Review of the implementation of Ontario Regulation 319/20: Independent Forest Audit

Executive summary

Background

Ontario’s forestry sector generates over $18 billion in revenue and supports nearly 149,000 jobs in communities across Ontario. The Ministry of Natural Resources (Ministry or MNR) is responsible for sustainably managing Ontario’s public forest resources under the Crown Forest Sustainability Act, 1994, (CFSA or Act). The management of public forests in Ontario is guided by the CFSA, along with supporting regulations, policies, and regulated manuals to provide for the long-term sustainability of Ontario’s forested lands. The Independent Forest Audit (IFA) program is an integral part of Ontario’s forest policy framework and provides assurance as to whether forests on Crown lands are well managed.

Ontario Regulation 319/20, Independent Forest Audits, (the Regulation) (replacing Ontario Regulation 160/04 in 2020) under the CFSA sets out the requirements for IFAs and requires that the forest management practices in each Management Unit (MU) be assessed at least once every 10–12 years through an IFA. The IFA assesses the performance of both the forest manager and the Ministry in meeting their forest management responsibilities. Auditors are required to assess a wide range of topics related to forest management, such as compliance with regulatory and licence requirements, effectiveness of forest management activities in meeting Forest Management Plan objectives, and sustainability. The Independent Forest Audit Process and Protocol (IFAPP), developed by the Ministry, provides auditors with guidance in meeting the requirements of the Regulation. Refer to Appendix A for further details on the regulatory framework and specific objectives of the IFA.

The Regulation also requires the Ministry to review implementation of the Regulation at least once every 10 years and to consult the public while conducting the review. This engagement was requested by the Ministry to fulfill the regulation requirement for a review and is part of the approved OPS-Wide Multi-Year Internal Audit Plan for the fiscal year 2022-23.

Objectives and scope

The objective of this advisory engagement was to review the implementation of the Regulation and identify opportunities for improvement. This included consultation with various internal and external stakeholders to obtain feedback on whether IFAPP met the requirements of the CFSA, the Regulation and the regulated manuals pursuant to section 68(1) of the Act.

Detailed information about the engagement (objectives, scope, and criteria) are included in Appendix B.

Overall advisory considerations

Overall, the Ontario Internal Audit Division (OIAD) found that the change in the Regulation to the 10-year cycle may impact the effectiveness of the audits required under the legislation. As the legislative changes have recently been introduced, there is not sufficient information available to fully ascertain the impact of this change. To further support the Ministry’s effort in improving the quality of the IFA processes, the following are key areas OIAD has identified within this report for Ministry consideration:

• align the IFAPP audit procedures to the objectives of the Regulation, to demonstrate that the procedures are effective in achieving each of the regulatory IFA objectives. This was raised as a consideration by OIAD in our previous report, however the Ministry has not yet implemented this
• the Ministry should consider assessing the corresponding updates which may be required to the IFAPP audit procedures as a result of the longer period between each audit
• the Ministry should consider undertaking a comprehensive review of the impacts to the IFA process to monitor and assess risks associated with the decision to move to the ten-year cycle. As more audits are being completed with longer timeframes, more data will be available with which to assess the impact of the change to the conduct of the IFAs

Overall management response

The ministry appreciates and acknowledges OIAD's report, including the identified advisory considerations. The considerations align with the ministry’s knowledge on potential areas for improvement of the IFA process. The ministry is committed to continuous improvement of the Independent Forest Audit process and is currently in the process of developing an action plan to address the considerations raised in the report. The ministry is already undertaking actions to address some of these considerations, such as proposing updates to:

• the Forestry Futures Committee Terms of Reference to clearly outline roles and responsibilities and reduce duplication
• the annual reporting requirements for IFA action plan activities to provide clarity and consistency to reporting
• silviculture policy implementation direction, including standards for silviculture assessment and reporting, to address challenges in silviculture monitoring

Any future proposed changes to the IFA regulation and/or process and protocol would require public consultation.

Conformance with Institute of Internal Auditor’s standards

This engagement has been conducted in conformance with the Institute of Internal Auditor’s International Standards for the Professional Practice of Internal Auditing.

The nature and scope of advice provided through this report was agreed to with the Ministry. By its nature, advice provided is based on availability and quality of information from both professional and client sources. We therefore express no opinion as to whether expected outcomes intended by the Ministry will be achieved.

Acknowledgments

OIAD would like to thank those that assisted us with this engagement. In particular, OIAD acknowledges the cooperation and assistance that was provided by the Policy Division and Regional Operations Division management and staff.

Introduction and Approach

Every 10 to 12 years, an Independent Forest Audit (IFA) takes place on each of the province’s 39 Management Units (MU) to examine the performance of both the forest manager and the Ministry in meeting their forest management responsibilities (for example, building roads and bridges, harvesting trees, and renewing the forests after they are harvested). In accordance with Ontario Regulation 319/20, Independent Forest Audits (Regulation), the IFA requires auditors to assess a wide range of topics related to forest management such as compliance of forest management activities with the Crown Forest Sustainability Act (CFSA) and other regulatory requirements, operational effectiveness, and sustainability. Details on the specific objectives of an IFA are included in Appendix A for reference.

Our review of the IFA process was guided by the requirements of the Regulation and the current audit process and procedures, as prescribed by the Independent Forest Audit Process and Protocol (IFAPP), dated December 2021. The IFAPP, developed by the Ministry, provides guidance to auditors in meeting the Regulation and describes key processes and procedures related to planning the audit, conducting the audit, communicating audit results, and completing action plans to address any findings. As part of our approach, OIAD also consulted with survey and workshop participants with forest industry knowledge to obtain feedback on the IFA processes. Refer to Appendix C for further details on the approach utilized by OIAD in conducting this review.

To provide an overview and understanding of the annual IFA process, the following table shows the steps involved and the approximate timing associated with those steps each year:

Table I: Key Phases of an IFA

In conducting this engagement, OIAD utilized the key phases involved in performing the IFA audit as an overall framework to solicit feedback from survey and workshop participants on IFA processes. The opinions expressed in this report are those of the survey participants and do not necessarily reflect the position of OIAD.

The following sections highlight the key points which have been brought to our attention through the review of IFA survey responses, supporting documents, as well as First Nation and Métis community and stakeholder feedback.

Detailed Observations and Considerations

1. Roles and Responsibilities

In accordance with the Crown Forest Sustainability Act (CFSA or Act), the Act allows the Ministry to establish the Forestry Futures Trust, to establish criteria to make payments from the funds of the Trust and to establish a Forestry Futures Committee (FFC). To govern the operations of the FFC in accordance with the Act, a Terms of Reference (TOR), dated March 2018, was established which defines the framework within which FFC operates and its relationship to the Ministry. In accordance with this TOR, one of the responsibilities of the FFC is to take the lead in managing implementation of Ontario’s IFA process.

To understand whether the current roles and responsibilities used in administering the IFA process were effectively functioning, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

• there are notable overlaps in roles and responsibilities between the ministry and FFC in conducting field audits, reviewing key reports, meetings, decision-making, etc., which comes at a huge administrative cost
• there is confusion between the ministry and FFC staff with respect to which organization is in charge and makes decisions
• the involvement of the FFC in the process adds a level of independence to the audit process that would not be otherwise achieved. As the FFC reports directly to the Minister, it is independent of both auditees
• FFC brings a minimum of three members to each field audit. A staff member should be involved in the field audit, but multiple individuals on site are costly with little value added. There are too many resources for oversight resulting in increased travel & accommodation expenses

Commentary from participants confirmed that while the addition of FFC was beneficial to the process, the overlaps in roles and responsibilities were, at times, causing confusion as to which organization was in charge.

To understand the division of roles and responsibilities as they are currently being utilized with respect to the administration of the IFA process, OIAD reviewed the IFAPP, noting the following key responsibilities between the ministry and FFC in Table II:

Table II: Ministry and FFC Roles and Responsibilities in the IFA Process

Based on the above table, OIAD noted that there were overlaps in responsibilities between the ministry and FFC with respect to the conduct and oversight of the audit.

In addition, OIAD reviewed the roles and responsibilities that were outlined in the Minister’s letter referenced within the TOR. Table III summarizes the roles and responsibilities between each organization as per the TOR:

Table III: Ministry and FFC Responsibilities per the TOR

Based on the above table, OIAD noted, for the most part, that there was separation in responsibilities between the ministry and FFC, as defined in the TOR, with respect to the administration and oversight of the IFA process.

However, current roles and responsibilities, as outlined in the IFAPP and shown in Table II, have evolved and are no longer consistent with those defined in the TOR. For example, per the TOR, the FFC is responsible for managing the conduct of the IFA process after the ministry selects the auditor. However, the ministry’s current responsibilities, per the IFAPP, indicate that the ministry is now involved in the management of the IFA process, which contributes to the noted overlaps in roles and responsibilities and adds to the administrative burden of the process.

A well-managed process requires that the roles and responsibilities for all the key parties are known, documented and align with the objectives of the process. Without clearly defined and communicated roles, the likelihood increases that there is confusion over accountabilities and duplication of work.

Consideration # 1:

The Ministry should consider reviewing the current roles and responsibilities of the ministry and FFC, as defined in both the IFAPP and TOR, with a view to minimizing any overlaps and reducing the administrative burden of the IFA process, while at the same time, ensuring alignment with objectives.

Consideration # 2:

Once the review of the roles and responsibilities has been undertaken, the Ministry should consider revising both the IFAPP and the TOR to reflect the updates to the roles and responsibilities and ensure alignment between the two documents.

2. First Nations, Métis Community and Local Citizens Committee Involvement

As part of the IFA process, the IFAPP requires auditors to solicit input from Local Citizens Committees (LCCs), along with First Nations and Métis communities that are in or adjacent to the MU. An LCC is established by the ministry District Manager for the applicable Ministry district or MU, in accordance with the requirements of the CFSA, and is comprised of local citizens representing a range and balance of interests.

In accordance with the IFAPP, there are several opportunities for the LCC, First Nations and Métis communities to provide input into the IFA process. At the beginning of an IFA, auditors are required to issue a notice advising the public that an IFA will be conducted. The public notice will include the purpose of the audit, identification of the MU being audited, the period of the audit, and how the public may provide input. Within 30 days of contract award, auditors must also advise all LCC members, First Nations and Métis communities that are within or adjacent to the MU, that an audit will be taking place, invite their input and confirm the method by which they wish to be consulted. With respect to First Nations and Métis communities, auditors are encouraged to arrange in- person meetings. Input from the LCCs, First Nations and Métis communities are solicited as part of the risk assessment and audit plan development. At the culmination of the IFA, the auditor is required to offer to present a summary of the audit findings and discuss the audit results.

To obtain perspectives from First Nations and Métis communities, stakeholders, and the public on the sufficiency of the IFA engagement processes, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

• a wide variety of methods are used to solicit input from local First Nations and Métis communities, LCCs and a sample of individuals from the Ministry’s Forest Management Plan (FMP) mailing list
• auditors also offer to present the findings to the LCCs, First Nations and Métis communities who have been involved in the process
• the involvement of First Nations and Métis communities is a very weak input process and not a meaningful form of engagement. Meaningful engagement would require more capacity support
• the audits examine whether Ontario’s rules were followed, but do not assess whether the outcomes important to First Nations and Métis communities have been achieved
• the audit team should include people who are accountable to, and primarily employed by First Nations and Métis communities and independent environmental non-governmental organizations
• the FFC board does not include First Nations or Métis representation

Participants’ commentary with respect to this topic was wide and varied. It was noted that there are currently no barriers to involving First Nations or Métis communities as part of the audit team or FFC and that diversity of experience is welcome provided the necessary qualifications are obtained. With respect to assessing outcomes important to First Nations and Métis communities, it was noted that the objectives of the IFA focus on assessing whether Forest Management Plans (FMP) have been developed in accordance with regulated requirements and the effectiveness of activities undertaken in accordance with the approved FMP, and there are currently no plans for the IFA to go beyond this scope. It was also noted that while processes have been established to solicit input from First Nations and Métis communities, there were challenges that were experienced beyond the scope of the IFA process because of staff turnover within these communities, COVID-19, and the lack of access to technology.

Consideration # 3:

The Ministry should consider resuming local in-person community meetings to facilitate the ability for First Nations and Métis groups to provide input into the process, given COVID-19 measures are no longer mandatory.

3. Risk Assessment

The Ministry introduced a risk assessment process to the IFA several years ago as part of modernization efforts to the IFA program. To facilitate the introduction of this new risk assessment process, the Ministry performed a comprehensive exercise using the International Organization for Standardization (ISO) 14001 Standard for Environmental Management Systems to classify all IFAPP audit procedures as either mandatory or optional. IFAPP audit procedures with the potential to have a significant impact on forest sustainability were classified as mandatory, while procedures with low impact were classified as optional.

After contract award and in accordance with the IFAPP, auditors are expected to conduct a risk assessment for each MU to determine which optional procedures (if any) need to be included within the scope of the audit. This assessment is based on interviews with the auditees and review of background information that is provided on award of the contract, such as previous IFA reports, annual reports, compliance information and results of forest certification status. The risk assessment must be documented in a short report summarizing the approach and rationale for decisions made regarding inclusion or exclusion of the optional procedures. This report is provided to the FFC and the Ministry for review and approval. Once the scope has been finalized, the auditor will prepare an audit plan for the IFA in consultation with the FFC, Ministry and auditee. The cost per day for any optional procedure is established in the RFS bid.

To understand the effectiveness of the risk assessment process, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

• there is too much flexibility allowing optional audit procedures to be omitted from audit scopes. Procedures should all be mandatory to ensure consistency
• auditors may be hesitant to suggest that optional procedures be assessed since this would elevate costs
• the risk assessment process brings pragmatism and common sense to the process and respects the auditors’ competency to make decisions
• going to 10-year audits, the risk assessments may not be as effective if there is auditee staff turnover during the period and recent staff lack the corporate memory to identify risks to auditors
• the risk assessment process is conducted by auditors after contract award. As a result, the lowest bid price may not actually be the lowest bid price
• The ministry input is not always obtained as part of the risk assessment
• there is an increased risk that many years will go by while none of the optional procedures are looked at

The following sections provide further details on the participant discussions related to various elements of the risk assessment process:

Timing of the Risk Assessment:

Commentary about the timing of the risk assessment process was brought forth by participants, noting that it would help if the risk assessment was done prior to issuing the contract. In this regard, auditors would have a better picture of what the risks are for the MU before bidding and required procedures would be agreed upon upfront. This would also remove any uncertainties from the bid price as the current procurement process determines the lowest bid price using a formula which combines the total bid price for mandatory procedures plus two days of a per-diem rate for optional procedures. If, based on the completion of the risk assessment, additional optional audit procedures are required at an additional cost, then the Ministry will increase the amount paid to the auditors upon approval of the risk assessment. Although it would be ideal to complete the risk assessment before the contracts were issued, challenges were raised with respect to who would have the capacity and resources to take on this additional workload in lieu of the auditors and whether it was possible to prepare the necessary background information within compressed timelines.

OIAD notes that there are certainly benefits to having the risks identified upfront, however it may not be feasible to make changes to the timing considering the limitations with the availability of alternative resources, procurement processes and preparation of information required to complete the assessment. Moreover, given the auditor is ultimately required to provide an audit opinion for the IFA, it is reasonable to rely on their professional judgement in determining the work required to be able to provide this opinion.

Format of Risk Assessment Report:

Participants also noted that for the most part, that auditors used their professional judgement and did a good job in evaluating the information gathered and performing the risk assessment, although based on the conversations, some challenges were noted with the consistency in the level of detail of the risk assessment report. In some cases, auditors interviewed the forest manager but did not include ministry District management and, in other cases, it was not always apparent why optional procedures were not included within the scope of the audit, notwithstanding that the IFAPP requires auditors to state why optional procedures were being audited.

Consideration # 4:

The Ministry should consider developing a MU risk assessment template to standardize completion of risk assessments and facilitate review to ensure the process was appropriately followed.

Standardization of IFAPP Audit Procedures:

Discussion with respect to the standardization of audits also ensued, especially considering the impacts associated with the Ministry’s decision to move to a ten-year IFA cycle. With the move to a ten-year timeframe, concerns were raised regarding the extended length of time that could go by should none of the optional procedures be performed. Participants commented that moving to all mandatory procedures would provide more certainty that everything is being audited and enable a more consistent approach across all MUs. In addition, standardization of audit procedures would facilitate identifying trends and issues across the province. Furthermore, it was noted that while the risk assessment process enabled modest-cost savings for industry, this has resulted in a significant amount of complexity and increased administrative workload for the ministry, FFC and audit firms. Notwithstanding the additional administrative workload, OIAD notes that an effective risk management process facilitates performance of audits in a useful manner as it enables the auditor to consider the unique attributes of a MU during the planning process and focuses audit effort to the areas that are deemed to be a higher risk.

Classification of IFAPP Procedures as Mandatory or Optional:

The Ministry informed OIAD that the IFAPP procedures are adjusted annually to incorporate changes made to the regulated manuals. However, during the discussions with survey and workshop participants, it was also noted that the exercise to review which IFAPP procedures were mandatory versus optional was done once approximately ten years ago using the ISO 14001 (Environmental Management Systems). The Ministry has not since performed a similarly comprehensive exercise to update the assessment based on consideration of provincial or regional trends and issues.

Consideration # 5:

The Ministry should consider developing a process to periodically review the classification of the mandatory and optional audit procedures.

4. IFAPP Procedures

To provide auditors with guidance in meeting the objectives of an IFA audit, the Ministry developed the IFAPP. This document outlines each of the key phases required as part of an IFA, timelines, roles and responsibilities of key parties and the necessary audit procedures to be performed in an IFA.

Objectives of the IFA:

To obtain an understanding of the IFA regulatory requirements in comparison with the current audit procedures being utilized in the IFA audits, OIAD compared the requirements of the Regulation with the IFAPP audit procedures, dated December 2021. Appendix A of the IFAPP details the specific standards or audit criteria set forth for the IFA along with detailed audit procedures to be used to assess whether the respective audit criteria were met. These criteria and audit procedures are currently organized using eight guiding principles. In comparison, the Regulation specifically defines six audit objectives for the conduct of the IFAs. Refer to Table IV below for this comparison:

Table IV: Comparison of Regulatory Objectives and IFAPP Principles

Looking at the above table and comparing the regulatory objectives with the IFAPP guiding principles, it’s not clear as to how the audit procedures under each of the principles link back to the objectives of the IFA regulation. While the IFAPP procedures are mapped to the requirements of the regulated manuals, the way that the IFAPP is currently organized makes it difficult to determine whether sufficient audit procedures were included under each of the guiding principles to effectively provide assurance that the requirements of the objectives from the Regulation were being achieved.

Through discussions with the Ministry, it was noted that the principles from Canadian Council of Forest Ministers (CCFM) criteria and indicators for sustainable forest management were carried over to the IFA audit program when it was originally set up back in 1995. At the time, it was deemed important that those principles be reflected in the audit program.

As the objectives outlined in the Regulation require the auditor to assess compliance with the manuals and FMPs, and the objectives of the manuals and FMPs are to achieve effective forest management and sustainability, aligning the procedures with these regulatory requirements will also support the principles and criteria arising from the CCFM.

Consideration # 6:

The Ministry should consider enhancing the IFA process by aligning the IFAPP audit procedures to the objectives of the Regulation to enable determination of the extent of work that is required to be performed to achieve each of the regulatory IFA objectives.

Review of IFAPP Procedures:

During our engagement, OIAD invited survey and workshop participants to share their perspectives on the appropriateness and effectiveness of the IFAPP procedures through survey and workshop discussions. Feedback from survey respondents is summarized below as follows:

• fundamentally important tasks such as the examination of FMP objectives, forest manager contractual obligations, and processes related to the achievement of long-term sustainability are being overshadowed with findings related to operational performance that have little to do with the long-term sustainability of the forest
• the IFAPP is generally a mix of performance and operational audits. Most auditors are competent to perform performance audits, but not necessarily operational audits. The auditor can determine if the forest manager had training to calculate the culvert catch basin and flow, how to install the culvert, etc., assess if data on culverts is maintained by the forest manager, and if there a process for routine inspection, maintenance, etc. and whether formal inspections completed and submitted to Forest Operations Information Program (FOIP). However, on the ground inspections of individual culverts and their correct installation is the responsibility of the forest managers and periodic field audits the responsibility of the ministry
  • Performance audits generally assess program delivery and adherence to applicable laws, policies, and directions. Basically, are the auditees “doing the correct things” as required by the FMP, Forest Management Planning Manual (FMPM), Forest Information Manual (FIM), etc. These audits have a focus on long-term sustainability of both the forest manager and the Forest. They provide the public with assurance its forest is being managed sustainably.
  • Operational audits generally assess specific operating activities. In a general sense “were things done correctly.” For example, was the culvert installed correctly, was the gravel pit properly sloped, etc. An assessment of how effectively these activities are carried out is the daily responsibility of the forest manager and the ministry.
• unclear on the connection between the IFA process and the use of specified procedures and roads maintenance and construction procedures in the IFA
• there is considerable duplication in the IFAPP

The following sections in this report are based on OIAD’s consideration of the survey results, workshop discussions and review of the procedures contained in the IFAPP.

In conducting the workshop sessions with Ministry staff, OIAD looked at both the mandatory and optional procedures and asked whether the procedures were effective in achieving the IFA objectives. The following IFAPP procedures were discussed in the workshop sessions as presented below, along with Ministry and OIAD comments:

I. Procedure 3.3.5 – FMP Description of Species at Risk (Mandatory Procedure):

This procedure requires the auditor to verify that the FMP describes the degree to which the quality or quantity of habitat for Species at Risk (SAR) could be affected by forest management operations and the implications of SAR and SAR habitat on the development of the FMP, as required by the FMPM. OIAD was informed that this procedure, along with several others, are included because there needs to be consideration as to whether the forest manager and the Ministry have met all the requirements of the FMPM, as well as other manuals and policies. However, it was noted that feasibility in auditing the development of the FMP is often difficult because it is very rare to find the people who actually did the work five years ago. This issue could be further exasperated with the move to the ten-year IFA cycle. Furthermore, concerns were also raised regarding the need to include audit procedures to determine whether the FMP has been properly developed, considering the FMP is prepared by industry professionals who are RPFs, and approved by the MNR Minister’s delegated authority, once satisfied that the Plan provides for the sustainability of the Crown forest.

OIAD notes that including audit procedures to review the processes followed in developing the FMP may not add value to the IFA. Furthermore, with the new ten-year timeframe of the audits, a FMP would have been approved by the Minister five to ten years ago, depending on the timing of the IFA. Findings raised in regard to the development of the FMP from five to ten years ago may not be useful, given that it will be difficult to apply any lessons learned to the development of new FMPs (for example, because of legislative and policy changes) and because the forestry activities for the MU will have already occurred.

II. Procedure 6.4 - Monitoring Indicators of Forest Sustainability (Optional Procedure):

The IFAPP states that the purpose of this procedure is to review whether programs are in place to ensure that data will be available for reporting on the FMP measurable indicators of forest sustainability. This IFAPP procedure requires the auditor to perform the following:

• assess whether programs are in place and are being implemented to provide sufficient data for all indicators identified in the FMP
• where surveys and field audits are used to collect and analyze information, assess whether the methodology used is relevant and appropriate to the desired data and whether it incorporates current knowledge and technology
• assess whether the programs, as implemented, address the objectives, indicators and their associated assessment methodologies outlined in the text and tables of the approved FMP

From our discussions with Ministry workshop participants, participants views were mixed. Some felt that this procedure should be mandatory, whereas others noted that this procedure relates to reporting and that there is a separate assessment of sustainability which is included as part of procedures in principle 7. Another participant noted that this procedure could be looked at by the auditor, depending on the results of the risk assessment.

OIAD notes the three steps with procedure 6.4 focus on assessment of the processes and methodology used to generate data used for reporting on sustainability indicators and that these three steps are all optional within the IFAPP. In comparison, procedure 7.3, which is a mandatory audit procedure further on in the IFAPP, requires the auditor to review and assess the indicators used in the determination of sustainability. However, it will be difficult to conclude on the achievement of sustainability indicators (per the mandatory audit procedure 7.3) without being able to place reliance on the underlying processes and methodology used to generate the indicators (per the optional procedure 6.4).

III. Procedure 4.7 – Access (Optional Procedure):

Forest managers are responsible for road construction, maintenance, and monitoring of the forest roads network on the MU per their obligations under their licence and approved FMPs. Road construction, various types of water crossings, road monitoring, maintenance, aggregates, and other access activities must be conducted in compliance with all laws and regulations, including the CFSA and approved activities in the FMP and Annual Work Schedule (AWS). To offset some of these construction costs, forestry companies can apply for reimbursement of eligible roads construction costs under the Forestry Industry Division’s (FID) Provincial Forest Access Roads Funding Program.

This procedure requires the auditor to select a sample of construction and maintenance activities for roads constructed or maintained with funding under the Road Construction and Maintenance Agreement to examine whether there is evidence that the work was performed as described in the invoice. As was explained to OIAD, the reason why roads are examined as part of the IFA, is to meet the objectives of the Regulation, which requires looking at compliance with the FMP.

During the discussions with workshop participants, several participants commented that this procedure could overlap with the FID, which does their own roads audit since they provide the funding for road construction. It was also noted that several districts keep a record of road activities and verify that the invoices meet the roads identified in the FMP and AWS and therefore there may be some overlap with this procedure included in the IFA.

OIAD notes that with the transition to the ten-year IFA cycle, checking these types of expenditures as part of the IFA may not make a lot of sense anymore and that these types of inspections could be done as part of a separate audit to verify the amount of road construction and maintenance funds that are invested in the forests and ensure that the roads are built to standard from an engineering perspective and that the Crown receives good value for the investment. Such procedures which have been tacked on as part the IFA erode the true purpose of these audits and shift the focus from auditing the effectiveness of management actions in meeting FMP objectives in a sustainable manner.

Moreover, it was noted that there are several procedures within the IFA which focus on assessment of specific types of operational activities (for example, whether roads were constructed correctly, whether the forestry aggregate pit was properly sloped, Forest Renewal Trust Specified Procedures, etc.) which provide little insight into long-term sustainability of a MU. Feedback from survey and workshop participants indicated that there is the sense that many of these types of compliance activities have shifted from the Ministry and included instead as part of the IFAs. The recent requirement to have a Ministry-Certified Forest Operations Compliance Inspector on the audit team, while adding rigour to the audit process, also underscores this shift to a more operational focus of the IFA.

Consideration # 7:

The Ministry should consider reviewing the audit procedures within the IFAPP to support the specific sections of the requirements of the Regulation using a risk-based approach that ensures appropriate procedures are included to facilitate the conduct of audits in an effective manner.

5. Information Used to Support IFA Audits

The effective conduct of an audit requires obtaining sufficient, appropriate audit evidence to provide a basis for the auditor's opinion. To support this requirement, the IFAPP requires that auditors obtain sufficient, objective evidence that is relevant and reliable, to assess whether the audit criteria and IFAPP audit procedures have been met. Auditors are expected to collect information through interviews, an examination of documents and observation of activities and conditions. Information gathered through interviews is to be verified by acquiring supporting documentation from independent sources, wherever possible. If there are any information gaps which preclude the ability of an auditor to draw conclusions, auditors must advise the FFC.

In performing the IFA, the auditor collects several sources of information covering the period under scope. Some of the key informational sources include:

1. Forest Management Plans (FMP) - Before any forestry activities take place, a FMP must be developed for each MU in the province and approved by the Ministry. A FMP outlines the forestry objectives over a ten-year period and the corresponding forest operations that are planned to be completed over that time to achieve those objectives.
2. Annual Work Schedule (AWS) - The AWS describes all forestry activities from the approved FMP that will be carried out for the year such as harvest, renewal, road construction and aerial pesticide spraying projects.
3. Annual Reports - Each year, an Annual Report is required to be prepared for the MU to summarize the activities completed during the year. The Annual Report is due on November 15 each year and includes information on amount of harvesting, preparation and planting, road construction and maintenance activities and any natural disturbances.
4. Forest Operations Information Program reports – forest managers are required to conduct compliance inspections each year as part of their ongoing monitoring responsibilities. The Ministry also provides oversight through its own compliance monitoring processes.

To an understanding of the calibre, adequacy and availability of the information used to support the IFA audits, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

1. annual report requirements are no longer being enforced by the ministry which results in:
   1. insufficient data being provided to auditors to conduct their work
   2. a lot of time spent by auditors in following up on missing information for each individual annual report, rather than performing the actual audit.
2. the Enhanced Annual Reports do not align very well with the audit period creating more difficulty in assessing some of the audit objectives (that is, assessment of utilization by area and volume, levels of renewal and tending, expenditure) and creating additional work for the auditees and auditors to gather the required data.
3. background information used to develop the audit sample is from Geographic Information System (GIS) shape files, however these files never match what is in the Annual Reports.
4. Silvicultural Effectiveness Monitoring (SEM) data is often incomplete or unavailable and the lack of standards for reporting is also problematic.

Annual Reports:

Commentary from the workshop discussions noted that due to streamlining efforts, the Ministry no longer approves the Annual Reports each year; only the Enhanced Annual Reports in Year five and final-year MU annual reports are required to be reviewed and approved by the Ministry. While the Annual Reports are submitted to the Ministry and posted publicly on the Natural Resources Information Portal, many participants noted that information within these Annual Reports is sometimes missing and not always rolled up correctly. Considering the cumulative effect of errors from the Annual Reports, OIAD was informed that additional effort is required by the Ministry to approve the Enhanced Annual Reports. Additionally, within the enhanced annual report, there is no mechanism that would require the forest manager to submit information that was missed in previous years annual reports. Considering the additional work required by both the Ministry and the auditors in addressing these errors, OIAD notes that the objective relating to reduction of the administrative burden may not have been effectively achieved.

In regard to the alignment of the Annual Reports with the audit period, it was noted that the Ministry recently made some changes to the IFA schedule to ensure that the audit aligns with the Enhanced Annual Report timelines. These changes, among others, were reflected with new the Regulation two years ago (revoking and replacing Ontario Regulation 160/04) and were intended to address the timing issues. However, Enhanced Annual Reports are often submitted late and therefore, are not available for the auditors to complete their assessment.

With respect to the discrepancy between the tables in the Annual Reports and GIS shape files, it was noted that information was being submitted in two different ways (in tables and shape files). While information submitted as shape files is automated, the data used for presentation in the Annual Report tables requires manual effort and therefore, there could be errors from having to manually summarize information into a table format versus the shapefiles. The Ministry, in conjunction with the Forest Management Planning Advisory Group, has recognized this issue and is currently working on potential solutions.

Consideration # 8:

The Ministry should review the Annual Reports process to ensure submission quality and timeliness.

Consideration # 9:

The Ministry should consider adding a statement to the Natural Resources Information Portal hosting the Annual Reports that this information is supplied by the forest manager with no Ministry review or approval.

SEM Data:

A key principle of Ontario’s forest sustainability framework is to ensure that regeneration efforts are achieving the standards established in the FMP. The SEM program provides the basis for measuring, collecting, analyzing, and reporting information on the renewal and state of Ontario’s public forests whether they have been depleted by harvest or natural means.

Workshop participants mentioned that there were inconsistencies between the Ministry’s regional/district offices and the forest managers on the standards for reporting on silviculture effectiveness. OIAD was informed that there is an ongoing debate around what the right standards are for measuring effectiveness. A major contributing factor for the data variations and conflicting results is the application of different survey methods (for example, sampling approaches and sampling intensities).

Consideration # 10:

The Ministry should consider investigating the factors which are causing discrepancies in the differences in SEM reporting and develop the required policies and technical direction to support making the audits more effective.

6. Reporting of Audit Results

Performance of the IFA audit culminates in a report which documents the auditor’s assessment based on results of audit procedures performed. The IFAPP notes that due to the nature of IFAs. (that is, auditing from the present back five or more years, assessing predictions of the future forest, etc.), professional judgement, in addition to evidence, plays a significant role in developing findings, identifying best practices, and stating conclusions.

In accordance with the processes laid out in the IFAPP, there are several steps involved before the final IFA report is published. Prior to preparation of the draft report, the auditor will review findings (that is, IFAPP Draft Report per Appendix I of Appendix D) with the auditees to ensure factual accuracy and consideration of all relevant evidence. The review of the draft findings is expected to occur at the closing meeting within one week of the end of the field audit. Within 30 days of the closing meeting, the auditor will submit a draft report to the auditee, staff within the Ministry’s district and regional offices, the Ministry Divisional Support Branch (DSB) and FFC personnel. The auditor will also offer to make a summary presentation of audit findings to the LCC, First Nations and Métis communities that are in or adjacent to the MU being audited. The final audit report is to be submitted to the FFC and Ministry within 60 days of the closing meeting. The process to prepare the action plans in response to the findings raised in the IFA report occur after the report is accepted by the Ministry. The reporting process is depicted in Figure I below:

Figure I: IFA Process Timelines

To obtain an understanding of the effectiveness of the audit finding and reporting processes, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

1. the change from recommendations to findings is generally working well. Findings identify an issue but leave the solutions to people who have training and work in the business
2. findings related to minor operational issues are overshadowing the more important performance indicators and have little to do with the long-term sustainably of the forest
3. recent tendency for auditors not to make findings directed at MNR Corporate, because they go nowhere
4. IFA is not meeting intended objectives. Audit reports have less and less meaning with respect basic forest sustainability
5. the one-week interval between the completion of the field audit and the draft version of Appendix 1 of the audit report is sometimes too short
6. the general public is generally less aware of the IFA process than voluntary third-party certifications, in part due to the marketing initiatives of the SFL

Audit Report Findings:

There was overall consensus from workshop participants that the change from recommendations to findings was a better process, as recommendations issued previously did not always address the core of the issues identified or provide flexibility to address the risk. Participants noted that it was better for auditees to determine the root cause of the deficiencies and develop the recommended actions, rather than the auditors. Most respondents thought findings were clear enough to be actioned. If a finding is not clear, OIAD noted that there are several checkpoints in the reporting process where clarification can be requested.

However, some participants noted that IFA reports have less meaning with respect to identification of risks related to long-term sustainability. Findings were being raised that were not commensurate with risks. For example, too much emphasis was being placed on non-compliance with minor operational issues (for example, forestry aggregate pit slope, erosion on a road, perched culvert, etc.) without proper consideration as to whether these issues were systemic in nature. Non-compliance with installation of three culverts over a ten-year period has a very different risk profile compared with issues identified as part of the evaluation of the compliance system as a whole (for example, and whether there are processes to perform a sufficient number of inspections, resolve issues identified, maintain data and report on results, etc.). As a result, findings related to these types of minor operational issues may in some cases overshadow some of the more important risks to sustainability.

OIAD also noted that the IFAPP specifically states that findings of non-conformity will provide a comprehensive description of the situation observed relative to the audit criteria, without consideration of the significance of the underlying risks and/or evaluation as to whether this is an isolated incident or part of issues that are systemic to the MU as a whole over the period under scope.

Consideration # 11:

The Ministry should consider updating the IFAPP to require that findings be more risk-based through consideration of impacts that are more systemic in nature.

Reporting Timelines:

With respect to the reporting timeframes, participants noted that final reports were being published in a timelier manner, largely due to the elimination of the requirement to table the final audit report before the legislature. However, some concerns were raised in regard to the one-week turnaround that was required to present a draft version of audit report Appendix 1 (findings). In some cases, it was noted that auditors were rushed to produce the draft findings one week after the end of the field audit and that, perhaps if more time was allotted to this phase of the process, better quality draft reports would result with less edits required thereafter. Furthermore, OIAD notes that going forward with the increased audit scope as a result of the Ministry’s decision to move to a ten- year audit cycle, this may further strain the ability to meet the current reporting draft reporting timeframes.

Consideration # 12:

The Ministry should consider revising the time allotted for auditors to prepare the draft version of audit report Appendix 1 (technical findings).

7. Action Plans

One of the fundamentals of an effective audit is the inclusion of a process that enables assurance that the findings made by the auditor are acted upon by the auditee. The elements of such a process include defining and documenting the specific activities that are to be implemented to address the findings, timeframes to implement the activities and who is responsible for implementation. In addition, a follow-up process must be established to monitor and ensure that the planned actions have been effectively implemented to mitigate the risk exposures identified.

Development of Action Plans:

Section 9 the Regulation provides that the Minister of MNR may require the forest manager of a MU to participate in the preparation of an action plan to address findings included in an IFA report. Action plans describe how the findings made by the auditor will be addressed by the Ministry and the forest manager after the final IFA report is accepted.

The IFAPP prescribes the process to develop action plans through performance of an analysis which identifies the root cause of the finding, action(s) required to address the finding and the responsible entities. As the Minister’s authority under section 9 has been delegated to the Director of the Ministry’s DSB, action plans are to be prepared within three months of the Director, DSB determining that such a plan shall be prepared and approved by the applicable Ministry Regional Director.

To obtain an understanding of the effectiveness of the processes used to develop action plans, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

1. Ministry corporate findings tend to be poorly actioned. More specifics are required in their action plan
2. development of action plans depend on how well the cause analysis was done. Cause analysis is done to different degrees across the regions
3. action plans have frequently been insufficient and often slowly implemented. Problems identified in IFAs. persist for decades

Survey and workshop participants voiced frustration with the lack of transparency and accountability in actioning corporate findings. It was noted that where the root cause analysis identifies that the finding is deemed to be of a corporate or provincial nature, there may be a lack of effort to address and track these types of issues.

It was further noted that because there is no longer a requirement to prepare a Provincial Action Plan for the yearly IFA findings, corporate findings may be neglected. OIAD notes that at a strategic level, the corporate ministry is a participant in the IFA process and as such, it is important to ensure that corrective actions are developed and implemented to ensure accountability and improving the forestry management system as a whole. With IFA timeframes moving to 10-12 years between audits, this process becomes even more critical.

Consideration # 13:

The Ministry should consider instituting a process which requires timely development of action plans in response to corporate findings raised in IFA reports. To facilitate transparency and accountability of the follow-up process, such action plans should be publicly reported and include the actions to be taken, responsible party, and timeframe for implementation.

Consideration # 14:

The Ministry should consider developing a periodic process to review findings across all IFA audits and identify systemic issues that need to be corporately addressed.

Tracking of Action Plans:

The final element of the IFA process is to ensure that the action plans from the previous audits have been addressed by having an independent review of the actions carried out by the auditees. For the IFA process, this component is directed by the Regulation requirement that the auditor shall assess the effectiveness of any action plan implemented in the MU in response to a previous IFA report. As a result of the Ministry’s decision to move to a ten-year IFA cycle, this independent review is now conducted up to 10-12 years (during the next scheduled IFA) after the original audit.

In the interim before the IFA audit, auditees are required to report annually on progress towards the completion of action plans as part of Annual Report for each MU. In accordance with the IFAPP, the Annual Report shall:

1. describe each action that has been completed during the reporting period
2. reference the finding to which each action applies
3. note whether the action was completed by the assigned date, and by the entity and position title assigned responsibility for completing the action
4. discuss the extent to which the action was effective in addressing the finding

For action plans prepared in response to IFAs. conducted on a five-year cycle prior to 2018, auditees were required to complete an Action Plan Status Report detailing the progress of the implementation of the Action Plan within two years of the approval of the Action Plan.

OIAD was informed that the replacement of the requirement for an Action Plan Status Report with a requirement to annually report on progress towards the completion of actions in MU Annual Reports occurred to mitigate the effects of the decision to move to a ten-year IFA cycle. As the previous Action Plan Status Report was required to be completed approximately two years after the audit, in moving to a ten-year cycle, there would be no updates on the status of the action plans during the eight-year period following the completion of the Action Plan Status Report. Therefore, the Ministry made the decision to change the process and require auditees to provide an update of the action plan implementation status as part of the MU Annual Report, in order to provide perspective on how actions are addressed over the short and long-term periods.

To understand the effectiveness of processes implemented to track action plans, OIAD requested feedback from survey and workshop participants. Feedback is summarized below as follows:

1. recent changes to the status reporting requirements cloud accountability. Action plans were previously public documents, so results could be readily tracked in the Action Plan Status Report. However, responses to the audit are now included in the licensee’s Annual Report, where it has the potential to get buried
2. there is no formal follow-up to check how findings are being actioned in between IFA audits. More information on the implementation of action plans is needed
3. addressing actions in a “timely manner” has been made irrelevant with the 10- year time span between audits
4. IFA implementation of action plans has been falling through the cracks and aren’t being monitored to ensure they are being completed in a timely manner before the next IFA
5. tracking of corporate findings is not sufficient since the Ministry does not have to report on the status of their action plans (that is, no requirement to prepare a Provincial Action Plan for the year’s findings for all audit assignments)
6. there is no work done corporately to address system problems across many audits (for example, a lot of money is invested in silviculture and the program is not followed)

Comments from workshop participants highlighted the concerns around the transparency and visibility of the status updates. OIAD noted that each forest manager publishes their Annual Reports on their respective websites and the Ministry’s Natural Resources Information Portal. As the Annual Reports are already lengthy documents which summarize the progress to date in meeting the planned level of activity described in the FMP, any significant events affecting the implementation of the FMP, monitoring and assessment activities, forest operations inspections and any instances of non- compliance, the status reporting gets lost in a much larger reporting process.

While OIAD recognizes the changes made by the Ministry to require that auditees provide annual updates on the status of the action plans in the Annual Reports, the reporting process alone is not sufficient to validate that the actions were appropriately completed as required in an effective manner to timely mitigate the risks identified. Waiting for up to 10-12 years for the next IFA audit to assess whether the appropriate actions were taken in response to findings is not an effective mechanism to ensure that the risks are being effectively mitigated.

Consideration # 15:

The Ministry should consider developing a process to track corporate actions and validate both the corporate and forest managers’ completed actions.

8. Move to 10-Year IFA Cycle

OIAD was informed that the Ministry evaluated several different policy options regarding the frequency and scope of IFAs., with the objective of reducing total program costs and workload for the forest industry. The goal was to reduce the number of IFAs. and/or associated workload while seeking to improve audit effectiveness and ensure that Ontario’s managed Crown forests continue to be administered in accordance with the CFSA. After consideration of various policy options, the Ministry made the decision to move from a five-year IFA cycle to a ten-year cycle. The new Regulation revoked and replaced Ontario Regulation 160/04, effective July 1, 2020, to move to the ten-year cycle with Minister discretion to extend the IFA for an additional two years. While the decision has been made to move to a 10–12-year cycle, the audits undertaken to date do not yet cover the entire 10–12-year timeframe as part of the audit scope. As time progresses, the audits will eventually include the entire 10–12-year timeframe.

During our engagement, OIAD requested input from survey and workshop participants as to whether the changes to the timing of the IFA audit cycle yielded the expected benefits, whether there were any challenges or concerns with the revised IFA timeframes and whether there were any opportunities for improvement. Feedback from survey respondents and workshop participants are summarized below as follows:

1. ability to access to sites, records and staff will be adversely impacted with the longer cycle. There will likely be little accountability for past actions
2. effectiveness of the risk assessment process will be impacted due to staff turnover, as the process relies on experienced staff and corporate memory to identify risks to the auditors
3. apart from a general forest overview, the field inspections will become somewhat meaningless (for example, looking at ten-year-old culverts). The forest manager and the ministry cannot afford to wait for a once a decade visits from auditors to identify problems that might put sustainability at risk
4. audit findings issued as part of a previous IFA will not be assessed until 10–12- years later
5. there are many cost inefficiencies associated with the longer audit cycle (for example, increased use of helicopter time due to access constraints and more work required as a result of the doubling of audit scope). It is unlikely that cost savings will be realized
6. the 10–12-year cycle is too long and inhibits assessment of actions necessary to maintain sustainability. If something goes awry in management on a specific forest in year two, by year 10 or 12 there could be a significant issue
7. audits performed in a five-year cycle were resulting in insignificant and repetitive findings which did not seem to justify the workload, resources and costs incurred
8. a few more years of IFA audits are required before an analysis of the impacts from the change to a ten-year cycle can be undertaken
9. moving from a five to a ten-year cycle is not as concerning because of the quality of the compliance monitoring system and third-party certifications (for example, from Forest Stewardship Council, Sustainable Forestry Initiative and Canadian Standards Association, Sustainable Forest Management) of many MUs (which require annual audits)

After considering the commentary that was received and reviewing documents prepared by Ministry in support of the analysis of the policy options, OIAD noted that there are several risks which need to be further evaluated and considered in terms of the impact to the quality and effectiveness of the IFAs. going forward.

In making the decision to double the scope of an audit from five years to ten years, the risk is increased that adequate information may not be retained and/or available to support gathering the evidence required to conduct the audit. Moreover, given the longer timeframe of the audit, there could be several changes which would increase the complexity of the audits. Changes during the extended period covered by the audits could arise to the forestry sites, from the planned operations (for example, FMPs, forest management objectives, contingency plans, etc.) and/or regulatory requirements (per the Act, manuals, and guides), which could necessitate more assumptions to have to be made and impede the ability of auditors to review specific forest operations. Furthermore, there is a higher probability of turnover in auditee personnel required to support the IFA audits. For example, key auditee staff within both the forest manager organization and the Ministry may no longer be employed to explain operational matters from up to ten years ago. After ten years, access to certain sites within an MU may no longer be possible because roads may not be maintained or have been decommissioned.

To reduce the administrative burden to industry and the ministry, the move to a ten-year cycle reduced the number of audits from an average of 9 per year to 4 per year. The doubling in audit period from five years to ten years contributes to the administrative workload savings because audits now include ten years of operations (in comparison to two audits which would have each covered five years). However, more time may be required to complete the audits as the scope of audit procedures and sampling requirements have remained unchanged with the introduction of the new ten-year IFA audit.

In regard to the IFAPP procedures, the Ministry has not yet updated the IFAPP to incorporate any changes to procedures which may be deemed required as a result of the decision to move to a ten-year cycle. OIAD notes that the current operational audit procedures that are included within the IFAs. may no longer be suitable considering the longer timeframe of the audits. Assessments related to whether certain operational activities were correctly performed at a particular point in time over the ten-year timeframe of the audit (for example, were the planted trees spaced correctly, was the culvert installed correctly, was the road constructed correctly, was the forestry aggregate pit properly sloped, etc.) may become somewhat irrelevant because of changes to regulatory requirements and/or processes and turnover in personnel. These types of procedures only provide feedback on operations at a certain point in time. With the longer timeframe of the audits, the IFAPP should be more focused on whether the auditees have sufficient processes in place to ensure compliance with the FMPM, FMP, FIM and other required policies. For example, are there processes established and effectively operating to collect accurate data, monitor results, perform compliance inspections, and correct issues that are identified? These types of procedures would necessitate increased review and scrutiny of historical documents, processes, and interviews with staff to understand whether the forestry operations are being effectively managed in a sustainable manner.

OIAD further notes that decreasing the number of annual audits from nine per year to four per year could negatively impact the already small pool of auditors available to conduct the audits, as there could be a decreasing interest from audit firms seeking to provide this service.

While the Ministry has eased the regulatory burden to the forest industry through a reduction in number of IFAs. required, it is interesting to note that the forestry companies are still voluntarily undertaking third-party certification audits for their forestry operations. SFLs can choose to be certified to a wide range of responsible forest management standards such as the Canadian Standards Association (CSA), the Sustainable Forestry Initiative (SFI), and the Forest Stewardship Council (FSC). These certifications are voluntary and are a tool designed to provide assurance to buyers, consumers, and other interest groups that the forest products are sustainably sourced and produced from well-managed forests. OIAD was informed that forestry companies are required to undertake four annual surveillance audits as part of maintaining these certifications for a five-year period. OIAD notes that the IFAs., which are now conducted every 10–12-years, may not continue to remain relevant given the third-party forestry certification audits that are conducted annually.

Consideration # 16:

With the move to the 10-year cycle, the Ministry should consider assessing the corresponding updates which may be required to the IFAPP as a result of the longer audit period.

Consideration # 17:

The Ministry should consider undertaking a comprehensive review of the impacts to the IFA process as more audits are being completed with longer timeframes to monitor and assess risks associated with the decision to move to the ten-year cycle.

Appendices

Appendix A: Background

Ontario’s Crown forests are managed through a legal and policy framework that has sustainability, First Nation and Métis community involvement and consultation, public involvement, and adaptive management as key elements of the process. Ontario’s forests encompass more than 70 million hectares and cover almost two-thirds of the province. Approximately 80% of Ontario’s forests are on Crown land and governed by the Crown Forest Sustainability Act (CFSA). The remaining forests are either privately owned or owned by First Nations, provincial or federal parks. Forest management of public land in Ontario occurs in an area in the middle of the province known as the Managed Forest. The Managed Forest is divided into geographical planning areas called Management Units (MU) that range in size from 300,000 to 3.6 million hectares, as depicted in Figure I, 36 (includes Algonquin Forestry Authority and 2 Local Forest Management Corporations) of the 39 MUs are managed by forest management companies operating under 20-year Sustainable Forest Licence (SFL) that are subject to renewal every 5 years. Three MUs are managed by the Crown.

Figure II: Management Units in the Managed Forest Area of Ontario

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The CFSA regulates the protection and sustainable use of Ontario’s forested lands. To guide the achievement of sustainable forest management, in conjunction with the CFSA, there is also:

• supporting regulations, policies, manuals, and guides
• a requirement for each MU to prepare a Forest Management Plan. A FMP outlines the objectives over a ten-year period for a MU and what forest operations may be completed over that time to achieve those objectives while ensuring the province’s Crown forests are sustainably used. Preparing a FMP is a rigorous process spanning three years and involving stakeholder, public and Indigenous community involvement at various stages. The FMP must be completed in accordance with the Forest Management Planning Manual, which provides the authoritative direction for forest management planning in Ontario
• a compliance program to monitor forest operations
• public reporting on the status of all aspects of forest management
• forest trusts which provide funding for renewing forests
• independent forest audits (IFAs) completed by independent auditors

The Independent Forest Audit (IFA) is an integral part of Ontario’s forest policy framework and provides assurance as to whether the forests are well managed. The Ontario Regulation 319/20 Independent Forest Audits (the Regulation) under the CFSA (which replaced Ontario Regulation 160/04 in 2020) sets out the requirements for IFAs. and requires that the forest management practices in each MU be assessed at least once every 10–12 years through an IFA. The Independent Forest Audit Process and Protocol (IFAPP), developed by the Ministry, provides auditors with guidance in meeting the requirements of the Regulation.

The Ministry informed OIAD that the Ontario Regulation 160/04 was replaced to:

• provide for more timely public reporting by replacing to the requirement to table audit reports in the legislature with a requirement to make them available online
• establish a ten-year audit period with the possibility of a 2-year extension
• expand on the circumstances that may be taken into consideration in granting extensions
• provide flexibility in scheduling audits and in determining how many are conducted annually
• replace the action plan status report with a requirement to report on the completion of actions in management unit annual reports
• update regulatory language to align with the current administrative and policy framework

The IFA is conducted by a team of at least three independent auditors, with at least one team member who is a Registered Professional Forester, and who possess the skills, knowledge, experience, and professional credentials necessary for the proper conduct of a forest audit. The IFA requires auditors to:

1. assess to what extent forest management and forest management planning activities complied with the Act, supporting regulations, manuals under subsection 68 (10) of the Act, and any approved forest management plans
2. assess the effectiveness of forest management activities in meeting the forest management objectives set out in the forest management plan
3. compare the forest management activities that were carried out with those that were planned
4. assess the effectiveness of any action plan implemented in response to a previous forest audit report
5. review and assess a licensee’s compliance with the terms and conditions of a forest resource licence
6. assess whether the management unit has been managed in a manner consistent with the principles of sustainability as set out in subsection 2(3) of the Act

Appendix B: Objectives, Scope, and Criteria

The objective of this advisory engagement was to review the implementation of Ontario Regulation 319/20, Independent Forest Audits, and identify opportunities for improvement. This included consultation with various internal and external stakeholders to obtain feedback on whether IFAPP met the requirements of the CFSA, the Regulations and the regulated manuals pursuant to section 68(1) of the CFSA.

The scope of this engagement included review of the IFAPP (dated December 2021) and covered key components of the IFA process, including:

• roles and responsibilities of key parties
• audit team qualifications
• audit contract management
• administration and implementation of the IFA program
• application of the IFAPP and identification of any inconsistencies between the IFAPP and other sources of information used in the audits
• sufficiency and appropriateness of information to support conclusions
• reporting of audit results
• tracking of status reports and progress towards addressing actions

The criteria for this advisory engagement were based on the Canadian Auditing Standards 200, developed by the Chartered Professional Accountants of Canada. This standard defines the auditor’s overall responsibilities when conducting an audit, such as:

• compliance with ethical requirements, including those related to independence, integrity, objectivity, professional competence, due care, and confidentiality
• conducting an audit in accordance with laws, regulations, and any regulated manuals
• planning the audit so that it will be performed in an effective manner and focusing audit effort to areas most expected to contain risks of material misstatement, whether due to fraud or error, with correspondingly less effort directed at other areas
• exercising and documenting any application of professional judgement when planning and performing an audit (for example, materiality, nature, timing, and extent of audit procedures used to meet audit objectives)
• obtaining sufficient appropriate audit evidence to provide a basis for the auditor's opinion about the achievement of the objectives
• communicating the results of the audit

Appendix C: Approach for the Review of the IFA

Our review of the Independent Forest Audit (IFA) was guided by the requirements of Ontario Regulation 319/20, Independent Forest Audits (Regulation) and the current audit process, as prescribed by the Independent Forest Audit Process and Protocol (IFAPP), dated December 2021. The IFAPP, developed by the Ministry, provides guidance to auditors in meeting the Regulation and describes key processes and procedures related to planning the audit, conducting the audit, communicating audit results, and completing action plans to address any findings from an IFA.

Working with the Ministry, the approach used by the Ontario Internal Audit Division (OIAD) was as follows:

• identified key participants involved with the IFA process (such as the Forestry Futures Committee (FFC), various branches of the Ministry, forest managers, Local Citizens Committees (LCCs), IFA auditors) as well as, First Nations, and Métis communities to understand their roles and responsibilities with respect to the IFA process
• to allow interested parties with an opportunity to provide input and feedback based on their experiences with the IFA process, First Nations and Métis communities, forest managers, IFA auditors, LCCs, Ministry staff and the public at large were notified that OIAD was conducting the review of the IFA using the Environmental Registry of Ontario
• prepared a survey, which was distributed to interested parties, to obtain their comments and perspectives regarding key aspects of the IFA process. A total of 36 responses were received and reviewed to identify key themes which were used as a basis for facilitated discussions with participants. In preparation for discussions with the Ministry, the summarized results from the surveys were also included in a pre-workshop package that was distributed to Ministry participants
• conducted six targeted facilitated discussions covering key facets of the IFA with representatives from the FFC, Ministry branches and forestry industry, along with one broader consultation session for any others who expressed interest in providing feedback. As part of each of the sessions, OIAD presented a summary of the key points which were brought to our attention through the review of IFA survey responses, supporting documents and discussions with the Ministry before soliciting feedback from each group

Appendix D: Acronyms

Table V: Acronyms