Internal Audit Committee Annual Report 2017-2018
Table of contents
- Summary of the Committee’s Work
- Assessment of the Public Service Commission
- Assessment of the internal audit and evaluation functions
- Results of the annual self-assessment
- Proposed Priorities
This annual report of the external members of the Internal Audit Committee (the Committee) of the Public Service Commission (the agency) covers fiscal year 2017-2018.
This period was the first fiscal year under the new Treasury Board Policy on Internal Audit and Directive on Internal Audit. This new policy suite, which took effect on April 1, 2017, no longer includes a requirement for departmental audit committees to produce an annual report. However, we have decided to continue to produce one as a basis for annual discussions with the Commissioners and the Executive Management Committee. This discipline will also continue to help us critically assess our performance as a committee at the end of each fiscal year and establish our priorities for the next one.
This report includes brief comments on context, a succinct summary of our work, and our assessments of how the agency is being managed and how the internal audit and evaluation functions are performing. It also includes an overview of the results of our annual self-assessment and our proposed priorities for fiscal year 2018-2019.
In terms of context for this report, 2 aspects stand out for the external members. One relates to the Public Service Commission’s role as a central agency leading a system-wide transformational agenda. The other relates to the leadership team and organizational structure.
This reporting period marked the second full year of implementation of the New Direction in Staffing. This initiative, which was designed to simplify and strengthen the staffing system across the federal public service, was again a major preoccupation for the organization. While significant progress was made in some areas during this reporting period, it has become increasingly clear to us that successful implementation of this initiative across the system will require cultural change in departments as well as within the agency. In this context, there are still very significant risks that departments will not achieve the envisaged results. Success will require sustained leadership and effective support to departments by the agency over a period of several more years.
We also experienced significant senior personnel and organizational changes. However, following a 2-year period in which the organization was led by acting presidents and experienced many adjustments to the responsibilities of senior executives, a new president was finally appointed in May 2017 to a 7-year term. This provided an opportunity to permanently staff senior management positions and set the organizational structure for the longer term. The new President has taken full advantage of this opportunity. The Committee is encouraged and supportive of these developments because they have better aligned the organization to address the risks in implementing the New Direction in Staffing.
Summary of the Committee’s work
During this reporting period, the Committee held 4 meetings. During the morning before each of these meetings, the external members, along with the Chief Audit and Evaluation Executive, met with the agency officials to receive a variety of briefings on specific topics. These morning meetings were followed by an in camera lunch with the President before the start of the formal Committee meetings to discuss key risks and challenges facing the organization. We also held separate in camera discussions with the President, Chief Financial Officer and the Chief Audit and Evaluation Executive following the Committee meetings. In addition, on 2 occasions, the external members attended a working dinner with the President to discuss broader issues.
For 2017-2018, we developed a comprehensive plan to ensure we met all obligations under the new Treasury Board policy suite on internal audit and were able to complete all of the actions identified in the plan. This included actions to ensure we were appropriately engaged throughout the year in each of the mandatory areas of responsibility defined in the new Directive on Internal Audit: values and ethics, risk management, management control framework, internal audit function, external assurance providers, follow-up on management action plans, financial statements and public accounts reporting, and accountability reporting.
We received updates on progress with audits and evaluations at each of our meetings. We provided advice on Phase I of an audit of information technology (IT) general controls, which focused on IT governance, and an associated management action plan. We also provided advice on an external assessment of the internal audit function and its associated management action plan, self-assessments done by the agency against the recommendations contained in 2 horizontal audits on information management by the Office of the Comptroller General and an audit on managing the risk of fraud by the Office of the Auditor General, and an internal audit and evaluation plan for the fiscal years 2018 to 2021. In addition, we provided our advice on a formative evaluation of the agency’s integrated intelligence.
Other key areas of focus related to our mandatory areas of responsibility included reviewing and providing comments on all financial statements and accountability reporting documents; reviewing the agency’s annual management accountability framework assessment by the Treasury Board of Canada Secretariat and providing advice on the associated management action plan; monitoring progress in implementing management action plans in response to audits and evaluations; reviewing and providing advice on the IT security and values and ethics action plans; providing advice on the continued development of the corporate risk registry and risk profile; and reviewing the results of the annual testing of the system of internal control over financial reporting.
In addition to our work in these core areas, we continued to provide input and advice on issues related to implementation of the New Direction in Staffing, including implementation within the agency. We also provided advice on the development of the new Departmental Results Framework (and the related program and performance profiles), which was approved by Treasury Board near the end of this reporting period, and on the early development of the agency’s approach to ensure the sustainability of its mission-critical IT systems.
Assessment of the Public Service Commission
Based on our engagements with management and staff in the Public Service Commission (the agency) during this reporting period, we have a positive view about how the agency is managed. During this reporting period the organization was able to manage risks competently and maintain effective controls over its operations. Even more importantly in terms of moving forward to implement its system-wide transformational agenda, the agency now has stable leadership at the top and an organizational structure fully aligned with its current priorities. In this context, we are confident that the agency is now well positioned to move forward.
At the same time, we recognize that there is still a very significant risk that the New Direction in Staffing will not be implemented in departments in a way that achieves the system-wide objectives the agency seeks from this initiative. Since these objectives must be achieved to position the public service for the future, this is a risk for the public service as well as for the agency.
To help manage this risk, the agency will, in our view, have to continue to make progress in some specific areas:
- First, the agency will have to implement effective performance management to measure progress in the implementation of the New Direction in Staffing across the system. The recently approved Departmental Results Framework and the related Departmental Plan 2018-2019 provide the foundation for measuring progress. However much work remains to be done to bring this framework to life by setting targets and collecting performance information that can be used for decision making by senior management. This is now a critically important stage of work in support of the New Direction in Staffing.
- Second, the agency will have to implement the New Direction in Staffing effectively internally. This will not only help the agency simplify and strengthen its staffing system like any other department, it will also enhance its credibility with departments through leading by example. In addition, it will help the organization learn what it takes to be successful in a departmental environment. This knowledge will inform its strategy choices and interactions with other departments.
- Third, the agency will have to renew its mission-critical IT systems. For quite some time, as highlighted in our previous annual reports, external members have been concerned about the sustainability of the Public Service Resourcing System. We are therefore encouraged by the priority that the agency is now giving to launching the system transformation project and the work being done to prepare the way. In our judgment, this is an extremely important initiative that needs to succeed to help enable successful system-wide implementation of the New Direction in Staffing.
- Fourth, the agency will have to strengthen its knowledge integration capacity. Having previously relied heavily on auditing individual departments, the agency must now, under the New Direction in Staffing, rely on multiple sources of information to develop an accurate picture of staffing performance in departments. In this context, a recent evaluation concluded that there is a need to improve the way that information is shared across the agency and to strengthen its knowledge integration capacity. The external members agree with this conclusion and believe that the agency now needs to establish its overall approach and implement this approach effectively in support of the New Direction in Staffing.
We know that the agency recognizes the need for continued progress in these areas and is committed and working hard to achieving it. Nevertheless, we are highlighting these 4 areas in this report because we believe achieving further progress in each area is critical to the successful implementation of the New Direction in Staffing.
In short, we have a positive view of how the agency is managed. We believe the organization is now well positioned to continue to deliver on implementation of the New Direction in Staffing. We will place a high priority on encouraging and supporting further progress during the coming year, with a particular emphasis on the 4 areas outlined above.
Assessment of the internal audit and evaluation functions
With the departure of the previous Chief Audit and Evaluation Executive in September and the arrival of its successor in December, it was another challenging year for the Internal Audit and Evaluation Directorate (the Directorate). However, the new Chief Audit and Evaluation Executive provided strong leadership in his first months on the job. We have a positive view of how he has positioned both the audit and evaluation functions for the upcoming fiscal year.
During this reporting period, the internal audit function met our expectations with respect to standards of performance and quality of products. However there were significant delays in delivering projects which impacted the delivery of subsequent projects. Similar delays were highlighted in our last annual report. Our concerns about delays, as well as our positive view on the technical performance of the audit function, aligns well with the results of an external assessment of the function which was completed at the end of the reporting period.
Similarly, the evaluation function met our expectations with respect to standards and quality of products, but there were again significant delays in delivering products during this reporting period. We believe, as we highlighted in our previous report, more needs to be done to avoid these delays.
Simply put, we believe the flow of audit and evaluation products to senior management and the Committee needs to increase. We also believe this can be done by scoping projects more tightly, increasing productivity and delivering these projects on schedule in a more disciplined way. In this context, we are very pleased that the new Chief Audit and Evaluation Executive has already put an approved plan and increased budget in place to do this. He is also taking immediate steps to strengthen the capacity of the Directorate for the longer term and to implement an action plan to address all of the recommendations in the external assessment of the audit function.
We are also pleased with the priority that the new President has placed on strengthening the audit and evaluation functions, including approving an increased budget. We fully support the President’s recent decisions to have the Chief Audit and Evaluation Executive report directly to the President for administration as well as operations, and to make him a member of the Executive Management Committee beginning in 2018-2019. We believe that this new reporting relationship will further strengthen the independence of the Chief Audit and Evaluation Executive. Membership on the Executive Management Committee will help position him well to make an even greater contribution.
Based on these recent developments, we are optimistic that, under the leadership of the new Chief Audit and Evaluation Executive, both the audit and evaluation functions will add more value, as we believe they should, to the organization in the coming year. We will place a high priority on supporting his efforts to do this.
Results of the annual self-assessment
At the end of this reporting period we conducted a self-assessment based on the questionnaire included in the Office of the Comptroller General’s most recent guidebook for departmental audit committees. We also invited the President, Chief Financial Officer, Chief Audit and Evaluation Executive and one Internal Audit and Evaluation Directorate (Directorate) staff member to complete the questionnaire. The results of this year’s self-assessment are particularly relevant and useful as the Internal Audit Committee (the Committee) begins the transition to a new chair. The self-assessment will be considered in depth by members at the first meeting in 2018-2019.
Overall, we are pleased with the way that the Committee has been able to continue to develop its strategic advisory role with the new President. This strategic role, which is recognized in the new Treasury Board policy suite and which we have been developing for several years, continues to be an area where we believe we can add increasing value going forward, particularly as the Committee broadens its skill set in the next round of membership appointments.
We are also pleased with the collaborative way in which senior managers have engaged us and the way in which the agency, especially the Directorate, has supported us. We believe the processes are working well and we feel well supported.
A key challenge for both the Committee and the agency moving forward will be to ensure that the transition to a new chair and a new member is as seamless as possible. However, given that the new chair has already served on the Committee for 2 years and we expect the new member will bring a fresh perspective and additional depth, we are confident that the upcoming year will be a highly productive one for the Committee.
This report marks the end of the tenure of Keith Coulter as chair of the Committee. The members would like to extend our sincere thanks for the exemplary leadership Keith has shown over the past 6 years as chair, and for the dedication and contribution he made previously as a member of the Committee.
Based on the considerations outlined in this report, the external members of the Committee recommend the following priorities for 2018-2019:
- Continue to build strength as a committee under the leadership of a new chair and with a new external member.
- Support the agency’s efforts to implement effective performance management, implement the New Direction in Staffing well internally, renew its mission-critical IT systems and strengthen its knowledge integration capacity by providing independent perspective and advice
- Support the efforts of the Chief Audit and Evaluation Executive to fully implement the Internal Audit and Evaluation Plan for fiscal years 2018 to 2021, thereby improving the flow of products to senior management and the Committee by providing timely input and advice.
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