Internal Audit of Strategic and Business Planning

Final Report
June 2012

Acronyms and Abbreviations

Executive Summary

In accordance with its approved Risk-Based Audit Plan for 2011-12, the Office of the Chief Audit Executive at the Canadian International Development Agency (CIDA) conducted an internal audit of strategic and business planning. The objective of this audit was to provide reasonable assurance that internal priority setting and planning processes and information are effective and adequate to support operations and delivery on the Agency's strategic outcome and expected results.

Strategic and business planning is an important function in every organization to better manage resources and strengthen accountability. As the lead agency for development assistance, it is vital that CIDA demonstrate value for money expended abroad to support Canada's foreign policy. As part of this audit, we examined the process of setting strategic (3 year) and Agency (annual) priorities, as well as the integration of CIDA's Program Activity Architecture and Performance Measurement Framework in the Report on Plans and Priorities and the branch Integrated Business Plans. We recognize that CIDA's planning regime extends beyond strategic and business planning. For example, the Agency undertakes significant program as well as project planning, that were not included in the scope of this engagement, but that will be examined as part of our internal audit on results-based management.

CIDA's strategic and business planning processes, including internal priority setting, are led by two branches within the Agency—the Strategic Policy and Performance Branch and the Chief Financial Officer Branch—with limited formal coordination among them.

There is strong leadership and engagement in the development of CIDA's five strategic and twelve annual Agency priorities. However, the timing of the establishment of Agency priorities at the beginning of the fiscal year is not optimal since the Integrated Business Plans and the Report on Plans and Priorities have already been developed for the corresponding fiscal year.

The approved Program Activity Architecture and Performance Measurement Framework drive the development of the Report on Plans and Priorities. In contrast, they were not the foundation for the 2011-12 branch Integrated Business Plans. Furthermore, the strategic and Agency priorities are not aligned to the Program Activity Architecture and expected results. It was noted, however, that there is a move to begin to align 2012-13 branch Integrated Business Plans with the Agency's approved Program Activity Architecture.

With respect to branch Integrated Business Plans, the Chief Financial Officer Branch plays a challenge function and provides support to other branches through standardized templates, guidance and integration meetings. The 2011-12 Integrated Business Plans were approved by their relevant branch heads. However, subsequent approval of branch budgets by Management Board is not tied to the Integrated Business Plans to ensure that branches are held to account for results achieved with the resources approved.

Audit Conclusion

The audit noted that many of the key elements to support sound strategic and business planning exist. However, further strengthening is required to ensure internal priority setting and planning processes and information are effective and adequate to support operations and delivery on the Agency's strategic outcome and expected results.

Statement of Assurance

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the conclusion provided and contained in this report. The audit conclusion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed upon with management. The conclusion is applicable only to the entity examined. The evidence was gathered in compliance with Treasury Board policy, directives and standards on internal audit and conforms with the International Standards for Professional Practice of Internal Auditing of the Institute of Internal Auditors. The evidence gathered was sufficient to provide senior management with proof of the conclusion derived from the internal audit.

Chief Audit Executive

1.0 Context

The internal audit of strategic and business planning was part of the 2011-12 Risk-Based Audit Plan recommended by the Audit Committee and approved by the President on March 25, 2011. This internal audit flowed from the Preliminary Survey of Business and Management Infrastructure and is one of a series of resulting cascading internal audits.  The decision to parcel out the audits flowing from the preliminary survey into a series of smaller audits was undertaken given the unmanageable size and scope of a single audit covering the full range of areas to be examined.

We recognize that CIDA's planning regime extends beyond strategic and business planning. For example, the Agency undertakes significant program planning as well as project planning. As work from our preliminary survey did not highlight significant risks or concerns with these areas, they were not included in the scope of this engagement. However, elements of program and project planning will be examined as part of our internal audit on results-based management.

While each of the cascading audits stands alone and addresses particular areas of risk and significance, it is expected that management's action plan included in this report may need to evolve as a more fulsome spectrum of CIDA's business and management infrastructure processes and practices are examined over the next two years.

2.0 Background

Planning is the primary mechanism to ensure activities are aligned to resources to deliver on the Agency's mandate, strategic outcome, expected results and priorities. 

According to the Financial Management Governance Policy, an organization should establish a sound financial management governance structure that fosters prudent stewardship of public resources in the delivery of the mandate of the organization, consistent with the Management, Resources, and Results Structure and the Management Accountability Framework. The Agency has an approved Program Activity Architecture (PAA) and Performance Measurement Framework (PMF).

As noted in the Treasury Board's Policy on Management, Resources and Results Structures, the PAA is intended to reflect how the Agency allocates and manages its resources to achieve its intended results. CIDA's PAA outlines six program activities as follows:

• Global engagement and strategic policy;
• Fragile countries and crisis-affected communities;
• Low-income countries;
• Middle-income countries;
• Canadian engagement; and
• Internal services.

The PMF is intended to provide a systematic approach for collecting, analyzing, utilizing and reporting on the performance of the Agency's program activities outlined in the PAA.

The key elements of CIDA's strategic and business planning process are led by two branches—the Strategic Policy and Performance Branch (SPPB) and the Chief Financial Officer Branch (CFOB).

The Agency's strategic planning process also encompasses the development of three-year strategic priorities and annual Agency priorities. These priorities are outlined in a Strategic Planning Framework that is updated annually.

At the corporate level, the Agency's strategic plan is the Report on Plans and Priorities (RPP). The RPP is submitted to Parliament in support of the financial appropriations being requested.

Each year, the Agency undertakes a business planning process whereby branches develop an integrated business plan (IBP) which includes many components such as budgets, planned activities, human resource strategies, risk, information technology etc. This process commences in the fall with draft IBPs approved by branch heads in December.

3.0 Audit Objective, Scope, Approach and Criteria

3.1 Objective

To provide reasonable assurance that internal priority setting and planning processes and information are effective and adequate to support operations and delivery on the Agency's strategic outcome and expected results.

3.2 Scope

The scope for this audit of strategic and business planning was defined based on the results of the Preliminary Survey of Business and Management Infrastructure.  As previously noted, the scope of this engagement was narrowed taking into account the full range of cascading audits will provide more fulsome assurance on the Agency's business and management infrastructure. Included in the scope were the following:

• CIDA's 2011-12 RPP;
• 2011-12 branch IBPs  and the associated planning process;
• Linkage of the Agency's approved Strategic Planning Framework, PAA, PMF and Corporate Risk Profile to the 2011-12 RPP and IBPs;
• Internal priority setting^{Footnote 1} and its integration into strategic and business planning; and
• The launch of the 2012-13 IBP process.

While the Agency has a number of additional program and project planning tools (i.e. Country Development Program Frameworks, Country Strategies, Institutional Strategies), these were not included in the scope of this audit. They will be examined as part of the internal audit of results-based management.

3.3 Approach and Methodology

The internal audit of strategic and business planning was conducted in accordance with Treasury Board policy, directives and standards, and conforms to the International Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors. The evidence gathered was sufficient to provide senior management with proof of the conclusions derived from the internal audit.

The audit methodology included, but was not limited to the following:

• Reviewing relevant Treasury Board and internal policies, guidelines and instructions;
• Reviewing the 2010 Strategic Planning Framework, PAA, PMF, Corporate Risk Profile, RPP as well as IBPs and Corporate IBP (focus was on testing 2011-12);
• Interviews with SPPB, CFOB, Corporate Secretariat, branch planners (Geographic Programs, Afghanistan and Pakistan Task Force, Partnership with Canadians, Multilateral and Global Programs) and corporate enablers (Human Resources, Information Technology, Integrated Risk Management unit within SPPB, Business Modernization Initiative);
• Gathering of information and analysis; and
• Validating of key findings with SPPB and CFOB.

3.4 Audit Criteria

The audit criteria are the benchmarks used to assess the adequacy and effectiveness of strategic and business planning at the Agency. The criteria were developed following the completion of the Preliminary Survey of CIDA's Business and Management Infrastructure carried out by the Office of the Chief Audit Executive in 2010-11. The audit criteria were discussed and agreed upon with the auditees and are presented in Appendix A.

4.0 Main Audit Findings and Recommendations

4.1 Results-Based Management

As outlined in the Policy on Management, Resources and Results Structures, the PAA and PMF are the intended foundation for both external and internal planning. They are expected to serve as the basis for allocating resources internally to achieve expected results.

Consistent with the requirements of the above policy, CIDA's 2011-12 RPP is based on its approved PAA and PMF. The RPP outlines the expected results and associated resource requirements for each of the Agency's six program activities. The 2011-12 RPP was developed in the fall of 2010 and approved by the President and the Minister. It was submitted to Treasury Board for tabling in Parliament in support of the Estimates process.

In addition to the development of the RPP as the Agency's strategic plan, the Agency undertakes business planning at the branch level. This includes an integrated business plan prepared by each of the Agency's 14 branches. Planning documents such as Country Development Program Frameworks, Country Strategies and Institutional Strategies are also developed by program branches.

In reviewing the 2011-12 branch IBPs, we found that branch IBPs are aligned to the Agency's annual priorities with only a cursory linkage to the PAA. Consequently, branch IBPs do not clearly demonstrate the planned delivery of expected results for the resources approved, consistent with the Agency's RPP. By not aligning branch plans to the Agency's PAA and expected results, the 2011-12 IBPs were not structured to readily support the monitoring of expected results and any associated reallocation decisions.

Recognizing that the IBP process is relatively new at CIDA and is continuously being improved, we examined the launch of the 2012-13 process.  We noted that some progress is being made to strengthen the alignment of branch plans to the Agency's PAA by providing financial resources by program activity and by requiring commitment and output information by relevant program/sub activity.

Recommendation 1

The Agency should continue to promote the evolution of Branch Integrated Business Plans by further strengthening their alignment to the Agency's Program Activity Architecture and the associated expected results and priorities.

4.2 Leadership, Guidance and Accountability

In 2008, the President, working with Management Board^{Footnote 2}, developed the strategic priorities for 2009-10 to 2011-12. The President also led a process to develop Agency priorities outlining the activities to be undertaken to deliver on the strategic priorities in 2009-10 to 2011-12. Strategic and Agency priorities are consolidated in the CIDA's Strategic Planning Framework. This framework is updated each year and posted on the Agency's intranet site.

The President's strong leadership in strategic planning extends beyond establishing internal priorities. She also leads the review of performance against Agency priorities in order to monitor progress.

CFOB has developed instructions and a series of standardized templates, which the branches use to prepare their IBPs. These templates included information on the commitments, activities and initiatives relevant to the branch. Also included is information and insight that may affect corporate enablers (i.e. human resources, information technology, risk, and decentralization).

CFOB hosts meetings with branch planners to review IBP requirements and provide any guidance as requested. Integration meetings are convened by CFOB to facilitate corporate enablers to provide feedback on branch IBPs. Some corporate enablers noted that branch IBPs, as designed and completed in 2011-12, do not provide them with sufficient useful information. For example, more detailed information about staffing (i.e. vacancies, classifications, and language levels) would be helpful to the Human Resources Branch if it was provided in each branch IBP. CFOB's annual review of the IBP process is a key mechanism to continually strengthen the branch business planning templates and process.

The Agency's RPP is reviewed by CIDA's Policy and Performance Committee and approved by the President. It is then approved by the Minister and tabled in the House of Commons as part of the Estimates process. The RPP is used to support Parliament in allocating resources to the Agency. It is a formal accountability document against which the Agency is required to report performance through the annual Departmental Performance Report (DPR).

Branch IBPs are approved by branch heads and submitted to CFOB. Any request for additional funds greater than the budgeted amount is included in the IBP and feeds into the budgeting process. These requests, along with key issues identified across the branches, are presented to the Resource Planning and Allocation Committee by CFOB. While this committee recommends the approval of budgets to Management Board, there is no formal approval of the branch IBPs linking the approval of branch budgets to planned activities and expected results for the utilization of these resources.

The Agency developed a 2011-12 overarching Corporate IBP that was signed by the President in October 2011, seven months into the fiscal year. The level of detail reflected in this plan does not provide branch level performance commitments or branch specific budgeting information that are used to holding branches to account. The absence of a branch-level accountability document linking the approval of branch budgets to expected results and priority commitments is in contrast to the RPP that is a clear accountability document to Parliament linking approved resources to expected results.

Utilizing branch IBPs as formal internal accountability documents will strengthen the linkage of resources to results at the branch level and enhance the value and utility of these documents commensurate with the time and resources required to develop them.

Recommendation 2

Branch Integrated Business Plans should be accountability documents that tie the approval of branch budgets to delivery against expected results and priorities.

4.3 Process

4.3.1 Coordination

As previously noted, CIDA's strategic and business planning process is led by two units within the Agency:

• The Strategic Planning unit within SPPB is responsible for managing the Agency's PAA and PMF, the RPP and the DPR. While this unit is not engaged in the internal priority setting process, it designed and updates the Strategic Planning Framework to reflect the final strategic and Agency priorities approved by the President; and
• The Business Planning unit within CFOB is responsible for managing the IBP process.

The roles and responsibilities for each of CIDA's corporate units are clearly defined; however, the diffusion of strategic and business planning across two units is not optimal in terms of efficiency or effectiveness. Each unit has developed separate processes and approaches for strategic and business planning.

With respect to coordination, there has been some collaboration between CFOB and SPPB in the past, as evidenced by a joint RPP/IBP call letter in October 2010. However, this coordination is ad hoc.

Recommendation 3

The coordination and collaboration between SPPB and CFOB should be strengthened to support effective and efficient strategic and business planning throughout the Agency.

4.3.2 Internal Priority Setting

Clear direction or priorities, in line with expected results, should be established at the start of the planning process.

Each year, between January and March, the Corporate Secretariat convenes a series of Management Board meetings to establish Agency priorities for the upcoming fiscal year.   These five multi-year strategic priorities and 12 in-year Agency priorities are the focus of CIDA's Strategic Planning Framework that is embraced by management. With 17 internally developed priorities, it is challenging to readily appreciate and distinguish those that are crucial to aiding the Agency in delivering on its mandate and expected results from those that are less so. In addition, there is no clear linkage or crosswalk between these 17 priorities and the Agency's PAA.

The RPP and branch IBPs are developed in the October to December timeframe, prior to the commencement of the development of the annual Agency priorities. While the leadership and engagement of the Management Board in establishing internal priorities is invaluable, the timing is problematic. By establishing Agency priorities following the development of the plans for the same time horizon, there is no opportunity to ensure that external plans (i.e. RPP) and internal plans (i.e. IBPs) are focused on the President-approved priorities and expected results.

Recommendation 4

CIDA's internal priority setting process should:

• include a review of the number of internal priorities in order to focus on key ones; and
• be timed to ensure internally developed priorities are aligned with the Program Activity Architecture and integrated into the Report on Plans and Priorities and Integrated Business Plans.

Appendix A: Audit Criteria

1.0 The strategic planning process is appropriate and aligned to the Agency's Program Activity Architecture and Government of Canada planning cycle.

• The Agency's approved PAA is the foundation for the development of the RPP   and internal planning (i.e. IBPs) and resource allocation.
• PAA results commitments outlined in the Agency's PMF are integrated into the RPP and IBPs.
• Internal strategic and Agency priorities are established as part of a robust strategic planning process and are integrated into the RPP and branch IBPs.
• The strategic and IBP planning processes have clear timelines aligned with the Government of Canada planning cycle.
• Roles, responsibilities and accountabilities with respect to internal priority setting and strategic and business planning processes are clearly defined and communicated.

2.0 IBPs are relevant and useful to support effective resource allocation and active monitoring for results based management and to support informed decision-making

• Branch IBPs describe how plans and strategies help respond to risk as outlined in the approved Corporate Risk Profile, as appropriate.
• Initial budget allocation and subsequent reallocations consider priorities outlined in IBPs.
• IBPs are useful to support in-year performance, financial and risk monitoring and reporting.

Appendix B: List of Recommendations and Management Action Plan