PERFORMANCE AUDIT GUIDE

Transcription

1 Auditor General for Local Government British Columbia PERFORMANCE AUDIT GUIDE FOR LOCAL GOVERNMENTS June 2016

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3 PERFORMANCE AUDIT GUIDE FOR LOCAL GOVERNMENTS June 2016 Auditor General for Local Government / British Columbia

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5 CONTENTS 3 Executive Summary The Auditor General for Local Government Performance Auditing The Performance Audit Process Our Commitment 8 About Performance Auditing Performance Audit Standards Types of Reports What an Audit Examines Who is Involved in an Audit 15 Information Access & Confidentiality Access to Information Confidentiality 17 Selecting Topics & Local Governments to Audit Planning and Prioritization Process Audit Themes Audit Topics Local Government Selection 21 Performance Audit Process Initiating the Audit Planning Phase Examination Phase Reporting Phase 27 After the Audit 28 Frequently Asked Questions 30 Glossary of Terms AGLG Performance Audit Guide for Local Governments 2

6 EXECUTIVE SUMMARY EXECUTIVE SUMMARY This executive summary provides a brief introduction to the role of the Auditor General for Local Government and a high level description of how performance audits work. Readers interested in learning more about the details of AGLG performance audits will find it in the main body of this guide. THE AUDITOR GENERAL FOR LOCAL GOVERNMENT British Columbia s Auditor General for Local Government (AGLG) was created to help strengthen the confidence of communities in their local government. To do this, we carry out independent, professional performance audits aimed at playing a positive, constructive role in enhancing local government accountability. Mandate The mandate of the AGLG, set out in the Auditor General for Local Government Act, is: To conduct performance audits of the operations of local governments in order to provide local governments with objective information and relevant advice that will assist them in their accountability to their communities for the stewardship of public assets and the achievement of value for money in their operations. The Act defines local governments as: municipalities, regional districts, greater boards, commissions, corporations or other organizations that are financially controlled by one or more municipalities, regional districts or greater boards and any other local body that may be prescribed by regulation at some point in the future. The Act also defines operations as the design or implementation of the programs, services, policies or systems of a local government and related procedures. The Legislative mandate of the AGLG does not include doing special examinations or the investigation of issues specific to a local government. Rather we focus on the review of services and programs that have potential applicability across all local governments. 3 Auditor General for Local Government

7 EXECUTIVE SUMMARY PERFORMANCE AUDITING A performance audit sometimes called a value for money audit is an unbiased examination, carried out following professional standards, to assess whether a particular area of local government activity is being carried out economically, efficiently and effectively. Audits may identify strengths as well as areas needing improvement, and are reported publicly. Benefits of an Audit We aim to carry out a performance audit that provides local governments with clear and unbiased feedback and helpful advice designed to help improve local government operations and to identify good practices being used elsewhere. Who s Involved Our performance audits are carried out by AGLG staff audit teams. We sometimes also include outside consultants hired to help us with our work where we do not have the required expertise or resources in-house. We work with local government staff in the areas being audited, and with key contact persons identified by the local government such as the chief administrative officer and chief financial officer. We also work with the Audit Council who helps select audit themes and topics, reviews and comments on audits and monitors the performance of the Office. How we Select Audits With more than 190 local governments in B.C., we can t audit every local government or every area of local government operations. Therefore, we carefully select audit topics and the local governments to be audited based on expected program risk as well as the program s relevance to the broader local government community. Our assessment of risk is based on the potential consequences and the likelihood of a program not achieving its objectives. We also try to make sure that over time our audits cover organizations of differing size, complexity and geographic distribution. AGLG Performance Audit Guide for Local Governments 4

8 EXECUTIVE SUMMARY THE PERFORMANCE AUDIT PROCESS There are four phases to the Auditor General for Local Government performance audit process: Initiating the audit, Planning, Examination and Reporting. The Phases of a Performance Audit diagram (see next page) provides more information on each of these. 5 Auditor General for Local Government

9 EXECUTIVE SUMMARY Phases of an AGLG Performance Audit Phase and Activities» Local Government Actions Considerations for Local Government INITIATING THE AUDIT Notification letter Information and news release on website Kickoff or opening meeting Protocol document Confidentiality requirements» Formally acknowledge start of audit» Agree to confidentiality requirements Who should be the key contact on the audit? Who should formally acknowledge the audit and agree to confidentiality requirements? PLANNING Understanding the Local Government and the Subject Matter» Assist audit team, as requested, in gathering gather knowledge of the subject matter information develop possible lines of enquiry» Acknowledge audit objective, assess auditability scope, and criteria assess appropriateness of local government determine the scope and criteria Development of audit plan Acknowledgement letter Who should acknowledge the audit objective, scope and criteria? EXAMINATION Evidence gathering and analysis Audit team/local government meetings to confirm and validate information collected Exit meeting or other follow-up meeting» Assist audit team, as requested, in collecting evidence» Assist audit team in confirming and validating facts» Participate in audit team/ local government meetings and exit meeting, as required Who should participate in the audit team/local government meetings and exit meeting? REPORTING Preliminary findings document shared with local government for review» Review and respond to preliminary findings document Fact clearance completed Proposed final audit report submitted to the local government for comment (45 day review period) Revised proposed final audit report» Provide comments on proposed final audit report to be included in final audit report prepared including summary of local government s comments submitted to Audit Council for comment Final audit report provided to local government prior to publication» Prepare an action plan in response to the recommendations in the report Who should review the preliminary findings document? Who should provide comments on the final audit report? Who should develop the action plan? What to include in the action plan? AUDIT REPORT PUBLISHED ON AGLG.CA AGLG Performance Audit Guide for Local Governments 6

10 EXECUTIVE SUMMARY OUR COMMITMENT Professional Standards To ensure our objectivity and credibility, we carry out all AGLG performance audits consistently with standards that have been set by a recognized and independent professional body. In Canada, the Auditing and Assurance Standards Board sets standards for performance audits. Confidentiality One of the most important aspects of performance audit work is confidentiality. The AGLG ensures the confidentiality of local government documents and information and the local government must commit to keeping audit-related information confidential. Independence AGLG performance audits are carried out independent of the provincial government and other agencies. The Auditor General for Local Government Act ensures that the AGLG functions at arm s length from government, allowing us to do our work objectively and in an unbiased manner. Transparency The AGLG operates transparently, sharing information with audited local governments on the nature of audit work as well as the evidence we gather, in addition to providing the proposed final audit report for the local government s review. Since our audit reports are always made public, we also assist local governments in being transparent with their taxpayers. 7 Auditor General for Local Government

11 ABOUT PERFORMANCE AUDITING ABOUT PERFORMANCE AUDITING A performance audit sometimes called a value for money audit is an unbiased examination, carried out in accordance with professional standards, of a service, program or project (or parts thereof) to assess whether it is being carried out with due regard to economy, efficiency and effectiveness. A performance audit uses specific criteria that are determined in advance to measure how the service being audited is performing. Economy the right amount of resources, of the right quality, delivered at the right time and place, at the lowest cost. Efficiency the minimum resource inputs to achieve a required quantity and quality of output. Effectiveness the extent to which the outcomes of an activity match the objective or the intended results of that activity. In cases where the audit identifies practices that could benefit other local governments, the audit report will highlight these and the AGLG will publicize them as part of the audit report so others can learn from the audit. Similarly, when a performance audit identifies an area where there is room for improvement, this too will be included in the audit report in order to help improve the economy, efficiency and effectiveness of the service for the local government auditee and other local governments with similar practices. This is quite different from the financial auditing that local governments in British Columbia have completed each year, which focuses on compliance matters and assurance that financial statements are fairly and reliably stated. Financial statement audits are conducted by each local government s external auditor, not the AGLG. AGLG Performance Audit Guide for Local Governments 8

12 ABOUT PERFORMANCE AUDITING The audits undertaken by the AGLG focus on value for money, as described in section 3 of the Auditor General for Local Government Act, which states that AGLG performance audits consist of: 3 2 (a) a review of the operations of a local government, as the operations relate to a matter or subject specified by the auditor general, to evaluate the extent to which I. the operations are undertaken economically, efficiently and effectively, II. III. IV. financial, human and other resources are used in relation to the operations with due regard to economy and efficiency, the operations are effective in achieving their results, or procedures established by the local government are sufficient for the local government to monitor the economy, efficiency and effectiveness of those operations, and b) recommendations to the local government arising from the review referred to in paragraph (a). Section 3(3) of the Act describes an additional way the AGLG provides useful tools and advice to local governments: 3 The auditor general may identify and develop and publish or otherwise provide information about recommended practices, arising from a performance audit, that the auditor general considers may be applicable or useful to other local governments. 9 Auditor General for Local Government

13 ABOUT PERFORMANCE AUDITING PERFORMANCE AUDIT STANDARDS To ensure our objectivity and credibility, we conduct our work following standards set by a recognized and independent professional body. This also helps ensure rigour, reliability, quality and consistency in carrying out our work and reporting our findings and recommendations. In Canada, the standards for assurance engagements, such as performance audits conducted by the AGLG, are set by the Auditing and Assurance Standards Board and are included in the CPA Canada Handbook - Assurance. CPA Canada standards for conducting assurance engagements other than audits of financial statements and other historical financial information provide the framework and requirements for planning, executing and reporting performance audits. Applicable standards (as of September 2015) are listed on the right. The AGLG also adheres to assurance standards outlined in the Public Sector section of the CPA Canada Handbook Assurance. Section 5020 association Section 5025 standards for assurance engagements other than audits of financial statements and other historical financial information Section 5030 quality control procedures for assurance engagements other than audits of financial statements and other historical financial information Section 5049 use of specialists in assurance engagements other than audits of financial statements and other historical financial information Section using the work of internal audit in assurance engagements other than audits of financial statements and other historical financial information CSQC 1 quality control for firms that perform audits and reviews of financial statements, and other assurance engagements AGLG Performance Audit Guide for Local Governments 11

14 ABOUT PERFORMANCE AUDITING TYPES OF REPORTS In addition to our annual service plans and annual reports, the AGLG produces two other types of reports: individual local government audit reports and AGLG Perspectives booklets. Audit Reports We produce a report for each performance audit we complete. These reports are specific to the audit, describing the audit work we did, the scope of the audit, the criteria we used to measure local government performance, our findings, conclusions and recommendations. Each report includes a summary response the local government may provide to us after reviewing a proposed final version of the report. We ask each audited local government to also provide an action plan that addresses the audit s recommendations, which we can include in the report. While the focus of each AGLG audit report is clearly on the local government that was the subject of a particular audit, the report can be a useful tool for other local governments. The expectations, findings and recommendations outlined in the report may be useful as a high level reference point for other local governments to assess their current situation and consider possible improvements. AGLG Perspectives Booklets In order to provide additional useful tools and advice to a wide range of local governments, we also publish AGLG Perspectives booklets. We intend these booklets to be relevant to many local governments and others interested in local government affairs. They build from what is included in our performance audit reports to include information of much broader applicability. We generally create an AGLG Perspectives booklet once we have undertaken a number of audits in a particular subject area. In addition to information we gathered in the course of conducting these audits, we also look to best practices elsewhere in preparing AGLG Perspectives booklets and consult with experts in the field as appropriate. 12 Auditor General for Local Government

15 ABOUT PERFORMANCE AUDITING WHAT AN AUDIT EXAMINES AGLG performance audits aim to help local governments be accountable to their communities for how they manage public assets and achieve value for money in their operations. We accomplish this by examining particular local government programs or services, gathering evidence and reviewing it rigorously against specific audit criteria that are established before the audit begins. We recognize the tremendous diversity of local governments in British Columbia and are respectful of their varying histories, circumstances, resources and priorities. Our performance audits never make comment on a local government s strategic policy or objectives, as assessing overall policy directions is not part of our mandate. We try to make recommendations that are of value to all local governments, irrespective of their particular circumstances. Our audits may but do not necessarily reach conclusions as to whether value for money (economy, efficiency and effectiveness) has been achieved. As described in the AGLG Act, we cannot call into question the merits of policy decisions or objectives of a local government. AGLG Performance Audit Guide for Local Governments 13

16 ABOUT PERFORMANCE AUDITING WHO IS INVOLVED IN AN AUDIT The AGLG Audit Team AGLG performance audits are carried out by the AGLG using audit teams that may include outside consultants. To facilitate interactions with local governments during an audit, the AGLG adheres to our Engagement Protocol document, which can be found on the AGLG website. The document lists the steps and phases you can expect to see as the audit is conducted. At all times, our audit teams act respectfully and with integrity, carrying out all work to professional standards. The Audit Council The AGLG also works with the Audit Council who helps select audit themes and topics, reviews and comments on audits and monitors the performance of the Office. The Local Government The local government being audited plays a crucial role in the performance audit process by providing access to audit information, reports and explanations, in addition to identifying a key contact person. When an AGLG audit team arranges to meet with the local government, such as an opening or exit meeting, it is important for the local government to ensure that all appropriate staff members attend. At the start of the audit, the AGLG and/or AGLG staff will also meet with the board or council. The local government should ensure that all employees who will be involved with the audit are briefed on the purpose, nature and timetable of the audit. When the AGLG provides the local government with a proposed final audit report, it is essential that the local government review it carefully and provide written comments within the prescribed timeframe and develop an action plan to address the report s recommendations. We encourage local governments to communicate with the office early about any concerns or comments they have. In all cases, it is important for the local government to follow the Engagement Protocol, including respecting deadlines laid out in that and other documents. Both Parties It is important for both parties to ensure that there is clear communication and share any concerns about how the performance audit process is proceeding. Local Government Resources We are aware that a performance audit can place demands on local government staff and can be challenging for smaller local governments with limited staff resources. We endeavor to be sensitive to this reality, while also ensuring that every audit is completed to the same professional standards. 14 Auditor General for Local Government

17 INFORMATION ACCESS & CONFIDENTIALITY INFORMATION ACCESS & CONFIDENTIALITY Provisions for information access, security and confidentiality are among the most important and most serious of all issues for the Auditor General for Local Government. It is essential that local governments involved with a performance audit fully understand and respect these responsibilities. ACCESS TO INFORMATION Section 13 of the Auditor General for Local Government Act says that a local government whose operations are the subject of a performance audit must provide the AGLG with access to records and information, the local government s facilities and explanations necessary for the auditor general to conduct a performance audit. In addition, the Act requires that the following people must also provide information to the AGLG in the course of carrying out a performance audit: Anyone who has an agreement with a local government that relates to an AGLG performance audit. The AGLG has the legal authority to obtain a court order forcing a person to provide information as required under the Act. The clear preference of the AGLG, of course, is for everyone involved to voluntarily provide all relevant information. Anyone granted money by a local government that relates to an AGLG performance audit. AGLG Performance Audit Guide for Local Governments 15

18 INFORMATION ACCESS & CONFIDENTIALITY CONFIDENTIALITY One of the underlying principles of audit work is a duty of confidentiality. The AGLG ensures the confidentiality of local governments documents, consistent with Section 16 of the Auditor General for Local Government Act, which restricts the disclosure of information the AGLG obtains while doing a performance audit. What the AGLG May and May Not Share The AGLG will only disclose a record or information obtained in the course of a performance audit when it is considered necessary to do so in order to conduct a performance audit or for other exceptions set out in the Act. In order to comply with this requirement, drafts of audit reports are only shared with the audited local government. Only the final published audit report is disseminated publically by the AGLG. What a Local Government May and May Not Share Beginning with the initial meeting between AGLG audit team members and the local government, all documents and information relating to the performance audit that the AGLG shares with the local government are considered to be audit working papers, which are confidential. Accordingly, we ask the local government to not disclose them to anyone outside of the local government. We deliver the proposed final audit report to the local government by courier, in numbered, printed copies for the board/council and chief administrative officer (or other key contact for the audit). This document must not be photocopied or reproduced. We ask the local government to return these copies to the AGLG s office by the deadline we state. Alternatively, proposed final audit report numbered print copies may be destroyed, with confirmation, if agreed to by the AGLG. The provisions of the Freedom of Information and Protection of Privacy Act do not apply to any records or information created by or for, or in the custody or control of, the AGLG in relation to the exercise of powers under the AGLG Act. 16 Auditor General for Local Government

19 SELECTING TOPICS & LOCAL GOVERNMENTS TO AUDIT SELECTING TOPICS & LOCAL GOVERNMENTS TO AUDIT We make decisions around what audit topics we will explore and what local governments will be included using a three-step audit planning process: 1. We identify broad audit themes to be explored in our audits over a multi-year period. Periodically, these are reviewed to ensure they consider and reflect any significant changes in the issues facing local governments in B.C. We publish these themes in the AGLG s annual service plans as required by Section 22 of the Auditor General for Local Government Act. 2. We go through a detailed planning and prioritization process to identify specific audit topics to be explored under our audit themes. 3. Following the identification of topics, we determine which specific local governments to include in the planned performance audits. AGLG Performance Audit Guide for Local Governments 17

20 SELECTING TOPICS & LOCAL GOVERNMENTS TO AUDIT Audit Planning Process 1 IDENTIFY BROAD AUDIT THEMES Example: Infrastructure Sustainability and Infrastructure Asset Management 2 3 IDENTIFY SPECIFIC AUDIT TOPICS SELECT LOCAL GOVERNMENTS Example: Learnings from Local Government Capital Procurement Projects and Asset Management Programs Example: City of Campbell River, City of Cranbrook, City of Dawson Creek, District of North Vancouver, City of Rossland and District of Sechelt For example, the AGLG s initial service plan identified the audit theme: Infrastructure Sustainability and Infrastructure Asset Management. Subsequent to the publication of that service plan, the AGLG identified a specific topic for audit under that theme: Learnings from Local Government Capital Procurement Projects and Asset Management Programs. The AGLG then went on to select six local governments for audit on that topic: City of Campbell River, City of Cranbrook, City of Dawson Creek, District of North Vancouver, City of Rossland and District of Sechelt. 18 Auditor General for Local Government

21 SELECTING TOPICS & LOCAL GOVERNMENTS TO AUDIT PLANNING AND PRIORITIZATION PROCESS The following criteria guide the detailed planning and prioritization process we use to select audit themes and identify audit topics. 1. Risk The possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of consequences and likelihood. Local Government Opperational Program Risk Assessment 2. Relevance The applicability of the area of local government activity to local governments of various sizes, geographic areas and population densities, plus the likelihood that best practices might be identified. Critical 9 High Risk Programs 3. Significance The size of expenditures, the number of people affected by the program or service, the potential size of economic, social or environmental impacts, the number of stakeholders affected and the extent of their interest and potential impact. Consequences High 5 The Local Government Operational Program Risk Assessment diagram illustrates how risk, as defined by consequences and likelihood, factor into the decision to audit one area of local government operation over another. A high risk area is one where there are significant consequences and a significant likelihood of a program not meeting its objective. The greater the risk, the stronger the rationale for examining that area as part of an audit. Managrable 1 Low Risk Programs 1 Remote 5 Possible Likelihood 9 Likely AGLG Performance Audit Guide for Local Governments 19

22 SELECTING TOPICS & LOCAL GOVERNMENTS TO AUDIT AUDIT THEMES Audit themes are broad areas the AGLG identifies from time to time to potentially explore through performance audits. Specific audit topics are developed under these more general themes. As described earlier, our audit themes are selected through a detailed planning and prioritization process that considers risk, relevance and significance. We periodically review our audit themes to ensure they consider and reflect any significant changes in the issues facing local governments in B.C. We list our current audit themes in our annual service plan each year. AUDIT TOPICS Audit topics are the specific areas of local government operations that we select to be the subject of performance audits. We identify audit topics following the selection of audit themes, as part of the detailed planning and prioritization process. Our planning and prioritization process includes extensive consultation with local governments and other stakeholders on issues most relevant to them in their efforts to deliver value for the tax dollars they spend. LOCAL GOVERNMENT SELECTION Once we have identified an audit topic, we select one or more local governments to be included in performance audits on that topic. The AGLG s selection of particular local governments is based on factors such as: The importance of the audit topic to the local government s operations. Ensuring that the range of our audits, over time, includes local governments of varying natures, sizes, and locations. Potential sources of good practices that may be identified and may be of value to other local governments. Other factors and emerging issues. We do not select particular local governments for audit simply because we have received one or more complaints about their operations. While the AGLG has the responsibility of selecting the local governments to be audited under each topic, we consult with the local government before our audit plan is finalized. Such discussions may provide us with information affecting the proposed audit and how it is to be conducted. During the planning phase of each performance audit, the AGLG will confirm whether or not each selected local government is an appropriate candidate for the audit. It is possible that the selection of local governments may be revised as a result of this process. 20 Auditor General for Local Government

23 PERFORMANCE AUDIT PROCESS PERFORMANCE AUDIT PROCESS INITIATING THE AUDIT The AGLG begins the performance audit by notifying the affected local government. Notification Letter We send a letter to the local government informing it of our intention to conduct a performance audit. The letter includes the audit topic. The AGLG always notifies a local government subject to an audit before publicly announcing the audit. Once a local government is aware of our intention to conduct a performance audit, we will publish a news release on our website listing the audit topics and the names of the local governments we have identified for audit participation. Dealing with the News Media When the AGLG announces that your local government will be included in an audit, this information is published on the AGLG website. As a result, you may be contacted by the news media. While the audit topic and names of the local governments being audited are public information, information on audit scope, objectives and criteria and other aspects of the audit are only made public with the release of the final audit report. It is essential that you limit your public comments to publicly-available information. For more on this topic, please see the earlier section on Information Access & Confidentiality. Opening Meeting We ask the local government to meet with us to begin the performance audit process. In most cases, the local government will want its chief administrative officer and mayor or chair to participate in this meeting. At the opening meeting, we present the local government with a protocol document, which outlines the details of how we will work together during the performance audit process. We will also present the local government with a document outlining the confidentiality provisions required in order to participate in an audit. See the page on Information Access and Confidentiality for more on this topic. AGLG Performance Audit Guide for Local Governments 21

24 PERFORMANCE AUDIT PROCESS PLANNING PHASE During the planning phase, the AGLG gathers information to develop the audit plan. Understanding the Local Government and the Subject Matter The AGLG s initial planning work lays the groundwork for the audit. This includes: gathering knowledge of the local government and the proposed subject matter, developing possible lines of enquiry for the audit, assessing the auditability and appropriateness of the local government, and determining the scope and criteria for the audit. We will ask the local government to participate in meetings and/or provide information to help the audit team understand the area being audited. This will likely include visits to local government offices or sites of operation. Considerations for the Local Government As part of our audit process we ask local governments to do the following: Identify who will be your key contact for the audit. This decision is entirely up to your local government; commonly, the local government s chief administrative officer is assigned this responsibility. Acknowledge your responsibility for the activities subject to the audit and agree to AGLG confidentiality requirements. Again, it is up to the local government to decide what form these approvals should take. Identify an appropriate individual to sign off on the acknowledgement of the objective, scope and criteria of the performance audit on behalf of your local government. 22 Auditor General for Local Government

25 PERFORMANCE AUDIT PROCESS Audit Plan Based on the knowledge gained through our initial planning, the audit team develops an audit plan to guide work on the audit. The audit plan will include information in the following areas: Audit Objective the overall goal of the audit. Audit Scope the range of operations to be examined and the range of questions to be explored. Lines of Enquiry the specific areas that will be explored in the audit. Audit Criteria the specific benchmarks against which the activities being audited will be evaluated. Acknowledgement Letter We will ask the local government to sign off on their acknowledgement of the audit objective, scope and criteria. It is important for the local government to raise and resolve any questions or concerns on these points prior to signing off. Advisory Committee The AGLG establishes an expert advisory committee for each performance audit. This committee assists the AGLG in ensuring that the audit is appropriately focused and provides an objective evaluation of the audit team s judgments and conclusions. The advisory committee is part of the AGLG s quality assurance process, ensuring the validity of our work. AGLG Performance Audit Guide for Local Governments 23

26 PERFORMANCE AUDIT PROCESS EXAMINATION PHASE The examination phase is when the audit team gathers information and data relating to the audit criteria. There is close interaction between the audit team and the local government during this phase, with audit team members usually spending time onsite with the local government s staff and making requests and engaging in dialogue while offsite. It is essential during the examination phase for the audit team and the local government to work together well and share a clear understanding of their roles and responsibilities. We will ask the local government to make sure staff are aware of the planned work and are available to provide requested documents and participate in interviews, as needed. Considerations for the Local Government We will ask you to identify key individuals who will participate, on behalf of the local government, in meetings to validate the information we have gathered. Evidence Gathering and Analysis A key element of the examination phase is our collection of information and data, which we assess against the audit criteria identified in the planning phase. The audit team collects evidence from documents, through interviews with local government staff and by other means. Cooperation of the local government is essential and expected, as it is legally required to give the AGLG access to audit-related records, other information and explanations. Once information and data is collected, the AGLG analyzes it as part of the process of finalizing the audit working papers. This allows us to identify preliminary findings and develop our audit conclusions. Audit Team/Local Government Meetings During this phase, the audit team may ask for meetings to confirm that the information that has been collected is relevant, accurate and complete. This may include an exit or other follow-up meeting after the AGLG team concludes its onsite work at local government offices. 24 Auditor General for Local Government

27 PERFORMANCE AUDIT PROCESS REPORTING PHASE During the reporting phase, the AGLG finalizes our understanding of facts and findings, prepares a proposed final performance audit report, shares it with the local government, seeks comments from the local government and makes revisions as needed. Ultimately, we make a final report public on the AGLG website. The audit report formally presents the AGLG s observations, conclusions and recommendations relating to the performance audit. The local government plays a key role during this phase in providing comments on the proposed final performance audit report. In cases where the audit identifies practices that could benefit others, the audit report will highlight these so other local governments can learn from the audit. Similarly, when a performance audit identifies an area where there is room for improvement, this too will be identified in the audit report in order to help improve the economy, efficiency and effectiveness of the service activities. Preliminary Findings Clearance Considerations for the Local Government Local governments are asked to do the following: Identify who should review and provide comments on the preliminary findings document on behalf of the local government. Determine who is authorized to review and provide comments on the proposed final audit report. Consider issuing your own news release once the audit report has been published. Prior to finalizing the proposed final audit report, the audit team needs to confirm all key facts and findings with the local government. We do this by providing a preliminary findings document to the chief administrative officer and/or other representatives of the local government (including elected officials, if appropriate). We then meet to discuss the accuracy and relevancy of the information we provide to the local government. The local government is responsible for reviewing all fact statements, advising the AGLG if the information is incorrect or incomplete and providing corrected information with documentary support. This process can also be an opportunity to begin a dialogue on the potential conclusions and recommendations that align with the preliminary audit findings we have developed. AGLG Performance Audit Guide for Local Governments 25

28 PERFORMANCE AUDIT PROCESS Substantiating the Report Substantiation is the detailed documentary evidence that supports the observations and conclusions that will appear in the final report. Throughout the audit, the audit team maintains a record of all evidence gathered and its sources so that all parts of the report are thoroughly supported. Proposed Final Audit Report for Comment Once the AGLG has completed a proposed final version of the audit report, we provide it to the local government for comment. As per the AGLG Act, the local government is provided no less than 45 days to respond in writing. We encourage local governments to communicate with the office regarding any concerns or clarifications needed early in the review process. Local Government Comments After the AGLG receives comments from the local government and has adjusted the report as necessary, we insert the local government s summary response in the final report. We also ask local governments being audited to develop an action plan based on the recommendations for inclusion in the report. Providing an action plan provides added assurance to taxpayers that the local government is committed to addressing the recommendations. Publication of the Final Report Immediately prior to the public release of the final report, the AGLG will provide the local government with a copy of the final audit report and a tracked changes version that shows any final adjustments made to the report. We will release the final report on the AGLG website and issue a news release and backgrounder after the final report has been delivered to the local government. 26 Auditor General for Local Government

29 AFTER THE AUDIT AFTER THE AUDIT Recommendations made in AGLG audit reports are intended to assist a local government in improving its performance. It is up to audited local governments to determine how to address the recommendations. Local governments are accountable to their electors for how they choose to respond. Audit reports are publically available on the AGLG website. Follow-up Work The AGLG may, at a future date, choose to carry out follow-up audits or studies to determine the extent to which audited operations have changed following an AGLG audit. The value of undertaking such followup work will be assessed during the AGLG s normal annual performance audit planning process. Post-Audit Survey In the future, the AGLG intends to ask audited local governments to complete a post-audit survey as part of our quality assurance process. This will help us to gather information on various aspects of the audit experience and is intended to enable us to continuously improve our audit processes. AGLG Performance Audit Guide for Local Governments 27

30 FREQUENTLY ASKED QUESTIONS FREQUENTLY ASKED QUESTIONS The following questions and answers are to assist local governments selected for an audit in answering questions they may receive from constituents, media and other stakeholders relating to an AGLG performance audit. Is this an audit by the provincial government or is it an independent audit? This performance audit is being carried out by the Auditor General for Local Government (AGLG), which operates at arm s length from the provincial government. The AGLG has sole authority to select topics and those local governments to be audited. How is this audit different from the regular audit of financial statements that all local governments do each year? A performance audit is quite different from an audit of financial statements. The AGLG s performance audits look at the actual outcomes of local government activities. They are specifically focused on looking at the economy and efficiency of specific local government operations and the extent to which these operations are effective in achieving the strategic policy directions set by the local government. What s involved in a performance audit? AGLG performance audits follow a consistent process that has four stages: initiating, planning, examination and reporting. Each of these stages includes a specific set of steps that enable the AGLG to gather the information they need to provide useful recommendations in the final audit report. For more information on the phases, refer to page 6 of this document or download the Performance Audit Phases Infographic on AGLG.ca. What exactly is being audited? The audit topic is announced at the beginning of the process and is public information. The AGLG s final report will outline both the process and the audit s findings. To learn more about the AGLG s current audit topics and audit process, please visit AGLG.ca. How was this audit topic selected? The performance audit topic was selected by the AGLG through a systematic performance audit planning process. The detailed planning and prioritization process includes consultation with local governments and other stakeholders to identify key issues affecting local governments in British Columbia. Information on the AGLG s audit themes and topics is published in their Annual Service Plan on AGLG.ca. 28 Auditor General for Local Government

31 FREQUENTLY ASKED QUESTIONS How was this local government selected? Are there particular concerns about this local government? The AGLG s selection of a particular local government is based on factors such as: The importance of the audit topic to the local government s operations. Ensuring that the range of audits, over time, includes local governments of varying natures, sizes, and locations. Potential sources of good practices that may be identified and may be of value to other local governments. Other factors and emerging issues. What information updates will be provided to the public during the process? Like all audits, the process is confidential while it is underway. However, at the conclusion of the audit all final audit reports are made public on AGLG.ca. How confidential is the performance audit process? The performance audit process is highly confidential. AGLG audit-related information is exempt from the provisions of the Freedom of Information and Protection of Privacy Act so confidential information is protected and audits can be rigorous and follow due process. Detailed information on confidentiality requirements during an audit can be found in sections 16 and 24 of the Auditor General for Local Government Act. When will the audit be completed? Since each performance audit is unique, the time required will vary. The AGLG estimates that the process for most audits is likely to take anywhere from six months to one year to complete from start to finish, depending on audit complexity. Timeline estimates are always subject to change. Will the final report be made public? Yes. All final AGLG performance audit reports are made public on AGLG.ca. The report will also include a summary of the local government s comments and action plan. What will you do with the recommendations when the AGLG releases its report? The AGLG asks local governments to carefully review and consider any recommendations in the final report and encourages audited local governments to develop an action plan in response. Can the AGLG force a local government to implement its recommendations? No. Like other auditors general, the AGLG does not have the power to force local governments to implement its recommendations. The recommendations made in an AGLG audit report are intended to assist a local government in improving its performance. AGLG Performance Audit Guide for Local Governments 29

32 GLOSSARY OF TERMS GLOSSARY OF TERMS Accountability an obligation to answer for responsibility, such as a local government s responsibility to its electors. Acknowledgment Letter request for the local government to sign off on the audit objective, scope and criteria. It is important for the local government to raise and resolve any questions or concerns on these points prior to signing off. Action Plan a plan we recommend local governments develop that addresses the audit s recommendations. If the local government provides an action plan, we will include it in the final audit report in addition to the local government s summary response. Audit Criteria the specific benchmarks against which the activities being audited will be evaluated against. Audit Evidence the information an auditor gathers in order to form a credible opinion of the local government s performance in the area being audited. Audit Objectives broad statements developed by the audit team to define the intended audit accomplishments. Audit Plan a document describing the strategy and detailed approach to be taken with an audit. Audit Team the staff and contractors identified by the AGLG to carry out audit work. All audit team members are covered by the AGLG s confidentiality provisions. Auditability and Audit Worthiness whether a local government operation can be successfully audited and whether the audit is likely to result in useful information being collected. Due Regard an obligation to be prudent in its use of resources, that is, to consider all reasonable and appropriate actions in decision making. Economy the right amount of resources, of the right quality, delivered at the right time and place, at the lowest cost. Efficiency the minimum resource inputs to achieve a required quantity and quality of output. Effectiveness the extent to which the outcomes of an activity match the objective or the intended results of that activity. Engagement Protocol Document - a document that outlines the details of how the AGLG and local government will work together during the performance audit process. Final Audit Report a signed, written document presenting the audit objective, scope and results of an audit. Lines of Enquiry the specific areas that will be explored in an audit. Notification Letter a letter the AGLG sends to the local government informing it of our intention to begin the performance audit process. Opening Meeting a meeting between the AGLG and the local government to begin the performance audit process. 30 Auditor General for Local Government

33 GLOSSARY OF TERMS Operations the design or implementation of the programs, services, policies or systems of a local government and related procedures. Preliminary Findings Document the document provided to the local government that is used to confirm the accuracy and relevancy of the facts and findings produced by the audit team. Quality Assurance a program through which the AGLG evaluates the work of their audit teams. Recommendations actions the AGLG believes are necessary to improve the operations of a local government in the area being audited. Risk the possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of consequences and likelihood. Scope the range of operations to be examined and the range of questions to be explored in a performance audit. Value for Money the extent to which a given expense results in an efficient and effective return. Working Papers records of the information obtained, analysis carried out and conclusions reached during an audit. These provide the basis for an audit s findings and recommendations. AGLG Performance Audit Guide for Local Governments 31

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