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Audit and Evaluation Committee — Terms of reference (revised June 28, 2022)

Table of contents

INTRODUCTION

The Financial Administration Act requires that deputy heads establish an audit committee for their departments. The Treasury Board (TB) Policy on Internal Audit and Directive on Internal Audit expand on the legislation, requiring the establishment of departmental audit committees that include a majority of members from outside the federal public service (external members).

Although audit and evaluation are the subjects of separate policies in the federal government, the management of these functions is closely linked, particularly in small agencies. In the interest of efficiency, the Office of the Commissioner of Lobbying (OCL) Audit and Evaluation Committee (AEC) also has responsibilities related to evaluations that are carried out under the TB Policy on Results.

As OCL is an independent Agent of Parliament, the Commissioner of Lobbying (Commissioner) is the deputy head of the organization. This document establishes the responsibilities and operating arrangements that the Commissioner has established for the OCL AEC.

EFFECTIVE DATE

The AEC Terms of Reference (TOR) was reviewed at the June 28, 2022 meeting of the AEC and subsequently was approved by the Commissioner. It replaces all previous versions of TORs or Charters for the AEC.

RELEVANT LEGISLATION AND RELATED POLICIES

The AEC TOR supports the application of the following policies and legislation:

Legislation:

Financial Administration Act, Section 16.2, 16.21, Section 42.1

Treasury Board Policies and Directives:

Policy on Internal Audit (April 2017)

Directive on Internal Audit (April 2017)

  • Appendix A: Mandatory Procedures for Internal Auditing in the Government of Canada
  • Appendix B: Mandatory Attributes of the Composition and Operations of the Departmental Audit Committees

Policy on Results (July 2016)

Directive on Results (July 2016)

APPLICATION OF THE TB INTERNAL AUDIT POLICY TO OCL

The Treasury Board Policy on Internal Audit applies to the offices of Agents of Parliament with specific exceptions identified within the policy as follows:

  • the Commissioner does not brief a minister on matters arising from the work of internal audit; (4.1.3)
  • the Commissioner does not have to ensure that completed audit reports are released on platforms as prescribed by TBS; (4.1.6)
  • the Commissioner does not have to ensure that the Comptroller General of Canada is provided with full and timely access to all information, documentation or explanations required or requested by the Comptroller General of Canada; (4.1.7)
  • the Chief Audit Executive (CAE) is not subject to qualification requirements established in the policy; (4.2.1.1 and 4.2.1.2)
  • the Commissioner is not required to submit the approved risk-based audit plan to the Comptroller General of Canada; (4.2.5)
  • the Commissioner is not required to consult with the Comptroller General of Canada on the establishment of the Departmental Audit Committee; (4.2.8)

In addition to the exceptions, the policy identifies that the Commissioner has sole responsibility for:

  • directing the OCL audit plan;
  • monitoring and ensuring compliance with this policy within OCL;
  • establishing and maintaining an audit committee; the members of these committees are not appointed through the Treasury Board appointment process led by the Comptroller General of Canada; and
  • determining any additional measures that may be appropriate to safeguard the integrity of the internal audit function if the chief audit executive does not have a recognized internal auditor certification or professional accounting designation in Canada.

ACCOUNTABILITY OF THE AEC

The sole accountability of the AEC is to the Commissioner. In this regard, members are accountable for the objectivity, quality and timeliness of their advice and for the performance of their contractual responsibilities.

RESPONSIBILITIES OF THE AEC

The AEC is responsible for the following:

  • Providing objective advice and recommendations to the Commissioner regarding the sufficiency, quality and results of internal audit engagements related to the adequacy and functioning of the Office's frameworks and processes for risk management, control and governance.
  • Using a risk-based approach, reviewing all areas of management designated by the Comptroller General of Canada for committee review. These areas are listed in the next section of this document.
  • Providing advice and recommendations on matters for which the Commissioner, as accounting officer, is responsible, and on other related matters as needed or requested by the Commissioner.
  • To provide advice and recommendations to the Commissioner on the selection of areas for evaluation and on the scope, conduct and results of those evaluations.

AREAS OF MANAGEMENT FOR AEC REVIEW

The key areas of management that fall within the scope of the AEC are:

VALUES AND ETHICS

Review and provide advice on the systems and practices established by the Commissioner to monitor compliance with laws, regulations, policies and standards of ethical conduct and to identify and deal with any legal or ethical violations within OCL. Work may also include a review of the procedures and feedback mechanisms established to monitor conformance with OCL’s code of conduct and ethics policies, as well as how its processes encourage and maintain high ethical standards.

RISK MANAGEMENT

Review and provide advice on the risk management tools and processes established and maintained by OCL.

MANAGEMENT CONTROL FRAMEWORK

Review and provide advice on OCL’s internal control arrangements and be informed on all matters of significance arising from work performed by others who provide assurances to senior management and the Commissioner.

INTERNAL AUDIT FUNCTION

  • Recommend, and periodically review, a departmental internal audit policy for the approval of the Commissioner.
  • Provide advice to the Commissioner on the sufficiency of resources of the internal audit function.
  • Review and recommend for approval a multi-year risk-based internal audit and evaluation plan.
  • Monitor and assess the performance of the internal audit function.
  • Provide advice to the Commissioner on the recruitment and appointment, as well as the performance of the CAE.
  • Review and recommend for approval internal audit reports and corresponding management action plans to address recommendations.
  • Review regular reports on progress against the risk-based internal audit plan.
  • Be made aware of internal audit engagements or tasks that do not result in a report to the AEC and be informed of all matters of significance arising from such work.

EXTERNAL ASSURANCE PROVIDERS

Be informed and advise the Commissioner on OCL management’s response to reports of external assurance providers (including the Office of the Auditor General (OAG) and the Public Service Commission) and provide advice on audit-related issues and priorities raised by these external assurance providers.

FOLLOW-UP ON MANAGEMENT ACTION PLANS

Review regular reports on the progress of the implementation of approved management action plans resulting from prior internal audit recommendations as well as management action plans resulting from the work of external assurance providers.

FINANCIAL STATEMENTS AND PUBLIC ACCOUNTS REPORTING

Review and provide advice to the Commissioner on the key financial management reports and disclosures of OCL, including quarterly financial reports, annual financial statements and Public Accounts.

Review the annual Statement of Management Responsibility Including Internal Control over Financial Reporting and provide advice to the Commissioner on the risk-based assessment plans and associated results related to the effectiveness of the departmental system of Internal Control over Financial Reporting.

For the annual audit of OCL financial statements that is carried out by the Office of the Auditor General of Canada (OAG), the AEC will review:

  • The financial statements with the external auditor and senior management, discuss any significant accounting estimates and adjustments therein, any adjustments required to the statements as a result of the audit, as well as any difficulties or disputes encountered with management during the audit
  • Management letters arising from the external audit
  • The auditor's findings and recommendations relating to the internal controls in place for financial reporting and consider their impact on controls, risk management and governance processes.

ACCOUNTABILITY REPORTING

The AEC will receive copies of the Departmental Plan, the Departmental Results Report and other significant accountability reports in advance of their submission to Treasury Board Secretariat or publication and will provide advice if requested. These reports provide context for the deliberations of the audit committee and advice to the Commissioner.

EVALUATION

With respect to evaluations carried out under the TB Policy on Results, the AEC will:

  • Provide advice to the Commissioner, though review of the OCL risk-based audit and evaluation plan, as to programs or operations of OCL that should be the subject of an evaluation
  • Review and advise on the terms of reference, scope and timing of any planned evaluation
  • Review the findings of evaluations carried out and monitor subsequent management action plans.

MEMBERSHIP

Composition

The AEC is composed of:

  • The Commissioner (Ex-Officio member)
  • A Chair, selected by the Commissioner from among the external members
  • At least one external member selected by the Commissioner, in addition to the Chair

The Commissioner may appoint other members to the AEC. However, there must always be a majority of external members. At the Commissioner’s discretion, external candidates from the list of potential audit committee members that is maintained by the Comptroller General of Canada may be considered.

The AEC must have the following attributes in its composition:

Diversity – Over time, the membership of the AEC must reflect Canada’s diversity in terms of gender, official languages, Indigenous Canadians, minority groups and regional representation.

Collective Competence – When deciding on the membership of the AEC, the Commissioner will ensure that the collective skills, knowledge and experience of members allows the committee to carry out its responsibilities competently and efficiently.

Freedom from Conflict of Interest – Upon appointment, members must be free from any real or apparent conflict of interest. In addition, members must disclose all new activities, interests or appointments for the Office to assess whether they may impair or be seen to impair the member’s ability to perform their duties in an independent and objective manner. This should be done at least annually for the duration of the member’s term.

Security Clearance – Members must be willing and able to obtain an appropriate security clearance.

Financial Knowledge – Members must be familiar with financial reporting or are to become familiar with such reporting within the first year of their appointment. At least one external member of the AEC must possess a professional accounting designation in good standing

Term of appointment

An external member of the AEC is to serve no more than two terms and up to a maximum of six years. A single term must not exceed four years. For example, if a member’s first term is four years, then the second and final term would be limited to two years. The Commissioner may extend the term of an external member at the Commissioner’s discretion to ensure continuity within the AEC.

Proactive disclosure

OCL will disclose proactively the contract value and expenses (including travel and hospitality) of individual external AEC members. This will be done on the OCL web site.

MEETINGS

Frequency

The Committee will meet at least three times in person or virtually each fiscal year. Additional meetings may be scheduled at the discretion of the Commissioner.

Quorum

In order to have quorum, the number of external members in attendance must be a majority.

Operations

In the interest of efficiency, Committee business may be carried out by electronic means, including email, telephone, facsimile or delivery of documents through the mail, providing that the requirements of the Government Security Policy are observed.

Attendance by Non-Members

The CAE/CFO will attend all meetings. The Commissioner may invite other OCL staff, representatives of service providers to OCL, individuals who have prepared documents to be discussed, or any other appropriate individuals to attend a meeting.

Representatives of the OAG will be invited to attend meetings to discuss planned OAG audits, OAG audits that are underway, or completed OAG audits. At the discretion of the Commissioner, OAG representatives may be invited to participate in other AEC business.

In-Camera

At each meeting, in-camera sessions will be scheduled between the external members and individually, the Commissioner and the CAE/CFO. If a representative of the OAG is present, an in-camera session with external members will be offered. External members may request in-camera meetings with other OCL staff.

Minutes

Minutes will be taken at each AEC Meeting and will include a record of the persons present. The Minutes of AEC meetings for each fiscal year will be summarized in the AEC’s Annual Report.

ACCESS TO OCL STAFF AND TO THE AEC

All AEC members have full access to the Commissioner and the CAE/CFO.

Members have access to other OCL staff and documentation (subject to legislated privacy and confidentiality requirements) as may be needed to fulfil the AEC’s responsibilities. However, unless there are compelling reasons not to do so, the Chair will request permission from the Commissioner before proceeding with such access.

The Commissioner and the CAE/CFO have full access to external members of the AEC. Other members of the OCL Executive Team may request an in-camera meeting with the Chair or other external member if circumstances require it.

PLANNING AND REPORTING

Annual Plan

The Chair, in consultation with other members of the AEC and the CAE/CFO, will prepare annually a plan to ensure that the responsibilities of the AEC are scheduled and addressed. This plan will be presented to the Commissioner for approval.

Annual Report

The Chair, in consultation with other external members, will prepare an Annual Report and submit it to the Commissioner by the end of June each year. The report will include:

  • A summary of the minutes of meetings and other AEC activities held during the fiscal year
  • Any concerns regarding risk management, the control and governance framework or processes
  • An assessment of the capacity, independence and performance of the internal audit function
  • Any recommendations concerning the foregoing items
  • Priorities for the AEC in the coming year

Separately, the Chair, in consultation with other external members, will provide the Commissioner with an assessment of the performance of the Chief Audit Executive and the OCL audit function.

AEC ASSESSMENT

The AEC will annually self-assess its performance and discuss the assessment with the Commissioner.

SUPPORT TO THE COMMITTEE

The CAE will ensure that administrative and operational support is provided to the AEC including:

  • timely preparation of all notices and agendas of meetings
  • coordination of presentations and distribution of reports and/or related documents that are prepared for the AEC’s information or consideration
  • timely preparation and distribution of meeting records of decisions
  • performance of other duties as may be assigned.

REVIEW OF THE AEC TERMS OF REFERENCE

The AEC Terms of Reference will be reviewed every two years, or sooner if there are significant changes to TB policy or to the legislation, mandate or governance structure of OCL.

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