Audit of the Management Control Framework for Conflict of Interest

Report Summary

Introduction

The audit of the Health Canada Management Control Framework for Conflict of Interest was undertaken in accordance with the 2003-04 Risk-Based Audit Plan as approved by Health Canada's Departmental Audit and Evaluation Committee.

The Values and Ethics Code for the Public Service (the Code) was introduced in September 2003, and supercedes the 1986 Conflict of Interest and Post-Employment Code which was revised in 1992. The Code reinforces rules of conduct respecting conflict of interest, to minimize the possibility of conflicts arising between the private interests and the public service duties of public servants. Within Health Canada (HC), responsibility for the administration of conflict of interest and post-employment measures (COI-PEM) is given to the Human Resources Services Directorate (HRSD) of the Corporate Services Branch. Chapter 2 of the new Code highlights conflict of interest measures, and Chapter 3 discusses post-employment measures.

The scope of the audit work encompassed the application of the sections of the Code related to conflict of interest and post-employment measures within Health Canada. The audit engagement commenced in October 2003 and the fieldwork was completed in March 2004. All audit work was undertaken in the National Capital Region. Regional employees were included in the survey but regional offices were not visited by the audit team.

The objectives of this audit were to independently review, assess and report on:

• managers' and employees' degree of awareness and sensitivity to the Conflict of Interest and Post-Employment Measures sections of the Code;
• the Management Control Framework for application of the Conflict of Interest and Post-Employment Code for the Public Service; and
• the methods in place to monitor and report on the departmental application of the Conflict of Interest and Post-Employment Measures sections of the Code.

Key Findings

Conflict of interest is clearly a matter of significance for all managers and employees of the Department. The complex mandate and mission of Health Canada involves the establishment of policies, regulations and partnerships that ultimately have a bearing on the health of all Canadians - an issue currently very close to the heart of the people of Canada. Ensuring the public's trust represents a strategic objective for departmental management and, consequently, is a potentially high risk area.

Health Canada has signalled that it sees values and ethics as a cornerstone of public management and service to Canadians and has acted to promulgate the Values and Ethics Code for the Public Service. In assigning responsibility to HRSD for administering the Code with reference to COI-PEM, the Department has reinforced the importance of its human resources services function as the conduit for managing conduct regarding conflict of interest. It is within this context that conflict of interest administration is positioned: a small, one-person, function serving a large and diverse departmental population.

As a result of the careful collection, analysis and examination of information pertaining to the objectives of this assignment, the audit identified the following four main findings:

First, the high degree of general sensitivity to COI issues which the auditors identified is seen as very positive. Nevertheless the Department needs to further promote education and awareness at the operational level to encourage employees and managers to maintain their understanding of the requirements of the Code.

Under the Code, each employee is responsible for taking such action as is necessary to prevent real, potential or apparent conflicts of interest, and it is the Department's responsibility to ensure that employees and managers are aware of, and understand, the Code. From interviews and survey responses, the audit found that there is, indeed, a high general awareness of COI requirements, processes, and consequences in Health Canada, particularly at the executive (EX) level. The survey responses also indicated a tendency for employees to avoid formally raising COI issues, whenever possible. Furthermore, there appears to be a general lack of understanding of the roles and responsibilities of the Labour Relations and Conflict Resolution Unit (LRCRU), compared to those of the Centre for Workplace Ethics and the Internal Disclosure Office. Employee awareness and understanding of the scope of post-employment measures also appears to require strengthening. Remedial measures to address the issue are relatively minor, but would greatly enhance the Department's ability to minimize its risk.

Second, improvements are needed in the supporting processes and mechanisms of the management control framework for COI-PEM in order to allow for more effective risk recognition and mitigation.

Notwithstanding the Department's recognition of the strategic significance of Conflict of Interest, and the associated risks, the management control framework in place for Conflict of Interest lacks the formal processes to plan, organize, control, direct and communicate the activities related to the administration of COI-PEM, as well as the measures and metrics that indicate management's continual improvement of the efficiency and effectiveness of the operations both of which are necessary to ensure the departmental process meets Treasury Board of Canada Secretariat (TBS) requirements. The capacity to address the Department's COI risk is somewhat limited by resource availability. There is only one full-time individual - the COI Advisor - dedicated to COI-PEM in the Department as a specialist resource. The function does not benefit from the presence of a formal methodology or mechanism to govern COI-PEM administration. The absence of key elements of a robust management control framework reduce the Department's capability to recognize and mitigate strategic risks associated with conflicts between the public trust and private interests of employees.

Third, current sources of performance information are limited by the lack of a formal method of data compilation. In addition, certain key elements such as performance standards and reporting criteria have not yet been established. At present, TBS has not specified the exact time, form and content for COI reporting requirements, other than desirable high-level indicators. The department needs to develop a mechanism to enable the preparation of reporting information for TBS /Central Agency reporting.

For senior managers within Health Canada to receive on-going assurance that the department has adequately applied the Code in its operations, it is necessary to have management practices in place to measure and report performance through reliable information systems for decision-making and accountability. The lack of adequate performance, or decision-support information is largely attributed to addressing COI-PEM priorities with severely limited resources and a lack of impetus pending initiation of central agency reporting requirements. Consequently, without reliable and timely information, management may be unable to gauge the adequacy of the Department's application of the policy requirements and, in turn, may be compromised in its decision-making and accountability for COI-PEM in the Department.

Finally, the auditors were told that the extensive investigative work done by HRSD in the administration of COI-PEM in the past couple of years has resulted in remedial actions taken to bring a number of difficult cases to successful resolution. The HRSD is generally well regarded by HC Branches for its knowledge of COI requirements. The auditors are satisfied that the confidentiality of employee information is protected in an appropriate manner within the responsible HRSD administrative unit and concluded that the Department complies with the TBS requirements on COI and PEM.

Overall, the audit acknowledges the challenges of implementing a compliance regime for conflict of interest administration within a principles-based culture promoting values and ethics. Nevertheless, an increased emphasis on formal processes, mechanisms and controls, as well as positive awareness initiatives, would be beneficial in mitigating the risk of diminished public confidence in the integrity of departmental processes.

The audit team wishes to thank all those who generously contributed their time and effort in support of this assignment.

Recommendations

It is recommended that:

1. The Assistant Deputy Minister, Corporate Services Branch, develop and implement:
   1. a more formal awareness training and education program with respect to conflict of interest and post-employment measures (COI-PEM), to include clearly stated roles and responsibilities for COI-PEM administration; and
   2. enhanced measures to facilitate post-employment obligations, including:
      • a departmental requirement for exit interviews for the specified group (EX equivalent and 2 levels down) including a standardized declaration/ non-disclosure agreement, and periodic monitoring of the volume of such agreements; and
      • for all exiting employees, an additional element be included in the Departure Clearance form to ask
      • if real, apparent or potential conflict may arise in the assumption of their duties with their new employer, should they be immediately accepting new employment; and
      • if they were offered an exit interview by their supervisor at Health Canada.
2. The Assistant Deputy Minister, Corporate Services Branch direct:
   1. the development and implementation of formal processes to plan, organize, control, direct and communicate the activities related to the administration of Conflict of Interest and Post-Employment Measures (COI-PEM) in Health Canada, including:
      • the introduction of administrative tools, such as a departmental COI-PEM Policy and Procedures Manual/ Guide;
      • a centralized repository for all COI-PEM reference material; and
      • a COI-PEM business case addressing potential resource scenarios.
   2. development and implementation of metrics for the COI-PEM business process to permit assessment of potential improvements in effectiveness and efficiency of operations.
3. The Assistant Deputy Minister, Corporate Services Branch ensure that the Human Resources Services Directorate:
   1. develop formal mechanisms, including the establishment of data elements, standards and criteria, to proactively address departmental and central agency requirements for COI-PEM performance information; and
   2. establish basic performance reporting tools - such as a Lotus 1-2-3 spreadsheet or MS-Access database - so that information elements can be captured by administrative support staff and analysed and reported on by supervisory staff.