PACC Committee Report

Background

Internal audit and evaluation are valuable tools that can help government work better for all Canadians. In its 1993 Report, the Office of the Auditor General indicated that the traditional purpose of internal audit in federal government departments is:

To review and assess, independently, management practices, including controls, in major financial, administrative and operating areas and to recommend improvements wherever beneficial. These reviews are designed to help managers achieve their business objectives by identifying weaknesses or opportunities to improve the overall economy, efficiency and effectiveness of departmental management practices.[1]

When it is done correctly, internal audit can provide senior managers with reliable information for improving management practices. Its usefulness increases when budgets are tight and managers are faced with tough decisions. Effective internal audit can also strengthen the accountability of deputy ministers to ministers and, in turn, of ministers to Parliament, for the use of resources.

Evaluation is another tool that can be used to improve government’s performance and strengthen accountability. Evaluation is:

A disciplined assessment of government programs and activities. It is based on independent, systematic measurement and analysis, carried out to meet expectations set in policy and standards and publicly reported.[2]

The results and conclusions produced by evaluations can and should be used to make adjustments to programs and activities in order to improve their effectiveness, efficiency, and economy. Evaluations can also provide policy-makers, parliamentarians, and Canadians with relevant, reliable information on outcomes achieved through the expenditure of public funds:

By answering questions about what has been accomplished, program evaluation can provide an important measure of the value obtained from government programs and expenditures.[3]

In contrast with their potential utility, however, audits of the Government’s internal audit and evaluation functions have consistently produced disappointing results.

In 1993 the Auditor General reported that there was no uniformly high standard of internal audit throughout the Government. Quality varied considerably from one department to the next and all internal audit units needed improvement to meet the best private sector standards of practice. More leadership from the Office of the Comptroller General (now part of Treasury Board Secretariat) was needed in the form of support, assistance, and professional guidance. At the departmental level, several senior managers did not fully recognize the value of internal audit. Audit coverage needed improvement and audits needed to be more closely based on risk assessment. Problems were found with staffing; the Auditor General pointed out “internal audit too often has been used as a place to relocate people without potential for advancement in other areas.”[4] A survey of audit reports in most departments in the AG’s sample revealed that they contained:

Numerous observations of little significance, were often issued long after the audit work had been completed and, on occasion, were not followed up on to determine whether corrective action had been taken.[5]

The audit found that internal audit groups needed to measure and report on their own performance. In conclusion, the Auditor General called on the Office of the Comptroller General, senior departmental managers, and internal audit units to move quickly to improve internal auditing.

In 1996 the Auditor General informed Parliament that “the overall situation remain[ed] fundamentally unchanged” from the one he found in 1993.[6] Deputy ministers and other senior departmental managers still did not fully understand the function or value of internal audit. Departments were not always following up to verify that managers had implemented recommendations resulting from internal audits. Of the seven internal audit units examined in detail, four did not meet established standards. Progress was noted in one area: in contrast to 1993, roughly half of the internal audit units were measuring their own performance.