Management Practices Audit of the Policy and Strategic Direction Sector

Background

The Policy and Strategic Direction Sector ('PSD' or 'the Sector') of Aboriginal Affairs and Northern Development Canada (AANDC) is the centre of policy and partnership-building within the Department. The Sector provides a breadth of responsibilities ranging from developing and delivering major Departmental reports (e.g. RPP, DPR and MAF) to fostering departmental relationships with First Nations, Inuit, Métis, and non-status Indians.

PSD Sector's initial budget allocation for 2013-2014 was approximately $118.8M. The PSD Sector has a staff compliment of 233 full time equivalent positions and is organized across four distinct branches as follows:

• Strategic Policy, Cabinet and Parliamentary Affairs Branch
• Planning, Research and Statistics Branch
• Litigation Management and Resolution Branch
• Aboriginal and External Relations Branch

On February 22, 2012, the Deputy Minister approved AANDC's 2012-13 to 2014-15 Risk-Based Audit Plan, which included a Management Practices Audit (MPA) of the PSD Sector. This MPA was initiated by the Audit and Evaluation Sector (AES) in September 2013.

Audit Objective and Scope

The objective of the audit is to provide senior management with assurance over the adequacy and effectiveness of a selection of high risk management controls and activities in place to support the achievement of the PSD Sector's objectives.

The audit objective is supported by detailed audit criteria developed and aligned with Treasury Board of Canada Secretariat's Audit Criteria Related to the Management Accountability Framework (MAF).

The scope of the audit covered four higher risk management practice areas, as identified through the Control Self-Assessment workshop, document review, and input from the Senior Assistant Deputy Minister of PSD. AES also considered previous audit and review findings, departmental priorities, and planned future audit work, in determining the scope of the audit. The management practice areas included in scope were as follows:

• Accountability;
• Human Resources Planning;
• Risk Management; and
• Performance Measures.

Audit fieldwork was conducted at AANDC Headquarters during September and October, 2013.

Statement of Conformance

This audit conforms with the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program.

Observed Strengths

The audit identified that the Sector operates in a dynamic environment characterized by considerable change. Against this context, the audit revealed examples of robust practices having been established by PSD to respond to Deficit Reduction Action Plan (DRAP) impacts and sector-specific challenges. Examples of these practices include:

• The Aboriginal and External Relations Branch completed an exercise to map the skill sets of branch staff to six key skill areas required within the newly formed branch. In doing so, Branch management is better able to identify staff across the Branch that can support short and long term projects.
• Initiatives have been undertaken to proactively collect client feedback as a means of supporting continuous improvement related to specific Sector activities. By way of example, the Strategic Policy, Cabinet and Parliamentary Affairs Branch conducts a post-mortem exercise at the conclusion of each legislation development process that involves in-depth interviews with stakeholders to collect feedback on the support provided by the Branch, and on what could be improved. Other initiatives undertaken throughout the Sector include lessons learned exercises, feedback questionnaires, and ad hoc client surveys.

Conclusion

Generally, management practices were found to be effective and adequate, however, improvements are required in the areas of accountability, human resource planning, risk management and performance measures.

Recommendations

The audit team identified areas where management practices and processes could be improved, resulting in four recommendations, as follows:

1. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should ensure that the accountabilities and responsibilities of the Sector and its Branches are clearly communicated, explained and understood by Sector management and staff. Once clarified, as well as prioritized, these accountabilities should be leveraged as a foundation in support of effective HR planning, risk management and performance measurement (see Recommendations 2, 3 and 4).
2. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should, as part of the existing initiative to develop an updated Strategic HR Plan for the Sector, ensure that HR strategies and activities are developed to support proactive management of key HR challenges (e.g. retention of corporate knowledge, succession planning and achievement of target competency profiles) consistent with the Sector's accountabilities and organizational structure. The activities should include an update of the 2011 workforce analysis and environmental scan.
3. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should develop a formal documented approach to risk management in the Sector, including an ongoing process, and governance structure for identifying, assessing, and monitoring risks and corresponding mitigation actions. This should include the development of a Sector-specific risk profile, that is continuously monitored and regularly updated, and which reflects Sector and Branch accountabilities.
4. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should take steps to establish outcome-based performance measures that align with the Sector's mandate, accountabilities, and service offerings. This would include:
   • Identifying and validating the Sector's key outcome, client groups, and related service standards;
   • Developing standards that support efficiency and quality of service delivery; and
   • Establishing data collection, analysis, and reporting mechanisms.

Management Response

Management is in agreement with the findings, has accepted the recommendations included in the report, and has developed a management action plan to address them. The management action plan has been integrated into this report.

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 management practices engagements, 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.

By the end of fiscal 2012-13, AES had completed Management Practices Audits (MPAs) of all ten regions and four of the Department's sectors. Three MPAs were scheduled for completion in 2013-14, including the MPA of the Policy and Strategic Direction Sector (PSD) as per AANDC's 2013-14 to 2015-16 Risk-Based Audit Plan, approved by the Deputy Minister on February 27, 2013.

1.2 Control Self-Assessment

The CSA workshop is a venue through which AES gathers management's opinion on the importance, efficiency, and effectiveness of key management practices. Specifically, the workshop facilitates dialogue and sharing of individual views on how well key management practices are functioning in support of the Sector's objectives. AES facilitated a CSA workshop with representatives of PSD management on September 6, 2013. The workshop captured discussions on a sub-set of management controls that were considered higher risk and/or priority based on an initial assessment^{Footnote 1} of control areas.

Twelve different control areas were discussed during the half-day CSA workshop. While there was consistency in how participants viewed the importance, efficiency and effectiveness of some control areas, the session also revealed that a range of perspectives exist across the Sector. It was also apparent from the workshop that the government-wide Deficit Reduction Action Plan (DRAP) was viewed as having implications regarding the importance, effectiveness and efficiency of a number of control areas (e.g. recruitment, hiring and retention).

The analysis of workshop feedback, along with other considerations as noted in section 2.2 of this report, were considered in selecting the management practice areas for inclusion in the audit.

1.3 Policy and Strategic Direction Sector

The mandate of the PSD Sector is "to provide advice, shape policy and deliver results"^{Footnote 2}. The Sector consists of four distinct branches and a Business Management Unit (BMU) that have a breadth of responsibilities ranging from developing and delivering major Departmental reports (e.g. RPP, DPR and MAF) to fostering departmental relationships with First Nations, Inuit, Métis, and non-status Indians. While three of the Branches deliver internal services to the Department, a fourth supports partnership-building on behalf of the Department. The majority of the work of this newly formed Branch represents program related activities under the Strategic Outcome of The Government. An organization chart is provided in Appendix A that identifies Sector Branches and the BMU and their key responsibilities.

Sector priorities are defined within PSD's 2013-14 business plan as follows:

• To plan and manage the Department's policy, legislative and research agendas strategically, drawing on a wide range of perspectives and evidence and, ensuring alignment with government priorities;
• To efficiently and effectively manage the litigation case-load and funding relationship with the Department of Justice in a strategic manner and, provide advice based on litigation trends and results to inform policy and program development;
• To foster and manage effective departmental relationships with representative First Nations, Inuit, Métis, non-status Indians and international organizations, and federal/provincial/territorial and, where appropriate, northern governments; and,
• To lead and promote the strategic alignment and management of departmental frameworks and, the timely development and delivery of all major results based plans and reports.

In 2012-13 the PSD Sector's actual expenditures were approximately $122.4 Million. Not included in this figure are the 2012-13 expenditures of the Office of the Federal Interlocutory (dealing with Métis and Non-Status Indians) ($23 Million) and the Department's Inuit Relations Secretariat ($4.5 Million), which were transferred to PSD Sector in September 2012. For 2013-14 the Sector's initial budget allocation was approximately $118.8 Million. The PSD Sector has a staff compliment of 233 full time equivalent positions across four distinct branches.

2.1 Audit Objective

The objective of the audit was to provide senior management with assurance over the adequacy and effectiveness of a selection of high risk management controls and activities in place to support the achievement of the PSD objectives.

2.2 Audit Scope

The scope of the audit covered four higher risk management practice areas, as identified through the CSA workshop, document review, and input from the Senior ADM of PSD. AES also considered previous audit and review findings, departmental priorities, planned future audit work, in determining the scope of the audit. The management practice areas included in scope were as follows:

• Accountability;
• Human Resources Planning;
• Risk Management; and
• Performance Measures.

Audit fieldwork was conducted at AANDC Headquarters during September and October, 2013.

4.1 Accountability

In any organization, it is critical that authorities, responsibilities and accountabilities are clearly defined and communicated, and that delegated authorities are aligned with individuals' responsibilities. In addition, an effective organizational structure should be clearly defined and documented, ensuring clear lines of communication and reporting are in place, and providing an appropriate span of control. The practices that support the ongoing communication and clarity of accountabilities are particularly important in an environment that is experiencing a period of organizational change. They are also important within organizations that, like PSD, are responsible to deliver against a broad range of distinct accountabilities.

The audit found that PSD articulates accountabilities through different means including the 2013/14 Sector Business Plan (which defines priorities and performance expectations at the Branch level) and through the Human Resource (HR) Employee Performance Management process (whereby efforts are taken to align and cascade individual accountabilities through performance agreements). In addition, the audit also found that accountabilities are supported via formal workplans, job descriptions, and committee mandates. Interviews also indicated that accountabilities were a routine topic of discussion at management meetings.

Notwithstanding the efforts described above, the audit found that accountabilities and responsibilities were clear for some groups but not clear or otherwise fully understood across the Sector. Specifically, interviews with management revealed that Branch and Directorate level accountabilities and responsibilities require additional clarification. A number of interviewees cited the recent organizational changes as impacting the clarity of accountabilities. This issue was particularly evident within the Aboriginal and External Relations Branch (AERB) which is comprised of a variety of functional units that were brought together under the newly created Branch in September 2012. In addition to challenges associated with DRAP-related staffing reductions, AERB management noted that it was not yet clear how the accountabilities of this new Branch, which focuses on relationship building with external stakeholders, fit within a Sector that is otherwise focused on internal service delivery. The resulting uncertainty was identified as a particular concern as the Branch seeks to confirm its key priorities in light of continued resource constraints.

Interviewees from other Branches also expressed some concerns related to the clarity of accountabilities in the wake of recent organizational change, albeit to a lesser extent than AERB. For example, the Litigation Management and Resolution Branch has recently initiated a review of the Branch's organizational structure in light of the need to better allocate workloads and accountabilities in a post-DRAP environment and in light of increasing stakeholder expectations. Finally, interviewees from across PSD expressed a concern that staff reductions, and the inability to fill vacated positions due to uncertainty regarding next year's staffing budget, were impacting their ability to meet an established accountability to deliver "valued added services" to the Department. They advised that staff reductions have shifted focus to transactional/facilitation work, rather than the provision of guidance and support to the Department in relation to important matters such as developing Memorandums to Cabinets, Treasury Board submissions, and business plans.

Clearly defined and communicated responsibilities and accountabilities are particularly important for the Sector given the breadth of its mandate and the recent organizational changes.

Recommendation:

1. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should ensure that the accountabilities and responsibilities of the Sector and its Branches are clearly communicated, explained and understood by Sector management and staff. Once clarified, as well as prioritized, these accountabilities should be leveraged as a foundation in support of effective HR planning, risk management and performance measurement (see Recommendations 2, 3 and 4).

4.2 Human Resource Planning

Human resources planning is a process that involves identifying current and future HR needs. When effectively implemented, it supports the recruiting and retention of the right people, building a supportive work environment and developing the capacity necessary to deliver against the organization's objectives. In his call for Public Service renewal, the Clerk of the Privy Council directed federal departments and agencies to improve human resources planning as part of integrated business planning. An important part of this integrated approach is succession planning and management. Taken together, these planning processes help identify, develop, and retain the talent necessary to achieve current and projected business objectives^{Footnote 3}.

In 2011, PSD created an Integrated Human Resources Plan (IHRP) designed to guide HR Planning for the sector. The document included a fulsome workforce analysis and environmental scan to reflect the internal and external factors that could impact HR Planning. In support of the IHRP, PSD created an HR Action Plan (activities to be undertaken in response to the specific challenges detailed in the IHRP), a Staffing Plan and a Succession Plan. At the time, the IHRP and its resultant plans provided an in-depth analysis and approach to addressing the human resource challenges facing the Sector. While the Sector has since updated the HR Action Plan and the Staffing Plan (as per Departmental requirements), neither the IHRP nor the Succession Plan have been updated.

PSD has been subject to a number of changes since 2011, including significant organizational restructuring and staff reductions, including the inability to fill vacated positions, which have changed the nature and scale of HR challenges facing the Sector. While there is a current initiative to update the IHRP (i.e. a draft PSD Strategic HR Plan is under development), and there is evidence of innovative practices (e.g. a skills mapping exercise completed by AERB to identify and leverage employee skills/experience in support of Branch priorities), it is not apparent that the Sector is sufficiently addressing its HR challenges. For example, the 2011 environmental scan and workforce analysis have not been updated to inform the Sector's required (or "target") competency profile in light of organizational changes. In addition, management interviews revealed increasing risks as a result of recent and pending departures. Specifically, there was a concern regarding the Sector's ability to mitigate the loss of corporate knowledge and to effectively address succession planning, particularly in specialized roles such as those that involve providing direct support to the Deputy Minister and/or Minister.

Recommendation:

2. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should, as part of the existing initiative to develop an updated Strategic HR Plan for the Sector, ensure that HR strategies and activities are developed to support proactive management of key HR challenges (e.g. retention of corporate knowledge, succession planning and achievement of target competency profiles) consistent with the Sector's accountabilities and organizational structure. The activities should include an update of the 2011 workforce analysis and environmental scan.

4.3 Risk Management

Effective risk management practices support an organization's ability to respond proactively to change and uncertainty by using risk-based approaches and information to enable more effective decision-making throughout an organization^{Footnote 4}. In this regard, there is a need to formally articulate (i.e. clearly document and communicate) an organization's direction and approach to risk management. AANDC's Integrated Risk Management Framework (October 2012) defines and describes AANDC's approach to risk management, including the need for Sector ADM's to identify, assess, mitigate, monitor and report on Sector-level risks.

The audit found that PSD senior management employs an informal approach to the management of Sector-level risks. Interviews with management indicated a common view that risk management is embedded in a variety of existing management practices including senior management meetings that include discussion of risks and risk mitigations and the business planning and quarterly reporting processes that incorporate risk considerations. It was also noted that Sector-level risks were addressed within the context of the Senior ADM's responsibilities as owner/co-owner of certain corporate risks (as identified in the AANDC's Corporate Risk Profile).

Notwithstanding the activities described above, the Sector has not formally articulated an approach to risk management that would serve to demonstrate that Sector-level risks are being appropriately identified, assessed and mitigated in a manner consistent with Departmental expectations or that is otherwise effective or efficient. For example, no Sector Risk Profile has been developed, nor does the 2013-14 Sector Business Plan identify any Sector-specific risks associated with PSD's planning commitments and priorities. The Sector's current approach to risk management increases the likelihood that one or more significant risk exposures may not be identified and/or addressed.

Particularly in light of the organizational changes impacting PSD, a more formal/structured approach to risk management would help ensure that Sector-level risks are adequately identified and prioritized. Further, such an approach would serve the complementary objectives of supporting risk-based decision making and supporting the efficient use of resources by prioritizing options based on risk information.

Recommendation:

3. The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should develop a formal documented approach to risk management in the Sector, including an ongoing process, and governance structure for identifying, assessing, and monitoring risks and corresponding mitigation actions. This should include the development of a Sector-specific risk profile, that is continuously monitored and regularly updated, and which reflects Sector and Branch accountabilities.

4.4 Performance Measures

To help identify how management is progressing against planned activities, it is important to identify intended outcomes and performance measures that are linked to organizational objectives. In addition, it is critical that management monitors its actual performance against intended outcomes and adjusts course as needed.

Review of documentation and interviews with Management indicated that certain Branches are undertaking initiatives to collect client feedback as a means of supporting continuous improvement. For example, the Strategic Policy, Cabinet and Parliamentary Affairs Branch conducts a post-mortem exercise at the conclusion of each legislation development process to collect opinions from stakeholders about what could be improved. Other initiatives undertaken throughout the Sector include lessons learned exercises, feedback questionnaires, and ad hoc client surveys. While these initiatives are generally strong practices to identify areas of improvement related to specific activities, results are not systematically reported and used as a means to assess the achievement of intended outcomes.

The audit found that PSD sets out planning commitments within its annual business plan and establishes performance measures for each planning commitment. Progress against these planning commitments is presented in the Quarterly Reports. Measures include, for example, reporting of specific output volumes such as the number of policy committee meetings held, the number of new litigation cases processed, and the number of lunch and learn sessions held. The BMU has responsibility for assembling Quarterly Reports; however, it relies on each Branch for the information and volumetric data. The Quarterly Reports are reviewed and commented on by the Senior ADM, and meetings are held between the Senior ADM and DGs to discuss progress presented in them.

The audit also found that while PSD has established and is reporting on certain performance measures as part of the business planning and quarterly reporting processes, these are largely output-based measures. The Sector has not established intended outcomes related to its accountabilities and that align with its planned commitments, nor performance measures that are linked to intended outcomes. Outcome-based performance measures for internal services groups typically focus on service delivery, client satisfaction, and quality. The lack of outcome-based measures limits the Sector's ability to demonstrate contribution and value-add, and support decision-making by senior management. Furthermore, it is noteworthy that there is a strong likelihood that central agencies will require internal services groups to report on outcome measures, service standards measures, and efficiency measures in the near future.

Recommendation:

The Senior Assistant Deputy Minister of the Policy and Strategic Direction Sector should take steps to establish outcome-based performance measures that align with the Sector's mandate, accountabilities, and service offerings. This would include:

• Identifying and validating the Sector's key outcome, client groups, and related service standards;
• Developing standards that support efficiency and quality of service delivery; and
• Establishing data collection, analysis, and reporting mechanisms

Audit Criteria