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/ Canadian Government Executive
// February 2016
Internal Audit
Performance Auditing in Local
Governments in Canada
Ron
Foster
P
erformance auditing can lead to more efficient, effective, and economical pro-
gram delivery and stronger internal controls within local governments. Sur-
prisingly, many audit functions within local governments in Canada are still
conducting few or no performance audits. To understand why they are lagging
behind their U.S. counterparts, researchers surveyed auditors within all the major cities
in the United States and Canada. This article provides highlights of the study from a
Canadian perspective. The full report is available at
http://www.theiia.org/bookstore.Time Spent on Performance Auditing
Survey results show that auditors in Canadian cities are spending 10% less time than
their U.S. counterparts conducting performance audits because barriers to performance
auditing are considerably higher in Canada.
1. Responsibility for performance auditing is not set out in state or
provincial legislation.
2. Universities do not offer adequate performance audit education.
3. City bylaws do not require performance audit.
4. Governance processes are not mature.
5. Local performance reporting processes are not mature.
6. Funding is insufficient compared to audit responsibilities.
7. Affordable training courses are not available.
8. Internal audit is not sufficiently understood or supported.
9. Standards and guidelines are inadequate.
10. Effective training courses are not available.
Average
Exhibit 1: Top Ten Barriers to Performance Auditing
English
Canada
.60
.58
.56
.52
.50
.49
.48
.38
.36
.35
.48
Quebec
.25
.63
.55
.55
.48
.63
.65
.53
.40
.65
.53
United
States
.45
.51
.40
.33
.36
.33
.44
.36
.21
.35
.37
Exhibit 2: Provincial Legislation for Municipal Auditors
Local Government Required
to Appoint Municipal Auditor
General
Nova Scotia, Quebec, (for cities
with populations over 100,000)
Toronto, Ontario
British Columbia
Local Government Empowered
to Appoint Municipal Auditor
General
Winnipeg, Manitoba,(specific
provisions), Ontario (specific
provisions)
No Provision for Municipal
Auditor General or City Auditor
Saskatchewan, Alberta,
Newfoundland, Nunavut, New
Brunswick, Yukon, Prince Edward
Island, Northwest Territories
1. Lack of Provincial Legislation
In English Canada, respondents indicated that lack of provincial legislation requiring
performance audits was the most serious barrier to effective performance auditing.
In Quebec, lack of legislation represented much less of a barrier, probably due to the
fact that cities in Quebec with populations of 100,000 are required by provincial legisla-
tion to conduct performance audits.
Due to the limited success introducing
municipal auditor general functions in
Ontario, the researchers suggest that IIA
Canada collaborate with professional au-
dit associations to identify model legisla-
tion to help ensure audit functions can
fulfill their mandates and meet profes-
sional audit standards.
2. Inadequate Education
Programs
In both English Canada and Quebec,
inadequate education programs at the
university level were viewed as a sig-
nificant barrier to effective performance
auditing. Most thought it would be more
cost effective to provide additional train-
ing courses through local chapters of The
IIA and the CCAF-FCVI than to attempt
to fund improved programming within
the universities.
3. Lack of City By-Laws
In both English Canada and Quebec, lack
of by-laws setting out the authority and
responsibility of the audit function to
conduct performance audits was identi-
fied as a barrier to performance auditing.
Audit leaders suggested that IIA Canada
could work together with professional
audit associations to identify model leg-
islation at the local level.
4. Immature Governance
Processes
In both English Canada and Quebec,
immature governance processes were
identified as a significant barrier to ef-
fective performance auditing. Respon-
dents within many of the small and
medium-sized cities suggested that
members of council do not fully under-
stand the roles of the auditors or coun-
cil’s responsibilities for governance. In
Quebec, this problem is aggravated by
the fact that most of the smaller and