Audit of NRCAN’s Strategic and Operational Planning Process

Presented to the Departmental Audit Committee (DAC)
April 10, 2019

Table of Contents

• Executive Summary
  • Introduction
  • Strengths
  • Areas for Improvement
  • Internal Audit Conclusion and Opinion
  • Statement of Conformance
  • Management Response and Action Plan
• Introduction
  • Audit Purpose and Objectives
  • Audit Considerations
  • Scope
  • Approach and Methodology
  • Criteria
• Findings and Recommendations
  • Strategic and Operational Planning Processes
  • Governance Supporting Strategic and Operational Planning
  • Management Information
• APPENDIX A – Key Governance Committees Expected to Provide Strategic Oversight
• APPENDIX B – Audit Criteria

Executive summary

Introduction

The Department of Natural Resources Canada (“NRCAN” or the “Department”) has a mandate that includes the Energy, Forestry, Lands and Minerals and Innovation and Energy Technology Sectors, and works toward advancing clean energy technology, public safety, economic development as well as expanding engagement with Indigenous peoples. The Department employs approximately 3,900 FTEs in offices and laboratories across the country and manages an annual budget of approximately $1.04 billion (excluding statutory payments). As a science-based department, NRCAN devotes nearly half of its budget to fund science-based activities and approximately 45% of its workforce are scientists and technologists. The department works with a wide range of partners including provincial/territorial governments, non-governmental organizations, industry, and academia in addressing complex, multi-disciplinary issues, challenges and opportunities.

Effectively responding to the challenges and opportunities presented by these, and other forces, presents a management challenge for an organization as large and complex as NRCAN. Establishing expected results, setting strategic directions and organizational priorities, aligning organization resources to deliver upon priorities, and monitoring progress are key management processes for ensuring that NRCAN effectively delivers upon its expected results and in turn, delivers on its mandate commitments. To support this management focus and a clearer alignment between results, activities and resources for departments, the Treasury Board of Canada Secretariat (TBS) introduced a new federal policy and directive on results in 2016.

The Policy on Results sets forth federal accountability, performance measurement requirements and the importance of results in management, decision-making and public reporting. The broader objective of this Policy is to ensure that government departments are focused on the achievement of results through the implementation of a Departmental Results Framework (DRF) and Program Inventories, with indicators for performance measurement and monitoring. It intends to shift the way departments report on and communicate their progress (activities, outputs and outcomes) through improved planning and reporting measures. Although TBS does not have an overarching policy requirement relating to strategic and operational planning processes, there are certain Acts and Frameworks referenced within the Policy on Results (e.g. Management Accountability Framework) which establish accountabilities for the performance of duties and effective planning processes as primary mechanisms for achieving organizational excellence.

The Policy on Results requires federal government departments to align their activities with their mandate and priorities, and to track their performance to ensure that results are achieved in an efficient manner. Implementation of this policy offers Departments’ the opportunity to create linkages between financial spending and results achieved through the implementation of a Departmental Results Framework (DRF) and Performance Information Profiles (PIP). TBS requires reporting to be provided at the program-level of the Program Inventory on both actual and planned financial expenditures and human resources.

At NRCAN, corporate strategic and operational planning activities are coordinated by two Sectors, the Strategic Policy and Results Sector (SPRS) and Corporate Management and Services Sector (CMSS) who work with all sectors of the organization to perform corporate planning and develop corporate planning deliverables (e.g. Departmental Results Framework). The role of SPRS includes coordination of corporate planning and reporting and risk management activities for the Department through, for example coordination of NRCan input to the Federal budget process, and the delivery of the Departmental Plan (DP), the Departmental Results Report, and Corporate Risk Profile (CRP). SPRS gathers corporate information requirements through its interaction and coordination with the planning and reporting divisions within the Sectors. For 2017-18 SPRS^{Footnote 1} had approximately 323 FTEs and salary expenditures of $29.3M, of which 94 FTEs and $10.4M salary expenditures were associated with functions with a department-wide focus. CMSS coordinates corporate resource planning activities, and covers internal service functions in areas including IM/IT, finance, real property and human resources, in collaboration with Sectors. For 2017-18, CMSS had approximately 610 FTEs and salary expenditures of $46.6M.

The objective of the audit was to assess the effectiveness of the Department’s strategic and operational planning governance structures, processes and information management systems in supporting the achievement of results.

Given the significance of strategic and operational planning processes for the Department, an audit of this area was included in the 2018-2021 Risk-Based Audit Plan.

Strengths

Various governance groups have been established with mandates to support departmental priority setting and planning.  Further, roles and responsibilities related to the development and monitoring of strategic/corporate plans (e.g. Departmental Plan) and operational plans have generally been established.

The Department has commenced implementation of its Departmental Results Framework, which establishes a foundation to support strategic and operational planning efforts, however, this implementation is at an early stage of maturity.

Senior Management has access to regular financial, human resource and operational performance and status information for some of its strategic priorities (e.g. federal budget commitments, ministerial mandate letter commitments).

Areas for improvement

While various governance groups have been established, the way in which these oversight groups are integrated in the consideration and establishment of long-term departmental directions, departmental (external and internal) priority setting, and strategic risk mitigation from their various enabling perspectives (e.g. policy, science, human resources) is not clearly defined.   Further, the Department has not established a clearly defined or long-term priority setting process.

The Department has commenced implementation of its Departmental Results Framework, including definition of expected results and outcomes, however, how this framework will inform future strategic and operational decision-making and planning processes within the department is not yet defined.

In support of current planning processes, there are opportunities to improve the alignment, integration and relevance of current corporate planning and resource planning processes in order to reduce duplication of effort on the part of CMSS, SPRS and sector planning representatives. While the Department has implemented some processes to align its financial and human resources to its strategic priorities, however, resource allocation processes for the most part continue to be heavily sector focused (i.e. resource allocation through sector-based budgets).

While the Department has identified the need to integrate internal service planning (e.g. human resources) into its strategic and operational planning processes, this remains a work in progress.

Internal Audit conclusion and opinion

In my opinion, while the department maintains a series of discrete planning processes and deliverables at the corporate and sectoral level, the department does not currently have effective strategic and operational planning processes that would enable definition of a desired future state for the department, and establishment of strategic and operational plans and supporting processes towards realizing the future state. Accordingly, there are opportunities to improve the department’s governance structure, processes and information management systems in supporting the achievement of results. Successfully undertaking these improvements will require strong commitment from NRCAN senior management.

Statement of conformance

In my professional judgement as Chief Audit and Evaluation Executive, the audit conforms with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada’s Policy on Internal Audit, as supported by the results of the Quality Assurance and Improvement Program.

Christian Asselin, CPA, CA, CMA, CFE
Chief Audit and Evaluation Executive
April 10, 2019

Acknowledgements

The audit team would like to thank those individuals who contributed to this project and, particularly employees who provided insights and comments as part of this audit.

Introduction

The Department of Natural Resources Canada (“NRCAN” or the “Department”) is a large federal organization with a mandate that includes the Energy, Forestry, Lands and Minerals and Innovation and Energy Technology Sectors, and works toward advancing clean energy technology, public safety, economic development as well as expanding engagement with Indigenous peoples. The Department employs approximately 3,900 FTEs in offices and laboratories across the country and manages an annual budget of approximately $1.04 billion (excluding statutory payments). As a science-based department, NRCAN devotes nearly half of its budget to fund science-based activities and approximately 45% of its workforce are scientists and technologists. The department works with a wide range of partners including provincial/territorial governments, non-governmental organizations, industry, and academia in addressing complex, multi-disciplinary issues, challenges and opportunities.

Effectively responding to the challenges and opportunities presented by these, and other forces, presents a management challenge for an organization as large and complex as NRCAN. Establishing expected results, setting strategic directions and organizational priorities, aligning organization resources to deliver upon priorities, and monitoring progress are key management processes for ensuring that NRCAN effectively delivers upon its expected results and in turn, delivers on its mandate commitments. To support this management focus and a clearer alignment between results, activities and resources for departments, the Treasury Board of Canada Secretariat (TBS) introduced a new federal policy and directive on results in 2016.

The Policy on Results sets forth federal accountability, performance measurement requirements and the importance of results in management, decision-making and public reporting. The broader objective of this Policy is to ensure that government departments are focused on the achievement of results through the implementation of a Departmental Results Framework (DRF) and Program Inventories, with indicators for performance measurement and monitoring. It intends to shift the way departments report on and communicate their progress (activities, outputs and outcomes) through improved planning and reporting measures. Although TBS does not have an overarching policy requirement relating to strategic and operational planning processes, there are certain Acts and Frameworks referenced within the Policy on Results (e.g. Management Accountability Framework) which establish accountabilities for the performance of duties and effective planning processes as primary mechanisms for achieving organizational excellence.

The Policy on Results requires federal government departments to align their activities with their mandate and priorities, and to track their performance to ensure that results are achieved in an efficient manner. Implementation of this policy offers Departments’ the opportunity to create linkages between financial spending and results achieved through the implementation of a Departmental Results Framework (DRF) and Performance Information Profiles (PIP). TBS requires reporting to be provided at the program-level of the Program Inventory on both actual and planned financial expenditures and human resources. 

At NRCAN, corporate strategic and operational planning activities are coordinated by two Sectors, the Strategic Policy and Results Sector (SPRS) and Corporate Management and Services Sector (CMSS) who work with all sectors of the organization to perform corporate planning and develop corporate planning deliverables (e.g. Departmental Results Framework).  The role of SPRS includes coordination of corporate planning and reporting and risk management activities for the Department through, for example coordination of NRCan input to the Federal budget process, and the delivery of the Departmental Plan (DP), the Departmental Results Report, and Corporate Risk Profile (CRP).  SPRS gathers corporate information requirements through its interaction and coordination with the planning and reporting divisions within the Sectors. For 2017-18 SPRS^{Footnote 2} had approximately 323 FTEs and salary expenditures of $29.3M, of which 94 FTEs and $10.4M salary expenditures were associated with functions with a department-wide focus. CMSS coordinates corporate resource planning activities, and covers internal service functions in areas including IM/IT, finance, real property and human resources, in collaboration with Sectors. For 2017-18, CMSS had approximately 610 FTEs and salary expenditures of $46.6M.

Given the significance of strategic and operational planning processes for the Department, an audit of this area was included in the 2018-2021 Risk-Based Audit Plan, approved by the Deputy Minister on April 12 2018.

Audit Purpose and Objectives

The objective of the audit was to assess the effectiveness of the Department’s strategic and operational planning governance structures, processes and information management systems in supporting the achievement of results. 

Specifically, the audit assessed whether:

• NRCAN has established governance structures to effectively support its strategic and operational planning processes;
• NRCAN’s strategic and operational planning processes effectively support the achievement of results; and
• NRCAN’s information management systems effectively support strategic and operational planning information needs and decision-making.

Audit Considerations

A risk-based approach was used in establishing the objectives, scope, and approach for this audit engagement. The following areas were identified as having significance in the achievement of the Department’s strategic and operational planning processes, and were therefore assessed as areas of increased risk for this audit:

The effectiveness of the governance structures in place involved in strategic and operational planning processes, including the establishment, clarity and communication of their roles, responsibilities and accountabilities.

The processes in place to establish, define, and align strategic priorities and operational plans with the appropriate resources (i.e. financial, HR, real property and IM/IT) in support of an integrated approach.

The information systems in place to support timely and relevant information on strategic and operational planning activities to support decision-making.

Scope

The scope of the audit mainly focused on governance structures, corporately led processes and information systems supporting the development and monitoring of strategic and integrated operational planning processes. The audit focused primarily on the period of April 2016 to December 2018, and while not including a detailed examination of each sector’s planning activities, it considered business planning processes conducted within departmental sectors.

Considerations were also be given to the results of previous advisory and audit projects on related topics.

Approach and Methodology

The approach and methodology followed the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada’s Policy on Internal Audit. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that audit objectives are achieved. The audit included tests considered necessary to provide such assurance. Internal auditors performed the audit with independence and objectivity as defined by the International Standards for the Professional Practice of Internal Auditing.

The audit included the following key tasks:

• Interviews with key personnel and committee representatives;
• Review of select TBS and internal policies, guidelines, and review of NRCAN planning process documentation and planning process outputs; and
• Assessment of the integration of key corporate service functions process (human resources, accommodation, IM/IT coordination, among others) into the overall strategic and operational planning.

The conduct phase of this audit was substantially completed in December 2018.

Criteria

The audit criteria were developed based on the key controls set out in the Treasury Board of Canada Secretariat’s (TBS) Core Management Controls as well as the TBS Policy on Results. Please refer to Appendix B for the detailed audit criteria. The criteria guided the audit fieldwork and formed the basis for the overall audit conclusion.

Findings and Recommendations

Strategic and Operational Planning Processes

Summary Finding

Overall, the audit found that a clearly defined or long-term priority setting process has not been established within NRCAN. Further the audit found that:

• The Department has commenced implementation of its Departmental Results Framework, including definition of expected results and outcomes, however, the manner by which this framework will inform, and/or be used to support future strategic and operational decision-making and planning processes within the department is not yet apparent;
• The Department does not have an effective process to ensure that strategic priorities are supported by consistent operational plans;
• While the Department has identified the need to integrate internal service planning into its strategic and operational planning processes, this remains a work in progress;
• The Department has implemented some processes to align its financial and human resources to its strategic priorities, however, resource allocation processes continue to be heavily sector focused.

Supporting Observations

Effective strategic and operational planning processes are dependent on a foundation of effective priority setting, clearly defined outcomes that are linked to strategic objectives and integrated operational planning including responsive resource allocation processes. The audit sought to determine whether the department has effective processes in place to establish strategic priorities; define, monitor and report upon expected outcomes; ensure operational plans are aligned with strategic priorities; align financial and human resources with plans; and integrate internal service considerations into its strategic and operational planning processes.

There are many different frameworks and methodologies used by organizations for strategic and operational planning. In a Government of Canada context, there is limited overarching policy guidance relating to strategic and operational planning beyond certain Acts and Frameworks referenced within the Policy on Results (e.g. Management Accountability Framework) which establish accountabilities for the performance of duties and effective planning processes as primary mechanisms for achieving organizational excellence.^{Footnote 3}

Given this latitude, the commitment to develop a strategic plan is a departmental decision and the senior management of the department must see value in the effort for it to succeed and provide effective and practical guidance to support decision making within the organization.

While there are no absolute requirements for a strategic planning process or resulting strategic plan, common elements include:

• Confirmation of the organization’s purpose/mandate;
• Analysis of the organization’s current external and internal environment;
• Establishment of a vision or future state aspired to by the organization (e.g. 3 to 5-year view);
• Establishment of strategic goals, objectives and strategies towards the future state;
• Translation of strategies into resourced operational plans;
• Ongoing measurement, monitoring of progress, and refinement.

In relation to these common attributes, the audit team received near unanimous feedback from departmental representatives that NRCAN currently does not maintain a strategic plan but instead maintains a collection of discrete planning processes and deliverables maintained at the corporate (e.g. Departmental Plan, Corporate Risk Profile) and sector level. Examples of sector/branch specific plans identified included an Integrated Business Plan (2015 – 2018) for the Innovation and Energy Technology Sector, an Integrated Business Plan (2016 – 2018) for the Surveyor General Branch, and a Research Plan (2016-2021) for Canmet Mining.

As an illustration of the current state, NRCAN’s intranet provides employees with the following information to enable their learning as to “how NRCAN is advancing its priorities to meet its mandate and core functions”. The content provided to employees includes outdated material such as:

• An Integrated Business Plan for the period 2013 – 2016 that provides a roadmap of how NRCAN is working to achieve its vision and how activities support departmental priorities
• A Corporate Risk Profile from 2013 that defines the key risk key risks and opportunities facing Natural Resources Canada (NRCAN), and how the mitigation strategies support sound organizational operations and the fulfillment of NRCAN’s Strategic Outcomes.
• A Science and Technology Strategy from 2010 that describes a series of S&T strategic objectives and actions amongst other information.

This employee-focused content also includes the 2018-19 Departmental Plan, which presents a one-year view of the Department’s priorities, planned results against its three core responsibilities, and a summary view of planned financial and human resources by core responsibility.

Collectively, these planning documents do not provide a coherent view of NRCAN’s strategic context; where NRCAN’s is heading in the medium to long term (e.g. 3 to 5 year horizon); what NRCAN’s external (e.g. natural resource sector) and internal (e.g. human resource) priorities are beyond the short term; what actions, timeframes and resources are required to make progress; and how the department will know if it is successful.

While there are questions as to the coherence of the Department’s planning documents, also acknowledged is the significant challenge faced by the department as it balances the complex planning required to respond to the priorities established in ministerial mandate commitments, federal budget commitments, Government of Canada horizontal initiative commitments, central agency requirements (e.g. MAF commitments), horizontal department initiatives, and sector specific initiatives, all while being responsive to issues that emerge on a day to day basis that require departmental management focus and departmental resources to address.

It is within this context that the following sections present observations related to specific elements of NRCAN’s current strategic and operational planning processes.

Priority Setting Processes

The audit found that the Department maintains a number of priority setting activities. Key to priority setting are the ministerial mandate letter commitments. Other priority setting activities identified included senior management weekly planning meetings, federal budget implementation planning, and the process for developing the Departmental Plan.

Based on analysis of the 2018-19 departmental planning activities that led to the development of the 2018-19 Departmental Plan, the audit team found that the strategic priority setting process in place for the department is not well defined in terms of how priorities are established, endorsed or approved, and communicated within the Department.

As illustration, in a November 2017 meeting of the Planning and Reporting Committee, a proposal was discussed to define strategic priorities in relation to the Departmental Results Framework and to present a menu of strategic priority options to the Executive Committee, as the governance body responsible for establishing the Department’s directions and priorities.

Sector planning DG representatives (members of PRC) were then asked to identify three to five strategic priorities to be provided to SPRS for consideration. SPRS representatives then conducted follow up discussions with sector DG’s based upon which SPRS established five proposed strategic priorities (and twenty-four key supporting elements including mandate letter commitments, federal budget commitments and other departmental priorities) for 2018-19:

Strategic Priority	Example Supporting Priorities/Activities
Clean, Technology, Science and Innovation	Clean Technology and Innovation; Investment in Innovative Natural Resources
Transition to Low-Carbon Economy	Canadian Energy Strategy; Pan-Canadian Framework on Clean Growth and Climate Change
Market Access and Competitiveness	North American Energy Integration; Impact Assessments
Renewing Relationship with Indigenous Peoples	Renewed Relationship with Indigenous Peoples; Artic, the North and Coasts
Greater Safety and Security for Canadians	Oceans Protection Plan, Pipeline and Offshore Safety

Multiple attempts were made to discuss proposed priorities at ExComm in November, 2017 however, this discussion was ultimately deferred. Instead these proposed priorities were presented at a January, 2018 special meeting of the Policy and Science Integration Committee. The five strategic priorities were refined and confirmed and the identified set of supporting priority activities was re-focused from twenty-four to sixteen.

Based on PSIC endorsement of these priorities, SPRS drafted the 2018-19 Departmental Plan which involved working with sectors to identify key activities and initiatives that were considered supportive of and aligned to the five strategic priorities and NRCAN’s core responsibilities.

While this priority setting exercise contributed to the development of the Departmental Plan and serves to highlight the importance of key files being worked on within the Department, interviews with departmental representatives confirmed that there is a lack of clarity in how these priorities are intended to inform broader and longer-term planning efforts within the department either within sectors, programs or those organizations responsible for horizontal service delivery within the department (e.g. IT, Real Property). Illustrative examples of this lack of clarity include: what are the resulting Department’s science priorities? (representing 50% of departmental resources); what are the resulting Department human resource priorities? (representing 3,900 FTEs); what are the resulting Department real property priorities? (representing 220 facilities nation-wide that house departmental employees and operations).

The audit team observed that the Department maintains a Corporate Risk Profile which includes identification of operational risks such as Information Technology and Cybersecurity (e.g. increasing complexity of IM/IT) and Enabling Program Delivery (e.g. aging real property and S&T equipment; attracting and retaining diverse talent) however, these risks have not been yet been translated into clear mitigation strategies that could provide guidance on the priority related questions raised by interviewees.

Expected Outcomes and Results related to Priorities

The Department corporate planning and reporting processes have been undergoing significant change over the past two years with the preparation for and implementation of the Departmental Results Framework in response to the Policy on Results. This initiative has consumed significant effort across the department as NRCAN has confirmed its core responsibilities:

Core Responsibility	Description
Natural Resource Science and Risk Mitigation	Lead foundational science and share expertise for managing Canada’s natural resources, reducing the impacts of climate change and mitigating risks from natural disasters and explosives
Innovative and Sustainable Natural Resources Development	Lead the transformation to a low-carbon economy by improving the environmental performance of Canada’s natural resource sectors through innovation and sustainable development and use.
Globally Competitive Natural Resources Sector	Advance and promote market access, inclusiveness and competitiveness for Canada’s natural resource sectors, in support of jobs and economic growth

For each core responsibility, the DRF includes the definition of three results statements to summarize what results the Department is trying to achieve. Each of these Departmental Results includes one to four Departmental Results Indicators, which are measurements to be used as the basis of assessing progress.

For each of NRCAN programs of the Program Inventory (thirty-three in all), a performance information profile has been developed which includes the definition of performance indicators tied to the expected “immediate”, “intermediate” and “ultimate” outcomes for the program. Each of these programs is aligned to a core responsibility.

Implementation of this framework remains a work in progress as the department is at an early stage in being able to produce and rely upon results information from the DRF. During 2018, SPRS engaged a third-party review of the performance information profiles and conducted its own assessment of performance information profiles to identify and communicate gaps and opportunities to program owners. One of the key opportunity areas identified related to concerns on the completeness of performance indicator definition within each program. As a continuing focus on generating complete performance information, SPRS is planning to conduct a “mid-year” 2018-19 review of program “actual” performance information.

While the implementation of the DRF has established a foundation to be potentially leveraged in future corporate and operational/program planning efforts, the department has not defined a path forward as to how this will happen. This includes defining how program leads should be using the performance information profile (PIP) in the management of their programs. Other considerations not yet addressed include definition of how the risk information generated through PIPs will be used to inform broader department risk planning and mitigation processes; whether program leads will be expected to develop operational/annual plans for their programs (e.g. key activities, milestones, etc.); or whether department resource allocation processes, including financial and human resource budgeting, will be tied to specific programs. These questions remain under consideration by SPRS and CMSS as this implementation proceeds.

Alignment of Operational Plans to Priorities

In relation to the strategic priorities of the Department (e.g. priorities endorsed for inclusion in the 2018-19 Departmental Plan), the department has not defined nor implemented a process to ensure that priority activities / initiatives are planned in a complete or consistent manner to enable ongoing monitoring of progress of these activities / initiatives and, by extension, progress against strategic priorities. Additionally, the department has not implemented a challenge function to drive consistency in operational planning. Key operational planning considerations would include, for example, clear establishment of responsibility for the priority, clear definition of activities, milestones and timing related to the priority activity/initiatives, and resourcing required.

Notwithstanding this observation, the department has established a monitoring and reporting process related to departmental commitments from Budget 2017 and 2018. These Budget commitments include some overlap with Departmental priorities (e.g. Pan-Canadian Framework on Clean Growth and Climate Change) with this senior management focused monthly reporting including, for each initiative, the identification of NRCAN sector responsibilities, key milestones, and the status of resources committed.

Internal Service Planning Integration

During the audit, SPRS was in process of drafting a summary view of the department’s Integrated Planning and Reporting Cycle (IPRC) and related planning and reporting outputs. This draft document, confirmed as being a work in progress, represented the most complete view of the department’s strategic and operational planning process available to the audit team.

The IPRC includes the timing and sequencing of key departmental corporate planning process elements such as: NRCAN Priority Setting and Risk Identification, and development of various planning documents including the Departmental Plan, the Corporate Risk Profile, and the Departmental Sustainable Development Strategy. Development of these planning components, identified as “strategic”, is led by SPRS.

This document also identifies the timing and sequencing for development of plans for enabling functions and internal services within NRCAN including:

• Financial/budgetary;
• Human Resources;
• Information Technology;
• Procurement;
• Departmental Security; and
• Investment Planning;

Development of these planning components, identified as “operational”, are led by CMSS.

While the IPRC presents an inventory of key departmental planning and reporting elements, it remains a work in progress as the department has not yet fully defined the processes underlying the various components of IPRC, nor defined expectations and processes for ensuring that departmental internal service planning processes (e.g. human resources planning, information technology planning) are appropriately informed by and support strategic and long-term corporate priorities. Interviews with departmental planning representatives consistently confirmed this gap.

This lack of definition of recognized long-term priorities and departmental directions was identified by internal service representatives as being an impediment to their longer-range planning to ensure that their services effectively meet departmental needs. As a result, planning for services such as information technology and real property are still rooted in an approach focused on these services calling on sectors, typically on an annual basis, to determine their needs/requests and prioritizing those requests based on available internal service funding.

Alignment of Resources to Priorities

NRCAN resources available to deliver on core responsibilities and priorities include approximately $1.04B (excluding statutory payments) annually and 3,900 FTEs. The 2018-19 Departmental Plan includes a notional allocation of financial resources and human resources to each of its three core responsibility areas, plus NRCAN internal services.

Of the $1.04B in annual funding available to NRCAN, approximately 50% represents temporary funding allocated/aligned to specific programs and initiatives (e.g. Federal Budget commitments).

The remaining 50% of funding represents more permanent funding and is allocated to sectors who make decisions on the allocation of resources to areas within their sectors. In relation to this primarily decentralized resource allocation process, the audit found that the department does not have an effective process to proactively evaluate the resources required to address priority areas and to re-align resources to fund those priorities.

Notwithstanding this observation, the Department does maintain an approximate $20M per year Departmental Reserve fund (representing approximately 1.3% of departmental funds) with Deputy Minister oversight. Based on a review of recent allocation decisions, these funds are in some cases used to support implementation of new and emerging priorities (e.g. funding of Indigenous Policy and Coordination Group) but are also used to support core operational pressures. The Department has recently created an IT Investment Fund of approximately $4M in FY 2018-19 to address high priority IT initiatives approved by IMTC/BTC.

Similarly, examples were noted of the department implementing various decisions to allocate human and financial resources to areas identified as priorities. These included the establishment of the Indigenous Affairs and Reconciliation Sector to support advancing the reconciliation agenda and establishing a Trans Mountain Expansion task team to support consideration of this project.

Risk and Impact

Strategic and operational planning processes that are not fully integrated may result in the development of planning outputs that are more rooted in telling the story of department activities than being the basis of communicating and supporting management decision making towards the achievement of departmental strategic objectives. Further, strategic and operational planning processes that are not fully integrated may result in an inability to properly prioritize and allocate resources to those programs and activities of most importance to the department.

Recommendations

Recommendation 1 - It is recommended that:

1. The ADM, SPRS and ADM, CMSS & CFO engage EXComm and obtain their endorsement to develop a strategic planning process and a departmental strategic plan.
2. Subject to senior management endorsement, the ADM, SPRS and ADM, CMSS & CFO jointly review the departmental strategic planning process; and in collaboration with sector representatives, develop, implement and renew a departmental strategic plan.
3. Subject to senior management endorsement, the ADM, SPRS and ADM, CMSS & CFO jointly define the requirements, processes and cycle for development and integration of corporate operational plans (e.g. HR, IM/IT, Real Property) in support of the departmental strategic plan.

Management Response and Action Plan

Management agrees with Recommendation 1.

1. The ADM, SPRS, and the ADM, CMSS & CFO, will conduct a diagnostic (i.e., NRCan’s planning maturity assessment) of the current NRCan strategic and operational planning processes. They will collaborate with NRCan Sectors and will engage with EXComm in order to identify existing planning capacity, gaps, and any duplication of efforts throughout the department. Options will be prepared and tabled to EXComm for decision on the approach to move forward.

These options will propose a streamlined and integrated departmental planning and reporting approach, and include considerations to:

• better align strategic and operational planning, as well as resources allocation consideration;
• reduce burden and duplication of processes;
• leverage the implementation of the Departmental Results Framework (DRF); and
• establish the scope for the preparation of a departmental strategic plan.

Timing: December 2019

Position responsible: Director General, Planning, Delivery and Results Branch, SPRS; and Senior Director, Planning and Operations Branch, CMSS

• finalize NRCan’s integrated departmental planning and reporting approach, including how it will support the development of a departmental strategic plan.
• develop guidelines to support the effective implementation of the integrated planning and reporting approach, including on:
  • establishing the role of Sectors and existing governance committees (see R2);
  • leveraging the Departmental Results Framework and associated data (see R3); and,
  • integration of corporate operational plans and resource allocation processes as applicable.

Timing: By April 2020

Position responsible : Director General, Planning, Delivery and Results Branch, SPRS; and Senior Director, Planning and Operations Branch, CMSS

• launch the integrated planning and reporting approach; and
• start consultations to prepare the departmental strategic plan and prepare its draft.
• define how enabling corporate plans (e.g. HR, IM/IT, Financial plans etc.) could be integrated into an operational plan to support the departmental strategic plan.

Timing: By November 2020

Position responsible : Director General, Planning, Delivery and Results Branch, SPRS; and Senior Director, Planning and Operations Branch, CMSS

The ADM, SPRS and the ADM, CMSS & CFO, in collaboration with Sectors to:

• Seek Senior Management`s approval (through EXCOM) of the departmental strategic plan.

Timing: By December 2020

Position responsible: Director General, Planning, Delivery and Results Branch, SPRS; and Senior Director, Planning and Operations Branch, CMSS

Governance Supporting Strategic and Operational Planning

Summary Finding

Governance structures have been established to support departmental priority setting and planning, however the manner in which these oversight groups are integrated in the consideration and establishment of long-term departmental directions, departmental (external and internal) priority setting, and strategic risk mitigation from their various enabling perspectives (e.g. policy, science, human resources) is not clearly defined.

Roles and responsibilities related to the development and monitoring of strategic and operational plans have generally been established however there are opportunities to improve the alignment, integration and relevance of current corporate planning and resource planning processes in order to reduce duplication of effort on the part of CMSS, SPRS and sector planning representatives.

Supporting Observations

Clearly defined governance structures and supporting operational roles and responsibilities are essential in providing leadership and enabling integration of strategic and operational planning processes and related decision-making. The audit sought to determine whether oversight committee mandates and accountabilities, and operational roles and responsibilities are clearly defined and support the development and monitoring of strategic and operational plans in support of the achievement of results.

Strategic Direction and Oversight

Beyond NRCAN’s organization structure (i.e. ADM’s who are responsible for specific department sectors operating at the direction of the Deputy Minister), the department maintains several executive-level oversight committees that have mandates for directing the strategic and operational planning of the department and integration of NRCAN operations.

The Executive Committee (ExComm) is the senior-most deliberative and decision-making committee of the Department, expected to ensure policy, science, program and corporate integration. The Deputy Minister and ExComm are supported by several other senior management committees including the Policy and Science Integration Committee (PSIC), Science and Technology Board (STB), Business Transformation Committee, Human Resources Management Committee (HRRC) and the Planning and Reporting Committee (PRC).

The terms of reference for these various oversight committees, summarized at Appendix A, are interpreted as establishing expectations for providing departmental strategic direction from various perspectives:

• ExComm supported by the PRC – departmental directions and priorities;
• PSIC – policy directions and priorities;
• S&T Board – science directions and priorities;
• BTC – human resource, IM/IT, real property directions and priorities; and
• HRRC – human resource directions and priorities.

While these mandates reference various roles relating to setting of direction and approving of plans and strategies (e.g. Excomm expected to establish department directions and priorities and approve the Departmental Plan), the process through which these oversight groups are engaged in the consideration and establishment of departmental (external and internal) priorities, or the evaluation of corporate risks (e.g. in support of the Corporate Risk Profile) from their various enabling perspectives (e.g. policy, science, human resources) is not clearly articulated. As an example, the Department has recognized a need to develop a broader Science and Technology strategy, however, the manner by which this planning exercise is sequenced and integrated into the department’s Integrated Planning and Reporting Cycle, or the manner by which the department’s science priorities are expected to inform the department’s human resource or real property priorities, is not clearly defined.

Planning Process Coordination

Corporate and operational planning activities are coordinated by two Sectors, the Strategic Policy and Results Sector (SPRS) and Corporate Management and Services Sector (CMSS) who work with all sectors of the organization to perform corporate planning and develop corporate planning deliverables (e.g. Departmental Results Framework and Departmental Plan). The role of SPRS includes coordination of NRCAN corporate priority setting and risk identification processes and related corporate planning and reporting and risk management activities for the Department through the delivery of the Departmental Plan, the Departmental Results Report, and Corporate Risk Profile. SPRS has also overseen the development and implementation of the Departmental Results Framework over the past two years. CMSS coordinates resource planning activities, including financial and human resources. Both sectors actively work with NRCAN sectors in carrying out their respective roles.

The audit found that there is a lack of alignment and coordination in the various “asks” made by SPRS and CMSS in support of resource planning (CMSS) and corporate planning (SPRS) exercises. The disjointed nature of these processes contributes to inefficiency and duplicated effort on the part of CMSS, SPRS and sector planning representatives and not contributing to a holistic understanding of program operations.

Illustrative examples of the different “asks” made of sectors where there is opportunity for better integration and improved efficiency include the processes undertaken to generate sector input into establish:

• Departmental reserve priorities;
• IT/IM project priorities;
• Real property project priorities;
• Corporate risk profile input;
• Management accountability framework input;
• Sustainable development plan input;
• Departmental plan input;
• Departmental results input.

Addressing integration opportunities to reduce this planning/reporting burden would require the combined attention of CMSS and SPRS.

The Planning and Reporting Committee (PRC), comprised of sector planning leads, is a key forum in supporting strategic and operational planning efforts within the department. This committee is responsible for:

• ensuring that the Department has robust strategic planning, performance measurement, financial management, and reporting functions that are embedded in policy and resource allocation decision-making at NRCAN; 
• promoting and providing advice on an integrated approach to strategic and operational planning, reporting, performance measurement and risk management;
• providing advice and guidance on setting the Department’s strategic and corporate priorities, ensuring that these priority-setting exercises are informed by central agency policies, mandate commitments, government-wide priorities and departmental risks.

Given the current state of departmental strategic and operational planning processes, adherence to these defined roles remains a work in progress.

The terms of reference of PRC identify a number of governance committees of relevance or potential relevance to PRC, including ExComm, Policy and Science Integration Committee, Science &Technology Board, Business Transformation Committee, Human Resources Renewal Committee, however the manner by which PRC specifically interacts with these committees and the responsibility of PRC vis a vis these committees has not yet been articulated in relation to PRC’s role of promoting an integrated approach to strategic and operational planning.

Risk and Impact

Lack of clarity in strategic and operational planning governance (e.g. decision-making relating to priority directions) may result in organizational confusion as to priorities and may lead to planning processes and outputs that are not sufficiently integrated to support achievement of desired departmental results.

Recommendations

Recommendation 2 - It is recommended that the ADM, SPRS and ADM, CMSS & CFO jointly review and engage EXComm to define the specific responsibilities of the department’s current senior management governance and oversight committees (e.g. EXComm, Policy and Science Integration Committee, Business Transformation Committee, Planning and Reporting Committee) in relation to strategic and operational planning processes and outputs.

Management Response and Action Plan

Management agrees with Recommendation 2.

The ADM, SPRS and ADM, CMSS & CFO will jointly review, in collaboration with NRCan Sectors and in consultation with EXComm, departmental governance and oversight committees to confirm their responsibilities, and to align their work, in relation to the integrated departmental planning and reporting framework, as well as their roles in supporting the implementation of the DRF, its PI and PIPs.

Terms of Reference of governance and oversight committees will be updated accordingly, based on the results of this review, learning from the initial implementation of the integrated planning and reporting approach and the results of the Audit of Corporate Governance (scheduled for completion by March 2020)

Timing: By September 2020

Position responsible: Director General, Planning, Delivery and Results Branch, SPRS; and Senior Director, Planning and Operations Branch, CMSS

Management Information

Summary Finding

Senior Management has access to regular financial, human resource and operational performance and status information for some of its strategic priorities, however, the department has not implemented monitoring and reporting processes that would enable robust periodic analysis of the status of its defined strategic priorities.

The department has made some financial information system changes to support the implementation of the Departmental Results Framework, however significant questions remain as to how related Performance Information Profile information is to be used in the management of programs and what financial, human resource and operational information system changes will be required to fully support this implementation.

Supporting Observations

Timely and relevant management information and reporting is key to enable appropriate monitoring of progress against strategic priorities and to enable course corrections as necessary. The audit sought to determine whether senior management has access to timely and relevant information to enable strategic and operational planning decision-making, and whether the department’s information management systems effectively support strategic and integrated operational planning information needs.

For strategic priorities adopted for 2018-19, the department has not implemented a summary or formalized periodic reporting approach to present a comprehensive view of the status of priorities (e.g. status of milestones, financial status, key risks) in year.

Notwithstanding this observation, the audit found that distinct monitoring and reporting processes have been established for federal budget commitments and ministerial mandate letter commitments, which represent some of the departmental strategic priorities.

For Budget 2017 and 2018 commitments, CMSS coordinates a monthly reporting process to support senior management in monitoring the status of progress against these commitments. This monthly analysis and reporting draws from Human Resources, Finance, Cabinet Affairs, and program areas to provide a view of, for example, the status of:

• TB submissions by Budget item;
• Planned vs. actual staffing;
• Financial forecasts;

and results related to the budget item (e.g. status of Grant & Contribution agreements)

In addition, the department produces monthly status reporting updates for its mandate letter commitments, all of which are considered strategic priorities. Production of this report is coordinated by SPRS based on input from sector representatives.

Production of this type of status monitoring information is typically supported by manual and “as needed” data collection processes to serve specific information needs.

As noted, the department is in process of implementing significant changes to its planning and reporting architecture with the implementation of the Departmental Results Framework and its associated performance measurement focus.

The department has implemented some information system changes to align to the Departmental Results Framework. For example, the department has adopted a financial coding structure, which enables the tracking of actual costs against DRF program inventory areas. Management informed the audit team that the Department has recently initiated the use of business intelligence tools (i.e. Financial Management Reporting Tool (FRMT) and the Business Planning Consolidation Tool (BCPT)) to assist with internal planning/resource management related to financial forecasting.

Significant considerations, however, remain to be addressed as to the information system and process changes that will be required to fully support the implementation of the DRF. Key considerations include clarifying expectations relating to:

• How program leads should be maintaining and using the performance information profiles in the management of their programs;
• How corporate planners will draw from and integrate information generated from the performance information profiles to inform broader planning efforts (e.g. consolidation of PIP risk information to identify risk themes requiring management attention);
• How the department will efficiently track and report on program and results performance information (i.e. as defined in Performance Information Profiles). Currently this is based on primarily manual data collection processes and while the need for a more robust data management approach has been identified as being required, no action has yet been taken;
• Whether the department will move to a process of allocating resources (budgeting) by program area, versus the current sector-based model.

At this point, the Department has not yet established a path forward to addressing these areas to ensure that the Department can benefit from and effectively leverage the investment it has made in implementing the Departmental Results Framework to date.

Risk and Impact

Deficiencies in management information and reporting processes to support the timely monitoring of performance against priorities and core responsibilities may result in untimely management responses to program issues and challenges and may preclude timely course corrections.

Recommendations

Recommendation 3 - It is recommended that the ADM, SPRS and ADM, CMSS & CFO, in collaboration with sector representatives, jointly define the requirements and develop an approach for leveraging and integrating its Department Results Framework (including Performance Information Profiles) into its strategic and operational planning processes, including the resources required for implementation.

Management Response and Action Plan

Management agrees with Recommendation 3.

The ADM, SPRS and ADM, CMSS & CFO, in consultation with NRCan Sectors, will define the requirements and develop an approach for how the DRF and the PI will support and inform strategic and operational planning, as well as resource allocation as required.

This will include:

• review of programs’ financial, human resource and performance information systems, including how the data is tracked, maintained, and used;
• exploring how strategic and operational planning exercises could draw from and integrate data; and
• identification of resources required for implementation, both at the departmental and sectoral level.

Throughout this process, the ADM, SPRS and ADM, CMSS & CFO will engage the Performance Measurement, Evaluation and Experimentation Committee (PMEEC) to support the development of the approach to link the DRF implementation to the strategic and operational planning process, they will engage with EXComm members and other committees as required prior to presentation to Senior Management for decision.

Timing: by September 2021

Position responsible: Director General, Planning, Delivery and Results Branch, SPRS; Senior Director, Planning and Operations Branch, CMSS; and Director General, Finance and Procurement Branch, CMSS

APPENDIX A – Key Governance Committees Expected To Provide Strategic Oversight

APPENDIX B – Audit Criteria

The criteria were developed based on the key controls set out in the TBS Core Management Controls and the TBS Policy on Results.The criteria guided the fieldwork and formed the basis for the overall audit conclusion.

The objective of the audit was to assess the effectiveness of the Department’s strategic and operational planning governance structures, processes and information management systems in supporting the achievement of results.

The following audit criteria were used to conduct the audit:

Audit Sub-Objectives	Audit Criteria
To determine whether NRCAN has established governance structures to effectively support its strategic and operational planning processes and the achievement of results.	1.1 The mandates and accountabilities of oversight committees related to strategic and operational planning are clearly defined and aligned to support the development of timely and effective strategic and operational plans to support the achievement of results.
	1.2 Roles and responsibilities related to the development and monitoring of strategic and operational plans are clearly established and communicated at the departmental and sectorial level.
To determine whether NRCAN’s strategic and operational planning processes effectively support the achievement of results.	2.1 NRCAN has an effective process in place to establish strategic priorities, based on reliable and appropriate information such as government priorities, risk information, and environmental scans.
	2.2 NRCAN has an effective process in place to clearly define expected outcomes for its strategic priorities and operational plans; and regularly monitor and report on progress against expected results.
	2.3 NRCAN has an effective process in place to ensure that operational plans are aligned with strategic priorities.
	2.4 NRCAN has an effective process in place to align its financial and human resources to its strategic and operational plans.
	2.5 Internal service considerations such as human resources, real property and IM/IT are effectively integrated into NRCAN strategic and operational planning processes.
To determine whether information management systems effectively support strategic and operational planning information needs and decision-making and the achievement of results.	3.1 Senior Management has access to timely and relevant financial, human resource and operational information to effectively enable strategic and operational planning decision-making.
	3.2 The department’s financial, human resource and operational information management systems effectively support strategic and integrated operational planning information needs and the achievement of results.