Archived - Directive on Small Departments and Agencies Audit Committee

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1. Purpose

1.1 This document provides direction on the responsibilities, membership and operations of the Small Departments and Agencies (SDA) Audit Committee.

2. Context

2.1 The Comptroller General is responsible for establishing an audit committee to provide for review, advice and recommendations on internal auditing performed on SDAs by the Office of the Comptroller General. Deputy heads of SDAs undertaking internal audit work in their departments may choose to access the SDA Audit Committee for advice and guidance.

2.2 This directive is issued pursuant to section 7. (1) (a) and (e.2) of the Financial Administration Act.

3. Effective Date

3.1 This directive takes effect on July 1, 2009. It replaces the Directive on Small Departments and Agencies Audit Committee, dated April 1, 2006.

4. Requirements

4.1 SDA Subcommittees

With the endorsement of the Comptroller General and in consultation with affected deputy heads, the SDA Audit Committee may establish portfolio-based subcommittees to fulfill its responsibilities more effectively.

4.2 Responsibilities of SDA Audit Committee

4.2.1 Risk Assessment

The Office of the Comptroller General will conduct and present to the committee, at least annually:

  • An assessment of broad risks relating to SDAs across government; and
  • A summary analysis of risk management and the control environment for SDAs or clusters of SDAs.

4.2.2 Internal Auditing Performed under the Direction of the Comptroller General

4.2.2.1 The audit committee shall review and advise the Comptroller General, respecting an internal audit charter prepared by the Office of the Comptroller General for the conduct of internal auditing in SDAs and regularly review its continuing appropriateness. As a minimum, the charter shall describe:

  • The scope of internal auditing to be undertaken in SDAs by the Office of the Comptroller General;
  • The internal audit planning process;
  • Protocols for the conduct of internal audit engagements;
  • The internal audit reporting process;
  • Communications protocols among the committee, deputy heads of SDAs and the Office of the Comptroller General;
  • The adequacy of resources provided by the Comptroller General for internal auditing in SDAs;
  • The performance of the Office of the Comptroller General in conducting internal audit services in relation to SDAs; and
  • The risk-based internal audit plan for SDAs prepared by the Office of the Comptroller General and on the allocation of internal audit resources.

4.2.2.2 Additionally, the audit committee shall:

  • Receive and recommend for approval by the Comptroller General, internal auditing reports and management action plans to address recommendations; and
  • Be aware of internal auditing engagements initiated by deputy heads of SDAs and review and recommend the reports arising from such engagements for approval by the responsible deputy head.

4.2.3 Agents of Parliament and Central Agencies

The audit committee will:

  • Be briefed on audit-related issues and priorities related to SDAs, as may be raised by central agencies;
  • Review draft audit reports of the Office of the Auditor General (OAG), other agents of Parliament and central agencies that have implications for SDAs and, if appropriate and practicable, advise and make recommendations to the responsible deputy heads on responses and action plans developed by SDA managers to address the applicable audit recommendations; and
  • Be briefed on the impact of government-wide initiatives on SDAs.

4.2.4 Follow-up on Management Action Plans

4.2.4.1 The audit committee shall:

  • Assess whether there are effective arrangements in place to monitor and follow-up on management action plans respecting recommendations from internal audit, the OAG, or other sources; and
  • Regularly receive follow-up reports from management regarding actions taken.

4.2.4.2 In respect of audits directed by the Office of the Comptroller General, the committee will receive periodic briefings on whether management's action plans have been implemented and, as practicable, whether the actions taken have been effective. Such briefings shall identify any areas where, in the view of the Office of the Comptroller General, management has accepted a level of risk that is unacceptable to a department or to the government.

4.3 Membership of the SDA Audit Committee

4.3.1 The SDA Audit Committee is to include a majority of external members who have been recruited from outside of the federal public administration. Members from the federal public administration shall be limited to individuals at the level of deputy head and associate deputy minister.

4.3.2 The Comptroller General shall jointly, with representative SDA deputy heads, identify and engage suitably qualified external members to be recommended for approval by the Treasury Board. The Comptroller General shall also establish competency profiles to guide the recruiting of audit committee members and for establishing or proposing other requirements related to terms of service.

4.3.3 The SDA Audit Committee may have up to seven members.

4.3.4 Members of the audit committee are to be selected so that their collective skills, knowledge, and experience will allow the committee to competently and efficiently carry out the functions assigned. Members of the audit committee should be free of any conflict of interest, real or perceived.

4.3.5 A member shall serve no more than two terms. To ensure adequate continuity, initial engagements for the first members of the committee may be staggered and terms for these individuals may be for less than four years.

4.3.6 All members of the audit committee will be reasonably familiar with private or public sector financial reporting, or undertake to become so within the first year after appointment. At least one member is to be a financial expert. A financial expert must possess:

  • An understanding of generally accepted accounting principles and financial statements;
  • The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;
  • Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the financial statements of small departments and agencies, or experience actively supervising one or more persons engaged in such activities;
  • An understanding of internal controls and procedures for financial reporting; and
  • An understanding of audit committee functions.

4.3.7 The Comptroller General is responsible for selecting a member to chair the committee.

4.3.8 The quorum for an audit committee or subcommittees will be a majority of the members. No alternates shall be permitted.

4.3.9 The chair shall, as necessary, invite representatives of the OAG to attend committee meetings to discuss the OAG's plans, findings and other matters of mutual concern. The chair of the audit committee or a subcommittee shall invite the deputy head of any SDA to attend a meeting when any matter relating specifically to that SDA is on the agenda for consideration. All deputy heads of SDAs shall have direct access to the audit committee.

4.3.10 Members of the audit committee shall receive orientation and training on the committee's responsibilities and objectives from the Comptroller General.

4.4 Operations of the SDA Audit Committee

4.4.1 The roles, responsibilities, and operations of the SDA Audit Committee and subcommittees shall be documented in an audit committee terms of reference or charter, recommended by the SDA Audit Committee for approval by the Comptroller General. The document shall be reviewed periodically.

4.4.2 The Comptroller General shall ensure administrative and secretarial support to the SDA Audit Committee. Support to subcommittees shall be arranged in consultation with the Comptroller General and responsible deputy heads. The chair of the SDA Audit Committee, in consultation with the Comptroller General, shall prepare a plan to ensure that the annual and ongoing responsibilities of the committee are scheduled and fully addressed. The plan shall be presented to the committee for approval.

4.4.3 The SDA Audit Committee shall meet at least four times a year. The committee is encouraged to schedule meetings at least six months in advance so that departmental management and auditors can prepare the information and reports required to support the committee's work. Rescheduling of audit committee meetings would be by exception only.

4.4.4 The SDA Audit Committee, at the discretion of the chair, may invite SDA deputy heads or other SDA officials to meet individually and/or in camera with the committee.

4.4.5 The SDA Audit Committee shall be in operation no later than June 30, 2009.

4.4.6 The SDA Audit Committee shall prepare an annual report that:

  • Summarizes the committee's activities and their results;
  • Documents any significant concerns the committee may have regarding risk management, control and governance (including accountability) frameworks and processes for SDAs;
  • Provides the committee's assessment of the overall internal audit capacity and performance, including that provided by the Office of the Comptroller General in conducting internal auditing in SDAs; and
  • Provides, as required, recommendations to deputy heads and the Comptroller General regarding the improvement of risk management, control and governance frameworks and processes, including recommendations for the improvement of internal auditing in SDAs.

4.4.7 Prior to finalization of the annual report, the Comptroller General shall be fully briefed. The final report will be provided to the Comptroller General and the Secretary of the Treasury Board for communication to SDA deputy heads.

5. Enquiries

Please send any questions about this directive to:

Office of the Assistant Comptroller General, Internal Audit
Treasury Board of Canada Secretariat
L'Esplanade Laurier
300 Laurier Avenue West
Ottawa, Ontario
K1A 0R5

Email: ias-svi@tbs-sct.gc.ca

Fax: (613) 952-3698