Government Reinforces Integrity of Audit and Oversight

[ Backgrounder ]

For immediate release
October 21, 2005

OTTAWA – The Honourable Reg Alcock, President of the Treasury Board, today introduced a new Policy on Internal Audit.

The Government of Canada is creating the position of Chief Audit Executive in every government department and agency. Recruitment and training will begin as a priority.

"In audit and oversight, the presumption of integrity rests with the independence of those conducting the review. No matter how talented and professional the executive, the freedom and trust that comes from a truly independent review can only make the organization stronger," said Alcock. 

The Comptroller General has issued guidelines on the qualifications of Chief Audit Executives. The professionally accredited Chief Audit Executive will be responsible for overseeing and promoting the professional conduct of internal audits, providing assurance on the adequacy of internal controls within departments, including assessing the adequacy of controls over financial management, financial reporting and the delivery of programs and activities with due regard to efficiency, effectiveness and economy.

Most government departments and agencies have internal audit committees. To further protect the integrity of the audit process, the government will make these audit committees much more independent from the management of the organizations they review. When the new policy is fully implemented, all audit committees will have a majority of members coming from outside the public service, with the remainder coming from outside the department in question.

The Comptroller General will determine the criteria for the selection of committee members and will, jointly with the Deputy Minister, participate in their selection. 

Deputy Ministers will continue to brief Ministers on significant audit matters. In addition, it is expected that Ministers would meet annually, in camera, with the internal audit committee for assurance regarding risk management, control and audit systems. It is also expected that Deputy Ministers would routinely be briefed by the internal audit committee on their assurance findings.

Consistent with its new Policy on Internal Audit, the government is strengthening its internal audit capacity across government and will ensure audit services are made available for small agencies and for the Office of the Comptroller General to conduct horizontal audits across government as required. Recruitment of up to 300 new auditors will begin as a priority.

The government is also realigning the functions of Consulting and Audit Canada (CAC) to separate its consulting and audit services. The consulting services of CAC will be moved within Public Works and Government Services Canada (PWGSC). Over the next few months, PWGSC will be working with the Office of the Comptroller General to determine how best to use the current audit services to strengthen the internal audit function government-wide.

The government will also begin ongoing annual audits of departmental financial statements, with an initial focus on about 20 of the largest organizations that represent about 90% of government expenditures. 

Strengthening internal audit and oversight are key components of the government's ongoing commitment to the continuous improvement of public sector management.

 "The completion of the internal audit policy allows us to finalize the work on the new policy of Senior Financial Officers, which is the other pillar of strong financial oversight," added Alcock.

- 30 -

For more information, contact:

If there is a discrepancy between any printed version and the electronic version of this news release, the electronic version will prevail

TTY (Telecommunications device for the hearing impaired) - (613) 957-9090

Backgrounder

The 2006 Policy on Internal Audit

The Government of Canada's new Policy on Internal Audit is a key component of the Government's management agenda, which sets out a vision for a more integrated, networked public sector and focuses on enhanced efficiencies, cost savings and continuous improvement with a view to provide better results to Canadians.  

The new Policy on Internal Audit builds on the 2001 policy, as well as recommendations made by parliamentarians, the Auditor General and internal audit experts in the public and private sectors.  It provides a greater level of assurance to the Ministers, deputy ministers and deputy heads of departments and agencies and supports their efforts to provide accountable, transparent and effective management.  It also provides a clear, integrated assignment of responsibilities for internal audit activities between the heads of departments and agencies and the Comptroller General of Canada.

The 2006 Policy on Internal Audit is designed to re-position internal audit as a critical underpinning for effective and credible governance at the departmental and government-wide levels.  It will improve the independence, objectivity and overall effectiveness of the internal audit function across government, as well as significantly increase the number of professionally accredited internal auditors in the public sector. 

Highlights:

1. The new policy strengthens and further professionalizes the internal audit function across government in a number of substantial ways:

• It requires the establishment of, and adherence to, stringent, professional standards and the application of internationally recognized internal auditing practices.
• It provides for the recruitment of additional skilled professionals to ensure that the Government can rely on a sufficient pool of well-trained internal auditors.  This will require an investment building to up to $40 million of new funding per year.
• It calls for the certification and/or accreditation of accounting and audit professionals whose duty it is to deliver internal auditing services.
• It establishes the requirement for professional training for internal auditors to develop and maintain their internal auditing skills.

2. The new policy increases the independence of the internal audit function from departmental operations in order to ensure that Ministers, deputy ministers and deputy heads of departments and agencies have the independent and objective information that they need to mitigate risks and improve the overall performance of their organizations.  This includes:

• The creation of audit committees that include professional and experienced members drawn largely from outside the federal public service.
• The creation of a Chief Audit Executive position in departments and agencies that is separate from the operations of departments and agencies.  This allows the internal audit function to provide objective opinions and advice on the effectiveness of departmental programs and management processes, and to report findings in a timely manner to heads of departments and agencies.   

3. The new policy provides a comprehensive, government-wide approach to the way internal audit activities are planned and conducted in federal departments and agencies.  It creates the conditions to ensure that priorities are clearly established, communicated and acted on in order to mitigate risks and improve performance.  It also provides a clear picture of the state and effectiveness of internal controls government-wide.  It includes:

• The implementation of rigorous, common methodology that is proven and internationally recognized in all departments and agencies that will guide them in the delivery of sound, professional internal audit services. 

• The conduct of ongoing internal audit practice inspections and assessments by independent and qualified professionals.

• The delivery of internal audit services by the Comptroller General on broad issues that cut across federal departments and agencies, such as management practices related to human resources, contracting and the program delivery of education for Aboriginal people and climate change.

4. The new policy enhances the oversight, monitoring and reporting role of the internal audit function by providing added assurance and allowing sound decision-making for heads of departments and agencies, as well as improving reporting to Parliament.   To this end:

• Chief Audit Executives will provide annual opinions on the adequacy of the controls, processes and measures to mitigate risks in place in their respective departments and agencies in addition to reporting on their respective internal audit activities.
• The Comptroller General will report annually to Treasury Board on the overall state of controls, good management processes and measures to mitigate risks in place across the federal government, including reporting on controls, thematic and government-wide issues, as well as results of internal audit work carried out within large and smaller departments and agencies.

• All final reports on internal audit activities and findings will be made available to the public in a timely manner.

As the 2006 Policy on Internal Audit requires the establishment of a series of frameworks, practices and standards across the whole of government, it will be introduced gradually in all departments and agencies starting in early 2006, and will be fully implemented by 2009.

The Office of the Comptroller General has completed an assessment of the current number of professional internal auditors in departments and agencies and has estimated future requirements to strengthen the function that includes additional auditors, training, technology, professional certification and affiliations, and standardization of methodologies across all government departments.  Based on this assessment, the estimated requirements could cost to up to $40 million of new funding per year.

It is important to note that internal auditing activities that are conducted in a professional manner by skilled, independent internal auditors can save the Government millions of dollars in terms of opportunities for increased effectiveness and efficiency.

Related Information

2006 Policy on Internal Audit and accompanying documents: http://www.tbs-sct.gc.ca /pubs_pol/dcgpubs/ia-vi/siglist_e.asp

Re-establishment of the OCG: http://pm.gc.ca/eng/accountability.asp

OCG's Internet site: http://www.tbs-sct.gc.ca /organisation/ocg-bcg_e.asp

Announcement on the strengthening of Internal Audit: http://www.tbs-sct.gc.ca /media/nr-cp/2004/1118_e.asp

Modern Comptrollership: http://www.tbs-sct.gc.ca /cmo_mfc/