GENERAL RESPONSE
In
the 2004 Budget, the Government made a commitment to "reorganize and bolster
the internal audit function on a government-wide basis to ensure that audit
programs are based on sound risk analyses of all departmental activities, with
the authority to delve into every corner of every portfolio." Strengthening internal audit is an important
part of the Government's agenda to improve public sector management and ensure
the rigorous stewardship of public funds.
This will be achieved by an extensive internal audit policy review
process that aims to transform how internal audit is practiced within the
public sector, ensuring that it is led by certified internal audit
professionals and supported by independent audit committees. A transformative agenda such as this
requires due process and diligence that the Treasury Board Secretariat has been
engaged in since Budget 2004.
Reflective of the Government's on-going commitment to improving the
practice of internal audit are the extensive consultations that have already
occurred both internally and externally, and the serious and quick attention
the Government continues to give to this matter.
These efforts to
strengthen internal audit will reinforce good stewardship practices and sound
decision-making at the departmental level, thereby enabling central agencies,
particularly the Treasury Board Secretariat, to focus on strategic rather than
transactional matters. By the beginning
of the next fiscal year, it is expected that a new Policy on Internal
Audit,
accompanying directives, standards and guidelines for audit committees and
Chief Audit Executives (who provide direct assurance support to deputy heads)
will come into force. This will be
supported by a three-year incremental and phased implementation by the Office
of the Comptroller General, who will also be responsible for general oversight
and for carrying out internal audits in small departments and agencies and
government-wide horizontal audits, amongst others.
With
these initiatives, the Government expects to rebuild internal audit capacity,
as well as standardize the audit function across government through
professionally-driven operating processes, supported by common technology
platforms. The Government is also
committed to enhancing the objectivity, independence and competency of Chief
Audit Executives and audit staff, and establishing audit committees that are
independent from line management.
As the Government is in the process of
finalizing a revised Policy on Internal Audit, and because this policy is part
of a wider process to modernize management in the Government of Canada, many of
the specific items raised by the Committee cannot be addressed at this
time. The Government's position on all
of these matters, including internal audit, will be tabled in Parliament in the
coming months.
RECOMMENDATION 1
That Treasury Board Secretariat
submit a detailed plan, that includes timelines, to the Standing Committee on
Public Accounts that shows how and when it will produce a revised Policy on
Internal Audit. The revised policy must
contain a specific clause prohibiting revisions to final internal audit
reports, or reports commissioned from outside auditors, that result in changes
to audit opinions.
Consultations are
taking place within Government, taking into account the views and
recommendations of the Auditor General and the Standing Committee on Public
Accounts. Timelines for the production
of a revised policy are presently under consideration by the Government. Upon the finalization of the policy, the
Government undertakes to submit a detailed plan of implementation as
recommended by the Committee without undue delay.
The
issue of revisions to internal audit reports after finalization is under review
by the Office of the Comptroller General.
RECOMMENDATION 2
That Treasury Board Secretariat set
benchmarks for the implementation of the revised Policy on Internal Audit,
monitor departmental progress against these benchmarks, take corrective action
in the event of slippage, and report the results to Parliament in its annual
departmental performance report beginning with the report for the period ending
31 March of the year following the coming into force of the revised Policy on
Internal Audit.
Timelines
for the production and implementation of a revised Policy on Internal Audit are
presently under consideration by the Government. The Government undertakes to implement the recommendations set
out above; however, since the internal audit policy review is still in its
consultative stage, the details have not been finalized.
RECOMMENDATION 3
That when the Office of the Auditor
General conduct a follow-up audit focused on the implementation of
recommendations contained in Chapter 1 of the Report of the Auditor General to
the House of Commons, November 2004, implementation of the revised Policy on
Internal Audit and the changes related to internal audit announced by the
President of Treasury Board on 18 November 2004 must also be taken into
account.
The
Government notes this recommendation.
RECOMMENDATION 4
That
the Office of the Comptroller General develop a strategy that details how it
will meet the requirements of the revised Policy on Internal Audit and how it
will ensure that internal audits are conducted on a regular basis, and table
that strategy with the Standing Committee on Public Accounts no later than 30
days following the coming into force of the revised Policy on Internal Audit.
As
consultations are taking place, the Office of the Comptroller General is
considering parallel implementation strategies. Once the revised Policy on Internal Audit has been approved, the
Government will confirm with the Committee a date for the tabling of the
strategy.
RECOMMENDATION 5
That
Treasury Board Secretariat create, on a priority basis, a new classification
system for internal auditors that recognizes and rewards the unique skills they
offer and make that system operational to coincide with the implementation of
the revised Policy on Internal Audit.
The Government agrees with the Standing Committee on Public Accounts
that a detailed analysis of classifications for government internal auditors is
required. The Public Service Human
Resources Management Agency of Canada (PSHRMAC) is responsible for the
classification modernization program.
PSHRMAC has commenced this analysis and the results of the analysis will
assist the Government to determine what actions, if any, need to be taken with
regard to a new classification system for internal auditors.
RECOMMENDATION 6
That either in its Main Estimates or
in its annual Report on Plans and
Priorities, Treasury Board Secretariat
include information on the funding to be allocated to the Office of Comptroller
General for the specific purposes of meeting its obligations under the Policy on
Internal Audit. This reporting should
commence in fiscal year 2006-07.
The Government
agrees.
RECOMMENDATION 7
That each department and agency of
Government with an internal audit function include information on the funding
to be devoted to the function in either its Main Estimates or in its annual
Report on Plans and Priorities. This
reporting should commence in fiscal year 2006-07.
The
Government of Canada will respond more fully once consultations related to the
draft revised Policy on Internal Audit have been completed and the policy has
been approved.
RECOMMENDATION 8
That the Government of Canada table
an amendment to the Access to Information Act as called for by the
Access to
Information Review Task Force in its recommendation
4.24, at the earliest
possible opportunity.
The Government is currently in the
process of consulting parliamentarians to ascertain their views on this
issue. On April 5, 2005, the Minister
of Justice presented a discussion paper outlining the Government's views on reform
of the Access to Information Act to the House Standing Committee on
Access to Information, Privacy and Ethics. This Committee is expected to study the issues and provide its input and
advice prior to legislation being introduced in the House of Commons.
RECOMMENDATION 9
That in conjunction with the
revision of the Policy on Internal Audit, all internal audit units in
departments and agencies be placed under the authority of the Comptroller
General of Canada.
The
Government believes that deputy heads are responsible and accountable for
managing their departments in line with existing legislation, regulations and
policy. Hence, the Government does not
concur with this recommendation.
The
Government acknowledges the need to ensure that the internal audit function is
independent and believes that the consultations currently under way to draft a
new internal audit policy will address the rationale that lies behind this
recommendation.
RECOMMENDATION 10
That Treasury Board
Secretariat develop a detailed action plan showing the steps that will be taken
to ensure that internal audit units are fully prepared, prior to January 1,
2007, for an external quality assessment as called for by the International
Standards for the Professional Practice of Internal Auditing. This action plan must include the date(s)
set for the external assessment, specific reference to the actions that will be
taken, and target implementation and completion dates for each phase of the
plan, and be submitted to the Standing Committee on Public Accounts no later
than 31 December 2005.
Following
the finalization of the revised Policy on Internal Audit, and no later than six months after its effective date, the Government will
report back to the Committee with an action plan detailing the preparations for
external quality assessments of internal audit units.
RECOMMENDATION 11
That Treasury Board
Secretariat monitor the progress made by internal audit units leading up to the
external assessment, and report the results to the Standing Committee on Public
Accounts on a semi-annual basis beginning 30 June 2006.
The consultations
presently in progress regarding a revised internal audit policy include the
concept of external review of internal audit groups. However, given that the consultations have not been concluded,
the Government is not in a position to confirm the deadlines set out in the
recommendation. The Government does
commit to respond more fully to the Committee following the coming into force
of the revised policy.
|