2024 Guidebook for a Departmental Audit Committee

Note

  • This document is intended as advice or guidance, and contains questions and considerations, though not exhaustive, that are critical to the functioning of Departmental Audit Committees.
  • This document is currently being updated to reflect the new Global Internal Audit Standards released by the Institute of Internal Auditors. If there are any immediate questions related to the application of the standards please contact ZZIAS@tbs-sct.gc.ca.
  • This document does not constitute a departmental legal or policy requirement nor does it establish monitoring obligations on the part of the Treasury Board of Canada Secretariat.

On this page

Introduction

Since their inception in 2006, Departmental Audit Committees (DACs) have formed an integral component of the Government of Canada’s efforts to ensure rigorous stewardship and accountability for public resources. Meanwhile, much has changed in the federal government’s operating environment over that time, characterized not only by a fast-moving and ever-evolving risk environment, but an enhanced emphasis on horizontal approaches and business transformation initiatives to address growing complexity in how government works.

In this context, DACs face significant challenges but remain uniquely positioned to offer advice and guidance, with the power to address some of the most pressing matters in modern public administration.

This latest version of the Guidebook for a Departmental Audit Committee has been updated to reflect these realities, as well as changes to the updated Policy on Internal Audit and the Directive on Internal Audit, effective June 2023. As such, the Guidebook continues to present a framework to support the work of DACs and remains premised on the understanding that its contents should be adapted to meet each committee’s and each department’s unique needs and circumstances.

The Guidebook is divided into three broad sections:

The Guidebook will function as an evergreen document, with updates to be posted, as needed, on appropriate web-based platforms or communicated to DAC members through their host departments.

1. Overview of a Departmental Audit Committee

In this section

The sections that follow set out the roles and responsibilities of a DAC as a whole and of DAC members individually.

1.1 Role and responsibilities of the Departmental Audit Committee

A DAC is an advisory body whose role is defined in the Treasury Board Policy on Internal Audit and the Directive on Internal Audit. The Terms and Conditions for Audit Committee Members address the key issues that surround the initiation and management of members’ tenure.

A DAC is expected to support the deputy head in their accounting officer roleFootnote 1 by providing the deputy head with objective advice and guidance, independent of management, in the areas of governance, risk management and control.Footnote 2

The DAC members’ knowledge, experience, expertise and independence as external to the public service should provide a valuable, impartial and respectful supplementary perspective on departmental operations.

DACs must also provide a crucial challenge function to management, which is core to the purpose of its external composition. In so doing, the committees serve to help strengthen management processes and practices in departments across the federal government.

While policies related to internal audit and audit committees may be modified from time to time, and were most recently updated in June 2023, the core areas of DAC responsibility remain constant:

The amount of time spent by the DAC on each of these core areas of responsibility varies in accordance with the complexity, risks and priorities of the department in question. The intention is for the DAC to provide sufficient and appropriate coverage to all areas over the course of a year.

The approach to addressing some of the responsibilities listed above will necessarily be adapted by the Small Departments Audit Committee and by the  Treasury Board Secretariat Audit Committee due to the horizontal nature of their mandates (e.g., accountability instruments and financial statements).

The DAC’s independence from line management situates the chair and members to provide the deputy head with strategic guidance and advice in areas that may appear to fall outside of the core responsibilities listed above. This guidance could be in the form of advice on topics ranging from strategic planning to large IT-enabled business transformation projects to digital government.

For instance, the DAC could play a critical role in questioning whether and how management has taken steps to adhere to IT project oversight and management processes and principles. With respect to strategic planning, the DAC could play a valuable challenge function regarding alignment between departmental performance targets and strategies to deliver on them. These activity areas in fact support the DAC’s core responsibilities for risk management, management control frameworks, and accountability reporting (see corresponding aides-mémoire 3.2, 3.3 and 3.8), and are expected to be undertaken in accordance with the department’s risk and operational environment.

In all areas of their responsibilities, DACs must always be satisfied that they have received sufficient information in order to be confident in the advice they provide to the deputy head. Consistent with the Terms and Conditions of Appointment for Audit Committee Members, DACs must devote appropriate time to preparation and should raise any information gaps with the chief audit executive (CAE). Just as auditors are often referred to as “professional sceptics,” DAC members must endeavour to ensure that they have received some acceptable level of substantiation of the information, findings and conclusions that are presented to them for deliberation.

Where the substantiation is not present, DAC members are justified in challenging departmental staff to better support their material prior to the committee forming a decision on their advice to the deputy head.

1.2 Accountability relationships

The DAC’s primary role is to assist the deputy head in monitoring the organization’s core systems of control and accountability. The DAC’s direct reporting relationship to the deputy head provides them with objective advice and guidance, independent of management, in the areas of governance, risk management and control. This is the role that makes DACs critical to achieving the objectives of the Treasury Board Policy on Internal Audit. The DAC should be conversant with the policy, and the directive and guidance that support it, relative to their responsibilities. It should be noted that the DAC has no relationship or accountability to the appropriate Minister.

Another critical player in this relationship is the Office of the Comptroller General (OCG). In addition to co-recommending the appointment of DAC members, the Comptroller General of Canada is responsible for providing functional direction to the internal audit community across the federal government.Footnote 3

The following diagram illustrates the DAC’s key accountability and reporting relationships.

Figure 1: DAC Accountability Relationship
DAC accountability relationship
Figure 1: DAC Accountability Relationship - Text version

The DAC’s accountability relationship to the deputy head fits within broader departmental relationships and accountabilities as follows:

  • The Departmental Audit Committee provides advice to the Deputy Head, functional oversight to the Chief Audit Executive and the Chief Financial Officer.
  • The Chief Audit executive and the Chief Financial Officer are accountable to the Deputy Head.
  • The Deputy Head is accountable to the Minister.
  • The Comptroller General provides functional direction to the Departmental Audit Committee, the Chief Audit Executive and the Chief Financial Officer.
  • The Office of the Auditor General and the Departmental Audit Committee share information.

1.3 Authority

The DAC has no authority over the operations of the department; it should not be directing departmental staff, nor should it be undertaking activities reserved for management. In addition, the DAC role does not include management of the Internal Audit activities for the department.

The DAC chair has no authority over the other members or the CAE. The role involves additional responsibilities aimed at ensuring that established committee procedures are respected and that expectations for the DAC are met.

1.4 Knowledge of business and relationship with management

The importance of orienting DAC members to their roles is especially critical. Upon joining a DAC, external members should be briefed by management on the expectations for the DAC and on the department’s business through presentations and discussions, and, where appropriate, through site visits. In addition, sessions orienting the DAC to public service governance and the machinery of government are offered annually.

It is important that DAC members continue to increase their understanding of the department’s business throughout their tenure, particularly in the areas of the business that are undergoing significant change. To this end, members should discuss their information needs with the CAE and arrive at an effective system of briefings to stay current on important departmental developments. This may be done through a variety of technologically enabled communications channels and methods, as well as through discussions with management. Important to note that DAC members should only be meeting with the organization’s executive team as part of regular DAC meetings.

Strong, open relationships between the DAC and management with respect to these responsibilities are also critical to the committee’s success. Of particular importance is the relationship and dialogue between the DAC chair and the deputy head. 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.

Open communication with the CAE and the chief financial officer is essential in building effective relationships with the management team and in bolstering knowledge of departmental operations. The DAC may also want to invite a member of the executive team and/or members of the internal audit team to attend DAC meetings as observers, perhaps on a rotating basis. This participation can be a valuable learning opportunity for observers to strengthen their understanding of the DAC and its work while at the same time increasing awareness of the DAC mandate and operations in the department.

The OCG hosts an annual DAC symposium where current issues and relevant topics are presented and discussed. This event is widely recognized as an important opportunity for members to learn and share.

1.5 Comparison of a DAC to a private sector audit committee

The role of the DAC is different from that of an audit committee in the private sector.

In the private sector, the board of directors is responsible for governing the organization and has the full authority to do so. Audit committees are a sub‑committee of the board of directors. The board nominates members for appointment and delegates authority to the audit committee for financial oversight. The audit committee has a fiduciary role in helping the board fulfill its governance and oversight responsibilities in the areas of financial management and reporting, risk management, control assessment, external auditors, and the effective use of internal auditing. The audit committee also has the responsibility to review and recommend to the board the approval of the audited financial statements of the organization.

By contrast, in the Government of Canada, individual departments generally do not produce audited financial statements. Departmental financial results are consolidated into the public accounts and audited by the Auditor General of Canada. DAC members’ responsibility over financial matters is limited to reviewing and providing advice to the deputy head on the key financial management reports and disclosures of the department.

DACs in the federal government are advisory and are not a part of the governance structure for departments. DACs are appointed by the Treasury Board on the recommendation of the President of the Treasury Board. DAC members have no authority to make decisions or to direct the activities of public servants. Rather, they advise the deputy head on the key areas of responsibility as defined by the Comptroller General of Canada.

1.6 Membership

As set out in the Treasury Board Policy on Internal Audit and Directive on Internal Audit, the DAC must have a majority of independent, external members who do not hold a position in the federal public administration. The membership is to reflect Canada’s diversity in terms of gender, official languages, Indigenous, minority groups and regional representation.

The Directive on Internal Audit states that Committee members are to be familiar with financial reporting or become familiar with such reporting within the first year of their appointment. In order to support good governance practices across the committee, section B.1.2.3 of the Directive stipulates that at least one external member is to be a financial expert (FE) holding a professional accounting designation in good standing. On an exceptional basis, the Comptroller General may grant an exception to the requirement for the financial expert to hold a valid professional accounting designation.

External members are jointly selected by the deputy head and the Comptroller General of Canada for approval by the Treasury Board. The collective skills, knowledge and experience of the members are to enable the committee to undertake its duties competently and efficiently. DAC membership from within the federal public administration is to be limited to individuals at the level of deputy head unless an exception is granted by the Comptroller General of Canada.

Although they are not members of the committee, by virtue of their central roles in the department, the chief financial officer and the CAE are expected to attend all committee meetings. As necessary, the chair may also request other departmental officials and representatives from the Office of the Auditor General (OAG) and the Treasury Board of Canada Secretariat (TBS) to attend.

2. Functioning of a Departmental Audit Committee

In this section

2.1 Charter or terms of reference

The DAC is expected to document its roles and responsibilities in a charter or terms of reference. The DAC’s roles and responsibilities should be consistent with Treasury Board policies and guidance, while recognizing that the committee may be requested to provide advice in additional related areas where the deputy head feels they can benefit from the DAC’s counsel.

The charter or terms of reference must be approved by the deputy head and reviewed periodically. Changes to relevant policies and standards should be factored into the process for reviewing and updating the charter or terms of reference.

The DAC charter may indicate a continued requirement to provide advice in areas that may no longer be required by policy but where the deputy head feels the DAC can continue to add value. For example, the DAC may be requested to review and provide advice on departmental accountability reports or financial reports prior to their finalization even though this is no longer a policy requirement.

2.2 Annual plan

To ensure the fulfillment of its responsibilities, the DAC is expected to prepare an annual plan for the deputy head’s approval. DAC members and the deputy head should be actively engaged in this process. The annual plan will help the DAC use a risk-based approach to reviewing the core areas of responsibility as well as scheduling any additional areas where the deputy head wants the DAC to provide strategic advice. DAC members may want to review pertinent elements of this Guidebook, either individually or as a committee, when developing the annual plan.

Recognizing that not all core areas of responsibility may be covered in a single year, the DAC may find it beneficial to have the plan cover a two-year horizon.

2.3 Meetings

Meetings are a main working forum for the committee, and members should participate actively. Meetings provide an opportunity to review information, identify and discuss important issues, and develop informed judgments. The usefulness of meetings and the DAC’s overall effectiveness depend on members’ thorough preparation beforehand and their willingness to discuss key issues at meetings.

The number of meetings each year largely depends on the extent and nature of the DAC’s work. On average, DACs meet three to four times per year. The committee may find it beneficial to use teleconferencing and/or video conferencing as a means to carry out DAC business where there is important, time-sensitive work to be done but the nature or volume of it does not warrant an in-person meeting. For example, a DAC meeting may be held via teleconference to review and provide advice on the department’s financial statements, including any associated auditor’s report.

In camera discussions should be a regular and integral part of each DAC meeting. The committee should meet separately in camera with the CAE, the chief financial officer and the external auditor, when in attendance. A good practice is for the external DAC members themselves to meet in camera, either before the meeting, as part of the agenda, or both.

It is the chair’s responsibility to include these in camera discussions at every DAC meeting and to ensure that sufficient time is set aside for them. Regularly scheduling such meetings provides an excellent opportunity for the DAC and key stakeholders to communicate privately and candidly.

2.4 Expectations of the DAC

As previously noted, in fulfilling its responsibilities, it is expected that the DAC will exercise due diligence, provide constructive challenge in its work and maintain independence from line management.

2.4.1 Expectations of the DAC chair

The chair of the DAC is to be from outside the federal public administration (unless an exception is granted by the Comptroller General of Canada). Exceptions exist primarily to address sudden vacancies or delays in the Treasury Board appointment process. The position holds no authority beyond the functioning of the committee.

The expectations of the DAC chair include, but are not limited to, the following:

2.4.2 Expectations of DAC members

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

2.5 Support from the department

To perform its work, the DAC requires the support and cooperation of the department’s management. The committee depends on management for information, reports, knowledge and insight about the department’s practices and the issues it faces. There is no set model for the provision of this support. Nor is there a set lead within departments for the provision of this support. In some departments, it is provided by the corporate secretariat; in others, it is provided by the internal audit function. Where support is provided by internal audit, the CAE should keep the DAC secretariat separate from the other internal audit business to maintain the internal audit function’s actual and perceived independence and objectivity.

Support provided to the DAC can cover many activities, including administrative, strategic and logistical support. This could include:

Departments should provide updates on ongoing matters of importance to the DAC and relay key communications from the OCG. The department should also support the external members in developing a sound understanding of their role and responsibilities and those of the department, and in complying with their Terms and Conditions of Appointment. This Guidebook can also be used by the department to support the DAC, particularly by those providing secretariat support. In addition, this Guidebook may be shared with the chief financial officer, whose presence is required at every DAC meeting.

Appendix A describes examples of the kind of support and assistance departments should consider providing to DACs. A sample table of contents for a DAC orientation/reference binder is included as Appendix B.

2.6 Self-assessment

While considered a good practice, there is no requirement from the OCG for DACs to submit an annual report. The decision whether to adopt the practice will be made by the deputy head and will depend on a number of factors that determine the relative value derived by developing this report.

A formal, external assessment of the DAC’s performance is part of the external assessment of the internal audit function to be carried out every five years. The DAC should also undertake a periodic self-assessment of its own performance.

Self-assessments help ensure that the DAC delivers on its charter or terms of reference and continually enhances its value to the deputy head. Self-assessment can take many different forms, involve several participants and use diverse techniques. The key to successful self-assessments is a willingness to actively seek out opportunities to improve performance and recognition of the importance of acting on the results. Management should not hesitate to use the self-assessment as a basis to assess DAC performance and determine whether the DAC is adding value.

The format of the self-assessment is up to the department. Appendix C contains a sample DAC self-assessment questionnaire, which sets out the kinds of questions that can help members gain insight into the DAC’s performance.

To obtain more comprehensive insight into the DAC’s performance, value and opportunities for improvement, consideration should be given to including attendees at DAC meetings as well as members of management who have extensive interactions with the committee in the self-assessment process.

Regardless of the tool used, the critical element is the dialogue and discussion at the DAC with regard to the results so as to identify and effectively address any noted areas for improvement in a timely manner.

2.7 Conflict of interest

The search for subject matter experts on a DAC can result in the consideration of candidates who are active in a departments’ sector of operations. When recruiting, departments should consider whether the benefits of appointing a subject matter expert on the audit committee outweighs the risks of the emergence of a real, apparent or potential conflict of interest. Conflicts of interest do not relate exclusively to matters concerning financial transactions or the transfer of economic benefit; any area of activities can have a negative impact on the perceived objectivity of the appointee. Each situation must be assessed on a case-by-case basis. Details on DAC’s responsibility when it comes to conflict of interest can be found in the DAC “Guidance on Conflict of Interest and Disclosure Requirements.”

3. Aides-mémoire

In this section

This section contains eight aides-mémoire, one for each of the DAC’s eight core areas of responsibility:

  1. 3.1 Values and ethics
  2. 3.2 Risk management
  3. 3.3 Management control framework
  4. 3.4 Internal audit function
  5. 3.5 External assurance providers
  6. 3.6 Follow-up on management action plans
  7. 3.7 Financial statements and public accounts reporting
  8. 3.8 Accountability reporting
  9. 3.9 Supplementary aide-mémoire: Large transformational initiatives

The specifics of each of these core areas may vary due to changes in Treasury Board policy and the department’s specific needs. For this reason, each aide-mémoire should be reviewed in the context of the DAC’s charter or terms of reference.

These interrelated aides-mémoire are intended to support the DAC as a whole, and members individually, in performing their due diligence. Each aide‑mémoire includes a series of prompts or questions that individual members can ask themselves and/or management when reviewing materials, reports and information provided to the committee.

There is no requirement for the DAC to use these aides-mémoire and, if employed, no requirement to use the entire list of questions where the risk is not assessed as significant. However, they can help stimulate meaningful discussion in each of the DAC’s key areas of responsibility. They are not an exhaustive list and should also help DAC members ask the necessary probing questions and consider the reasonableness of responses with greater knowledge and understanding.

In addition to a set of questions, each aide-mémoire provides a list of guidance material that is pertinent to the particular subject matter. Departments should make this guidance available to DAC members as requested or required.

3.1 Values and Ethics aide-mémoire

This aide-mémoire is designed to help DAC members consider values and ethics when reviewing materials, participating in discussions or receiving presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this area are expected to be outlined in the department’s DAC charter or terms of reference. In general, it is expected that the DAC’s work will include reviewing and advising the deputy head on departmental systems and practices established to monitor compliance with laws, regulations, policies and standards of ethical conduct, and identify and deal with any legal or ethical violations. It may also include the procedures and feedback mechanisms established to monitor conformance with its code of conduct and ethics policies, as well as how its processes encourage and maintain high ethical standards.

Pertinent government policies and related guidance

  1. Government of Canada web page on values and ethics of the public service
  2. Values and Ethics Code for the Public Sector
  3. Treasury Board Directive on Conflict of Interest
  4. Public Servants Disclosure Protection Act
  5. Criminal Code, Part IV
  6. Department-specific values and ethics code and related guidance

Leadership and people management

Departmental culture

Policies and guidelines

Values and ethics program

Values and ethics learning

Values and ethics monitoring and reporting

3.2 Risk management aide-mémoire

This aide-mémoire is designed to help DAC members consider risk management when reviewing materials, participating in discussions or receiving presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this area are expected to be outlined in the department’s DAC charter or terms of reference. In general, it is expected that the DAC’s work focuses prominently on reviewing and advising the deputy head on the department’s risk management arrangements.

Pertinent government policies and related guidance

  1. Treasury Board of Canada Secretariat risk management web page
  2. Framework for the Management of Risk
  3. Guide to Integrated Risk Management
  4. The department’s own risk management policy and guidance

Risk management responsibility

Risk management Strategy

Corporate risk profile

Fraud risk management

Integrated risk management

Continuous risk management learning

Risk management reporting and monitoring

3.3 Management control framework aide-mémoire

This aide-mémoire is designed to help DAC members consider the department’s management control framework when reviewing materials, participating in discussions or receiving presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this area are expected to be outlined in the DAC charter or terms of reference. In general, it is expected that the DAC’s work will include reviewing and advising the deputy head on the departmental internal control arrangements, and that its work will be informed on all significant matters that arise from the work performed by others who provide assurances to senior management and the deputy head.

The DAC should understand the level of comfort that the deputy head has with regard to their responsibilities under subsection 16.4 of the Financial Administration Act to maintain effective systems of internal control in the department and whether that comfort is justified.

Pertinent government policies and related guidance

  1. Treasury Board Policy on Financial Management
  2. Treasury Board Guide to Internal Controls Over Financial Management
  3. Treasury Board Policy on Results
  4. Management Accountability Framework: methodology and findings
  5. Financial Administration Act
  6. Department-specific management and internal control policy or framework

Management controls: roles and responsibility

Management controls: control framework and departmental systems

Management controls: project management

Management controls: control certifications

Reporting and monitoring of controls

3.4 Internal audit function aide-mémoire

This aide-mémoire is designed to help DAC members consider the department’s internal audit function when reviewing materials, participating in discussions or receiving presentations. Given the DAC’s independence from line management and responsibilities in this area, the DAC is well positioned to influence the professionalism, quality, performance and capacity of the internal audit function and provide the deputy head with advice on addressing areas of concern. This aide-mémoire provides questions for consideration to assist the DAC in this work.

Overview of DAC responsibilities

The specific DAC responsibilities in this area are expected to be outlined in the department’s DAC charter or terms of reference. The DAC should be able to reasonably determine if the deputy head is meeting the requirement of subsection 16.1 of the Financial Administration Act to ensure “an internal audit capacity appropriate to the needs of the department.”

In general, it is expected that the DAC’s work will include reviewing and advising the deputy head on:

  • the department’s internal audit policy or 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 (including the results of external practice assessments and ongoing and periodic internal assessments)
  • 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.

Pertinent government policies and related guidance

  1. Section 16 of the Financial Administration Act
  2. Treasury Board Policy on Internal Audit
  3. Treasury Board Directive on Internal Audit
  4. International Professional Practices Framework (The Institute of Internal Auditors)
  5. Treasury Board of Canada Secretariat frameworksfor oversight of internal audit

Internal audit policy or charter

Independence and objectivity

Internal audit planning

Internal audit delivery

Internal audit reports

Internal audit capacity and resources

Performance of the internal audit function

3.5 External assurance providers aide-mémoire

This aide-mémoire is designed to help DAC members consider reports of external assurance providers and accompanying materials when participating in discussions or presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this area are expected to be outlined in the DAC’s charter or terms of reference. In general, it is expected that the DAC’s work in this area will include being informed of and advising the deputy head on the results of the work of external assurance providers,Footnote 8 and providing advice on audit-related issues or priorities raised by the external assurance providers.

Pertinent government policies and related guidance

The Office of the Auditor General of Canada (OAG) produces functional audit guidance and tools for general application in performance audits, or for use in audits on specialized areas.

  1. What to Expect—An Auditee’s Guide to the Performance Audit Process
  2. Examining Public Spending—Estimates Review: A Guide for Parliamentarians
  3. The Environment and Sustainable Development Guide: Integrating Environmental and Sustainable Development Considerations in Direct Engagement Work

Leadership and support

OAG and central agency audits and management improvement initiatives

3.6 Follow-up on management action plans aide-mémoire

This aide-mémoire is designed to help DAC members consider follow-up of management action plans when reviewing materials, participating in discussions or receiving presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this critical area of oversight are expected to be outlined in the DAC charter or terms of reference. In general, it is expected that the DAC’s work in this area will include regularly reviewing and advising the deputy head on the progress of implementing approved management action plans resulting from the work of internal audit and external assurance providers.

Pertinent government policies and related guidance

  1. International Professional Practices Framework (The Institute of Internal Auditors)
  2. Treasury Board Directive on Internal Audit

Roles and responsibilities

Monitoring and reporting

3.7 Financial statements and Public Accounts reporting aide-mémoire

This aide-mémoire is designed to help DAC members consider the departmental financial statements and Public Accounts reporting when reviewing materials, participating in discussions or receiving presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this area are expected to be outlined in the DAC’s charter or terms of reference. In general, it is expected that the DAC’s work in this area will include reviewing and, as appropriate, advising the deputy head on key departmental financial reports and disclosures of the department, including quarterly financial reports, annual financial statements and Public Accounts, and the annual Statement of Management Responsibility and associated plans and assessments with respect to internal controls over financial reporting. The DAC is not required to recommend these materials for approval by the deputy head, nor are they expected to participate in their development.

If the financial statements are audited, it is generally expected that the DAC will review the financial statements with the external auditor and senior management, discussing any significant accounting estimates and adjustments, as well as any difficulties or disputes the external auditors encountered with management during the course of the audit. It is also generally expected that the DAC will review any management letters arising from the external audit and the auditor’s findings and recommendations relating to internal controls over financial reporting and consider their impact on departmental governance, risk management and control processes.

Pertinent government policies and related guidance

  1. Treasury Board Directive on Accounting Standards
  2. Government of Canada Accounting Handbook (GCAH)
  3. CPA Canada Public Sector Accounting Standards (PSAS)
  4. Treasury Board Policy on Financial Management

Accounting policies and practices

Financial statement presentation

Review and signoff

Audited financial statements / Public Accounts

3.8 Accountability reporting aide-mémoire

This aide-mémoire is designed to help DAC members consider accountability reporting when reviewing materials, participating in discussions or receiving presentations from senior management.

Overview of DAC responsibilities

Specific DAC responsibilities in this area are expected to be outlined in the DAC’s charter or terms of reference. In general, it is expected that the DAC’s work will include receiving copies of departmental accountability reports (i.e., reports to Parliament). Regardless of the timing and focus of the DAC’s review of actual accountability reports, it is expected that through this area of responsibility or that of the management control framework, the DAC would generally review and comment on their confidence in the underlying processes that support effective accountability reporting, consistent with requirements of the TBS. The committee 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 the DAC would be involved in the development of these reports.

Pertinent government policies and related guidance

  1. Treasury Board Policy on Results
  2. Treasury Board guidance for accountability reports to Parliament

Process and timing

Presentation and linkage between accountability reports

Review and certification

3.9 Large transformation initiatives aide-mémoire (supplemental)

This aide-mémoire is designed to help DAC members exercise their challenge function when reviewing materials, participating in discussions or receiving presentations from senior management regarding large change management initiatives or horizontal projects.

Overview of DAC responsibilities

While not specifically one of the eight areas of DAC responsibilities, large transformation projects are initiatives that combine the oversight of risk management and management control frameworks. This area, if applicable, should be outlined in the department’s audit committee charter or terms of reference. In general, it is expected that the DAC’s work will include reviewing and advising the deputy head on current, in development and future transformational initiatives and projects of significance where the department has a key role or is impacted (including 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 resources available vs. required to deliver projects
  • how the end-state organization and services will differ from the current state

Many of the questions in this aide-mémoire are among those found in the Transformation Guidance for Audit Committees, published by the National Audit Office, United Kingdom, which has permitted OCG to use its material. Another useful tool is the British publication, The 7 lenses of Transformation, which provides a practical guide for understanding complex transformations. Links to both publications are included in the list below.

Pertinent government policies and related guidance

  1. Guidebook for Horizontal Assurance Frameworks (2017)
  2. Lessons Learned From the Transformation of Pay Administration Initiative
  3. Transformation Guidance for Audit Committees, National Audit Office, UK
  4. The 7 lenses of Transformation, GOV.UK
  5. Treasury Board Policy on the Planning and Management of Investments
  6. Department-specific policies, practices and related guidance

Project vision

Strategy

Governance and architecture

Change and implementation

Performance management

Technology/data

Horizontal initiatives

Involvement of Internal Audit and the DAC

Appendix A: suggested departmental support for the DAC

In order for the DAC to effectively carry out its duties, it requires assistance and support from the department. The leadership for this support may be provided by the department’s internal audit function or another area in the department (e.g., departmental corporate secretariat). There is no set model for providing this support, and it is up to the department to determine the model that is best suited to its needs. Where the support is provided by internal audit, the CAE should keep the DAC secretariat separate from the other internal audit business so as to maintain the actual and perceived independence and objectivity of the internal audit function.

Suggested departmental support to be provided to the DAC includes the following:

Appendix B: sample table of contents for a DAC orientation/reference

The following is a sample table of contents of suggested material for departments to include in an orientation/reference binder for DAC members:

  1. Departmental corporate information
    1. Organization charts
    2. Executive profiles
    3. Corporate risk profile
    4. Business plans for key lines of business / Departmental Investment Plan
    5. Key ministerial briefing notes
    6. Departmental legislation (i.e., the Act that governs the organization)
    7. Values and Ethics Code for the Public Sector and the departmental code of professional conduct
  2. Departmental accountability reporting to government
    1. Departmental Results Framework
    2. Most recent Departmental Plans
    3. Most recent Departmental Results Report
    4. Departmental financial statements, including the annex to the Statement of Management Responsibility including Internal Controls over Financial Reporting
  3. Treasury Board Policy on Internal Audit and related Directive
  4. Key documents related to the department’s internal audit function
    1. Internal Audit Charter
    2. Approved Risk-Based Internal Audit Plan (RBAP)
    3. List of internal audit reports (past year)
    4. Recent annual report of the CAE (if applicable)
    5. Internal audit performance reports
    6. Most recent internal quality assessment report
  5. Management Accountability Framework
    1. TBS Management Accountability Framework documents and details
    2. The department’s most recent Management Accountability Framework or oversight assessment by the Office of the Comptroller General
  6. List of recent reports of external assurance providers
  7. Key documents related to the evaluation function
    1. Approved departmental Evaluation Plan
    2. List of evaluation reports (past year)
  8. DAC documents
    1. DAC Charter
    2. DAC Guidebook
    3. DAC Terms and Conditions of Appointment for Audit Committee Members
    4. Guideline on Conflict of Interest
    5. Guidance on Proactive Disclosure

Appendix C: self-assessment questionnaire

The sample questions provided in this questionnaire may be used as a starting point for audit committee external members in conducting their functional evaluation of the committee. These questions should be adapted to suit departmental needs. The model questionnaire contains an exhaustive list of 48 questions. Members are not required to use all questions or categories. Rather, they are encouraged to select those whose answer would add the most value. Members are also free to add questions of their own creation. Each self-assessment should reflect the DAC’s intention to appraise their own performance and to look for areas for improvement.

The model questions are formulated to closely examine the committee’s functionality, as well as the importance that members attach to specific areas of query. Each question also provides an opportunity for comments.

The first part of the template pertains to the competencies, abilities and responsibilities of the DAC as a whole.

The second part of the template pertains to infrastructure and operations. This is where DAC members assess the level of support provided.

The third part of the template deals with the administration of DAC meetings. DAC members will assess the mechanical aspects of the meeting process and back-office procedures.

DAC members provide a response for each question, by selecting “Yes,” “Somewhat,” “No” or “Insufficient knowledge.”

Members choose the degree of importance (high, medium or low) they feel is appropriate for each query and corresponding response.

In the last section, there are three questions and a request for general comments.

These are included to gather insight or opinions on issues pertinent to all DACs.

Members are strongly encouraged to support their responses by providing comments.

3.10 Competencies and abilities (questions 1 to 23)

3.11 Infrastructure and operations (questions 24 to 29)

Administration and audit committee meetings (questions 30 to 48)

Other comments

Please answer these additional questions:

  1. What do you think is the most critical issue the DAC should address in the coming months?
  2. Is there a particular topic that you consider important, but on which you are not receiving information or are receiving insufficient information?
  3. Are there any significant elements that affect the DAC’s effectiveness or performance?
  4. In your opinion, do you believe that the DAC is adding sufficient value to the deputy head and to the department? Can you provide examples? (optional)
  5. Do you have additional general comments?

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