Policy on Results: What is the difference between Evaluation and Internal Audit in the federal government?

From: Treasury Board of Canada Secretariat

Goals of Evaluation

An evaluation in the Government of Canada is a systematic and neutral collection and analysis of evidence to judge merit, worth or value. It determines the extent to which a program or project has achieved expected results. Evaluation informs decision making, improvements, innovation and accountability.

Evaluations:

Focus on questions related to relevance, effectiveness and efficiency. Evaluations measure programmatic results and contribute to the assessment of results achievement.
Aim to inform decision making, improvements, innovation and accountability and, depending on user needs, can focus on other themes and issues including alternatives to existing interventions. Evaluations also facilitate learning and innovation.
Ask ‘Are we doing the right things?’

Goals of Internal Audit

Internal audit in the Government of Canada is a professional, independent and objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to assessing and improving the effectiveness of risk management, control, and governance processes.

Internal Audits:

Focus on management systems, processes and procedures, including the integrity of financial and non-financial information. The results of internal audit engagements help identify emerging issues and make recommendations for the improvement of management practices.
Aim to support deputy heads in their role as accounting office^{Footnote 1}, by contributing directly and proactively to improving risk management, control and governance; and to ensure that deputy heads receive assurance and advice from their departmental audit committees and internal audit function to inform decision making in their departments.
Ask ‘Are we doing things right?’

Comparison between Evaluation and Performance Audit

Certain types of evaluation (e.g. formative evaluations) are similar to performance audits, in that they both examine a program’s processes including efficiency and economy using both similar and different approaches. However, unlike evaluations, performance audits do not measure results achievement but, rather, focus on management practices, controls and reporting systems. Furthermore, these performance audits do not question issues such as relevance of government policies.

Differences between Evaluation and Internal Audit

The following table outlines further differences between Evaluation and Internal Audit in federal organizations in response to some basic questions.

Question	Evaluation	Internal Audit
Who does it?	A neutral evaluation function, which is established and maintained by the deputy head.^{table 1 note 1} Federal evaluators led by a Head of Evaluation (HE). Contracted evaluation consultants under the direction of the HE.	An independent internal audit function, which is established and maintained by the deputy head.^{table 1 note 2} Internal auditors led by a Chief Audit Executive (CAE). Qualified contracted assurance service providers under the direction of the CAE.
Who oversees it?	Performance Measurement and Evaluation Committee A committee of senior officials that is intended to act as the focal point for the use of evaluation within the department. Chaired by the deputy head. Members are selected at the discretion of the deputy head.	Departmental Audit Committee^{table 1 note 3} A committee that includes a majority of external members recruited from outside of the federal public administration. Chaired by an external member. Members are jointly selected by the deputy head and the Comptroller General of Canada (CG), and approved by the Treasury Board.
When is it done?	Conducted according to a deputy head-approved five-year rolling departmental evaluation plan (DEP) developed annually by departments based on the needs, risks and priorities of the department and consultations with TBS. In addition: All ongoing Gs&Cs that have a five-year average actual expenditure of $5 M (or greater) per year must be evaluated at least once every five years as per section 42.1 of the Financial Administration Act;^{table 1 note 4} The Secretary of the Treasury Board can require departments to undertake certain evaluations; Departments may be required to undertake evaluations based on a commitment in a TB submission; and The Secretary of the Treasury Board can also initiate centrally-led evaluations at his/her discretion.	Conducted according to a deputy head- approved departmental risk-based audit plan (RBAP) that spans multiple years, focuses primarily on assurance, and considers the following: Departmental areas of high risk and significance; Horizontal audits led by the CG; Planned audits led by external assurance providers and other departments as appropriate; and Other oversight engagements. The CG, according to an OCG RBAP, leads internal audit engagements: focused on departments that do not have an internal audit function; that address horizontal, sectoral or thematic risks or issues or any other audits that have been identified by the CG or the Secretary of the Treasury Board. Where the capacity and expertise are in place, Internal Audit also has the option to provide consulting services to the organization. The CG has the authority to direct departments to undertake audits identified by the CG or the Secretary of the Treasury Board.
How is it carried out?	In accordance with the Mandatory Procedures for Evaluation and Standard on Evaluation. Led by the HE and conducted by neutral evaluators.	In accordance with the Institute of Internal Auditors’ International Professional Practices Framework and certain requirements of the Treasury Board Policy on Internal Audit, which combine to form the internal auditing standards for the Government of Canada. Led by the CAE and conducted by internal auditors.
How are Programs involved?	Evaluations are conducted in a neutral manner with integrity in relationships between evaluators and stakeholders. Program officials collaborate with the HE and evaluators in the conduct of evaluations and evaluation planning exercises. Program officials are responsible for developing and implementing performance measurement in consultation with the HE. Program officials ensure that valid, reliable and useful performance data is available to meet the needs of an evaluation of the program.	Internal audits are carried out independently from program management.
What are the key requirements for small departments and agencies (SDAs) with regard to Evaluation and Internal Audit?	An evaluation function is not required to be established. The HE does not need to demonstrate competencies set by the Secretary of the Treasury Board. SDAs are not required to develop a formal departmental evaluation plan. Instead SDAs are to undertake an annual evaluation planning exercise to determine the need for evaluations.	As per TB Policy on Internal Audit, an internal audit function is not required to be established for most organizations with a reference level of under $300 million. Deputy heads of SDAs are required to consider the risk profile and control environment of their department and decide whether the work performed by the OCG meets their internal audit requirements or whether further internal audit engagements are necessary, or whether to establish an internal audit function. An independent audit committee established and maintained by the CG reviews and provides recommendations on the results of internal audit engagements performed by the OCG for SDAs.
Table 1 Notes Table 1 Note 1 The Policy on Results defines neutral as impartiality in behaviour and process, ensuring that official, professional, personal or financial relationships or interests do not have an impact on evaluations. Neutrality also requires that preconceived ideas, prejudices or biases do not affect the decision whether to evaluate; analysis; findings, conclusions, recommendations; and the tone and content of evaluation reporting. Return to table 1 note 1 referrer Table 1 Note 2 The Policy on Internal Audit defers to the Institute of Internal Auditors, which defines independent (independence) as the freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner. Return to table 1 note 2 referrer Table 1 Note 3 The Financial Administration Act 16.2 provides the legal requirement for the establishment of departmental audit committees for large departments: “Subject to and except as otherwise provided in any directives issued by the Treasury Board under paragraph 7(1)(e.2), the deputy head or chief executive officer of a department shall establish an audit committee for the department.” Return to table 1 note 3 referrer Table 1 Note 4 Section 42.1 of the Financial Administration Act provides the legal requirement for the evaluation of ongoing programs of grants and contributions every five years. The section also includes a provision for Treasury Board to modify the requirement. Pursuant to this, the Policy on Results requires deputy heads of large departments and agencies to annually approve a five-year, rolling departmental evaluation plan that includes evaluations of all ongoing programs of grants and contributions that have five-year average actual expenditures of $5 million or greater per year (Section 4.3.15.4). Those under $5 million are considered for inclusion in the departmental evaluation plan on a risk basis. Return to table 1 note 4 referrer

Sources:

Policy on Results and supporting tools
Policy on Internal Audit and supporting tools
‘Performance Audits’ section of the website of the Office of the Auditor General of Canada.

All sources are under public domain.

Footnotes

Footnote 1

The Financial Administration Act sets legislative requirements for internal audit in section 16.1 , which states “The deputy head or chief executive officer of a department is responsible for ensuring an internal audit capacity appropriate to the needs of the department.” and sections 16.4 (1 & 2) which state that deputy heads, as accounting officers, are “accountable before the appropriate committees of the Senate and the House of Commons for:
(a) the measures taken to organize the resources of the department to deliver departmental programs in compliance with government policies and procedures;
(b) the measures taken to maintain effective systems of internal control in the department;
(c)…”

Return to footnote 1 referrer

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Date modified:: 2020-07-23

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