WHAT TO EXPECT: A CROWN CORPORATION’S GUIDE TO A SPECIAL EXAMINATION Speaker’s Name Date What to expect: A crown corporation’s guide to a special examination nov.-2016 Template Owner: DEPT

Our Objective This presentation aims to outline and answer questions you may have with respect to: our objectives in conducting a special examination (SE); roles and responsibilities of those involved; the phases of a SE; the nature of the report and responding to recommendations; and how we communicate and handle information.

Legislative mandate Required by the Financial Administration Act (FAA) At least every 10 years – or more often if required by the Governor in Council, the Minister, the Board of Directors, or the Auditor General

What is the objective of a Special Examination? To determine whether the systems and practices we selected for examination are providing the corporation with reasonable assurance that: its assets are safeguarded and controlled, its resources are managed economically and efficiently, and its operations are carried out effectively, as required by section 138 of the Financial Administration Act. These bullets are known as the statutory control objectives.

Our responsibility To express an opinion on whether there is reasonable assurance that during the period covered by the audit, there were no significant deficiencies in the corporation’s systems and practices that we selected for examination; and a conclusion about whether the Corporation complied in all significant respects with the applicable criteria. The opinion is included within the conclusion.

What is a significant deficiency? A major weakness in the key systems and practices that could prevent the corporation from achieving the statutory control objectives.

How do we determine the examination criteria? Criteria are developed in accordance with professional standards and OAG policies. The OAG has developed standard criteria for the systems and practices common to most Crown corporations. Criteria specific to the operations of the corporation are developed by the team based on their knowledge and experience of the corporation, its standards and practices, good practices from other organizations, professional literature, and in consultation with the corporation.

Nature of the conclusion At the end of the special examination the audit team will prepare a report that will include a conclusion that can be one of 3 forms: no significant deficiencies; one or more significant deficiencies; and no reasonable assurance of achieving the statutory control objectives. In addition to the conclusion, our SE report will present our observations and findings in more detail for each area examined, and usually contains recommendations.

Roles and Responsibilities Audit Team Audit Committee Board of Directors Crown corporation management and staff Internal specialists and external advisors

Audit Team The team, lead by the Principal, will clearly communicate to the corporation and the board, what to expect throughout the SE. The plan will describe what systems and practices will be examined and what criteria will be used to assess them. There will be ongoing communication from the audit team throughout the SE (timing for each phase, expected timing for a draft report, briefings on progress). The team will make a reasonable effort for minimal disruption to corporate staff and to resolve disagreements quickly, professionally, and respectfully.

Audit Committee The audit committee can expect to be consulted at least twice: at the planning phase to discuss the special examination plan; and during the reporting phase when the team will provide the AC with the draft report. They may also be consulted throughout the examination to provide status reports as required.

Board of Directors As the primary recipient of the special examination report, board members will be engaged as follows: In the planning phase, members will be asked to meet with team members to help identify the key systems and practices; In the examination phase, members will be asked to meet with team members especially regarding our examination of governance; and In the reporting phase, they will be asked to meet formally with the team to discuss the content of the report, findings, and recommendations.

Corporation management and staff Staff affected by the SE are briefed on the purpose, nature and timing of the SE. Staff interviewed by the audit team will be asked to review and sign-off on meeting minutes. Requested documentation is expected to be provided in a timely manner and the appropriate staff are expected to be available for interviews. Management will be asked to provide comments at key points in the examination.

Internal Specialists and External Advisors Provide advice to the audit team at a minimum during the planning and reporting phases. This is not a legislative requirement, but part of the OAG’s System of Quality Control to ensure the appropriate skills and experience are brought to each SE.

Planning phase Formal communications to initiate the SE Understanding the corporation – the team will be requesting interviews and documentation to help them select what systems and practices they will examine and what criteria are suitable to evaluate the systems and practices selected. The corporation will be asked to confirm, in writing, its understanding of the terms of the engagement outlined in engagement and solicitor-client privilege letter.

Special Examination Plan The SE plan will identify: the systems and practices that will be examined; the objective, scope and approach, the criteria against which those systems and practices will be measured; the expected timing of key communications and phases of the SE; and whether we plan to rely on the work of the corporation’s internal audit function. The team will seek advice on the plan internally with relevant OAG specialists and also engage an external advisory committee. At the end of the planning phase, the corporation must review the SE plan and acknowledge the suitability of the criteria as a basis for assessing whether the audit objective has been met.

Examination Phase Expect the team will be requesting documents and interviews in order to: carry out procedures and gather evidence; assess evidence against criteria; form judgements & conclusions on whether there is sufficient evidence to support the SE opinion; and validate the findings and conclusions with the corporation.

Reporting Phase The draft SE report will formally present the findings against the criteria used, conclusion against the audit objective, and the recommendations relative to the audit objective. If there are recommendations, management will be expected to respond formally to those recommendations. We are required to report directly to the Board of Directors, and may report to the Minister and Parliament by exception.

Responding to the report The team will seek management’s views on the validity and completeness of the findings, conclusion, and recommendations. Management will be asked to prepare formal responses to the recommendations. The corporation also must confirm that it has provided us with all information requested or that could significantly affect the findings or the conclusion of the audit report.

Report Distribution Under the FAA, the Board is required to submit the SE report to the Minister and President of the Treasury Board within 30 days of its receipt, and make the report public within 60 days of its receipt. The team will conduct procedures to ensure the publicly made version and any references to it are accurate.

After the SE As part the Office’s objective to identify possible areas for improvement, the corporation will be asked to complete a post-examination survey.

Information Access and Security All information we determine is relevant to carry out the SE including: all forms of communication (i.e., written, verbal, auditory, etc.); documents that may be subject to solicitor/client privileges; Memoranda to Cabinet or records of Cabinet decisions and Treasury Board submissions or decisions; Corporate staff are expected to make themselves and information available in a reasonable timeframe (normally within 5 business days, for readily available information); and Other arrangements may be agreed upon with the OAG if retrieving documents requires additional work. The provisions of the Access to Information Act do not apply to the OAG for audit purposes.

Security Information provided is kept in our direct possession. At a minimum, we comply with the same security arrangements that apply to your employees. The OAG code of values, ethics and professional conduct is used. The Access to Information Act does not allow us to disclose any record requested that is used or created in the course of the SE. Our draft reports provided to the corporation will be numbered and we will request their return – we ask that you respect the confidentiality of our documents provided to you for review.

Redaction of Information Removing classified information from the SE This would be rare, and would only occur if the information was classified. Information could be classified due to: information obtained in confidence; international affairs and defence; security; and economic interests (i.e., trade secrets)

QUESTIONS?