Archived - Management Practices Audit of the Northern Affairs Organization (Headquarters)

Background

A second round of Management Practices Audits (MPAs) was included in the 2010-13 Risk-based Audit Plan (RBAP) on the basis that MPAs provide Aboriginal Affairs and Northern Development Canada (AADNC) with an effective and economical approach to improving management practices and increasing awareness of leading practices. The RBAP was recommended by the Audit Committee and approved by the Deputy Minister on April 19, 2010.

The approach for the second round of MPAs included a Control Self-Assessment (CSA) workshop and an audit of management practices focused on the areas of highest risk as identified by the Audit and Evaluation Sector (AES) through the CSA workshop and a review of previous audit and review findings.

Senior management leadership for the Northern Affairs Organization (NAO) has recently undergone change with the arrival of a new NAO Assistant Deputy Minister (ADM) in 2010. With this transition, NOA management is currently making revisions to some of its key processes.

Audit Objective and Scope

The objective of this audit was to provide senior management with assurance over a selection of management practices assessed as being higher risk during a CSA workshop, a review of previous audit and review findings, and a review of departmental priorities. For management practices identified as high risk, AES assessed whether the controls and activities in place are adequate and effective in supporting the achievement of organization objectives in a manner that is compliant with applicable policies, procedures and regulations.

The scope of this audit covered April 1, 2009 to March 31, 2011. As described in the audit objective, the audit examined higher risk management practices and activities in terms of relative importance and performance. The audit scope for the Northern Affairs Organization (NAO) included the management practice areas of governance and strategic direction, human resources (HR) management, internal communications, policy development and design, risk management, and budgeting and forecasting.

The focus of this audit was only on NAO operations in the National Capital Region; management practices in NAO Regional offices (Nunavut, Yukon, and Northwest Territories) are to be covered in separate audits.

Observed Strengths

Throughout the audit fieldwork, the audit team observed several examples of how controls are properly designed and are being applied effectively by NAO management. This resulted in several positive findings which are listed below:

• Effective internal communications mechanisms are in place and considered by staff to be improving in ensuring relevant and timely information is shared;
• To help ensure Branch operational plans are aligned with NAO objectives, Branches describe key activities, performance indicators and risks as input in the development of the NAO Business Plan;
• Management has identified a preliminary set of NAO-level risks and is developing a more formal approach to risk management;
• NAO actively participates in committees and working groups at the departmental and sector-levels and takes an active role in influencing policy design; and,
• The budgeting process followed by NAO includes challenging resource allocation decisions and monitoring budgets on a regular basis.

Conclusion

Generally, management practices were found to be effective and adequate; however, some areas for improvement were noted to strengthen management practices in the following areas: governance and strategic direction, human resources management, and risk management.

Recommendations

The audit team identified areas where NAO management practices and processes could be improved, resulting in four recommendations.

The Audit and Evaluation Sector recommends that the Northern Affairs Organization Assistant Deputy Minister:

Through the conduct of this audit, the audit team identified areas outside NAO's responsibility where Human Resources and Workplace Services Branch, the HR service provider for Headquarters, management practices and processes could be improved, resulting in two recommendations which have been communicated to the responsible office of primary interest.

The Audit and Evaluation Sector recommends that the Human Resources and Workplace Services Branch Director General:

5. Clarify expected control requirements for staffing actions and ensure that supporting control documentation is retained for audit and file continuity purposes.

6. Work in collaboration with Sectors to review the Quarterly Dashboard metrics used to monitor HR staffing actions to ensure exceptional staffing actions are adequately monitored by AANDC management.

1.1 Management Practices Initiative

The Audit and Evaluation Sector (AES) conducted twenty (20) Management Practices Reviews (MPRs) between 2007 and 2010 as part of a Department-wide initiative to assess the relative strength of regional and sector management practices. Following the completion of the first round of MPRs, the Deputy Minister and the Audit Committee recommended that a summary report be prepared to highlight the strengths and weaknesses of the MPR process and to make a recommendation on whether the management practices review initiative should be continued. As a result of the analysis, a second round of MPRs, using a revised approach, was recommended by the Audit Committee and later approved by the Deputy Minister.

Under the revised approach, which was designed to provide departmental management with an audit level of assurance, management practices engagements were to be conducted in two phases: a Control Self-Assessment (CSA) workshop and a limited scope audit. Based on the feedback received from the CSA as well as the results of previous audits and reviews, and a review of departmental priorities, a limited number of management practices were to be selected for inclusion in an audit.

1.2 Control Self-Assessment

The CSA workshop is the venue through which internal audit gathers participants' opinions on the importance, efficiency, and effectiveness of key management practices. Specifically, their views on how well each of their key management practices is functioning to support achievement of the organization objectives. The CSA workshop was facilitated by an AES facilitation team, led by an external third-party, and was designed to allow for maximum discussion, with anonymous voting technology used to encourage open and objective feedback.

As a result of the workshop discussions, preliminary interviews, and the review of previous engagement findings, AES identified six key areas of potential risk that required further analysis. These six areas of risk were as follows: governance and strategic direction, internal communications, policy development and design, risk management, budgeting and forecasting, and human resources (HR) management. These risk areas were mapped to relevant Core Management Control categories and relevant audit criteria were developed and assessed (audit criteria are included in Appendix A).

1.3 Northern Affairs Organization

The Northern Affairs Organization (NAO) has a broad mandate with respect to the North which includes advancing political evolution, managing natural resources including those of the Arctic offshore, protecting the environment and fostering leadership in sustainable development both domestically and among circumpolar nations and, implementing land claims and self-government agreements. NAO leads and co-ordinates the efforts of federal departments and agencies in delivering the Government of Canada's integrated Northern Strategy as well as contributing to AANDC priorities.

The resources for the NAO are shared among NAO Headquarters and three regional offices located in the three territories: Yukon; Northwest Territories; and Nunavut. NAO Headquarters is divided into the following Branches and Directorates: the Natural Resources and Environment Branch; Northern Policy & Science Integration Branch; Devolution and Territorial Relations Branch; Northern Oil and Gas Branch; and Strategic Management Directorate.

2.1 Audit Objective

The audit objective was supported by detailed audit criteria developed in alignment with Treasury Board Secretariat's Core Management Controls.

2.2 Audit Scope

The scope of this audit covered April 1, 2009 to March 31, 2011. The audit examined management practices and activities considered by management and AES to be higher risk in terms of relative importance and performance. In certain instances where audit work was recently conducted or where future audit work is planned, management practices identified as high risk were excluded from the scope of this audit. In addition, management practices considered to be the primary responsibility of AANDC Headquarters were removed from the scope of the audit. Headquarters' areas consistently identified as a high risk will be subject to future department-wide audits.

The focus of this audit was only NAO operations in the National Capital Region. Management practices in NAO Regional offices (Yukon, Northwest Territories, and Nunavut) are to be covered in separate management practice audits.

The scope for the NAO audit included the areas of: governance and strategic direction, internal communications, policy development and design, risk management, budgeting and forecasting, and human resources (HR) management. Audit fieldwork was conducted in Headquarters from August 22 to September 30, 2011.

5.1 Governance

5.2 Communications

5.3 Risk Management

At AANDC there is an expectation that Sectors understand the key risks that threaten their ability to meet their objectives, and that they have appropriate mitigation plans in place. Having a documented approach to risk management enables management to better identify, articulate and understand the potential risks to the achievement of the organization's objectives and to determine the exposure to these risks given controls and/or mitigation activities. The focus of this audit was on the risk management at the NAO-level; other risk management activities conducted in NAO (e.g. project risk management) were not part of the scope of this audit.

The process used to develop the NAO risk register is led by the NAO Strategic Management Directorate (SMD). As part of the annual business planning process, risks identified in Branch business line plans are aggregated by SMD into an overall NAO risk register. For the most recent business planning cycle, approximately 90 Branch risks were identified by management and summarized into 10 NAO risks. The audit reviewed the risks identified in the Business Plan, the risk register, and the summary of NAO preliminary risks and confirmed the risks identified are adequate as a representation of key risks facing NAO.

While NAO has developed a process for identifying and aggregating risks and has developed a preliminary NAO risk register, management has not yet finalized its approach or practice to regularly monitor or report on those risks and related mitigating actions. At the time of the audit, a proposed approach was being discussed by management which would include the regular discussion of risks at the Northern Management Board. To ensure identified risks are managed and monitored, it will be important that NAO's risk management efforts continue and management finalizes its formal approach for the ongoing management of risks.

5.4 Policy Development and Design

Given the unique mandate of the NAO to develop and support the North, it is important the organization have a formal and coordinated approach to monitor external environments and actively participate in AANDC's policy processes to ensure NAO needs and requirements are considered in AANDC's overall policy design.

Management noted there are two distinguishing characteristics to monitoring and influencing policy design within NAO; policy which relates to the Northern Strategy, and policy which relates to AANDC's Aboriginal and First Nations mandate. Through a review of supporting documents, (e.g. briefing notes, presentations, meeting minutes, Terms of Reference) the audit found that NAO plays a key role (and is often responsible) in establishing direction and drafting policy and/or briefing the Minister or Cabinet with respect to the Northern Strategy. For other policies, the audit found that NAO actively participates on AANDC senior management committees such as the AANDC Policy Review Committee and the AANDC Policy Coordination Committee, which provides NAO with the opportunity to monitor potential changes in policy design or direction. Inquiry with management and review of Committee Records of Decisions, revealed that sufficient resources are in place to support and influence policy design.

5.5 Stewardship

5.6 Human Resources Management (NAO)

5.7 Human Resources Management (HRWSB)