2021–22 Audit and Evaluation Committee Annual Report

June 2022 – Thirteenth Annual Report
For the year ended March 31, 2022

Annual Plan and Annual Report

The Audit and Evaluation Committee (AEC) carries out its activities in accordance with an annual plan that is prepared by the Chair and approved by the Public Sector Integrity Commissioner of Canada (Commissioner). The document specifies the number of meetings planned for the coming year and the topics to be covered at the meetings. At the end of each fiscal year, the Chair of the AEC, in consultation with other external members, prepares a report (this document) for the Commissioner that describes the AEC’s activities during that year and provides an assessment of the systems, controls and other management tools that are in place at the Office of the Public Sector Integrity Commissioner of Canada (PSIC).

Membership

The Chair and members are selected by the Commissioner. The membership of the 2021–22 AEC was as follows:

Chair

• Josée De La Durantaye, External

Members

• Joe Friday, Commissioner
• Jacques Paquette, External

Regular non-member attendees

• Denis Bilodeau, Deputy Commissioner and Chief Audit Executive (CAE)
• Éric Trottier, Manager, Financial Services and Chief Financial Officer (CFO)
• Heidi Bartman, Chief Results Delivery Officer

Meetings

The Committee met on the following dates during the 2021–22 fiscal year:

• April 29, 2021
• August 10, 2021
• October 6, 2021
• December 3, 2021
• March 1, 2022

This year, all meetings were held by teleconference. At each AEC meeting, the external members held an in-camera session with the Commissioner. There was also an in-camera session with representatives from the Office of the Auditor General (OAG).

Support for the Committee

The AEC received information and support from management to help it carry out its duties and responsibilities effectively. The Commissioner also made his reports to Parliament, including his Annual Report and Case Reports, available to the AEC.

With the help of the AEC Chair, the Chief Results Delivery Officer prepared the agendas and minutes for the 2021–22 meetings and supported the AEC’s work.

Summary of 2020–21 AEC Meeting Topics

The AEC considered the following items in 2020–21.

OAG audit of financial statements

• The OAG audited PSIC’s annual financial statements.
• On August 10, 2021, OAG staff members Julie Tremblay, Nathalie Chartrand and Katessa Valderrama presented the results of the audit of the 2020–21 financial statements to the AEC. Ms. Tremblay told the AEC that the independent auditor’s report did not include any contingencies and that the financial statements were free of material misstatements.
• She said that two risks were identified in the annual audit plan: (1) management’s circumvention of controls, and (2) completeness and accuracy of salaries.
• In the case of the second risk, the OAG reported that an irregularity had been observed. Pay accruals from prior years may overstate accounts payable and accrued liabilities. She noted that this inaccuracy had not been corrected, as management had decided to correct it in the next year, in view of the materiality of the correction to be made.
• Ms. Chartrand thanked PSIC staff for their full cooperation.
• The OAG representatives asked the AEC members and participants whether they were aware of any fraud at PSIC. The members and participants replied that they were not aware of any fraud.
• External AEC members and OAG representatives held an in-camera meeting.
• The audit cycle continued with a presentation by OAG staff members Julie Tremblay and Riowen Abgrall on March 1, 2022, on the audit plan for the 2021–22 financial statements. Ms. Tremblay noted that the risks remained unchanged from the previous fiscal year.

PSIC Risk-based Audit and Evaluation Plan (RBAEP)

• The AEC discussed the PSIC RBAEP a few times. The discussions focused in part on implementing the activities identified in the plan.
• There were discussions about PSIC’s risk profile in the RBAEP and the need to clarify the residual risks and update the associated risk mitigation strategies.
• A revised and streamlined version of the plan was presented to the AEC at the December 3, 2021, meeting. The update was well-received by the AEC.

AEC 2021–22 annual plan

• The AEC discussed the annual plan for the current year and planned future meeting agendas accordingly to ensure that all parts of the plan were covered. Some parts of the plan were moved or grouped together to facilitate meetings.

Audit and Evaluation Dashboard

• The PSIC Audit and Evaluation Dashboard was discussed at AEC meetings. The discussions included the status of each planned audit and evaluation and any proposed changes to the schedule.
• The AEC had a number of discussions regarding internal controls to clarify the respective oversight roles of the OAG, the service provider and PSIC. It was decided that an evaluation of internal financial controls would be added to the audit and evaluation plan to complement existing audit mechanisms. An outside firm will carry out the work.
• The AEC discussed the report on the cyclical staffing assessment conducted by the Public Service Commission for PSIC. Two items were brought to the AEC’s attention, and action on the recommendations will be included in the dashboard for the coming years. The AEC commended the Commission on the quality of its work and noted the value of such support for small organizations like PSIC.

Quality assurance exercise

• The AEC discussed the findings in a report on the 2020–21 quality assurance exercise. The findings focused on the efficiency and timeliness of the organization’s work.

Situation following COVID-19

• At each meeting, the AEC obtained an operations update concerning the situation created by COVID-19, particularly on maintaining operations related to PSIC’s mandate during this period. This included compliance with service standards, the course of operations related to investigations, and specific information technology measures to enable staff to continue their work.
• The issue of the eventual return to work was discussed, although teleworking had proven effective in ensuring that the Commissioner’s mandate was carried out despite the situation’s challenges.
• The AEC was informed that PSIC had updated its business continuity plan on several occasions to reflect the changing situation, including after the occupation of the downtown area by truckers.

Corporate values and ethics

• The AEC was informed that PSIC’s annual town hall on values and ethics would be held on March 11, 2022. The AEC welcomed this commitment to the implementation of PSIC’s Code of Values and Ethics.

Operations

• The AEC had regular opportunities to review and comment on operations statistics and the results of PSIC’s performance standards.

Budget

• The AEC reviewed quarterly financial reports prepared by PSIC and provided comments to the CFO. At each meeting, the CFO gave members a comprehensive report and analysis of expenditures and forecasts.

Human resources

• The AEC discussed human resources issues, including staffing, staff turnover, training and planning.

Information technology

• During the reporting period, the AEC had regular discussions on the risks associated with the delivery of IT services by the Canadian Human Rights Commission (CHRC), including cyber threats. The risks are reflected in both the RBAEP and the business continuity plan. The CFO briefed members on the system’s status, including the management of files, records and information.

PSIC reports

• The AEC provided advice, where necessary, on PSIC’s Departmental Plan, Departmental Results Report and Annual Report.

Audit and Evaluation personnel changes

• There were no changes in the AEC’s membership during the reporting period. However, late in the fiscal year, Ludovic Noubissi became Chief Financial Officer, replacing Éric Trottier, who left for another organization. The AEC thanked Mr. Trottier for the support he provided over the past few years.

Orientation and Learning Activities

Treasury Board Symposium for Departmental Audit Committees (DACs)

Josée De La Durantaye and Jacques Paquette attended the DAC Symposium on December 1 and 14, 2021. The symposium was virtual and was held over two half-days. It covered such topics as auditing during a pandemic, diversity of audit skills, and the importance of DACs building trust with senior management.

Agenda for Upcoming AEC Meetings

Some AEC activities take place every year, including the following:

• Providing the Commissioner with advice and recommendations on issues related to service delivery, including performance measurement and communication with stakeholders;
• Reviewing audit and evaluation reports;
• Following up on management action plans, including recommendations made in reports from other agents of Parliament;
• Cooperating with the OAG and the Office of the Comptroller General (OCG), if necessary, in view of PSIC’s status as an agent of Parliament;
• As a committee, acquiring a better understanding of PSIC’s administration and activities through briefings on PSIC operations given by knowledgeable PSIC employees so that members are better able to provide advice regarding risks;
• Reviewing quarterly financial statements and providing comments where appropriate on the Report on Plans and Priorities, the Departmental Performance Report and the Commissioner’s Annual Report to Parliament; and
• Participating, if necessary, in audit community learning events in order to exchange views with audit committee members in other departments and agencies.

Evaluation of PSIC’s Internal Controls and Risk Management and Governance Mechanisms

The AEC meets as a committee with PSIC staff three to five times a year. As a result, it can be difficult for the AEC to fulfil its role of providing sound advice to the Commissioner regarding the functioning of internal controls and risk management and governance mechanisms.

In order to fulfil its mandate, steps have been taken to increase the reliability of the advice provided by the CAE to the Commissioner during the reporting period and in this report:

• At each AEC meeting, external members held in-camera sessions with the Commissioner.
• During the reporting period, the Chair was in periodic contact with the CAE and the CFO.
• External members reviewed PSIC’s quarterly financial statements, and at each AEC meeting, the CFO was asked questions on financial matters (and provided satisfactory answers).
• An evaluation of internal financial controls by an outside firm was added to the audit and evaluation plan to complement existing audit mechanisms.
• On August 10, 2021, external members met in-camera with the OAG Principal responsible for the audit of PSIC’s 2020–21 financial statements. The audit did not identify any material misstatements or concerns that needed to be brought to the attention of the AEC, the CFO, the CAE or the Commissioner.

After taking these steps, the AEC’s external members said that in their view and to the best of their knowledge, PSIC’s system of internal controls and risk management and governance mechanisms were sound.

Assessment of the Capacity and Performance of the Internal Audit and Evaluation Functions

The AEC noted the following:

• The AEC meets regularly and has an external Chair. Its membership is reviewed annually and renewed when required.
• There is an OAG audit every year, and OAG staff have expressed appreciation for the cooperation of the PSIC representatives with whom they worked in carrying out the audits and for the cooperation of CHRC representatives, PSIC’s financial service providers.
• An RBAEP was developed and reviewed by the AEC and approved by the Commissioner; it is revised as necessary. The Audit and Evaluation Dashboard is prepared by the CAE and is reviewed at least once every fiscal year by the AEC.
• PSIC brings in external consultants who provide professional services in the areas of risk assessment, audits and evaluations, and audit and evaluation planning. The AEC will continue to monitor the results of these services.
• Sufficient funds are available to carry out the approved RBAEP.

The AEC will continue to review the capacity and performance of PSIC’s internal audit and evaluation functions.

(Original signed by)

Josée De La Durantaye, Chair
On behalf of the PSIC Audit and Evaluation Committee

Appendix A

Audit committees

The requirement for public sector organizations to establish independent audit committees in which a majority of members are from outside the federal public administration is an essential component of the Treasury Board (TB) Policy on Internal Audit. The fundamental role of such committees is to ensure that the deputy head has independent, objective advice and assurance on the adequacy of the department’s control and accountability processes.

The importance of audit committees was further highlighted in legislation when the Federal Accountability Act amended the Financial Administration Act to include the following requirements:

Internal audit measures (under the Financial Administration Act)

16.1 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.
2006, c. 9, s. 259.

Audit committees

16.2 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.
2006, c. 9, s. 259.

Appointment

16.21(1) A person who does not occupy a position in the federal public administration but who meets the qualifications established by directive of the Treasury Board may be appointed to an audit committee by the Treasury Board on the recommendation of the President of the Treasury Board.

Audit committees and parliamentary agencies

The TB Policy on Internal Audit makes specific reference to offices of agents of Parliament, including the Office of the Public Sector Integrity Commissioner of Canada (PSIC). Deputy heads of these organizations may, subject to compliance with sections 16.1 and 16.2 of the Financial Administration Act, authorize such departures from the specific policy requirements contained in the Policy as they may deem appropriate in light of the governance arrangements, statutory mandate and risk profile of the organization of which they are deputy heads.

Audit and evaluation

Although audit and evaluation are the subjects of separate policies in the federal government, the management of these functions is closely linked, particularly in small agencies. In the interest of efficiency, PSIC’s audit committee is also responsible for evaluation, in accordance with the TB Policy on Results, and is consequently named the Audit and Evaluation Committee (AEC).

Accountability of the AEC

The AEC’s role is advisory in nature. The AEC’s sole accountability is to the Public Sector Integrity Commissioner of Canada (Commissioner). In this regard, members are accountable for the objectivity, quality and timeliness of their advice and for the fulfilment of their contractual responsibilities. In addition, the AEC conducts an annual self-assessment of its work.

Responsibilities of the AEC

The AEC’s responsibilities under the TB Policy on Internal Audit (April 1, 2017) are as follows:

• Provide objective advice and recommendations to the Commissioner regarding the sufficiency, quality and results of internal audit engagements related to the adequacy and functioning of PSIC’s frameworks and processes for risk management, control and governance;
• Using a risk-based approach, review all areas of responsibility for departmental audit committees related to departmental management, control and accountability processes as determined by the Comptroller General of Canada. These include the following:
  • Values and ethics
  • Risk management
  • Internal audit function
  • Internal assurance providers
  • Follow-up on management action plans
  • Financial statements and public accounts reporting
  • Accountability reports
• Provide advice and recommendations on matters for which the Commissioner, as accounting officer, is responsible and on other related matters as needed or requested by the Commissioner.

With respect to evaluations, the AEC will do the following:

• Provide advice to the Commissioner, through review of the PSIC’s RBAEP, regarding PSIC programs or operations that should be evaluated;
• Review and advise on the terms of reference, scope and timing of any planned evaluation;
• Review the findings of evaluations and monitor subsequent management action plans.