Creating High-impact Public Sector Audit with Value-for-Money Auditing

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Creating High-impact Public Sector

Audit with Value-for-Money Auditing

CS 4-9

Tuesday July 7, 2015 12:45pm Jacques R. Lapointe

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Contents

• Evolution of value-for-money auditing (VFM) in Canada

• The Nova Scotia experience

– The starting point

– What was changed

– The effect

• A simple roadmap

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Evolution of the VFM Idea in

Canada

• “Prehistory”

• Federal Auditor General role and comprehensive auditing

• CCAF – Canadian Comprehensive Auditing Foundation

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Comprehensive Auditing Concept

“An examination that provides an objective and constructive assessment of the extent to which:

- financial, human and physical resources are managed with due regard to economy, efficiency and effectiveness; and

- accountability relationships are reasonably observed.”

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Comprehensive Audit Components

• Financial statement auditing • Compliance auditing

• Value-for-money auditing

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Value-for-money auditing

(VFM) - the 3 E’s

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VFM Application in Practice

• All levels of public sector audit - federal, provincial & municipal - legislative and internal

• Great variations in name and practice • Limitations placed on effectiveness

component

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Office of the Auditor General of Nova Scotia

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OAG Starting Point

• Antiquated mandate

• Focus on financial audit • “Broadscope” audits

• Due regard……

• Cyclical audit selection

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OAG Starting Point (2)

• Recommendations not implemented • Reports not read

• Low public profile

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What we Changed

• New legislation and mandate • Reorganized

– Reduced staff time on financial audits

– Freed resources to increase staff time on VFM audits

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What we Changed (2)

Communications for Impact

• Better recommendations • Better reports

• Messaging to the public

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What we Changed (3)

• Strategic plan

– Mission to improve the public sector

– Operational foundation: key elements

• Audit selection for impact

• Audit focus on effectiveness

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IIA’s 9 Key Elements

Organizational independence

Objective staff Formal mandate Competent staff

Unrestricted access Stakeholder support

Sufficient funding Professional audit standards Competent leadership

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Audit Selection for Impact

• Consider all public sector operations and activities

• In general, select by risk

• In particular, focus on programs that directly impact people

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Performance Audit defined – focus on

effectiveness

Examination of government entities, processes or programs

• Compliance

– with legislation, regulations and policies

• Adequacy of controls

• Adequacy of governance

– risk, ethics, direction and accountability

• Stewardship of resources • Value-for-money

– economy, efficiency and effectiveness

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Change Challenges

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Infection Control in Hospitals

Impact – reducing hospital acquired infections, illness and potential deaths

Effectiveness – program failures caused illness

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Home Schooling

Impact – ensuring home schooled children receive proper education

Effectiveness – inadequate program

leaves some children at risk of neglect and poor education

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Bus Safety

Impact – ensuring safety of bus passengers Effectiveness – 60% deficiencies and little enforcement leaves passengers at risk

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Child Welfare and Foster Care

Impact – helping protect children from abuse and neglect

Effectiveness – some children in foster homes left at risk

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Disease Outbreaks

Impact – responding to and controlling outbreaks and protecting the public

Effectiveness – Public Health not

adequately prepared for minor outbreaks like mumps, or for major pandemics

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Fire Inspection

Impact – ensuring safety from fire in public-use buildings

Effectiveness – public at risk of harm due to failure to inspect buildings

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The Effect of the Changes

• Audits with impact

• Improved program effectiveness • High audit office productivity and

morale

• Positive public profile for audit

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A Simple Roadmap to High-impact

Audit

• Create the foundation with IIA key elements

• Select audits for risk and impact • Audit effectiveness

• Focus on achieving positive change in the public sector

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Summary

• The foundation: IIA key elements • Audit programs with high impact on

people

• VFM audits of effectiveness • Achieving positive change

– good communications

– recommend, and follow up

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References

• IIARF Internal Audit Capability Model (IA-CM) for the Public Sector 2009 • IA Supplemental Guidance: Public Sector Definition and The Role of

Auditing in Public Sector Governance, 2nd _{edition 2012}

• IIA Supplemental Guidance: Implementing a New Internal Audit Function in the Public Sector 2012

• IIA Supplemental Guidance: Optimizing Public Sector Audit Activities 2012 • IIA – CBOK Nine Elements Required for Internal Audit Effectiveness in

the Public Sector 2014

• IIA – CBOK Internal Audit Capabilities and Performance Levels in the Public Sector 2014

• IIARF Emerging Strategies for Performance Auditing – Insights from City Auditors in the US and Canada 2014

• CCAF-FCVI Inc. Comprehensive Auditing: Concepts, Components and Characteristics 1984

• CCAF-FCVI Inc. Comprehensive Auditing in Canada 1985

• CCAF-FCVI Inc. Comprehensive Auditing: an Introduction 1994

• INTOSAI ISSAI 3100: Performance Audit Guidelines – Key Principles

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Questions?

Jacques R. Lapointe, CPA, CA, CIA, CRMA, CGAP Jacques.Lapointe@rogers.com