Follow-up Audit of the Canadian Northern Economic Development Agency - Office of the Comptroller General

Why this is important

Canadians expect the federal government to be well managed and to be accountable for the prudent stewardship of public funds, the safeguarding of public assets, and the effective, efficient and economical use of public resources. They also expect reliable and transparent reporting on how the government spends public funds to achieve results for Canadians.

The Financial Administration Act designates deputy heads as accounting officers for their department or agency. As accounting officers, deputy heads are accountable for ensuring that resources are organized to deliver departmental objectives in compliance with government policy and procedures; ensuring that there are effective systems of internal control; signing departmental accounts; and performing other specific duties assigned by law or regulation to the administration of their department or agency.

Core Control Audits are important as they provide deputy heads with assurance regarding the effectiveness of core controls over financial management in their respective organisation. By doing so, Core Control Audits inform deputy heads of their organisation's level of compliance with key requirements contained in selected financial legislation, policies, and directives. 

About the Canadian Northern Economic Development Agency

The Canadian Northern Economic Development Agency (CanNor) has a mandate to advance economic development in Canada's northern territories and serve as the federal hub for these efforts. The Agency does this through delivery of a suite of economic development programs; by developing policy and conducting research; and by aligning the efforts of partners and stakeholders, particularly among federal organizations. As well, the Agency coordinates and serves as the regional delivery agent for certain national economic initiatives. For the fiscal period of 2012-13, CanNor had planned spending of approximately $51 million and planned human resources of 78 FTEs (full-time equivalents).

Follow-up Audit Objective and Scope

The objective of the follow-up audit was to determine whether management actions from the 2011 Audit of CanNor have been effectively implemented and have resulted in compliance with key requirements contained in financial legislation, policies, and directives targeted by the recommendations.

The scope of the follow-up audit included financial transactions, records, and processes performed by CanNor. Transactions were selected from the period of March 1, 2012 to August 31, 2012. The audit examined a sample of transactions for each of the selected policies and directives. Finally, Section 33 (payments and settlements) of the Financial Administration Act (FAA) was not reviewed because it is administered by Aboriginal Affairs and Northern Development Canada (AANDC) through a Memorandum of Understanding. Appendix A provides a complete list of policies and directives included in the scope of the follow-up audit and the overall compliance in areas tested.

Conformance with Professional Standards

This audit was conducted in accordance with the Internal Auditing Standards for the Government of Canada. A practice inspection has not been conducted.

Background

The 2011 Audit of CanNor assessed whether controls over financial management and reporting were effective and conducted in a manner that was compliant with corresponding legislation, policies, and directives ^{Footnote 1}. The scope of the audit included an examination of transactions selected from fiscal year 2010-11.

The 2011 audit found that internal controls at CanNor were not conducted in a manner compliant with the requirements contained in twelve of thirteen policies, directives and corresponding legislation covered within the scope of the audit. As a result of the audit findings, nineteen recommendations were issued to the agency.

It was noted in the 2011 audit that the lack of effective controls observed could be attributed to the organization's short existence in addition to significant turnover in the finance management directorate. Furthermore, there appeared to be a lack of clarity, and/or evolving roles and responsibilities for other federal departments in providing corporate services to CanNor.  In light of the above, it was determined that a follow-up audit needed to be performed.

Audit Findings and Conclusion

The follow-up audit found that core controls over financial management regarding the transactions tested within CanNor resulted in compliance ^{Footnote 2} with the key requirements contained in three of ten policies and directives, and in partial compliance in seven of ten policies, directives and corresponding legislation tested. The significant improvements achieved by CanNor can be attributed to the implementation of new internal policies and processes as part of the commitments made in response to the findings and recommendations of the 2011 Audit.

CanNor has fully implemented twelve of the nineteen recommendations resulting from the 2011 Audit, as well as substantially implemented six of the nineteen recommendations issued. One recommendation has since become obsolete following the Membership Fees Policy being rescinded.

Recommendation

CanNor should ensure that the organization continues with the implementation of its Management Action Plan resulting from the 2011 Audit.

Management Response

Management has accepted the audit findings and has developed an action plan to address the recommendation. Management expects the Management Action Plan to be fully implemented by March 31, 2014.

The results of the follow-up audit and the Management Action Plan have been discussed with the President of CanNor and the Small Departments Audit Committee. The Office of the Comptroller General will follow-up on the Management Action Plan until all findings are resolved.

Appendix A: Policies and Directives Tested