Audit of Regions (Atlantic, Quebec, and Prairie and Northern)

2.0 About the Audit

2.1 Background

The Regional Operations Sector is Industry Canada's main presence throughout Canada, serving a key role in advancing regional economic interests. As the Department's eyes and ears in the regions, the Sector supports strategic policy development and decision making by gathering and disseminating regional intelligence and analysis. ROS also serves as the Department's main service delivery arm in the regions.

In support of Industry Canada's mandate, the ROS serves the needs of their regional clients through the delivery of programs and services, and supports the development and understanding of national policies, programs and regulations. ROS staff work in Industry Canada's five regions: Atlantic, Quebec, Ontario, Prairie and Northern, and Pacific. Each region is led by a Regional Executive Director (RExD).

All regions share a common departmental mandate, although individual regional priorities differ with respect to the contribution they make towards it.

The regions use satellite offices in addition to their district offices to ensure goals and objectives are met. In January 2011, there were 30 full-time employee positions in the Atlantic Region, 47 in the Quebec Region, 64 in the Ontario Region, 45 in the Prairie and Northern Region, and 34 in the Pacific Region.

Regional offices consist of the same directorates: Corporate Services (Finance and Administration, and Human Resources); Communications; and Policy, Analysis and Intelligence. They provide various level of support to the following program clients:

• Canadian Intellectual Property Office (CIPO)
• Chief Informatics Office (CIO)
• Competition Bureau (CB)
• Measurement Canada (MC)
• Office of the Superintendent of Bankruptcy (OSB)
• Spectrum, Information Technologies and Telecommunications (SITT).

The program clients do not report to the RExDs but rather to the Heads of their programs at National Headquarters. The level of service a client requires depends on the region and the program. These services range from a full slate of corporate services to simply providing advice on an as required basis.

The following chart shows the general organizational structure in the regions.

OSB, MC, CB and CIO operate with three regions instead of five: Eastern, Ontario, and Western. SITT recently announced that it will adopt a three-region model consisting of Quebec, Ontario/Atlantic, and Western regions.

Industry Canada's five regions are working towards a Common Services Memorandum of Understanding. They have identified the services to be provided to program clients and the differences in the depth of those services region by region. They have also developed a common set of services that all regions will provide to each program client. The Common Services initiative is currently under discussion with the program client community.

As noted above, Corporate Services in the regions consists of Finance and Administration, and Human Resources.

The Finance function includes financial planning and analysis, accounting operations, and financial policy and systems.

The Administration function includes accommodations, security, health and safety, access to information and privacy, mail service, reception co-ordination, inventory control, asset management, central file co-ordination, relocation advice, tenant services, telecommunications, petty cash, and contracting and procurement.

Finally, Human Resources includes awards and recognition, compensation and benefits, employment equity and diversity, human resource planning, labour relations, learning and development, official languages, staffing, and values and ethics.

This audit examined management controls that support corporate services, excluding Human Resources, delivered by three of the Department's five regions; Atlantic, Quebec and Prairie and Northern.

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2.2 Audit Context

In accordance with the approved Industry Canada (IC) 2010-2011 Multi-Year Risk-Based Audit Plan, the Audit and Evaluation Branch (AEB) undertook an audit of the Corporate Services in the Regions.

AEB last audited the regions in 2003 when it completed an audit of Corporate Services in the Ontario Region. Since then the role of Corporate Services in the regions has changed significantly, and the programs served have also changed.

In this, the first of two planned regional audits, the Atlantic, Quebec, and Prairie and Northern regions were examined.

2.3 Audit Objective

The objective of this audit was to provide reasonable assurance that specific management controls, as identified in the audit criteria, for Corporate Services (Finance and Administration) within the three regions — Atlantic, Quebec, and Prairie and Northern — are operating effectively. A number of sub-objectives were established to provide assurance that:

• roles and responsibilities are clear
• there is a formal risk management process that identifies risks and develops mitigation strategies
• regional Corporate Services (Finance and Administration) ensured compliance with Sections 32, 33 and 34 of the Financial Administration Act, and
• regional Corporate Services (Finance and Administration) ensured that financial transactions were carried out:
  • with due diligence
  • in compliance with Treasury Board Policies and with Industry Canada's Financial Control Framework.

2.4 Audit Scope

The scope of the audit was the core management controls that were assessed during planning as medium high and medium risk within Corporate Services (Finance and Administration), in three regions — Atlantic, Quebec, and Prairie and Northern — as identified in the audit criteria. For sampling purposes, the audit covered the period April 1, 2009 to December 31, 2010.

The scope of the audit excluded Human Resources; Communications; Policy, Analysis and Intelligence; contracting and procurement in the regional offices; and regional program clients.

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2.5 Audit Criteria

The audit criteria were developed based on a detailed review of documentation provided by regional management and/or researched by AEB, preliminary interviews with regional management, and a detailed assessment of the risks facing Corporate Services in the three regions based on the Management Control Framework, using Treasury Board's Core Management Controls as defined in November 2007.

Appendix A lists the audit criteria and demonstrates the relationship between the criteria and the audit objectives.

2.6 Audit Methodology

This internal audit was conducted in accordance with the Treasury Board Policy on Internal Audit and Internal Auditing Standards for the Government of Canada. The audit approach consisted of the following:

• Planning Phase — A risk assessment of the core management controls, as defined by Treasury Board's Core Management Controls, November 2007, for governance, internal control and risk management processes, was conducted in Corporate Services (Finance and Administration) in the three regions. Evidence gathered through document review and interviews with key stakeholders was synthesized to identify areas of medium high and medium risk. The results of the risk assessment contributed to the development of audit criteria and the audit program used during the conduct of the audit.
• Document Review — The audit team reviewed documents including, but not limited to, regional business plans and risk assessments, budgets, budget variance analyses, organizational charts, values and ethics statements, a presentation on the Common Services initiative, checklists, error reports, e-mails / communiqués between finance managers and regional personnel, intra-net sites, and financial monitoring visit reports from CAS.
• Interviews — Auditors visited all three regions and interviewed the following personnel at each site:
  • Director/Manager of Finance and Administration
  • Manager of Financial Services
  • Manager of Administration
  • Finance and/or Administration Officers
  • Regional Executive Director.
• Operation and Maintenance (O&M) File Review — The audit team performed two types of file tests on O&M expenditures (excluding salaries and related costs). Test 1 reviewed Section 33 services provided by Finance and Administration to program clients (e.g. SITT, CB, OSB, MC) in the region. Test 2 assessed regional directorate O&M expenditures for policy compliance, including whether authorized personnel carried out Sections 32, 33 and 34. Samples drawn for both tests were objective, random and representative.

The audit team analyzed and assessed the information gathered through the above activities against the audit criteria that were developed during the planning phase of the audit.

The planning phase of this engagement was from October 2010 to January 2011. Audit fieldwork was conducted from February 2011 to April 2011. Debrief meetings were held with each region separately at the end of May 2011 to validate the accuracy of the findings in this report.