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

Objective and scope

The objective of the audit was to ensure that controls over financial management and reporting were effective and conducted in a manner that was compliant with corresponding legislation, policies, and directives at the Canadian Northern Economic Development Agency (CanNor).

The scope of the audit included an examination of transactions selected from fiscal year 2010-11 along with forecasting processes, including payables at year end for March 31 2010 and 2011.

The scope was limited due to memoranda of understanding with other Canadian Federal Institutions who are responsible on behalf of CanNor for certain requirements in these policies and directives.

Conformance with Professional Standards

This audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing^{Footnote 1}.

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^{Footnote 2}.

The Financial Administration Act designates deputy heads as accounting officers for their department or agency. As accounting officers, deputy heads are accountable for: ensuring 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.

Background

CanNor was launched by the Prime Minister of Canada on August 18, 2009. It is the first federal department to have a mandate that is exclusive to the three Territories. Once established it will be the first federal department to have its head office located in the North.

CanNor commenced operations with its' head office being located in Ottawa. For the period under audit, the majority of corporate services were located in Ottawa. During the fiscal year 2011-12, CanNor's head office including all corporate services will be moved to Iqaluit.

As a start up department it is important that business processes be developed and implemented in the short term to ensure legislation, policies, and directives are respected. It is also important that reliable financial information is provided to senior management for decision making.

Audit findings and conclusion

Core controls over financial management and reporting within the Canadian Northern Economic Development Agency were not conducted in a manner compliant with the requirements contained in twelve of thirteen policies, directives^{Footnote 3} and corresponding legislation tested.

The lack of effective controls may be attributable to the organizations short existence in addition to significant turnover in the finance management directorate. Furthermore, there was a lack of clarity, and/or evolving roles and responsibilities for other federal departments in providing corporate services to CanNor.

Prior to the completion of this audit, CanNor began the process of developing the business processes and establishing supporting service agreements with other federal departments to ensure sound financial management and reporting to support senior management in decision making.

Recommendations

As part of this audit the Agency received detailed recommendations which revolved around three themes.  Recommendations were made to ensure expenditure initiation and account verification are performed by someone with the appropriate delegated authority and accomplished in a timely manner. The Agency was advised to develop business processes to ensure appropriate contracting vehicles are chosen and used within the terms and conditions and that files support the decision making process. Further recommendations were made to ensure documentation is on file for travel, hospitality, and acquisition cards.

Management action plan

Management has acknowledged the audit findings and has resolved to take action. The Agency has provided the Office of the Comptroller General with a management action plan to address actions taken towards the findings.  The results of the audit and the management action plan have been discussed with the President of the Agency and the Small Departments and Agencies 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