Letter from the Auditor General to the Secretary of the Treasury Board

5 March 2009

Mr. Wayne Wouters
Secretary of the Treasury Board of Canada
L'Esplanade Laurier - Floor: 09EE
140 O'Connor Street
Ottawa, Ontario  K1A 0G5

Dear Mr. Wouters, 

In recent discussions, I have indicated that my Office will be undertaking certain audit work related to the government’s Economic Action Plan. While we are only at the stage of very preliminary planning, and the exact nature of the work to be carried out will depend on several factors, I thought it might be useful to provide you with some comments on certain elements that the Government of Canada could take into account when designing and implementing its Economic Action Plan (Budget 2009), as well as the types of audit objectives and criteria that we would consider.

I appreciate that managers will face challenges in implementing the Plan, given the very tight time constraints. They will need to balance the government’s wish to move quickly with the requirement to exercise due regard; this will require a sound analysis of risk, and appropriate delivery mechanisms commensurate with those risks. The program design—notably the degree of flexibility and the specificity of eligibility criteria—will be a critical aspect of managing the Plan. As it is likely that most of the expenditures will be in the form of transfers, it will be important that the federal government adhere to its own Policy on Transfer Payments.  The choice of transfer mechanism should be appropriate to the associated risks. 

Coordination and integration will present challenges both within and across levels of government. The federal government will have to work very closely with the provinces, territories, and communities. It will be critical that the government be able to work effectively with other parties to provide timely and useful information for decision-making.

The government must ensure effective management and control over the spending of public money. One possibility to consider would be establishing a high-level coordinating committee that would provide the necessary oversight, stipulate what higher-level information will be required to manage the expenditures appropriately, and provide guidance on adapting program management as necessary. 

The government’s chief financial officers will no doubt play a critical role in managing risks and assuring compliance. The government should also expect its internal audit community and departmental audit committees to play a key role in providing assurance that the governance, risk management, and control frameworks established by federal departments and agencies are adequate. We would be pleased to coordinate our audit work with that of internal auditors and, where possible, take their work into account in our planned audit.

Before we begin any audit, we discuss the criteria we will use with management. In that vein, I am providing some more detailed expectations below that would be important considerations in future audit work related to the Economic Action Plan.

We would expect to see the following:  

Program design and accountability

• Programs under Canada’s Economic Action Plan are appropriately planned and monitored.
• Eligibility criteria are explicit and clear enough to reduce the potential for confusion about which projects/expenditures qualify.
• An appropriate risk-based framework for governance, risk management, and control is established.
• There are clear operational objectives that define "success" of the programs and provide the basis for program implementation.
• Accountability frameworks are developed, documented, and clearly communicated, including assignment of responsibility for achieving results.
• Mechanisms are in place to ensure that federal responsibilities related to environmental assessments are respected.
• Costs are tracked and reported accurately and in a timely manner.
• The federal government identifies at an early stage the kinds of data that will be needed in order to measure and report on results.
• The results reported to Parliament by the federal government are reliable.

Management frameworks

• Decision-making is supported by sound, documented, risk-assessment processes. The federal government clearly defines the nature of the risks, and it documents those risks that it accepts and the rationale for doing so. 
• Clear and well-defined eligibility and selection criteria are documented, commonly understood, and applied consistently to ensure that eligible projects with the highest merit are funded.
• Appropriate investments are made in management systems and practices to provide the necessary support. The federal government will need to ensure that the capacity and skills are in place in the departments and agencies tasked with these new responsibilities. 

Compliance with legislation

• Financial and management control of program expenditures complies with legislation and core controls such as the Federal Accountability Act and sections 32, 33, and 34 of the Financial Administration Act.
• The federal government ensures that projects comply with relevant environmental legislation.

In all our audits, the criteria we use are based mainly on the government’s own rules. Should the government decide to modify its normal processes in delivering the Economic Action Plan, we would expect the rationale to be clearly documented and accountabilities to be clear.

I hope this early information on what the government might expect us to look for in audit work related to the Economic Action Plan will prove beneficial.

Yours sincerely,

Sheila Fraser, FCA