Bill Matthews on the Cultural Influence of Internal Audit - Canadian Government Executive
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March 3, 2016

Bill Matthews on the Cultural Influence of Internal Audit

Bill Matthews was appointed Comptroller General of Canada in July 2014. He studied commerce at Dalhousie University and then earned his designation as a Chartered Professional Accountant. He started his career in the private sector and eventually became an Associate Partner with IBM, formerly PriceWaterhouseCoopers Consulting. He joined the Office of the Comptroller General of the government of Canada in 2004 and was named Assistant Comptroller General in the Financial Management and Analysis Sector in 2009. In 2011, he was named Assistant Secretary, Expenditure Management Sector, at the Treasury Board of Canada Secretariat. CGE Editor Patrice Dutil caught up with him to discuss the cultural impact of internal audit, the future of comptrollership, and innovation.

Bill Matthews

Q: Where is Comptrollership going?

Comptrollership in the Government of Canada is evolving to reflect a changing environment, one that entails the need for increased transparency and enhanced accountability. Going forward, the vision for comptrollership will need to include: strengthening the culture of measurement and innovation in program and policy design and delivery; providing evidence to inform decision-making; increased openness; and, most importantly, strengthening oversight of taxpayer dollars and the clarity and consistency of financial reporting.

Q: Comptrollership seems to be moving beyond numbers. You often talk about its “cultural” influence. What do you mean?

For me, the focus of today’s modern comptrollership is instilling core values of sound resource management and effective decision-making within and across the public service. This not only includes managers, but all public servants, whether they are engaged in front-line program and service delivery, policy or program design, or corporate service and support functions. Comptrollership is about ensuring that federal public service managers and employees understand their roles and responsibilities, and that they are equipped with the requisite skills and competencies. A comptrollership culture is one in which all public servants are able to see their work in the policies that guide their occupations and are able to take a risk-based approach to financial controls that supports flexibility and decision-making. This is how we develop programs that reflect fundamental public service values such as stewardship and accountability.

Q. What can Comptrollership bring to decision-making?

Good management and sound decision-making are at the heart of good government. My view is that comptrollership should ensure that decision-making is occurring at the right levels within the organization. Today’s digital environment increases access and inputs to decision points in government processes. It also provides opportunities to use this data to support evidence-based decision-making. This process is just as critical as the results it produces because it empowers managers and prevents administrative bottlenecks. It allows public servants to see their work in terms of responsibilities rather than tasks. It’s the job of comptrollership to find the opportunities to create better services and improved effectiveness that can save time and money.

Q. What is your view on the role of Internal Audit in risk-management?

The Policy on Internal Audit goes into detail concerning the responsibilities of internal audit shops with regard to risk. What’s not explicitly included in the Policy is the need for organizations to identify their risk thresholds. Risk is everywhere but we can’t audit everything. Internal audit can help senior management establish risk tolerances that address policy requirements but that still leave room for innovation.

We need to think critically about risk and risk tolerances. I want to encourage an open discussion across the public service to ensure we are focusing on the right risks. Through these discussions, public service managers will better understand their risk environments and Chief Financial Officers will be able to ensure their departments’ compliance with the appropriate control frameworks.

Q. How should these “open discussions” be framed?

Internal Audit can help, but sound management is a collective responsibility. I like the Institute of Internal Auditors’ model that positions the relationship between internal audit and programs and services as part of three lines of defense in effective risk management and control. In this model, the first line of defence is line management, which puts in place and monitors the system of internal controls that helps to manage risks and achieve objectives. This makes sense: operational management naturally serves as the first line of defense because controls are designed into systems and processes under their guidance.

The second line of defence is corporate management: it needs to build and reinforce the first line of defence controls. These functions encompass risk management frameworks; compliance with applicable laws and regulations; financial and operational risks; and reporting, including performance measurement and program evaluation. Each of these management functions possesses some degree of independence from the first line of defence.

Lastly, the third line of defence is internal audit with its mandate for the independent and objective examination of the organization’s system of governance, risk management and control.  Internal audit’s view of the organization and its management systems provides not only assurance on the integrity of operations in the organization but also trusted advice to management on how to sustain and improve these lines of defence.

Q. The government is putting a priority on increasing the rigour of costing information. Does IA have a role to play here?

Absolutely. Internal Audit has a critical role to play in ensuring that decision-makers have access to sound, evidence-based assurance on controls and control frameworks. Internal Audit assists managers by asking fundamental questions such as: whether managers have the necessary financial and non-financial information; what is the quality of this information; and is it being used to inform decision-making? I come back to culture–this forms the basis of strengthening the culture wherein internal audit and managers work together to address tough questions such as the efficiency and effectiveness of government business processes and whether Canadians are receiving value-for-money in how government policies and programs are being managed.

Q. Is there a role for Internal Audit in supporting innovation?

I think auditors should ask themselves how they can innovate audit processes while continuing to focus on providing evidence-based assurance on programs and services. I think we have to leverage technological advances such as data analytics.

Internal Audit also plays a broader role in contributing to innovation in the public service by assisting managers achieve their innovation goals for their organization. For example, readiness audits can aid senior management in identifying whether the necessary conditions are in place in order to facilitate innovation in a given entity and enable a culture of change.

Q. What are the core values of internal audit that should not get lost in this change?

For me, there are two: integrity and professional judgement. Integrity allows us to maintain audit rigour and fairness. One of the objectives of the Policy on Internal Audit is a “strong, credible” function; in other words, serve as a trusted advisor. The audit function is trusted by deputy heads and line management due to its independence from external influences.

A trusted and independent audit function must be delivered by objective auditors who demonstrate professional judgement. This judgement is being fostered through the professionalization of the internal audit function, which is a priority of my office. Talent management, succession planning, Chief Audit Executive Development, and a pilot program for Comptrollership Leadership Development are among the initiatives that contribute to maintaining and enhancing the quality of the professional practice of internal audit in the Government of Canada.

Q. What is the most enjoyable aspect of being the Comptroller General of Canada?

For me, working with the teams of knowledgeable, dedicated professionals that combine to make up the comptrollership community is the best part. These people work every day to strengthen investment planning, project management, procurement and asset management. They ensure the availability of appropriate frameworks, policies, accounting standards and guidance on financial management and accurate reporting across government. They focus on promoting the overall effectiveness and efficiency of government operations and the transparency of decision- making supporting the government’s efforts to provide value and accountability to Canadians. None of this is easy, but what never ceases to impress me is the passion they bring to the work; the energy and enthusiasm not just to do this right, but to do it better than we did it yesterday.

 

About this author

Patrice Dutil

Patrice Dutil is the Editor of Canadian Government Executive. He is a Professor in the Department of Politics and Public Administration at Ryerson University in Toronto. He has worked as a government policy advisor, a non-profit organization executive, a television producer and was the founder, and editor for five years, of The Literary Review of Canada. His upcoming publications include a book on the administrative practices of Canadian prime ministers Macdonald, Laurier and Borden, and a study of the 1917 election in Canada.

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