Role of Departmental Audit Committee Charter

On this page

• Introduction
• Purpose of the Departmental Audit Committee
• Membership
  • Composition
  • Chair
  • Vice Chair
  • Conflict of Interest
  • Tenure and Terms of Office
• Roles and Responsibilities
  • Expectations of DAC Chair
  • Expectations of DAC Members
• Meetings
  • Frequency
  • Quorum
  • Preparation and Attendance of External Members
  • Attendance of Ex-officio members and invitees
  • Deliberations/Records of Decisions
  • In-Camera
  • Self-Assessment
  • External Assessment
• Operations
  • Review of the DAC Charter
  • Access by/to the DAC
  • The DAC Orientation
  • Support to the DAC
• Proactive Disclosure
• Effective Date

December 2019

Introduction

This Departmental Audit Committee (DAC) Charter formally defines the purpose, authority, membership and responsibility of the DAC in the Department of Canadian Heritage (PCH). This Charter is complementary to the Treasury Board (TB) Policy on Internal Audit (Policy) and its associated Directive as well as the TB Guidebook for a Departmental Audit Committee.

The DAC is an important component to the good governance of PCH and a critical aspect of a professional and objective internal audit function to ensure oversight of public resources throughout the federal public administration.

Purpose of the Departmental Audit Committee

The DAC provides objective advice and recommendations to the Deputy Minister regarding the sufficiency, quality and results of internal audit engagements related to the adequacy and functioning of the PCH's risk management, controls and governance processes. To provide such support to the Deputy Minister, the DAC exercises oversight of core areas of departmental management, controls and accountability, including reporting.

The DAC, as a strategic resource, will provide advice, suggestions and recommendations when requested on specific emerging priorities, concerns, risks, opportunities and/or accountability reporting.

Membership

Composition

The Deputy Minister of PCH is responsible for establishing and maintaining an independent DAC that includes a majority of external members recruited from outside the federal public administration and selected by the Deputy Minister and the Comptroller General and, appointed by Treasury Board.

The DAC must reflect Canada’s diversity in terms of gender, official languages, Indigenous Canadians, minority groups and regional representation.

The DAC at PCH is comprised of three external members and three Ex-officio members. The external members are selected according to their collective skills, knowledge and experience, allowing the Committee to carry out its duties competently and efficiently.

The DAC external members are to be familiar with financial reporting or are to become familiar with such reporting within the first year of their appointment. At least one external member is to be a financial expert, holding a professional accounting designation in good standing, unless an exception is granted by the Comptroller General of Canada.

Chair

The Chair, appointed by the Deputy Minister and the Comptroller General of Canada, ensures that all areas of responsibility of the DAC are reviewed. The Chair also establishes effective relationships with management, as well as with stakeholders within the Government when relevant to the DAC.

The relationship and dialogue between the DAC chair and the deputy head is of particular importance. This interaction should be marked by its candour so that discussions of risk exposures and areas for improvement are unambiguous and focus on opportunities for effective mediation.

Vice Chair

A Vice Chair will be appointed at the first in-person DAC meeting following the start of a new fiscal year and shall carry out the duties and functions of the Chair when the Chair has declared a conflict of interest or is unable to attend a meeting. The appointment shall expire at the end of the fiscal year in which the Vice Chair was appointed.

Conflict of Interest

All DAC members shall be free of any real or perceived conflict of interest. They are to be knowledgeable of the Guidance on Conflict of Interest and Disclosure Requirements provided by the Office of the Comptroller General. DAC members must disclose all new activities, interests or appointments in order for the department to assess whether they may impair, or be seen to impair, the member’s ability to discharge his or her duties in an independent and objective manner. In addition to the declaration of conflict of interest that is held at the beginning of each meeting, the members are provided with a disclosure form to fill and sign annually.

Tenure and Terms of Office

An external member of the DAC is to serve no more than two terms and up to a maximum of six years. A single term must not exceed four years.

Roles and Responsibilities

The DAC’s primary role is to assist the Deputy Minister in monitoring the organization’s core systems of control and accountability and governance. Consideration should be given to the particular departmental mandate, objectives and priorities, as well as the corresponding risks affecting the Department and the Government. The DAC should also monitor departmental priorities and ensure they align with the Government’s stated priorities and direction.

At each DAC meeting, members meet with the Deputy Minister to discuss subjects of interest such as risk exposures and/or areas of improvement.

Notwithstanding the requirements outlined in the TB Policy and its associated Directive, as well as the nine areas of responsibility listed below, the Deputy Minister may seek additional advice, support and recommendations from the DAC members as required.

The nine key areas of responsibility of the DAC are as follows:

1. Values and Ethics
   • Includes reviewing and advising the Deputy Minister on the departmental systems and practices established to encourage and monitor compliance with laws, regulations, policies and standards of ethical conduct, and identify and deal with any legal or ethical violations.
   • For example, this area of responsibility would include the Review of the Ombudsman Annual Report as well as meeting with the Ombudsman to discuss the results of the report. At the start of each meeting, there is also a conflict of interest declaration made by all members.
2. Risk Management
   • Focuses prominently on reviewing and advising the Deputy Minister on the department’s risk management.
   • For example, this area of responsibility would include the review of the Departmental Risk Profile, the Risk-based Audit Plan, the Departmental Plan and the Fraud Risk Management Framework / Report.
3. Management Control Framework
   • Includes reviewing and advising the Deputy Minister on the departmental system of internal controls, and be informed on all significant matters that arise from the work performed by others who provide assurances to senior management and the deputy head.
   • For example, this area of responsibility would include the review of updates, as requested, on major projects, the Internal Control Review Results, the Ongoing Internal Control Monitoring Plan, the Annual Statement of Management Responsibility including internal controls over financial reporting as well as the review of Internal Audit reports.
4. Internal Audit Function
   • Includes reviewing and advising the Deputy Minister on the department’s internal audit charter, the sufficiency of internal audit resources, the quality and substance of the department’s Risk-Based Internal Audit Plan and progress against the plan, internal audit reports, the performance of the internal audit function, and the recruitment, qualifications and performance of the CAE.
   • It is also generally expected that DAC members would be informed of any internal audit engagements or tasks that do not result in a report to the DAC, including all matters of significance arising from such work.
5. External Assurance Providers
   • Includes being informed of and advising the Deputy Minister on the results of the work of external assurance providers such as the Office of the Auditor General of Canada, Agents of parliament and central agencies, and providing advice on audit-related issues or priorities raised by the external assurance providers.
6. Follow-up on Management Action Plans
   • Includes regularly reviewing and advising the Deputy Minister on the progress of implementing approved management action plans resulting from the work of internal audit and external assurance providers.
7. Financial Statements and Public Accounts Reporting
   • Includes reviewing and, as appropriate, advising the Deputy Minister on key departmental financial reports, such as quarterly financial reports, annual financial statements and Public Accounts, and the annual Statement of Management Responsibility including internal controls over financial reporting. The DAC is not required to recommend these documents for approval by the Deputy Minister, nor are they expected to participate in their development.
8. Accountability Reporting
   • Includes receiving copies of departmental accountability reports (i.e. Departmental Plan, Departmental Results Report). Regardless of the timing and focus of the DAC’s review of actual accountability reports, DAC would generally review and comment on their confidence in the underlying processes that support effective accountability reporting, consistent with requirements of the Treasury Board of Canada Secretariat. The DAC may also receive plans and reports prepared by the department’s evaluation function for information.
   • These reports are intended to provide context on departmental operations and oversight. The DAC is not required to recommend these documents for approval by the deputy head, nor is there an expectation that DAC would be involved in the development of these reports.
9. Large Transformation Projects
   • Includes reviewing and advising the Deputy Minister on current, in development and future transformational initiatives and projects of significance, where the department has a key role or is impacted (including IT related Audit Engagements as well as horizontal initiatives). The DAC should seek answers to questions about the fundamental purpose of the project, the skills and experience required to deliver it, the quality and timing of the data that will be used to guide projects, the amount of resources available vs. required to deliver projects, and, specifically, how the end-state organization and services will differ from the current state.
   • For example, this area of responsibility would include the updates on major projects such as My PCH Online.

Expectations of DAC Chair

The DAC chair is expected, but not limited to:

• Prepare the DAC annual plan;
• Oversee preparations of DAC meetings;
• Chair DAC meetings;
• Lead the DAC’s self-assessment process; and
• Support a positive DAC culture.

Expectations of DAC Members

In discharging their responsibilities, DAC members are each expected to:

• Be familiar with the sections of the TB Policy relevant to their work;
• Know, respect and comply with the Terms and Conditions of Appointment for DAC;
• Be familiar with the scope of internal audit and the limits of its purview.

Annually, the DAC will review its Work Plan and ensure that all of its roles and responsibilities are performed on a timely basis.

Meetings

Frequency

As per the practice at PCH, the DAC normally meets in person on a quarterly basis. At least two conference calls are normally held, in August and January, to discuss the Financial Statements and Corporate documents.

Quorum

The quorum for a meeting shall be the majority of the external members. Alternates for external members will not be permitted.

Preparation and Attendance of External Members

The DAC Meetings are the main working forum for the committee, and members should participate actively.

To enhance the effectiveness of the DAC meeting, in addition to attending each meeting, each member will:

• devote the time needed to prepare for and participate in each meeting by reading the reports and supporting materials provided for the meeting;
• ask probing questions and expect, encourage and elicit reasonable answers;
• encourage a culture of open, candid, respectful and direct communication between management and the committee; and
• provide sound counsel while respecting management’s authority to make decisions.

Reports and supporting material for each DAC meeting will be available and provided by the Office of the Chief Audit Executive to DAC members approximatively two weeks in advance of the scheduled DAC meeting to allow members sufficient time to review the material. Briefings and information on emerging issues and risks will also be provided as required.

Attendance of Ex-officio members and invitees

Ideally, the Deputy Minister, the Senior Associate Deputy Minister and the Associate Deputy Minister as Ex-officio members, the Chief Financial Officer and the Chief Audit Executive as required attendees, shall attend all meetings of the DAC. Observers and guests, such as the Corporate Secretary, may also attend DAC meetings. The Chair may request the attendance of other departmental officials as required.

When required, the Chair may ask a senior representative of an external assurance providers (such as the Office of the Auditor General or the Office of the Comptroller General) to attend the DAC meetings to discuss the plans, findings and other matters of mutual concern.

Deliberations/Records of Decisions

The DAC’s advice is presented by way of recommendations to the Deputy Minister. The DAC is encouraged to provide recommendations stemming from consensus as much as possible. The Chair is expected to attempt to achieve consensus where members express conflicting positions, views or advice. When consensus is not reached, the record of decisions of the meeting should reflect the diversity of opinions.

Records of decisions of each meeting shall document the decisions taken by the DAC members and shall include a high-level summary of the discussion as well as insights on the topics discussed. Comments contained in the records of decisions will not be attributed to individual members. The DAC secretariat within the Office of the Chief Audit Executive is responsible to prepare the records of decisions, including documenting the presence of the attendees, and submit to DAC for approval.

In-Camera

As part of each meeting, the DAC will normally meet individually In-Camera with the Chief Financial Officer, the Chief Audit Executive, representatives of external assurance providers when in attendance, and any other officials the Committee may determine appropriate to discuss departmental challenges or any other important matter deemed necessary. At the end of each meeting, DAC members will hold an in-camera between them.

The DAC will hold, at least annually, an In-Camera with the Ombudsman.

Self-Assessment

The DAC members, along with PCH senior management, should undertake a periodic self-assessment of the DAC’s performance to continually improve how it carries out its responsibilities and enhance its contribution to the DM.

External Assessment

A formal external assessment of the DAC's performance is part of the department's practice inspection of the internal audit function to be carried out every five years. The Practice Inspection is to be carried out by a qualified independent reviewer. The results of the external assessment accompanied with an action plan is to be communicated to the Deputy Minister, the DAC and the Office of the Comptroller General.

Operations

Review of the DAC Charter

Consistent with the TB Directive on Internal Audit, the role, responsibilities, and operations of the DAC are to be documented in a DAC Charter, reviewed periodically by DAC members and approved by the DM.

Access by/to the DAC

The DAC has unfettered access to the Chief Audit Executive, Chief Financial Officer, and other departmental managers and documentation (subject to applicable legislation) as may be required to fulfill its responsibilities.

The Chief Audit Executive has unfettered access to the DAC and to the DAC Chair.

The DAC Orientation

The role of the DAC can only be fulfilled if its members are well informed. New members shall receive orientation materials and briefing sessions on the DAC’s purpose, responsibilities and objectives, and on PCH’s business as well as that of the Federal Government.

Support to the DAC

The Office of the Chief Audit Executive will provide the DAC with the resources necessary to fully carry out its role, responsibilities and duties. To the extent it deems necessary to meet its responsibilities, and in keeping with its Charter, the DAC has the authority to retain independent advice and assistance.

The Office of the Chief Audit Executive provides support, for:

• The development of the DAC Annual Plan;
• The timely preparation of all notices and agendas of meetings;
• The timely coordination and distribution of reports and/or supporting material that are prepared for the DAC’s information or consideration;
• The timely preparation and distribution of the records of decisions; and
• Performance of other duties as assigned.

Proactive Disclosure

As per the TB Directive on Internal Audit, PCH is required to proactively disclose individual external DAC member remuneration and expenses (including travel and hospitality), in the time and manner prescribed by the Comptroller General of Canada.

Effective Date

This Charter has been recommended for the approval of the Deputy Minister of PCH by the DAC and takes effect on the date of its signature by the Deputy Minister.

Hélène Laurendeau

Deputy Minister of Canadian Heritage