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Audit of Governance

Departmental Audit Committee
October 4, 2019

Executive summary

Governance was identified as a medium-level risk area in the 2019-20 Integrated Audit and Evaluation Plan due to the risk of inconsistent and unclear governance practices that may hamper the Department's ability to effectively and efficiently achieve its priorities. The objective of this audit was to assess the effectiveness of Agriculture and Agri-Food Canada's (AAFC) governance structure in support of the achievement of departmental priorities. The audit focussed on the Department's core governance structure which has been designed to set the decision-making framework and to support the Deputy Minister in the achievement of the Department's strategic outcomes.

The audit examined whether effective processes and tools were in place for core governance committees to support the Deputy Minister in carrying out oversight responsibilities. The audit also examined the departmental governance committees and the overall governance structure to assess whether they were established with appropriate authorities and responsibilities. Finally, the audit focused on whether the core governance committee structure was reviewed and updated on a regular basis to respond to changing priorities, risks, and compliance requirements.

The Office of the Comptroller General of Canada and the Institute of Internal Auditors define Governance as the combination of processes and structures implemented by organizations to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives. Within the Canadian federal government, deputy heads are accountable for making decisions to achieve their departmental objectives and establish structures and mechanisms to support their decision-making.

Overall, the audit found that AAFC has established a governance structure that included committees attended by senior officials from all branches. Consistent with good governance practices, these core committees had formal Terms of References that were updated annually and documented Records of Decision, which were made available on a timely basis.

The audit concluded that the departmental governance structure could be enhanced to better support the achievement of departmental priorities.

The effectiveness of the governance structure could be enhanced by

1.0 Introduction

1.1 Risk context and objective

1.2 Overview of departmental priorities and governance

2.0 Detailed observations, recommendations and management responses

The following sections present the key audit observations. Recommendations for improvement are provided after the detailed observations. Management responded to each recommendation and provided:

2.1 Governance structure

2.2 Alignment to departmental priorities

2.3 Mechanisms and monitoring to support decision-making

3.0 Conclusion

Overall, the audit found that the Department had established a governance structure that included committees attended by senior officials from all AAFC branches. Consistent with good governance practices, these committees had formal Terms of Reference that were updated annually and documented Records of Decision, which were made available on a timely basis.

The audit concluded that the departmental governance structure could be enhanced to better support the Deputy Minister in managing the achievement of departmental priorities.

The effectiveness of the governance structure could be enhanced by

The audit recommendations and management responses and action plans are below:

Recommendation 1. Governance structure

Ensure the departmental governance structure reflects the intended direction-setting and decision-making roles, responsibilities, and authorities and increase consideration of departmental priorities in the forward agenda for the senior governance committees.

Management Response and Action Plan

Management Response and Action Plan: Agree.

The structure and nature of AAFC's core governance will be reviewed to ensure clarity of purpose of each of its constituting elements.

Lead(s) responsible: Corporate Secretary

Target date for completion: January 2020

Recommendation 2. Governance mechanisms and monitoring

Establish clearer expectations for documenting and monitoring governance decisions and for monitoring the effectiveness of the overall governance structure.

Management Response and Action Plan

Management Response and Action Plan: Agree.

Current practices will be reviewed to ensure that governance documentation supports AAFC's decision-making and that action items are effectively followed through.

Governance review requirements will be clarified with regards to the nature, frequency and purpose of these reviews.

Lead(s) Responsible: Corporate Secretary

Target date for completion: January 2020

Annex A: About the audit

Statement of conformance

The audit conforms to the Institute of Internal Auditors' International Professional Practices Framework, as supported by the results of AAFC's internal audit quality assurance and improvement program. Sufficient and appropriate evidence was gathered in accordance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing to provide a reasonable level of assurance over the findings and conclusions in this report. The findings and conclusions expressed in this report are based on conditions as they existed at the time of the audit, and apply only to the areas included in the audit scope.

Audit objective

To assess the effectiveness of AAFC's governance structure in support of the achievement of departmental priorities.

Audit scope

During the planning phase, the audit team interviewed key stakeholders, attended governance committee meetings, and analyzed senior management committee documents such as the terms of references, records of decision, meeting agendas, and other relevant documentation. Based on the information obtained in the planning phase, the audit team developed a risk assessment and identified scoping considerations. The areas identified as being of greatest risk were used to confirm the audit objective, scope, and criteria.

The audit examined management practices in place up to June 30, 2019. The documentation review focused on the period of January 1, 2018 to December 31, 2018.

The audit focused on the following core senior management committees that have a mandate to govern AAFC:

The audit examined the relationship between the core governance structure and other senior committees. It assessed the Procurement Review Board and Investment Planning Committee at a high level to understand how they fit into the overall departmental governance structure. Based on a review of committee documentation, observations of meetings and interviews with senior management, it was determined that these committees have process oversight roles but are not core senior governance committees like the Deputy Minister-level and Director General-level committees listed above. Furthermore, Internal Audit has identified investment planning on its 2019-20 to 2023-24 Integrated Audit and Evaluation Plan for audit in 2021-22.

The audit team did not assess the following:

Audit criteria

The audit examined three criteria of effective governance during the audit's conduct phase in the areas of authorities and responsibilities, oversight and monitoring.

Audit approach

The audit approach and methodology were risk-based and consistent with the “International Standards for the Professional Practice of Internal Audit”and the Treasury Board “Policy on Internal Audit”. These standards require that the audit be planned and performed so as to conclude against the objective. The audit was conducted in accordance with an audit program that defined audit tasks to be performed in the assessment of each line of enquiry.

Audit evidence was gathered through various methods. The audit team consulted extensively with departmental senior management and interviewed all of the branch heads and 19 Directors General, as well as officials in the Corporate Secretary's Office and the branches. Audit work included direct observation of committee meetings and analysis of documentation, including committee terms of reference and records of decision.

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