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For the fiscal year ending March 31, 2013
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Table of Contents
Audit Committes and Parliamentary Agencies
Audit and Evaluation
Role of the Audit and Evaluation Committee
Support to the Committee
Summary of 2012-13 AEC Activities
Observations of the Committee and Forward Agenda
Assessment of PSIC'S System of Internal Controls, Risk Management and Governance Processes
Assessment of the Capacity and Performance of the Internal Audit and Evaluation Functions
THE CREATION OF INDEPENDENT DEPARTMENTAL AUDIT COMMITTEES THAT INCLUDE A MAJORITY OF MEMBERS FROM OUTSIDE THE FEDERAL PUBLIC SERVICE IS AN ESSENTIAL COMPONENT OF THE TREASURY BOARD (TB) POLICY ON INTERNAL AUDIT. THE FUNDAMENTAL ROLE OF THESE COMMITTEES IS TO ENSURE THAT THE DEPUTY HEAD HAS INDEPENDENT, OBJECTIVE ADVICE, GUIDANCE AND ASSURANCE ON THE ADEQUACY OF THE DEPARTMENT’S CONTROL AND ACCOUNTABILITY PROCESSES.
THE IMPORTANCE OF AUDIT COMMITTEES WAS FURTHER UNDERLINED IN LEGISLATION WHEN THE FEDERAL ACCOUNTABILITY ACT AMENDED THE FINANCIAL ADMINISTRATION ACT TO INCLUDE THE FOLLOWING REQUIREMENTS:
16.1 THE DEPUTY HEAD OR CHIEF EXECUTIVE OFFICER OF A DEPARTMENT IS RESPONSIBLE FOR ENSURING AN INTERNAL AUDIT CAPACITY APPROPRIATE TO THE NEEDS OF THE DEPARTMENT.
2006, C. 9, S. 259.
16.2 SUBJECT TO AND EXCEPT AS OTHERWISE PROVIDED IN ANY DIRECTIVES ISSUED BY THE TREASURY BOARD UNDER PARAGRAPH 7(1)(E.2), THE DEPUTY HEAD OR CHIEF EXECUTIVE OFFICER OF A DEPARTMENT SHALL ESTABLISH AN AUDIT COMMITTEE FOR THE DEPARTMENT.
2006, C. 9, S. 259.
16.21 (1) A PERSON WHO DOES NOT OCCUPY A POSITION IN THE FEDERAL PUBLIC ADMINISTRATION BUT WHO MEETS THE QUALIFICATIONS ESTABLISHED BY DIRECTIVE OF THE TREASURY BOARD MAY BE APPOINTED TO AN AUDIT COMMITTEE BY THE TREASURY BOARD ON THE RECOMMENDATION OF THE PRESIDENT OF THE TREASURY BOARD.
AUDIT COMMITTEES AND PARLIAMENTARY AGENCIES
The Treasury Board (TB) Policy on Internal Audit makes specific reference to offices of agents of Parliament, including the Office of the Public Sector Integrity Commissioner. Deputy heads of these organizations may, subject to compliance with sections 16.1 and 16.2 of the Financial Administration Act, authorize such departures from the specific policy requirements contained in the Policy as they may deem appropriate in light of the governance arrangements, statutory mandate and risk profile of the organization of which they are deputy heads.
AUDIT AND EVALUATION
Although audit and evaluation are the subjects of separate Treasury Board policies, they are closely linked. This reality is reflected in the organization of most federal organizations, where audit and evaluation staff may be managed within the same group. In the interest of good management and efficiency, the Office of the Public Sector Integrity Commissioner of Canada (PSIC) audit committee is also responsible for evaluation as set out in the TB Policy on Evaluation and consequently, is named the Audit and Evaluation Committee.
ROLE OF THE AUDIT AND EVALUATION COMMITTEE
The role of the AEC is:
- To provide objective and independent advice to the Commissioner regarding the sufficiency, quality and results of assurance on the adequacy and functioning of PSIC's risk management, control and governance frameworks and processes (including accountability and auditing systems)
- To review, using a risk-based approach, all core areas of PSIC management, control and accountability processes, including reporting
- To provide such advice as may be requested by the Commissioner on matters for which the Commissioner, as accounting officer, is responsible to report before Parliamentary Committees
- To provide strategic advice as requested by the Commissioner on specific emerging priorities, issues and accountability reporting, including the Commissioner’s Annual Report to Parliament.
The role of the AEC is advisory and its sole accountability is to the Commissioner. In the event that significant, irreconcilable differences arise between the external members and the Commissioner, the external members may describe this disagreement in their annual report. In extraordinary circumstances, external members may seek to, or may be requested to, provide testimony regarding their differences to a Standing Committee of either House of Parliament.
The Chair and members are selected by the Commissioner. The 2012-13 Committee consisted of:
Michael Nelson, External
Mario Dion, Commissioner
Guylaine Leclerc, External
Joe Friday, Deputy Commissioner
France Duquette, Chief Audit Executive
Patricia Fraser, Manager, Financial Services and Chief Financial Officer
During 2012-13 the Committee met on:
June 18, 2012
December 18, 2012
March 20, 2013
In-camera sessions with the Commissioner, with the Chief Audit Executive, with the Chief Financial Officer, and with the OAG representative, when present, as well as between external members only, were held at each regular meeting.
SUPPORT TO THE COMMITTEE
The Committee received information and support from management to enable it to carry out its duties and responsibilities effectively.
SUMMARY OF 2012-13 AEC ACTIVITIES
Activities of the Committee each year include scheduled meetings, teleconferences and learning opportunities. Activities undertaken by the AEC during 2012-13 were as follows:
Office of the Auditor General (OAG) Audit of Financial Statements
- The Financial Statements are audited each year by the OAG.
- Marise Bédard of the OAG presented the results of the audit of the 2011-2012 fiscal year to the Committee on June 18, 2012. She advised that the audit resulted in an unqualified opinion on the financial statements.
- Ms. Bédard confirmed that the audit had gone well and thanked officials of PSIC and CHRC (the financial services provider to PSIC) for their full cooperation.
- On the recommendation of the AEC, the Commissioner signed the audited financial statements.
PSIC 2012 Departmental Performance Report (DPR) and 2013 Report on Plans and Priorities (RPP)
- The April 2012 version of the TB Policy on Internal Audit changed the requirements regarding audit committees and reports to Parliament. The former policy called for committee members to “review” these documents prior to their submission to Parliament. The new policy requires only that members “receive a copy” of the documents. In the interest of transparency, the Commissioner decided that he would continue to provide Committee members with the opportunity to review PSIC’s DPR and RPP prior to their submission to Parliament. Based on their individual interests and availability, each member will decide whether they will provide comments.
- At each meeting the Committee was provided with the opportunity to review and comment on operational statistics.
- Details were provided on disclosure file management, including number of active files, active investigations, and ageing statistics on files.
- Committee members appreciated the quality of these presentations and asked that they continue to be part of each AEC meeting. Members felt that the information improved their capacity to provide the Commissioner with advice regarding operational performance and risks.
Budget and Human Resources
- The AEC reviewed all quarterly financial reports prepared by PSIC and at each meeting, were presented with a report on expenditures and forecasts for the fiscal year.
- Each AEC meeting included a report on human resources issues, including hiring, staff turnover, training and planning.
- At the December 18, 2012 meeting, the AEC reviewed the Report on the Audit of Contracting, Acquisition Cards and Contribution program. Members appreciated the presence of the auditor, Mr. Claude Rivard, at the meeting. Mr. Rivard responded to questions and provided clarifications and context to members with respect to the observations and wording in the report. The AEC recommended the Audit Report for approval.
- Also at that meeting, the CAE presented a preliminary three-year PSIC internal audit plan. Security management, information management, travel and hospitality, the planning process, and performance management are areas included in the plan.
Office of the Comptroller General (OCG) Departmental Audit Committee (DAC) Symposium
- On November 7 and 8, 2012 the OCG held two learning and development events for members of departmental audit committees.
- On November 7, 2012 Michael Nelson attended a pre-symposium meeting of DAC chairs. The meeting was attended by the Comptroller General and by Chairs of DACs from small, medium and large departments. Topics discussed included participation of deputy heads in DAC meetings and experiences of attendees (in their DAC capacity) with Parliamentary Committees.
- On November 8, 2012, Michael Nelson, Guylaine Leclerc and France Duquette attended the DAC Symposium. Topics discussed at the symposium included the government’s Financial Transformation Strategy, a case study of Risk-Based Audit Plans, trends in expenditure management, a review of the policy guidance for DACs, a presentation by the Comptroller General and a panel on leveraging the collective expertise of audit committee members. Guylaine Leclerc participated as a member of this panel and made an excellent presentation that was appreciated by symposium participants.
PSIC Risk Profile
- An updated corporate risk profile was presented to the committee at the March 20, 2013 meeting. The Committee was pleased with the content and presentation of the document and provided comments to the Chief Audit Executive, including feedback and views on risk. The Committee agreed that actions taken by the Commissioner and staff during the course of the year had reduced the likelihood of certain risks.
Values and Ethics
- In April 2012, a new Values and Ethics Code for Public Sector came into force. The Commissioner initiated a process with PSIC staff to develop a complementary Code for PSIC. This Code, which incorporates specific values and behavioural expectations and examples, came into effect in June, 2012.
PSIC Operations Briefings
- At the December AEC meeting, members expressed an interest in receiving occasional briefings from PSIC staff on their responsibilities. The first of these briefings took place at the March AEC meeting, when the Manager of Case Analysis, Ashley Bressette-Martinez provided members with an overview of the intake and case analysis stages of a disclosure.
- During the period of this report, external member William Brock ended his membership on the Committee. The Commissioner and the Chair noted the valuable contributions that Mr. Brock had made during his term and thanked him for the time and effort that he had contributed.
- At the March 30, 2012 AEC meeting, the Commissioner had announced a change in his approach to selecting members for the AEC. Going forward, only those who had successfully gone through the OCG process for selecting external audit committee members would be considered by the Commissioner. The Commissioner felt that this would provide evidence of his policy to be as transparent as possible in selecting his advisors. The Commissioner followed this policy in selecting Guylaine Leclerc as an external member of the Committee in April, 2012.
- The Commissioner decided that in consideration of the size of PSIC, the membership of the AEC going forward would include two external members rather than three. In order to main the majority of external members, the membership of the Deputy Commissioner, Joe Friday was discontinued. The Deputy Commissioner will continue to be invited to attend all AEC meetings.
Revision of the AEC Charter
- In November, 2012, the Commissioner asked Michael Nelson to draft a revised Charter for the AEC. Considerations in preparing the draft would include the TB Policy on Internal Audit, recently revised audit committee charters of other agents of Parliament, and the experience of PSIC AEC members during past years.
- A draft was prepared and was discussed at the December 18, 2012 AEC meeting. Changes made at the meeting were included in a further draft that was circulated to members in March, 2013. The Commissioner approved the revised Charter at the March 20, 2013 AEC meeting.
OBSERVATIONS OF THE COMMITTEE AND FORWARD AGENDA
This has been a year of consolidation and progress for the Office. The work of the Commissioner and his staff has clearly moved the Office and its reputation forward.
Members of the AEC understand that we are not a management committee. However our charter provides that we may provide advice to the Commissioner on a range of issues, including management of risks. The comments in this section of our report are made from that perspective.
The Commissioner has restructured parts of the organization and is moving forward with staffing. The Committee will monitor the results obtained over the year as a result of these changes.
A sustained effort over the year has resulted in a reduction in the amount of lapsed funds. The Commissioner his clearly made his executive team aware that with a fully staffed organization and a return to the base budget, operational decisions must take budget limitations into account. The AEC will continue to support the role of the Chief Financial Officer in her efforts to ensure good forecasting and budgeting practices.
The AEC has consistently held the view that the most significant risk to the Office is that it will not be seen by stakeholders to be carrying out its mandate. We believe that the Commissioner must be able to provide factual evidence that complaints are received and acted upon by his Office in a timely way and that this is communicated to stakeholders. We have seen significant progress on this issue during the reporting period and we look forward to seeing further steps that the Commissioner can take.
The Committee will include the following in its forward agenda for 2013-14:
- Providing advice and recommendations to the Commissioner on issues related to delivery of services, including performance measurement and communication with stakeholders
- Reviewing audit and evaluation reports
- Follow up of Management Action Plans
- Cooperation with the OAG and the OCG where appropriate with the PSIC’s status as an Agent of Parliament
- As a Committee, developing a better understanding of both the administration and the business of the PSIC through the operations briefings that began at the March 2013 AEC meeting
- Review of Quarterly Financial Statements and provision of comments where appropriate on the Report on Plans and Priorities, the Departmental Performance Report and the Commissioner’s Annual Report to Parliament
- Ongoing communication with the Commissioner on Strategic Planning
- Participating where appropriate in audit community learning events in order to exchange views with audit committee members in other departments and agencies
- Providing the Commissioner with advice, when appropriate, regarding the Five-Year Review of the Public Servants Disclosure Protection Act
ASSESSMENT OF PSIC’S SYSTEM OF INTERNAL CONTROLS, RISK MANAGEMENT AND GOVERNANCE PROCESSESS
At the June 15, 2011 AEC meeting, the Committee was presented with the results of an assessment carried out by an independent consultant, on PSIC’s internal controls. The Committee noted that this review was carried out in cooperation with PSIC’s financial services provider, the Canadian Human Rights Commission (CHRC) and that CHRC staff are providing leadership and high-quality professional services in the support of PSIC’s financial systems and operations. The Committee was satisfied that management exercised appropriate due diligence and that action plans were in place for improvement where required. During discussion of the proposed three-year internal audit plan at the December 18, 2012 AEC meeting, the Committee determined that this was an area of low risk. The Committee was further assured by the results of the OAG audit of the 2012-2013 PSIC financial statements, which were reviewed at the June 18, 2013 AEC meeting. The Committee noted that the OAG provided an unqualified audit opinion and as well, the OAG congratulated PSIC and CHRC staff on their work and their collaboration during the audit.
ASSESSMENT OF THE CAPACITY AND PERFORMANCE OF THE INTERNAL AUDIT AND EVALUATION FUNCTIONS
The Committee acknowledges that as a small and relatively new organization, PSIC is still developing the optimal approach to organization and implementation of its audit and evaluation functions. The Committee noted that:
- The AEC meets regularly, including in-camera, has an external Chair, and membership is reviewed annually and renewed when required, as has taken place during the reporting period
- OAG audits have taken place
- A risk-based audit and evaluation plan has been prepared and reviewed by the Committee
The Committee will continue to review the capacity and performance of the internal audit and evaluation functions at PSIC.
Michael Nelson, Chair
On behalf of the PSIC Audit and Evaluation Committee