The Policy on Internal Audit of the Federal Government came into effect on April 01, 2006. Its objective is to strengthen public sector accountability, risk management, resource stewardship and good governance by reorganizing and bolstering internal audit on a government-wide basis.
In this context, the DFO Departmental Audit Committee (hereinafter called DAC) is an essential component of the organization’s governance structure and a critical aspect of a strong and credible internal audit regime.
The Deputy Minister is responsible for establishing the DAC. Authority in this regard is derived from the Policy on Internal Audit and the Treasury Board Directive on Departmental Audit Committees. The Policy and Directive also set out the basic parameters for the composition and operation of the DAC, and its responsibilities, duties and accountability.
One provision of the Directive is that the DAC shall document its role, responsibilities and operation in a Charter.
The DAC provides the Deputy Minister with independent, objective advice, guidance and assurance on the adequacy of the Department’s risk management, control, governance processes and audit capacity. To be able to do this, the DAC must exercise active oversight of core areas of departmental control and accountability in an integrated and systematic way.
The DAC is composed of members recruited from outside the Public Service. Based on proposals made by the Committee and its Chair, external members are jointly selected by the Deputy Minister and the Comptroller General, and are appointed by the Treasury Board. A member must be able to function in both official languages.
The Deputy Minister will chair the meeting and an external member will be vice-chair. The Chair will exercise leadership of the Committee members in the accomplishment of its responsibilities and duties (as per section 6). The Associate Deputy Minister is a standing member of the committee.
Members will be appointed by a Treasury Board Appointment Order. A full term of office is four years. An external member shall serve no more than two terms. However, to ensure continuity within the DAC, engagement of members by the Deputy Minister can be staggered.
The DAC will meet four times a year, with authority to convene additional meetings as circumstances require. The DAC meeting schedule will normally be set out one year in advance (refer to item 5b.) so that departmental management and internal auditors can prepare the information and reports required to support the DAC’s work. Rescheduling of meetings will be by exception only.
The Quorum for a meeting shall be the majority of the members. No alternates shall be permitted.
To enhance the effectiveness of the DAC meeting, each member will:
i. devote the time needed to prepare for and participate in each meeting by reading the reports and background material provided for the meeting; and
ii. maintain an excellent meeting attendance record.
The Senior Financial Officer (SFO), Senior General Counsel and the Chief Audit Executive (CAE) will attend all meetings of the DAC. The Chair may request the attendance of other departmental officials. As necessary, the Chair will ask a senior representative of the Office of the Auditor General to attend the committee meeting to discuss the Office’s plans, finding and other matters of mutual concern. The Chair may, as necessary, also ask Treasury Board Secretariat officials to attend.
A summary record of each meeting shall be kept and shall contain a record of the persons present, an accurate description of matters discussed and conclusions reached.
The Minister shall be briefed periodically on significant items arising from the work of internal audit and the audit committee.
At least once a year, the Minister and DAC will meet individually, in camera. In addition, DAC will meet individually, in camera, for assurance regarding risk management, control, governance and audit capacity with each of:
i. the SFO;
ii. the CAE;
iii. the representative of the Office of the Auditor General; and
iv. any other officials the DAC may determine.
The DAC has access to the CAE and SFO and to other DFO management and documentation (subject to applicable legislation) as may be required to fulfill its responsibilities.
The Chair of the DAC will prepare a plan to ensure that the annual and ongoing responsibilities of the DAC are scheduled and fully addressed. The plan will be presented to the DAC for its approval.
The role of the DAC can only be fulfilled if its members are well informed. Members shall receive formal orientation and training from TBS/OCG on the DAC’s purpose, responsibilities and objectives, and from DFO on its business in the official language of their choice. A process of continuing education (e.g., briefings and information on emerging issues and risks) has been established.
To the extent it deems necessary to meet its responsibilities, and in keeping with its Charter, the Committee has the authority to retain independent advice and assistance (through its Secretariat).
Secretariat support to the operation of the DAC shall be provided. This will include, but will not be limited to:
i. timely preparation of all notices and agenda meetings;
ii. coordination of presentations and distribution of reports and/or related documents that are prepared for information or consideration by DAC;
iii. timely preparation and distribution of a summary record of meeting proceedings;
iv. timely website postings; and
v. performance of other duties as may be assigned.
The DAC will be provided with the resources necessary to carry out its role, responsibilities and duties.
The DAC will review, at least annually, the arrangements established by management to exemplify and promote public services values and to ensure compliance with those laws, regulations, policies, and standards that relate to ethical conduct.
The DAC will review, at least annually, the corporate risk profile and departmental risk management arrangements.
The DAC will review, at least annually, DFO’s internal control arrangements, including the adequacy of management-led audit.
The DAC will:
i. recommend, and review regularly, the DFO internal audit Charter and the DFO internal audit policy for approval by the Deputy Minister;
ii. review regularly the adequacy of resources of the internal audit function;
iii. review and recommend for the Deputy Minister approval the risk assessment and internal audit plan prepared by the CAE;
iv. review regularly the performance of the internal audit function; among other matters, this will include a review of the conclusions of external practice inspections (refer to item 7b) and related remedial actions taken;
v. advise the Deputy Minister on the appointment and performance appraisal of the CAE;
vi. receive and recommend for approval internal auditing reports and management action plans to address recommendations; and
vii. be aware of internal audit engagements or tasks that do not result in a report to the DAC, and be informed of all matters of significance arising from such work.
The DAC will:
i. ensure management has adequate arrangements to support the OAG and central agencies in doing audit work in DFO;
ii. be fully briefed on all audit work relating to DFO to be undertaken by the OAG, other agents of Parliament or central agencies;
iii. review the audit reports of the OAG and central agencies that have DFO or government-wide implications and recommend for approval DFO responses and actions plans;
iv. meet at least once a year with the OAG and seek its comments and advice on matters of DFO risk, control and governance;
v. be briefed on audit-related issues and priorities raised by central agencies and advise the Deputy Minister on required action; and
vi. be briefed on, and advise the Deputy Minister on, the impact of government-wide initiatives to improve management practices.
The DAC will:
i. ensure that there are effective arrangements in place to monitor and follow-up on management action plans responding to recommendations from internal audits, the OAG, or other sources;
ii. periodically receive reports from management on actions taken; and
iii. receive reports periodically from the Chief Audit Executive (CAE) on whether management action plans have been implemented and whether the actions taken have been effective. The report will identify any areas where the CAE believes management has accepted a level of risk that is unacceptable to DFO or to the government.
The DAC will:
i. review the DFO financial statements with the SFO and all significant accounting estimates and judgments therein and recommend to the Deputy Minister whether they should be accepted; and
ii. review the DFO financial statements:
The DAC will review the DFO Corporate Risk profile and the Report on Plans and Priorities, the Departmental Performance Report and other significant accountability reports, to ensure that, to the best of their knowledge, there are no material misstatements or omissions.
The DAC will annually self-assess its performance and the results will be communicated in the Committee’s annual report.
At least every four years, the performance of the DAC will be subject to external assessment led by the Office of the Comptroller General as a key aspect of the Office’s practice inspection of a departmental internal audit function.
The DAC will prepare an annual report to the Deputy Minister. This report will:
i. summarize DAC activities undertaken and the results of its reviews;
ii. provide DAC’s assessment of the Department’s systems of internal controls;
iii. document any significant concerns the DAC may have in relation to DFO’s risk management, controls and accountability processes;
iv. provide DAC’s assessment of the capacity and performance of the internal audit function;
v. provide, as needed, recommendations for the improvement of risk management, controls and accountability processes, including recommendations for the improvement of the departmental internal audit functions; and
vi. provide such other information or documentation that the DAC deems important to best convey a fair and complete picture of its activity and results – and the context within which this ought to be viewed (e.g., including the disclosure of its Charter).
The purpose of the DEC is to provide the Deputy Minister and the Departmental Management Committee with credible, timely and objective information on the relevance and performance of all DFO programs and to guide and oversee the evaluation function.
Evaluation reports, once approved by the DEC, will be provided to the DAC for information.
The DAC shall review annually the appropriateness of its Charter, for reaffirmation by the Deputy Minister.
The DAC will inform the Secretariat of other unofficial activities throughout the year. These activities will be reported in the DAC Annual Report.