Report of the Internal Audit Committee to the Commissioners of the Public Service Commission for Calendar Year 2011
The Internal Audit Committee (Committee) of the Public Service Commission of Canada (PSC) is comprised primarily of external members to provide independent advice on matters relating to governance, risk management and controls. As required by the Committee's terms of reference, this report outlines Committee activities during the calendar year 2011.
Membership and meetings
The Committee was chaired by the President and has as its members: Dyane Adam PhD, Peter Boomgaardt and Keith Coulter; Robert Little completed his term on May 31, 2011 and was replaced by Mr. Coulter. Maria Barrados PhD also completed her extended term as President on December 31, 2011. The Committee gratefully acknowledges the great contributions of both members to the Committee's work. Anne-Marie Robinson was appointed acting President and subsequently confirmed in the position in February 2012.
A representative of the Office of the Auditor General (OAG) was invited to attend all meetings. Members of the PSC senior management and Internal Audit staff normally attended as observers and to respond to questions from members.
The Committee met five times during the year (February, May, August, November and December) with all members participating in all meetings in person or by teleconference. Two of the external members met with all the Commissioners on April 20 to present the Committee's 2010 annual report. The Committee regularly had in-camera sessions involving only the external members, the President and other staff as appropriate.
Committee terms of reference
The Committee reviewed and approved its Terms of Reference in November.
In determining meeting agenda topics and in completing this report, the Committee refers to eight key areas of oversight responsibility that are outlined in guidance provided by the Office of the Comptroller General (OCG).
Eight areas of oversight responsibility
Values and ethics
In August 2011, the Committee was updated on how the PSC disseminated its program of Values and Ethics to all staff and encouraged compliance; it was emphasized that the values of the PSC — integrity, respect, fairness and transparency — and the Public Service Employment Act (PSEA) — fairness, access, transparency, merit and representativeness — were integrated into every part of the organization's work. It was noted that some features of the program had been enhanced during the past year, including governance and performance indicators.
As well, the Committee was briefed on the “acceptable” rating in the current Management Accountability Framework (MAF) assessment by the Treasury Board Secretariat. Senior management reported on its activities since last year's update and provided results of the PSC Employee Engagement Survey.
The Committee was informed that the PSC has updated its Code of Conduct but that implementation awaits a new code of conduct being prepared by Treasury Board Secretariat for the public sector.
The Committee is pleased with the progress being made in this area over the past year.
During its December meeting the Committee received a briefing on the annual risk assessment from the Chief Audit Executive (CAE). The Committee made some suggestions that will be incorporated in finalizing the document.
Following up from last year when a review of certain Advance Contract Award Notices (ACANs) commenced, the Committee was updated on findings and the ultimate reporting of the matter by both the Internal Audit Directorate and the Office of the Procurement Ombudsman.
The Committee was briefed on the business plan for Staffing and Assessment Services Branch with special emphasis on cost recovery matters. The Committee identified several projects and areas of risk for specific follow-up during its meetings, namely:
- Cost Recovery;
- Test Security;
- Management of Information Technology Security implementation;
- Business Intelligence/Enterprise Data Warehouse; and
- Fiscal constraints.
The Committee is mindful of the changing risk landscape at both the PSC and government-wide levels. It considers that the PSC should continue to develop its risk management approach and culture, explicitly embodying risk assessments and suitable mitigation strategies in all its plans and activities.
Management control framework
The Committee was informed of the key management issues and how procedures have been adopted to mitigate concerns and produce desired results. The PSC also presented its investment plan along with a deck on new Treasury Board policies for investment planning and management of projects. In May, the Committee was presented with the PSC's Departmental Staffing Accountability Report and management's action plan responsive to the findings.
During three of the meetings, the Committee received updates on actions for managing fiscal constraint. As well, the Committee was briefed on government administrative rationalization for IT networks and staff compensation.
The Committee was regularly provided with key reports used by the Executive Committee of the PSC to monitor activities and engaged in full and open discussions on specific issues with follow-up actions included in the meeting minutes. The Committee noted the strong financial controls in place within the PSC as evidenced by results of self assessments and the OAG audit of annual financial statements.
OAG and central agencies
By virtue of the regular attendance of a representative of the OAG, the Committee has been kept well informed of matters raised by the OAG and about the OAG's audit plans. The OAG informed Committee members of updated responsibilities under the newly implemented Canadian Auditing Standards.
With respect to the issue of PSC's use of ACANs, the Committee considered the results of both the review of the Office of the Procurement Ombudsman and an Internal Audit. The Committee is satisfied that all necessary corrective actions have been taken with respect to these reports with implementation of the management action plan in response to the Internal Audit. This action plan was recommended by the Committee and approved by the President.
The CAE periodically updated the Committee on developments in the OCG, particularly on evolving role of internal audit and audit committees. In May the Committee was briefed on the evaluation of Treasury Board's Policy on Internal Audit.
Members attended a symposium for audit committee members sponsored by the OCG on November 3, 2011.
Follow-up on management action plans
The Committee uses three means of follow-up on management action plans:
- General Committee-related actions are included in the “Tracking of Follow-Ups” which is updated for each meeting;
- Management plans and progress on actions arising from recommendations of internal audits are reported semi-annually; and
- Progress on PSC commitments and action plans arising from PSC external audits are also reported on a six-month schedule.
In all cases, individual actions are monitored until the Committee concludes that changes have been successfully achieved. The Committee is generally satisfied with management's progress in implementing its action plans.
Financial statements and Public Accounts reporting
The Committee reviewed the annual financial statements prepared by management and noted no concerns with the judgments and estimates embodied in them. With respect to the OAG audit of the PSC's financial statements at March 31, 2011, the Committee was pleased to note that the OAG issued an unqualified opinion on the financial statements, reported no matters of concern and made no recommendations for improvement to management. The Committee recommended acceptance of the financial statements to the President.
Throughout the year the Committee also received copies of the Quarterly Financial Reports that PSC is now required to issue.
The Committee commends the PSC for the continuing high quality of its financial reporting.
During its May and August meetings respectively, the Committee reviewed proposed messages and drafts of the Departmental Performance Report for 2010-11. The Committee found the report satisfactory but urged improved reporting of accomplishments and suggested providing more context in some areas.
As a result of decisions by the Government, the Report on Plans and Priorities (RPP) process for Fiscal Year 2012-13 was delayed. Consequently, the Committee reviewed the draft RPP and provided its input in February 2012.
The Committee was briefed on the results of Round VIII of the Management Accountability Framework (MAF) assessment and the resultant PSC action plan. The Committee monitored the continuing implementation of recommendations arising from the Independent Review Committee's report of January 2009 Review of the Public Service Commission Oversight.
The Committee also received a presentation on the PSC's report on the PSEA five-year legislative reviews. As well, the Report of the Review of the Public Service Modernization Act, 2003 — released by Treasury Board Secretariat in December, 2011 — was discussed by the Committee.
The Committee received regular updates on strategic matters and such key challenges as:
- Staffing and Assessment Services operations;
- Test security;
- IT security;
- Business Intelligence/Enterprise Data Warehouse developments; and
- Priority administration.
In keeping with its mandate, the Committee provided suggestions to mitigate the evolving risks in PSC activities.
For information purposes, the Committee was provided with a copy of the 2010-2011 Annual Report of the Public Service Commission to Parliament.
The Committee considers that the PSC's accountability reporting regime is satisfactory and supports the continuing efforts to enhance the quality and relevance of data reported.
Internal audit function
The Committee reviewed the draft internal audit plan for 2011-12 and outlook to 2015-16. The Committee provided some suggestions for future audits and recommended the plan to the President for approval.
The Committee also received a briefing on the resources of internal audit and all staffing actions throughout the year. At each meeting the Committee was updated on the status of audits and plans; where appropriate based on findings at the preliminary survey stage, further work was modified on the recommendation of the Committee. Two internal audit reports were presented to the Committee: Selected ACANs, and Audit and Data Services Branch Management. A third audit, Human Resource Planning, was under way at year-end and is slated to be finalized in 2012.
The Committee placed special emphasis on findings and recommendations, as well as management's remedial action plans. Both internal audit reports were recommended for approval and the Committee provided input into the action plans which were approved by the President. A thorough systematic approach has been adopted to inform the Committee on the implementation of all internal audit recommendations.
As in past years Committee members were interviewed by Internal Audit in preparation for next year's audit plan and provided input with the intent of balancing the various requirements in advance of the draft plan being presented for approval.
The Committee considers that the internal audit function:
- is staffed by professionally qualified people;
- schedules its audits using a risk-based methodology;
- applies a professional approach to planning, executing, reviewing and reporting on its audits;
- follows up systematically on the progress of actions by management in response to audit reports; and
- follows guidance provided by the Treasury Board Policy on Internal Audit. Accordingly, the Committee considers that the internal audit function continues to evolve in line with OCG guidance, has a reasonable capacity to address its mandate and is performing its role in a satisfactory manner.
Building on its experience since 2006, the Committee considers that the 2011 activities constitute a satisfactory discharge of its responsibilities. The Committee recognizes that its role will continue to evolve as the OCG clarifies its expectations of internal audit committees in the federal public sector.
The Committee was provided with relevant and transparent information to enable the Committee to fulfill its mandate. In particular, the Committee was regularly briefed on how the PSC is dealing with the major challenges it faces. The Committee was pleased with the professionalism of staff, the candour concerning the challenges they face and the willingness to implement suggestions.
After its sixth year of activities, the Committee considers that it has a realistic appreciation of the complex issues faced by the PSC and its management processes. Based on observations over the past year the Committee concludes that the PSC has a rational approach and systematic management control framework to addressing its mandate, to monitoring results and to reporting publicly.
2012 promises to bring considerable change to the PSC, especially with the transition to a new President and Commission. As well, renewal of the Committee's membership will be undertaken, as tenures of the founding members come to an end.
For 2012, the Committee proposes consideration of the activities summarized in the attached schedule. In particular, specific issues that the outgoing Committee sees as warranting review include:
- Fiscal restraint implications;
- Impact of the five-year legislative review of the PSEA;
- Continuing enhancement of PSC's risk management approach and culture;
- Audit and Data Services Branch programs and activities;
- Follow-up to the 2011-2012 MAF assessment for PSC;
- Implementation of the new Public Service Commission Code of Conduct once the public service code is approved by Treasury Board; and
- Implementation of the PSC's internal audit plan for 2012-2013.
|#||Audit Committee Action/
|Frequency||Feb. Q1||May Q2||Aug. Q3||Nov. Q4||Special Meeting|
|Departmental Audit Committee Infrastructure|
|1.||Departmental audit committee Charter (4.4.1)||Review||Annually||x|
|2.||Audit committee annual plan (for upcoming fiscal year) (4.4.2)||Approve
~ 1 year ahead
|3.||Audit committee member competency profile (4.3.3)||Review||Annually||x|
|4.||Orientation/ongoing professional development requirements||Determine||Annually||x|
|Internal Audit Oversight Responsibilities|
|5.||Departmental internal audit charter / policy (4.2.2)||Review and recommend for approval||Annually||x|
|6.||Adequacy of internal audit resources (4.2.2)||Review||Annually||x|
|7.||Risk-based internal audit plan (4.2.2)||Review and recommend for approval||Annually||x|
|8.||Performance of the internal audit function/chief audit executive (4.2.2)||Review/
|9.||Departmental internal audit reports and management action plans to address internal audit recommendations (4.2.2)||Review and recommend for approval||Ongoing||-||-||-||-||Dec.
|10||Audit engagements or tasks that do not result in a report to the audit committee (4.2.2)||Receive for information||Ongoing||-||-||-||-|
|11||Follow-up reports on management actions taken (4.2.2)||Review||Regularly||x||x|
|12||Values and ethics (4.2.1)||Review||Annually||x|
|13||Departmental corporate risk profile and risk management arrangements (4.2.1)||Review||Annually||x||Dec.
|14||Management control framework (4.2.1)||Review||Annually||Dec.
|15||OAG and central agencies, including audit issues and reports that have departmental or government wide implications and accompanying management responses and action plans (4.2.3)||Review and recommend for approval / advise DM||Ongoing||-||-||-|
|16||Arrangements to monitor and follow-up on related management action plans (4.2.4)||Review||Annually||-|
|17||Departmental financial statements (18.104.22.168)||Review and recommend for acceptance||Annually||x|
|18||Departmental financial statements and/or Public Accounts Audits (including findings, management letters and external auditor performance) (22.214.171.124)||Review||Annually||x|
|19||RPP; DPR; CRP and other significant accountability reports (4.2.6)||Review||Annually||x
|20||CAE's annual overview report (4.2.2)||Annually||x|
|21||Committee self-assessment (4.4.1, 4.4.2)||Review||Annually||x|
|22||Advice and briefings re. OAG and central agencies (4.2.3, 4.2.4)||Discussion||Ongoing||-||-||-||-|
|23||Departmental audit committee annual report (4.4.5)||Prepare||Annually||x||x|
|24||Meet Commissioners with annual report||x
|In Camera Meetings|
|25||With DH (if not member), CAE, SFO/CFO (and OAG rep when attending) (4.4.4)||Discussion||Ongoing||-||-||-||-||-|
|Total Number of DAC Agenda Items to be Scheduled||8-13||6-11||6-11||3-7||4-6|
Note: The draft Calendar and Internal Audit Committee's (IAC) annual plan are subject to change upon arrival of the new President and IAC members.
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