Opening Statement to the Standing Committee on Public Accounts

Treasury Board's Revised Policies on Internal Audit and Evaluation

Mr. Chairman, we are pleased to meet with your Committee to discuss internal audit and evaluation in light of Treasury Board’s revised policies. We have been strong and consistent advocates of these essential management functions, and your Committee’s attention to them is particularly welcome. The Treasury Board Secretariat recently carried out a review of existing policies, and my Office provided input to the development of the revised polices.

We welcome the clear separation of roles between the two functions in the revised policies. We believe this separation will remove the confusion surrounding the existing policy, which puts the internal audit, evaluation and other functions together under the “review” label.

Internal audit provides senior management with independent and objective assurance on the adequacy and functioning of an organization’s risk management, control and governance processes. Evaluation provides information on the performance of policies, programs and activities that is not available from ongoing monitoring systems, and can help managers understand why things are working or not. I would like to comment on both these fundamental tools for management.

Internal Audit

We last examined the internal audit function across government in 1998 when we followed up on our 1996 audit. We noted an improvement in the quality of internal audit work, but consistency of quality across government departments remained a challenge. At that time, the Treasury Board Secretariat indicated that a number of initiatives were planned, including changes to the policies and standards for internal audit.

We are very pleased to see that progress has been made in this regard. We were consulted during the development of this policy and our comments were taken into account. The key challenge now is to implement the policy. Strengthening the capability of current staff, and recruiting and training additional staff, will require a major effort. This will be more difficult given that additional resources are also required at this time to implement the government’s important Financial Information Strategy and the Modern Comptrollership Initiative.

Equally important for the success of the new policy is the strong support of senior management, both in departments and in the Treasury Board Secretariat. Our past work has shown that the support of top management is essential for internal audit to be an effective, contributing part of the organization.

We support an improved internal audit function for many reasons. Most importantly, we believe internal audit is a fundamental tool of good management. A second reason is that we hope to place increased reliance on their work. As the government implements its Financial Information Strategy, we will want assurance that strong management control frameworks support these new financial systems. The internal audit work contemplated by the new policy in this area will be of particular interest to us.

An issue that warrants the continued attention of this Committee is the impact that Access to Information requests may have on the work of internal audit. Making completed reports public is entirely reasonable, but it is important to ensure that the nature and content of internal audit reports is not adversely affected by concerns about public disclosure. A further concern is that providing access to working papers and supporting documentation could be so restrictive for internal auditors that it risks compromising the function’s effectiveness.

Evaluation

In our value-for-money audits, we frequently examine whether the effectiveness of policies, programs or initiatives has been evaluated. We have also conducted several government-wide audits on the state of the evaluation function.

In 1993 we reported on the recognized potential for evaluation to provide reliable analytic information to serve program management, resource allocation and accountability. We found instances of good evaluations that had clearly made a difference. But, overall, we concluded that the story of program evaluation was one of high expectations and great potential that had been only partly fulfilled.

This Committee held two meetings on our 1993 chapters and asked us to report again in 1996 on the state of evaluation. We reported on the government’s progress in April 1996 and followed up on our recommendations in Chapter 20 of our December 2000 Report. We found that progress on key recommendations to the Treasury Board Secretariat had been unsatisfactory. The Secretariat had not set out government-wide priorities for evaluation, and despite Parliament’s clear interest in the subject, had not informed Parliament since 1996 about the relatively weak state of evaluation in government.

In Chapter 20 we noted that the Treasury Board Secretariat had undertaken a study that showed a clear need for a concerted effort to rebuild the evaluation function in the federal government. Recent steps taken by the government, Mr. Chairman, of which the revised evaluation policy is one part, are encouraging and timely moves in that direction after years of neglect.

In the past we have found that most evaluation activity focussed on lower-level issues and concerns. Evaluating and reporting the results of significant aspects of government continue to be key challenges. Evaluation must be an integral part of the government’s commitment to manage for results, and the government needs the capacity to effectively evaluate strategic issues — many of which cut across departmental or even jurisdictional boundaries.

The Treasury Board has made commitments to better position and to strengthen both the evaluation and internal audit functions. We are pleased that the Secretariat is establishing Centres of Excellence to provide leadership, advice and support to departments in implementing these policies. In addition, the Secretariat has committed to engaging senior departmental managers, including internal audit and evaluation managers, to support its policy on active monitoring of the state of management practices and controls across government. These developments provide a good basis for moving forward.

The success of the new policies will depend on their implementation. Mr. Chairman, your Committee may want to pursue with Treasury Board officials how they will ensure that, in implementing these policies, the shortcomings of the past will be addressed. Your Committee might also explore how the Treasury Board Secretariat will evaluate and report to Parliament on the effectiveness of the new policies and on the health of the internal audit and evaluation functions.

This concludes my opening remarks, Mr. Chairman. We would be pleased to answer your Committee’s questions.