Why did the city strike a panel to do this review of the audit function?
The panel was established in response to calls from the public to establish a Municipal Auditor General to improve the City’s governance and enhance transparency. The panel will review and advise on the best governance process for its Internal Audit function.
What is an audit? What are the different types of audits that can be done?
Financial Statement Attest Audit
Financial Statements of an organization are examined by an independent auditor who expresses an opinion (attests) whether the statements present fairly the financial results of the organization in accordance with national or international accounting standards. An audit is conducted in accordance with national auditing standards. An attest audit is not designed to determine whether the resources of an organization are being used effectively.
Performance audits will typically focus on either: Compliance – has the organization complied with policies and procedures; Value-for-Money (VFM) – has the organization used its resources in an efficient and effective manner with due regard for economy. These are normally conducted in accordance with recognized auditing standards.
What is the city’s current practice and environment for audit?
· Financial Statement Attest
An annual Financial Statement Attest Audit is conducted by an independent auditing firm
· Performance Audit
The City has an Internal Audit department
· Continuous Improvement
The City has started a formalized process of continuous improvement which may complement the audit processes
What is the city’s current practice with internal audit?
The City’s Internal Audit function consists of two individuals with professional accounting designations who are employees of the City. The Internal Auditors report to a Standing Committee of Council – Audit Committee. The Audit Committee reports to Council. The Audit Committee has provision for 2 external representatives with the remaining members being members of Council. The work plan of the Internal Auditors is developed in conjunction with City staff and is approved by the Audit Committee. The work plan typically consists of about 3 performance audits per year. The work plan may be interrupted by specific requests for special audits at the request of City staff or Council.
How do other cities structure their audit function?
There is no consistency across Canada. However, some internal audit function is common. Some municipalities have a Municipal Auditor General – appointed either by provincial legislation or municipal by-law. Some larger municipalities have both. A Municipal Auditor General is typically appointed for a limited term – 5 to 7 years and reports to Council. It may also report publicly.
What are the options the panel is considering?
Some broad options which the City could consider are:
· Status Quo
· Status quo with governance changes
· Enshrine mandate of Internal Audit in City by-laws
· Increase external membership on Audit Committee
· Audit Committee have a greater role in Internal Audit resourcing
· Increase Internal Audit Function staff with governance changes
· Move to a Municipal Auditor General structure
What would any of these changes mean for the city’s audit function?
1. If Status Quo - Maintains staff complement at 2 persons, No budgetary impact. Generally, resources allow for 3 about performance audits per year. Work plan is subject to additional work requests from the City
2. If Status Quo with Governance Changes – Would be similar to number 1 above but Audit Committee would consider whether additional work requests from City would be entertained. The value the City currently gets from having Internal Audit available for special projects could be diminished.
3. If Increase Internal Audit staff with governance changes - Additional audits could be performed annually, Audit Committee would consider whether additional work requests from City would be entertained, the value the City currently gets from having Internal Audit available for special projects could be diminished and there would be additional cost to City
4. If a Municipal Auditor General - Similar to number 3 above but legislation may allow Auditor General complete autonomy in work performed. Auditor General could raise the public profile of performance audits.