Memorandum from the Chief Internal Auditor

• Issued: June 2004
• Related documents
• Content last reviewed: November 2009

Internal Audit Division Management Board Secretariat	Division de la vérification interne Secrétariat du Conseil de gestion
Office of the Chief Internal Auditor and Assistant Deputy Minister 777 Bay Street, 15th Floor Toronto ON M5G 2E5 Tel: (416) 327-9368 Fax: (416) 327-9486	Bureau du directeur général de la vérification interne et sous-ministre adjoint 777, rue Bay, 15e étage Toronto ON M5G 2E5 Tél: (416) 327-9368 Téléc: (416) 326-9486

June 11, 2004
Memorandum to:	The Honourable Christopher Bentley Minister of Labour
Re:	Executive Summary of Third Party Audit of the Workplace Safety and Insurance Board (WSIB)

The Internal Audit Division of Management Board Secretariat was asked to procure an external service provider to conduct a third party audit of the WSIB. Following a fair, transparent and competitive process, we selected the firm of Grant Thornton LLP. Grant Thornton began the audit in March 2004 and completed it at the end of May 2004.

The audit objectives were to assess:

• the efficiency and effectiveness of WSIB corporate and administrative services;
• the effectiveness of governance and monitoring controls in place within the WSIB to ensure that investment practices are aligned with the business objectives and mandate of the organization;
• the effectiveness, efficiency and overall management of information and information technology services;
• the overall effectiveness of modern controllership within the WSIB.

The audit was not designed to provide assurance on the appropriateness of objectives and targets established by the WSIB or about representations made by the WSIB as to whether performance is satisfactory.

Conclusion

The Board has made improvements in its operational efficiency and effectiveness, internal controls and controllership functions. However, further improvements are required in:

• administrative Information Technology practices and investment governance;
• compliance with existing policies and processes.

Key Issues and Actions

Governance and Controllership

The audit identified a number of governance and controllership issues requiring decisions at the government level. In particular it is recommended that the Board be expanded and strengthened with increased representation; and that the positions of Chair and President be separated.

Budget Processes and Management Oversight

While budget processes used for 2004 were more rigorous than in prior years, it was noted that budget guidelines were more procedures focused and did not provide targets for expenditures or cost savings. It was also noted that the requirement to report and the circumstances that would trigger reporting by the Board's Executive Committee to the Audit and Finance Committee are not clearly articulated.

Therefore, it is recommended that for 2005, the criteria to evaluate the budget be clearly identified at the beginning of the process and clear directions and targets be communicated to all branches and divisions. It is also recommended that a policy be developed specifying the requirements to trigger reporting to the Audit & Finance Committee.

Procurement

The audit noted instances where internal control mechanisms over purchasing, leasing, and licensing goods and services were not effective or were by-passed.

For example, instances were noted of contracts which were sole sourced and policies were not followed. Documentation supporting decisions was not always available and in some cases work began before contracts were in effect.

Recommendations were made to review policies and update controls.

Board of Directors and Executive Expenses

The audit identified instances of ineffective controls over Board of Directors and Executive expenses.

As a result, a supplementary review was conducted. The main objective was to review the nature and value of the expenditures to assess whether funds were used only for WSIB purposes.

Based on the results of this review we have found that

• expense reimbursements of both Board members and executive management were related to WSIB business;
• there were instances where established policies and procedures were not followed; for example, proper documentation supporting expenses was not always present;
• existing policies do not address the approval of purchases and expenses of the Chair and President.

It is recommended that controls over the Board of Directors and executive expenses and reimbursement process be strengthened. For example, all business expenses should be properly supported and approved.

Investment Practices Oversight

The audit concluded that a reasonable level of governance exists over investment activities. However, there are opportunities for strengthening certain aspects of investment policies in the terms of reference for the Investment Committee. Consequently the audit focused on specific best practices that could be adopted for the WSIB's Investment Committee.

Information Technology Management

The audit examined governance structures over the management of major information technology projects. Overall the audit concluded that while the WSIB has improved project management processes, significant improvements are still required in project feasibility analysis, project management expertise and the identification and mitigation of project risks.

It is recommended that the WSIB address these issues prior to proceeding with intended large projects planned for 2005 to 2009.

Board management has responded to the audit's recommendations and the responses are included in the report. These are generally in agreement with the recommendations and express a commitment to address them. In many instances, action is already planned or underway.

In order to ensure that these planned management actions are appropriately completed to address the issues in the report, it is recommended that a follow-up audit be performed early next year.

Sincerely,

Jacques R. Lapointe, CA.CIA
Chief Internal Auditor and
Assistant Deputy Minister