Helping Parliament Hold Government to Account—Legislative Auditing
In Canada’s parliamentary system, legislatures are responsible for overseeing government activities and holding governments accountable for their handling of public money.
Legislative auditing plays a central role in holding governments to account. It provides independent, fact-based information, advice, and assurance that legislatures can draw on in their scrutiny of government spending and performance. Elected representatives need this independent reporting so they can effectively question or challenge the government on its actions.
In Canada, the Office of the Auditor General is responsible for legislative auditing of the federal government. It also audits the three territorial governments. The Office carries out three main types of legislative audits.
Performance audits (formerly known as value-for-money audits) answer these questions:
- Are programs being run with due regard for economy, efficiency, and environmental impact?
- Does the government have the means in place to measure their effectiveness?
Performance audits do not question the merits of government policies. Rather, they examine the government’s management practices, controls, and reporting systems based on its own public administration policies and on best practices. The Office reports its findings, which may include areas that are working well and recommendations for improvement.
For more information on performance audits, see the fact sheets Choosing Topics for Performance Audits and Managing Performance Audits—From Planning to Reporting.
Financial audits answer the question: Is the government keeping proper accounts and records, and presenting its financial information fairly?
Every year, the Government of Canada publishes the Public Accounts of Canada, which contain the government’s annual financial statements. The Auditor General provides an opinion as to whether these financial statements are fairly presented in accordance with the government’s stated accounting policies. The Auditor General also conducts annual financial audits of the three northern territories, most Crown corporations, and many federal organizations.
Financial audits of the federal government are similar to those done in the private sector, except that they have two additional components. First, many include an opinion on whether transactions examined by the auditors conform to laws and regulations. This tells Parliament whether the organization complied with authorities. Second, the Auditor General is able to report on any other matters he thinks should be brought to the attention of Parliament.
In financial audits, auditors test whether financial transactions support the amounts and disclosures in the financial statements. Audit procedures may include comparing the results of operations with planned results, assessing the reliability of a department’s financial control systems, and checking samples of transactions and balances. Auditors supplement these audit tests by further analysis and discussions with management.
Special Examinations of Crown Corporations
Special examinations of Crown corporations are a form of performance audit where the scope is set by law to include the entire corporation. In them, the Auditor General provides an opinion on the management of the corporation as a whole.
Special examinations answer the question: Do the corporation’s systems and practices provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively?
Under the Financial Administration Act, federal Crown corporations are subject to a special examination at least every 10 years. The Auditor General audits most, but not all, Crown corporations.
At the start of a special examination, the corporation’s audit committee receives the audit plan, which includes the criteria that will be used in the audit. When the special examination is complete, the Office submits its report directly to the corporation’s board of directors. In exceptional cases, the Office submits its report to the responsible minister and Parliament.
In March 2009, the Budget Implementation Act amended the Financial Administration Act to add measures that introduce new governance rules for Crown corporations. The board of directors is now required to submit special examination reports to the appropriate minister and the President of the Treasury Board within 30 days of receiving them. The board of directors is also required to make the reports available to the public within 60 days of receiving them.
Special examination reports are available on Crown corporations’ websites.