to the benefit of a wide array of domestic market participants and contribute to promoting the overall stability of the Canadian financial system, where appropriate.

Principles

In pursuit of these objectives, the Government of Canada carries out its wholesale debt management activities according to the following principles:

• Transparency and Regularity: The Government should conduct its debt programs in a transparent and predictable manner, and consult regularly with key market participants, to ensure the integrity and attractiveness of the Government of Canada securities market for dealers and investors.
• Prudence: Wholesale debt management activities should be managed to preserve access to diversified sources of funding, and support a broad investor base.

Objective

The fundamental objective of cash management is to meet the Government of Canada’s daily and contingency cash requirements, while maintaining the lowest level of cash balances maintaining an appropriate margin for uncertainty and minimizing the cost of carrying surplus funds.

Principles

In pursuit of this objective, the Government of Canada carries out its cash management activities according to the following principles:

• Transparency and Regularity: The Government should conduct its cash programs in a transparent and predictable manner, and consult regularly with key market participants to ensure the integrity and attractiveness of the Government of Canada money market for dealers and investors.
• Prudence: Cash management activities should maintain an appropriate margin for uncertainty in daily and contingency requirements. This is facilitated by actively managing treasury bills, cash management bills and cash management bond buybacks, preserving access to diversified sources of funds, including those used for contingency purposes, and supporting a broad investor base.
• Cost-effectiveness: Cash management activities should be actively managed such that the net cost to the taxpayer, if any, is minimized.

Objective

The primary objectives of retail debt management are to provide Canadians with access to Government of Canada retail savings products (Canada Savings Bonds and Canada Premium Bonds), and also to continue to look for opportunities to reduce overall Retail Debt Program delivery costs.

Principles

In pursuit of these objectives, retail debt activities are managed according to the following principles:

• Quality of service delivery: The program should be delivered and represented in a way that adheres to the quality and standards of a Government of Canada program.
• Prudent management: program investments and costs should seek to balance quality service delivery with effective control of operational expenses.
• Transparent pricing of retail debt products: aim to price retail debt coupons based on comparable retail market instruments, while recognizing Canada’s higher credit rating and factoring in the unique characteristics of CSBs and CPBs.

Objective

The objectives of foreign reserves management are to provide foreign-currency liquidity to the Government, support intervention to aid in the control and protection of the external value of the Canadian dollar and promote orderly conditions for the dollar in the foreign exchange markets, if required.

The liquid foreign currency assets held in the Exchange Fund Account (EFA) also form a key component of the Government of Canada’s prudential liquidity, which is available to meet financial requirements in situations where normal access to funding markets may be disrupted or delayed.

The EFA, which represents the largest component of foreign reserves, is an actively managed portfolio of liquid foreign currency securities and deposits. The key strategic objectives of the EFA are to maintain a high standard of liquidity, preserve capital value and optimize return subject to liquidity and capital preservation.

Principles

In pursuit of these objectives, the Government of Canada manages its foreign exchange reserves according to the following principles:

• Effectiveness and efficiency: Policy development and operations shall take into account, to the extent possible, leading practices of other comparable sovereigns. Regular evaluations shall be conducted to ensure the efficiency and effectiveness of the governance framework and borrowing and investing programs.
• Transparency and accountability: Information on investment and funding plans, activities and outcomes shall be made publicly available in a timely manner. Borrowing costs, investment performance and material exposures to financial risk shall be measured, monitored, controlled and regularly reported, as applicable.
• Risk management: Risk monitoring and oversight shall be independent of financial asset and liability management operations.
• Fiscal prudence: The EFA is an account that forms part of the Government of Canada’s balance sheet. Recognizing the importance of fiscal prudence and sustainability in public finances, the EFA shall be funded in a cost-effective manner through a funding framework that mitigates the potentially negative impacts of movements in interest rates and foreign exchange rates on the Government’s fiscal position by matching the funding with the currency, term and/or duration of the reserve assets. Credit risks associated with assets and liabilities are not offset under this framework and shall be addressed by other means.
• Financial stability: The EFA is an account that supports Canada’s preparedness for financial contingencies. As a result, the management of the EFA shall take into account Canada’s international commitments and global regulatory initiatives to support financial stability.

All funds management activities are subject to risk. As risk cannot be avoided, it must be effectively managed and mitigated where possible. The key objective of the risk management component of funds activities is to identify and effectively manage market, liquidity, credit, operational and legal risks related to funds management activities.

In pursuit of this objective, risk management activities are managed according to the following principles:

• Risk monitoring and oversight should be independent of financial asset and liability management operations, to ensure that risks are evaluated objectively.
• The Department of Finance and the Bank of Canada should strive to create a culture where risk management is highly valued, considered an integral part of all funds management activities, and viewed as a responsibility of all staff.
• The accountability for appropriately addressing risks should rest with those who are responsible for making specific decisions within the funds management framework.

The ultimate authority for funds management policy rests with the Minister of Finance.

The Minister of Finance is provided with the legal authority to operate the Government’s borrowing and cash management program under Part IV (Public Debt) of the Financial Administration Act (FAA), and the authority to hold and manage the Exchange Fund Account (EFA) through provisions in the Currency Act. The Minister may delegate some of these authorities to officials within the Department of Finance.

Section 24 of the Bank of Canada Act provides statutory authority for the Bank of Canada to act as the Government’s fiscal agent.

Details of these legal and regulatory frameworks can be found in the highlighted boxes below.

Part IV (Public Debt) of the Financial Administration Act (FAA) provides the legislative basis for the government’s borrowing program.

The FAA empowers the Governor in Council to authorize the Minister of Finance to borrow money. Each year, the Minister must table in Parliament a report on debt management activities for the previous fiscal year and a report on the planned borrowing and debt management for the next fiscal year. The Act provides the Minister with the authority to use modern financial and risk management tools and techniques such as interest rate and currency swaps, options, futures, and forwards in the conduct of its financial operation and for risk management purposes.

The Act provides the Minister of Finance with legislative authority to establish rules governing the issuance of debt. In addition, the Act provides the Minister with powers over the management of the Government’s assets and liabilities.

The powers of the Minister can be delegated to officials of the Department of Finance.

The Exchange Fund Account (EFA) is governed by Part II of the Currency Act and is held in the name of the Minister of Finance.

The legislative mandate of the EFA is to aid in the control and protection of the external value of the Canadian dollar. Under the Currency Act, as revised in 2005, the Minister of Finance is responsible for establishing a Statement of Investment Policy, which sets out the policy governing the acquisition, management and divestiture of assets for the EFA. The power to establish this Policy cannot be delegated to officials within the Department of Finance. The Currency Act specifies that the authority to carry out the Policy can be delegated to officials within the Department of Finance.

The Currency Act provides that the net income of the EFA for a fiscal year is payable to the Consolidated Revenue Fund of the Government of Canada.

The Bank of Canada Act provides statutory authority for the Bank of Canada to act as the government’s fiscal agent in the payment of interest and principal and generally in respect of the management of the public debt and the Exchange Fund Account of Canada.

The Minister of Finance provides the overall direction for funds and risk management activities, and is responsible for seeking Governor in Council approval to borrow money on behalf of the Government for each fiscal year.

Prior to the start of each fiscal year, the Minister reports to Parliament on the Government of Canada’s debt management strategy for the coming fiscal year through the Debt Management Strategy. As circumstances warrant over the course of the fiscal year, the Minister may approve significant initiatives or major changes to the Debt Management Strategy.

Within 30 sitting days of the tabling of the Public Accounts of Canada in Parliament, the Minister must submit a report on federal debt activities for the previous fiscal year (the Debt Management Report).

The Minister must also provide an annual report to Parliament on the operations of the EFA within the first 60 days the House is sitting after the end of each fiscal year (the Report on the Management of Canada’s Official International Reserves).

The Minister is supported by the Department of Finance and the Bank of Canada, as described below.

The Department of Finance is responsible for formulating funds management policy and strategy, submitting policy advice to the Minister, and for the preparation and publishing of official reports on funds management (e.g., the Debt Management Report, and the Report on the Management of Canada’s Official International Reserves).

As the fiscal agent for the Government of Canada, the Bank of Canada is responsible for:

• collaborating with the Department of Finance on the development of funds management policies and strategies;
• managing Receiver General cash balances held in the Consolidated Revenue Fund;
• managing the day-to-day and the operational implementation of funds management programs, which includes the execution of market operations, conducting auctions, market surveillance and system support services;
• the day-to-day monitoring of risks associated with funds management activities;
• working with the Department of Finance in managing the Retail Debt Program and its day-to-day activities.

It is the responsibility of senior management to provide advice to the Minister on policy, strategy and risk, and to direct and oversee funds management policy development and implementation.

Senior management at the Department of Finance includes the Deputy Minister, the Associate Deputy Minister, the Assistant Deputy Minister of the Financial Sector Policy Branch, and the General Director of the Financial Sector Policy Branch.

Senior management at the Bank of Canada includes the Senior Deputy Governor, the Chief of the Funds Management and Banking Department, and the Chief Risk Officer.

It is the responsibility of management to ensure that senior management is kept apprised of funds management activities. Management is also responsible for the establishment of procedures and controls to ensure that day-to-day funds management activities are consistent with approved policies and strategies.

Policies and strategies for funds management are developed under the direction of the Director of the Funds Management Division, Financial Sector Policy Branch of the Department of Finance, and the Deputy Chief of the Funds Management and Banking Department at the Bank of Canada. In addition, the Director of the Financial Risk Office at the Bank of Canada is responsible for providing analysis and advice on risk management policies associated with funds management activities, including credit risk assessment and risk modelling.

Senior officers are responsible for leading day-to-day funds management activities. Under their guidance, officers at the Department of Finance and the Bank of Canada work collaboratively to inform and advise management on policies, strategies, and program outcomes; formulate policy advice; coordinate timely and appropriate research and analysis; and conduct consultations with relevant financial market stakeholders.

The senior officers at the Department of Finance are the Chief, Debt Management Policy, and the Chief, Reserves Management, both from the Funds Management Division of the Financial Sector Policy Branch.

The senior officers at the Bank of Canada are the Assistant Director, Debt Management; the Assistant Director, Foreign Debt and Asset Policy; the Assistant Director, Retail and Wholesale Debt Administration; the Assistant Director, Financial Risk Office; and Assistant Director-Credit Rating Assessment Group, from the Funds Management and Banking Department and the Assistant Director, Foreign Reserves Management; Assistant Director, Treasury, Auctions, and Settlement Systems; and Assistant Director, Market Analysis and Operations, from the Financial Markets Department.

In addition, the Assistant Director, Financial Risk Office, is responsible for the day-to-day monitoring of risk associated with funds management activities, reporting on risk levels and operational infractions, and for providing advice on risk management issues in the development of funds management policy.

The governance structure for managing the Government’s financial assets and liabilities recognizes that the ultimate decision-making authority rests with the Minister of Finance, while providing flexibility for officials to make strategic and operational decisions and manage funds activities on a day-to-day basis.

The Minister of Finance provides strategic direction for the management of assets and liabilities by setting key parameters, including the maximum levels of debt and foreign reserves, cost implications, and the Government’s broad risk tolerance. Ministerial decisions are also sought as required on issues such as strategic plans, investment policies and levels, and debt structure. The design of key strategies, policies and oversight of operations, as well as the coordination of funding, investment and liquidity management activities is delegated to officials, working within these parameters.

The Department of Finance and the Bank of Canada jointly develop and implement financial asset and liability management strategies. This work is coordinated through a number of key committees, supported by working groups and teams. Figure 1 depicts the funds management governance committee structure, which is described in greater detail below.

To ensure that the Government’s financial asset and liability management is consistent with market trends and needs, policies are informed by regular engagement with market participants, including investors in Government of Canada securities, dealers, and other interested parties. In addition, financial asset and liability management policy development is informed by independent advice obtained through ongoing program evaluations (see Chapter 4 for more details).

The Department of Finance and the Bank of Canada regularly review the risk management framework to ensure it evolves to remain consistent with leading practices. Risk is considered in the development of asset and liability management policies, and in undertaking investment and funding operations. The formulation of risk policies and the measuring, monitoring, and reporting of risks is conducted by groups that are separate from the front office (i.e., Foreign Reserves Management and Debt Management) to promote independent and objective assessment of risk considerations and independent policy recommendations.

In particular, a formal Risk Committee reviews proposed strategic policies and provides advice to senior management on the associated risk implications as well as broad risk considerations relevant to funds management activities. In addition, the Financial Risk Office (Middle Office, Risk Modelling and Credit Risk Assessment groups) of the Bank of Canada, monitors and reports to senior management on risk exposures (including market, credit and operational risks) related to the Government’s financing and investment activities using techniques based on the leading knowledge and best practices of other sovereigns and private sector financial institutions.

The Financial Risk Office also provides risk assessments with respect to the development of financial asset and liability management policy, particularly related to market, credit and operational risks.

The Department of Finance and the Bank of Canada coordinate funds management activities through a number of committees and working groups. The committees are structured based on a partnership approach with decisions generally based on consensus, while recognizing the principal-agent relationship between the Department of Finance and the Bank of Canada and that the Deputy Minister of Finance is accountable to the Minister for funds management activities.

The Funds Management Committee (FMC) is a decision-making body responsible for all activities covering the Government’s financial asset and liability functions. The FMC generally meets quarterly, and on an ad hoc basis as required. The FMC is supported by the Debt & Treasury Management Committee, the Foreign Reserves Committee and the Retail Debt Committee.

The FMC’s mandate is composed of two key responsibilities: i) advising the Minister of Finance, through the Deputy Minister or a delegate, on policy and strategy for funds and risk management; and ii) providing overall direction to management and officials with respect to asset and liability management policies and strategies, consistent with the direction provided by the Minister. As required, the FMC may also consider operational issues arising from the work of the other committees where these have important strategic implications.

The FMC also monitors key risks associated with funds management and ensures that sound practices are in place for risk identification, measurement, monitoring and mitigation. The FMC is responsible for considering the risks associated with its decisions, and addressing these as deemed appropriate. In addition, the FMC reviews performance outcome reports and ensures the regular conduct of program reviews and evaluations. The FMC serves as an advisory body to the Department of Finance Audit and Evaluation Committee with respect to treasury evaluations (see Chapter 4 for more details on treasury evaluations).

The FMC is accountable to the Minister of Finance, through the Deputy Minister of Finance, with respect to performance against the Government’s objectives for the domestic debt program and the Exchange Fund Account.

The Department of Finance provides secretariat functions for FMC meetings.

The FMC is composed of the following members:

Finance: Associate Deputy Minister and the Assistant Deputy Minister from Financial Sector Policy Branch.

Bank: Chief, Funds Management and Banking Department.

The Associate Deputy Minister (Finance) chairs the FMC.

The Risk Committee (RC) is an advisory body to the FMC. The RC is responsible for reviewing reports on risk exposures, highlighting strategic risk issues the FMC should be aware of and any measures to mitigate these risks it identifies, and advising on broad risk considerations relevant to funds management activities. The RC generally meets quarterly.

When proposals are submitted to the FMC for approval, the RC opines on whether committees have appropriately addressed the risks identified. As required, the co-chairs of the Debt & Treasury Management Committee, the Foreign Reserves Committee and the Retail Debt Committee may also engage with the co-chairs of the RC to discuss risk aspects of specific policies and strategies being considered by these committees.

The RC is supported by the Financial Risk Office (FRO) at the Bank of Canada. The structure, mandate, operations, and composition of the FRO are set out in the Memorandum of Understanding on Treasury Risk Management between the Bank of Canada and the Department of Finance. In particular, the FRO's responsibilities are to assess, measure, monitor and report on risk exposures in the EFA and RG domestic cash balances, to advise operational and policy units on risk issues associated with policy initiatives, and to advise the RC on key risk issues related to proposals submitted to the FMC.

The Bank of Canada provides secretariat functions for RC meetings.

The RC is composed of the following members:

Finance: General Director of the Financial Sector Policy Branch, and a Senior Manager external to the Financial Sector Policy Branch.

Bank: The Chief Risk Officer, and one Senior Officer or Advisor to the Governor external to the Funds Management and Banking Department.

External: An external person to the Financial Sector Policy Branch and the Funds Management and Banking Department.

The RC is co-chaired by one representative from the Department of Finance (the Senior Manager external to the Financial Sector Policy Branch) and one representative from the Bank of Canada (the Senior Officer or Advisor to the Governor external to the Funds Management and Banking Department.

The Director, Financial Risk Office acts as an advisor to the Risk Committee.

The Debt & Treasury Management Committee (DTMC) is a decision-making body responsible for the Government’s domestic funds management activities. The DTMC monitors day-to-day debt and cash management activities, develops related operational policies and strategies, and ensures that they are implemented in keeping with the strategic directions provided by the Minister of Finance and the FMC. The DTMC is accountable to the FMC with respect to the management of the domestic debt portfolio. As required, the DTMC may also bring forward advice and recommendations on strategic domestic fund management issues to the FMC.

The DTMC meets regularly (typically every month) or as needed. The DTMC is supported by the Debt & Treasury Management Working Group, which includes officials from the Department of Finance and the Bank of Canada.

The Assistant Director of the Financial Risk Office (FRO) at the Bank of Canada provides advice to the DTMC on risk issues associated with domestic debt activities, identifies risks related to new policy and operational initiatives under consideration, and outlines options for addressing them. Advice provided by the Assistant Director of FRO is an integral part of DTMC’s policy development and approval process. The DTMC is responsible for considering and addressing as deemed appropriate, the risk issues identified by FRO.

The Department of Finance provides secretariat functions for DTMC meetings.

The DTMC is composed of the following members:

Finance: Director of the Funds Management Division and the Chief of the Debt Management Policy Section.

Bank: Deputy Chief of the Funds Management and Banking Department and the Assistant Director, Debt Management.

The Director (Finance) and Deputy Chief (Bank) co-chair the DTMC.

The Assistant Director of FRO acts as a special advisor to the DTMC.

The Foreign Reserves Committee (FRC) is a decision-making body responsible for policy matters affecting the management of Canada’s foreign reserves. The FRC oversees the funding and investment of the foreign reserves, and monitors the performance metrics regarding these plans, to ensure that the day-to-day funding and investment of foreign reserves are consistent with the strategic directions provided by the Minister of Finance and the FMC. The FRC is accountable to the FMC with respect to the management of the foreign reserves portfolio. As required, the FRC may also bring forward advice and recommendations on strategic foreign reserve management issues to the FMC.

The FRC meets regularly (typically every month) or as needed, and is supported by the Foreign Reserves Management Working Groups, which include officials from the Department of Finance and the Bank of Canada.

The Assistant Director of the Financial Risk Office (FRO) at the Bank of Canada provides advice to the FRC on risk issues associated with the Foreign Reserves, identifies risks related to new policy and operational initiatives under consideration, and outlines options for addressing them. Advice provided by the Assistant Director of FRO is an integral part of the FRC’s policy development and approval process. The FRC is responsible for considering and addressing as deemed appropriate, the risk issues identified by FRO.

The Department of Finance provides secretariat functions for FRC meetings.

The FRC is composed of the following members:

Finance: Director of the Funds Management Division and Chief of the Reserves Management Section.

Bank: Deputy Chief of the Funds Management and Banking Department and the Assistant Director, Foreign Debt and Asset Policy.

The Director (Finance) and Deputy Chief (Bank) co-chair the FRC.

The Assistant Director of FRO acts as a special advisor to the FRC.

The Retail Debt Committee (RDC) is a decision-making body responsible for overseeing the Retail Debt Program. The Retail Debt Committee develops annual work plans, coordinates program initiatives, and oversees campaign issues and pricing. It also provides recommendations to the FMC on overall retail debt strategy and the parameters for annual sale campaigns under the Program. The RDC is accountable to the FMC with respect to the management of the Retail Debt Program.

The structure, mandate, operations, and composition of the RDC are set out in the Memorandum of Understanding on the Retail Debt Program between the Bank of Canada and the Department of Finance.

The RDC meets regularly (scheduled monthly) or as needed, and is supported by the Retail Debt Working Group, which includes officers from the Department of Finance and the Bank of Canada.

The Assistant Director of the Financial Risk Office (FRO) at the Bank of Canada provides advice to the RDC on risk issues associated with the Retail Debt Program, identifies risks related to new policy and operational initiatives under consideration, and outlines options for addressing them. Advice provided by the Assistant Director of FRO is an integral part of the RDC’s policy development and approval process. The RDC is responsible for considering and addressing as deemed appropriate, the risk issues identified by FRO.

The Bank of Canada provides secretariat functions for RDC meetings.

The RDC is composed of the following members:

Finance: Director of the Funds Management Division and Chief of the Debt Management Policy Section.

Bank: Deputy Chief of the Funds Management and Banking Department and Assistant Director, Retail and Wholesale Debt Administration.

The Director (Finance) and Deputy Chief (Bank) co-chair the RDC.

The Assistant Director of FRO acts as a special advisor to the RDC.

Programs are monitored and reviewed on a regular basis to ensure their effectiveness.

Funds management activities are closely scrutinized to ensure asset and liability programs are delivered efficiently, prudently and cost-effectively within applicable authorities. Performance is reviewed on a regular basis internally as well as externally by experts outside of government. Effective and timely reporting on activities promotes senior level engagement on funds management issues and provides transparency and accountability to Canadians.

Performance is monitored and reported through a variety of measures. Debt and cash managers monitor developments in the primary and secondary markets through statistics that are indicators of liquidity and efficiency in the market of Government of Canada securities. Foreign reserve managers and the FRO monitor market, credit and operational risks as well as investment performance. Retail debt managers monitor developments in pricing, relative cost-effectiveness, sales and redemptions. Business line managers perform ad hoc tests of backup operational facilities.

In addition, senior officers conduct detailed reviews of programs and policies to assist in the development of policy advice as needed.

The Department of Finance and Bank of Canada conduct annual (or more frequent if required) consultations with market participants on market debt and cash management program design and implementation.

The Department of Finance and the Bank of Canada maintain internal audit and evaluation functions, which provide both financial audit coverage and periodic reviews of funds management activities. Significant domestic and foreign (EFA) balances are also components of the annual audited Public Accounts of Canada.

Independent third-party evaluations of major policies and programs are also conducted from time to time to assess program effectiveness and suggest potential enhancements.

The findings of these evaluations serve two principal objectives. First, they provide an assessment of past policy and operational decisions, relative to their objectives and the evolving standards and practices of other comparable entities. The results inform future policy direction and the enhancement of program effectiveness and efficiency. Secondly, evaluations support good governance by providing decision-making information for management and public transparency and accountability on outcomes.

The Reports on the findings of the treasury evaluations and the Government’s response to the evaluations are posted on the Department of Finance website, thereby providing a means to assess the past and future actions of government in the realm of funds management.

Organizationally, the Funds Management Committee functions as the Steering Committee for conducting independent evaluations of treasury policies and programs. The FMC determines treasury evaluation priorities, approves terms of reference for conducting evaluations, and reviews evaluation reports. In this role, the FMC is supported by the Treasury Evaluation Working Group (TEWG).

The Treasury Evaluation Working Group (TEWG) identifies and recommends priority areas for reviews and evaluations, develops Terms of Reference for independent evaluations for the FMC’s approval, and reviews reports prepared by internal and external evaluators.

The Department of Finance provides secretariat functions for TEWG meetings.

The TEWG is composed of the following members:

Finance: General Director of the Financial Sector Policy Branch, Director of the Funds Management Division, and a senior official/Advisor from Internal Audit and Evaluation.

Bank of Canada: Deputy Chief of the Funds Management and Banking Department

The General Director of the Financial Sector Policy Branch chairs TEWG meetings.

The Government of Canada is strongly committed to the principles of accountability and transparency in public reporting, and strives to provide relevant and timely information regarding funds management activities.

• Report on Plans and Priorities: Prior to the start of each fiscal year, each department, including the Department of Finance, tables main priorities by strategic outcomes, program activities and planned/expected results, including links to related resource requirements.
• Departmental Performance Report: At the end of each fiscal year, the Minister of Finance publishes the Departmental Performance Report in which the Department of Finance’s activities and accomplishment during the previous year are articulated.
• Debt Management Strategy: Prior to the start of every fiscal year, a report is provided to Parliament by the Minister of Finance that provides the Government of Canada’s market and retail debt management strategy for the coming fiscal year.
• Debt Management Report: Within 30 sitting days of the tabling of the Public Accounts of Canada in Parliament, the Minister of Finance provides Parliament with a report on the Government of Canada debt operations for the previous fiscal year.
• Report on the Management of Canada’s Official International Reserves: Within the first 60 days the House is sitting after the end of the fiscal year, the Minister of Finance provides Parliament with a review of the operations of the Exchange Fund Account for the previous fiscal year and the changes in Canada’s international reserve holdings against the background of developments in the foreign exchange market.
• Treasury Evaluation: The Reports on the findings of treasury evaluations, including Department of Finance comments are posted on the Department of Finance website.
• Bank of Canada Annual Report: This report describes the Bank of Canada’s funds management activities during the previous calendar year.
• Auditor General reports: The Office of the Auditor General (OAG) audits federal government operations and provides Parliament with independent information, advice and assurance to help hold the government to account for its stewardship of public funds.

This document is reviewed on a regular basis to ensure efficient coordination and control of activities and effective policy development and decision-making.

The secretariat of the FMC is responsible for maintaining this document up to date.

To the extent possible, the Government of Canada takes thorough steps to limit or mitigate the risks that arise in the course of funding and investment operations. The main risks that the government strives to mitigate include credit, market, liquidity, legal, and operational risks.

Broadly, domestic debt operations focus on managing interest rate risk, while foreign debt operations focus on managing interest and exchange rate risks through an asset-liability matching framework and credit risk through strict credit guidelines and collateral frameworks.

The major principles of the government’s treasury risk management framework are listed below.

Independence: Risk monitoring and oversight, supported by analytic capacity and a governance framework, are independent of funds management operations.

Risk culture: The Department of Finance Canada and the Bank of Canada strive to create a culture where risk management is highly valued, considered an integral part of all treasury management activities, and viewed as the responsibility of all staff.

Risk identification: All existing and new lines of business are thoroughly reviewed on an ongoing basis to identify all material relevant risks.

Risk mitigation: Credit, market, liquidity, legal, and operational risks are mitigated to the extent possible.

Risk measurement: Appropriate quantitative and qualitative measures have been developed in line with policies and guidelines.

Monitoring and reporting: Reports provide context and significance to managers on issues surrounding risk management and the government’s overall risk position and are prepared on a regular basis.

Review: Periodic review of risk management policies, procedures, and operations by internal staff as well as external, independent, experts are undertaken. Risk policies are in line with leading practices of other comparable sovereigns.

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