Independent Audit Flags Compliance Shortfalls in Government Agency’s Cyber Posture under New Regulation

The Challenge

When the National Infrastructure Development Agency (NIDA) underwent its first comprehensive cybersecurity compliance audit under the new Canadian Digital Security Governance Framework (CDSGF), few within the department anticipated major findings. The agency, responsible for overseeing critical federal infrastructure projects, had long prided itself on transparency and procedural rigor. However, the audit revealed a different story. One of systemic gaps, inconsistent controls, and a compliance posture misaligned with modern regulatory expectations.

The independent audit, commissioned by the Treasury Board Secretariat, evaluated NIDA’s adherence to the updated federal cybersecurity standards introduced under the Directive on Service and Digital. These standards required public bodies to enhance safeguards for sensitive citizen and project data, align with PIPEDA-equivalent principles, and adopt continuous monitoring practices.

Auditors found that NIDA’s control framework remained anchored in outdated policies that predated the reforms. Documentation was incomplete, risk registers had not been updated in over a year, and vulnerability assessments were irregular. Even more concerning, the agency’s internal incident response team operated without a defined escalation protocol. This gap increased the likelihood that breaches could go undetected or unreported, violating federal breach-notification requirements.

The audit also exposed weaknesses in third-party management. Several service providers handling infrastructure data lacked signed confidentiality agreements referencing the new regulatory requirements. Some subcontractors had not completed mandatory background checks, despite having access to information classified as “Protected B.” These deficiencies represented potential violations of both PIPEDA and the Policy on Government Security (PGS), exposing NIDA to compliance penalties and reputational risk.

When the final report was delivered, auditors identified “material weaknesses” in governance, risk management, and control assurance. They concluded that NIDA’s cybersecurity framework, while functional, did not provide “reasonable assurance” of compliance with the CDSGF. Executives were particularly concerned about findings showing inadequate segregation of duties within IT operations—a control essential to preventing insider misuse.

The impact was swift. The Treasury Board temporarily suspended certain digital integration projects until remediation was verified, and the Office of the Privacy Commissioner initiated a review of how NIDA handled personally identifiable information in its reporting systems. Public and media scrutiny followed, with growing concern about whether taxpayer data had been properly safeguarded.

Inside NIDA, morale declined as staff faced pressure to correct years of outdated processes and fragmented governance. The audit’s conclusion was clear: without immediate modernization and accountability, the agency risked not only regulatory non-compliance but also a significant erosion of public trust.

Our Solution

Service Area: Audit and Attestation with Compliance Remediation Enablement Our engagement focused on restoring compliance assurance and rebuilding governance maturity. We applied an evidence-based remediation approach aligned with the Treasury Board Policy on Service and Digital, the Policy on Government Security (PGS) and Directive on Security Management (DSM), the GC Cyber Security Event Management Plan (CSEMP), the Privacy Act, and PIPEDA as a third-party benchmark. Key actions included:

  • Governance and accountability: Established an executive-led remediation steering committee, appointed a Designated Official for Cybersecurity (DOC), and approved a new risk appetite statement aligned with Treasury Board requirements.
  • Control mapping and closure planning: Mapped existing controls to updated policy and legislative requirements, creating a prioritized remediation roadmap for high-risk areas such as segregation of duties, incident escalation, and continuous monitoring.
  • Incident response enhancement: Developed a standardized incident response playbook, including breach-notification triggers tied to the GC CSEMP. Quarterly tabletop exercises were introduced with audit-ready documentation.
  • Third-party risk management: Updated all vendor and subcontractor agreements to include security, privacy, and breach-notification clauses, audit rights, and data-residency assurances. Mandatory background checks were required for all contractors handling Protected B data.
  • Access and vulnerability management: Implemented multi-factor authentication (MFA) for privileged accounts, introduced dual-control approval for administrative changes, and defined patching and configuration baselines with strict service-level agreements (SLAs).
  • Evidence and assurance cadence: Created a centralized repository of audit evidence, including control documentation, system logs, and test results. Quarterly internal audits were scheduled to maintain assurance readiness.

The Value

  • Regulatory assurance restored: 18 of 22 material weaknesses (82%) were remediated in the first cycle. Remaining items were tracked with defined owners and closure timelines.
  • Reduced risk exposure: MFA was implemented for 100% of privileged users, and administrative dual-control reduced insider misuse risk by an estimated 65%.
  • Improved detection and reporting: The mean time to detect (MTTD) dropped from weeks to less than 24 hours through new escalation workflows and continuous monitoring.
  • Vendor compliance: 95% of vendors executed updated privacy and security clauses. All contractors handling Protected B data completed mandatory background checks.
  • Enhanced governance transparency: A digital risk register now provides executives with real-time visibility into control health, audit readiness, and compliance metrics—strengthening both accountability and public confidence.

Implementation Roadmap

Phase 1 – Stabilization (Weeks 0–4)
1. Confirm accountable executives, charter remediation committee, and formalize the risk appetite statement.
2. Complete control-to-requirement mapping across the Directive on Service and Digital, PGS, DSM, Privacy Act, and PIPEDA frameworks.
3. Establish a centralized audit evidence repository.

Phase 2 – High-Risk Remediation (Weeks 5–12)
4. Deploy MFA for all privileged accounts, implement dual-control for administrative functions, and conduct the first access recertification.
5. Finalize incident response playbooks with breach-notification triggers and escalation paths. Conduct the first tabletop exercise and retain documentation.
6. Launch monthly vulnerability scans, enforce patching SLAs by severity, and establish baseline configuration monitoring.
7. Update supplier contracts to include security clauses, audit rights, and background verification for all Protected B handlers.

Phase 3 – Institutionalization (Weeks 13–20)
8. Rebuild the enterprise risk register with defined ownership, key risk indicators (KRIs), and remediation tracking.
9. Conduct internal quality assurance audits to validate closure of high-risk findings.
10. Train departmental control owners on evidence management and ongoing compliance reporting.

Phase 4 – Continuous Improvement (Quarterly)
11. Perform quarterly internal audits to verify compliance with Treasury Board and Privacy Act obligations.
12. Refresh tabletop exercises and review supplier attestations for contract renewals.
13. Monitor performance metrics including MTTD, vendor compliance rates, and baseline drift, feeding results into continuous improvement cycles.