Report to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels et du développement économique
and Council/et au Conseil
30 November 2004/le 30 novembre 2004
Submitted by/Soumis par : Alain Lalonde, Auditor General/vérificateur général
Contact/Personne-ressource : Alain Lalonde, Auditor General/vérificateur général
Ref N°: ACS2004-OAG-BVG-0001
SUBJECT: OFFICE OF THE AUDITOR GENERAL
STATUTE AND MANDATE,
That the Corporate Services and Economic Development Committee recommend Council:
1. Approve the direction set out in Document 1, Office of the Auditor General – Statute and Mandate.
3. Receive for information Document
2, Office of the Auditor
General – 2005-2007 Audit Plan.
4. Approve the
establishment of a fixed-percentage rate for future annual budgets of the
Office of the Auditor General equal to or greater than 0.0
6% of the total operating
budget of the City of Ottawa.
At its meeting of 8 January 2003, City Council approved the following motion:
WHEREAS the Mayor and Council of the City of Ottawa are responsible for scrutinizing, evaluating and authorizing the Capital and Operating budgets of the municipality in any given year; and
WHEREAS the Mayor and Council and City Staff are accountable to constituents on how the City spends its taxpayer dollars; and
WHEREAS Council recognizes that the role of a City Auditor is fundamental in providing an oversight function on behalf of constituents and that this function must be seen as arms length, independent and objective; and
WHEREAS there is currently no fully independent analysis of the previous year’s budget undertaken prior to the delivery of the following year’s budget to assess whether or not constituents in the City of Ottawa are receiving value for money services, accurate accounting, or objective advice;
WHEREAS Denis Desautels, formerly the Auditor General of Canada has completed a study of the audit function for the City of Toronto; and
WHEREAS Mr. Desautels has expressed a willingness to undertake a review of the audit function of the City of Ottawa;
THEREFORE BE IT RESOLVED that Denis Desautels be engaged to assess the effectiveness of the audit function of the City of Ottawa, to an upset limit of $30,000 to be funded through the Operating budget of the Audit and Consulting Services, and report, with any recommendations, to Committee and Council.
Accordingly, Mr. Desautels presented his report to Council on September 3, 2003, and the recommendations contained in the report were approved. On October 22, 2003, the City Manager presented a report to Council on the implementation of Mr. Desautels’ report and Council approved the engagement of an external search firm to assist in the staffing of the new Auditor General position. Council further approved the following staff recommendation:
That the new Auditor General report back to Audit Committee/Council within six months of hire on the following: 1) a framework that contains protocols regarding his/her relationship to Audit Committee, city management, boards and agencies, etc. and requests for additional or special audits; 2) a work plan which is supported by the resources available; and 3) any recommendations to improve the effectiveness of the audit function including any staffing adjustments.
The new Auditor General joined the City of Ottawa on September 6, 2004. This report is in response to the above-noted recommendation and is being submitted three months prior to Council’s deadline. It presents the Statute and Mandate, including general requirements for the position and the office, independence and indemnity provisions for the position as well as the reporting protocols regarding Council, city management and affiliated boards and agencies. The report also presents the 2005-2007 Audit Plan.
Details concerning the Statute and Mandate and the 2005-2007 Audit Plan for the Office of the Auditor General are contained in the attached documentation.
As recommended by Mr. Desautels,
the Statute and Mandate is to be enshrined in provincial legislation as part of
the City of Ottawa Act.
approval by Council of the direction set out in Document 1, the City’s Legal Services
prepare the draft legislation. In summary, the Statute the specify that the
* Is independent of the City’s administration and reports to Council via an appropriate standing committee,
* Is responsible for carrying out performance, compliance and financial audits (except the annual attest audit) on the accounts and affairs of the City,
* Will, based on an annual work plan, undertake audits of the City and affiliated bodies (as defined in the Statute),
* May submit a longer term work plan at his/her discretion,
* May, if requested by Council, audit and report on other matters, however, these audits shall not take precedence over the primary responsibilities of the Auditor General and Council requests must provide appropriate funding,
* Shall have an annual budget that is set at a fixed percentage of the City’s total operating budget,
* Shall have access to any personnel and document related to an audit,
* May not be prosecuted by reason of an act done or failed to do in good faith in the performance of an audit,
* Shall report to Council, at a minimum, on an annual basis no later than June 30th, of the following year, with the first annual report to be issued in 2006 and
* May at his/her discretion, report on a more frequent basis to Council.
Document 3 contains the 2005-2007 Audit Plan for the City of Ottawa. Specific audits have been identified based on a number of selection criteria including impact on the public, budget size and impact of service disruption on public safety or financial exposure. The focus of this new audit plan is substantially different from previous audit plans at the City. Although a component of the plan will continue to include compliance and financial audits, a much greater emphasis will be placed on conducting performance audits. These projects will centre on examining efficiency and effectiveness issues within areas of the City which provide direct services to the public. The plan also includes projects in key affiliated organizations such as Police Services, Ottawa Community Housing and Hydro Ottawa.
It should be noted that although specific projects have been identified for 2006 and 2007, the audit plan for these years is subject to possible revision based upon issues rising from work conducted during 2005. The final plans for these years will be re-confirmed on an annual basis and presented to Council accordingly.
Document 3, which presents budget
details, is discussed below under Financial Implications.
There has been no public consultation on this item. The Auditor General conducted meetings with the Mayor, all Councillors and senior management prior to the preparation of this report.
Document 3 sets out in more
detail the recommended direction regarding the OAG budget. Mr. Desautels recommended that,
“the Office of the Auditor General should be established using the appropriate
resources from the existing Audit and Consulting Services group”. Mr. Desautels went on to state that
administrative support should be supplied independently from the City Manager’s
office. As described in the 2005-2007
Audit Plan, the transition from the former Audit and Consulting Services Branch
to the Office of the Auditor General is evidenced by a much greater focus on
performance auditing (sometimes referred to as value-for-money audits). These audits will examine issues within the
direct service areas of the City. This
shift in emphasis away from the more traditional financial audits of the past
and towards performance auditing requires significant modifications to the
resources inherited from the City’s former audit function. Fewer of the conventional financial auditing
skills, which are currently available, will be needed. On the other hand, greater access to
specialized expertise in a wide range of professional and operational
disciplines will be essential. As a result, a revised blend of
resources must be established within the OAG that more appropriately reflects
the new direction. The proposed 2005
budget addresses this. An increased
level of funding for professional and consultant services (to $300,000) is
presented, along with a net decrease in the existing staff complement of 4
positions. The net result of all
revisions is a 2005 total budget of approximately $1.18 million. This represents a budget savings of just
under $120,000 when compared to the 2005 budget guideline. The required increases are thereby absorbed
while at the same time enabling the expanded mandate to be achieved.
It is proposed that the annual
budget for the Office of the Auditor General be fixed at a rate of 0.
06% of the total operating
budget of the City of Ottawa (equivalent to the ratio of the adjusted 2004 budget). The proposed rate for the City’s audit
function would result in a level of funding that is below the audit budgets for
most other comparable Canadian cities.
Using a fixed-percentage approach would ensure that adequate and
appropriate funding for the new audit function is maintained independent of the
overall budget deliberations. Such an
approach is enshrined in the municipal legislation within the Province of Quebec.
3 – Office of the Auditor General – 2005 Budget s .
The Office of the Auditor General will undertake the implementation of the Statute and Audit Plan contained herein.