Opening Statement to the Standing Committee on Public Accounts

2008–09 Performance Report and 2010–11 Report on Plans and Priorities of the Office of the Auditor General of Canada

11 May 2010

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chair, we are pleased to be here and would like to thank you for this opportunity to discuss our 2008–09 Performance Report and our 2010–11 Report on Plans and Priorities.

With me today are John Wiersema, Deputy Auditor General, and Lyn Sachs, Assistant Auditor General of Corporate Services and Chief Financial Officer.

Each year we are privileged to contribute to Parliament's oversight of government spending and performance with the objective information, advice, and assurance that result from the performance audits, financial audits, and special examinations we conduct.

All of our audit work is conducted in accordance with the standards set by The Canadian Institute of Chartered Accountants. Our work is guided by a rigorous methodology and quality management system, and it is subject to internal practice reviews and to external reviews by peers. All of this provides assurance that you can rely on the quality of our work.

2008–09 Performance Report

During the 2008–09 fiscal year, the period covered by our most recent performance report, we used $84.4 million of the $87.9 million in parliamentary appropriations available to us. We employed the equivalent of 628 full-time employees, just under our budget of 635.

Using these resources, we completed 148 audits, including 32 performance audits of various federal and territorial departments and agencies, 8 special examinations of federal Crown corporations, and 108 financial audits.

Our 2008–09 Performance Report contains a number of indicators of the impact of our work and measures of our performance. The tables containing our targets and actual performance for these indicators and measures are attached to this statement as Appendix I.

For the 2008–09 fiscal year, our performance report shows that almost all of our indicators of impact remained positive. It also shows that our on-time performance remained good, but our on-budget performance left some room for improvement. We have started to see improvements in our on-budget performance for financial audits, and I can now say that for 2009–10 we will likely meet all of our targets for this indicator. As you will note, we have increased these targets for 2010–11.

Our performance report also shows that our internal practice reviews identified a number of instances where our Quality Management System was not applied consistently and rigorously and where improvements should be made.

As you may recall, an International Peer Review team is reviewing our audit practices and support services. The preliminary peer review findings are similar to those of our internal practice reviews. We anticipate receiving the final report in June.

We are not satisfied with these results. I will outline shortly a major project we are undertaking that will address both this situation and the adoption of international accounting and auditing standards.

2010–11 Report on Plans and Priorities

With respect to our 2010–11 Report on Plans and Priorities, let me begin by saying that, in light of the current economic situation, we plan to take the same course of action for this fiscal year as we did last year and not request any additional funding. Our planning includes continuing our efforts to reduce our total expenses and delivering fewer performance audits—24 in 2010 as compared with 30 in 2009. Appendix II, attached to this statement, provides an updated list of our planned performance audits and special examinations for the coming years.

In Budget 2010, the government stated that departmental operating budgets are frozen at 2010–11 levels for the next three years and that departments are expected to absorb the economic increase of 1.5 percent in salaries. We estimate that the impact of this latter decision will require us to find a further $860,000 in savings for 2010–11. Given this requirement, we have reviewed and prioritized the work carried out by my Office to identify any assignments or areas that could be reduced or eliminated.

As a result of this review, we have recently communicated to the Comptroller General that we will not audit departmental-level financial statements. In addition to the issue of funding, we reached this decision after considering the delays in the readiness of the largest government departments to have their financial statements audited, as well as the lack of a formal government policy on audited departmental financial statements.

The adoption of international standards in 2010 and 2011 will lead to significant changes in accounting and auditing in Canada. And as I mentioned a moment ago, we also need to make improvements to our Quality Management System and its application in our audits. In response, we have launched a major project—a Renewal of Audit Methodology—that will continue until December 2011. This project involves the development or updating of four audit manuals—one on matters common to all of our audits and three that are specific to our product lines. The project also includes developing or updating all of our supporting tools, templates, checklists, and audit procedures. In addition, it includes the necessary change management activities, including revamping the training of our audit staff to ensure that our methodology is put into practice and implementing procedures to ensure that it is kept up to date.

The project involves $3 million of out-of-pocket costs, largely for translation costs, and a significant amount of staff time over the next two years. Staff time includes the time spent to develop the material, take the training, and provide project management.

Our people are very important to our success. While we have been recognized as one of Canada's Top 100 Employers for the past three years and one of Canada's Top 20 Family-Friendly Employers for a second consecutive year, we foresee continuing challenges.

In recent years, the market for auditors and accountants has seen both increased demand and limited supply, affecting both the private and public sectors. We expect this competitive market to continue and to result in significant pressure on compensation.

Finally, we would like to inform the Committee that we have recently had difficulties with access to information when conducting our audits. Officials have refused information that we requested, have redacted it, or have provided it very late. Some members will recall a similar situation in 2006. An order-in-council was prepared then that was supposed to resolve this type of conflict; however, it has been interpreted very narrowly by officials.

Senior government officials have recently agreed that there has been a problem with the interpretation of the order-in-council and that steps must be taken to resolve this matter immediately. As a result, the Secretary of the Treasury Board will be providing this week instructions to deputy ministers and to departmental legal counsels in order to provide clarity on our rights of access. I am pleased with the attention that senior officials have paid to this issue and believe it will resolve the matter.

In conclusion, Mr. Chair, my staff and I appreciate your ongoing interest in and support for our work. My colleagues and I look forward to continuing to support you in holding the government to account for its management of public funds.

Thank you, Mr. Chair. We would be pleased to answer your questions.

Appendix I

Summary of our indicators of impact

Objectives and indicators

2007-08
Actual

2008–09
Actual

2008–09
Target

2010–11
Target

Our work adds value for the key users of our reports

Percentage of audit committee chairs who find our financial audits add value

87

85

75

90

Percentage of parliamentary committee members who find our performance audits add value

97

n/aFootnote1

90

90

Percentage of board chairs who find our special examinations add value

75

97

90

90

Our work adds value for the organizations we audit

Percentage of Crown corporation and large department senior managers who find our financial audits add value

83

83

75

80

Percentage of departmental senior managers who find our performance audits add value

55

75

65

70

Percentage of Crown corporation chief executive officers who find our special examinations add value

96

84

75

80

Key users of our reports are engaged in the audit process

Number of parliamentary hearings and briefings we participate in

33

35

maintain or increaseFootnote2

maintain or increaseFootnote2

Percentage of performance audits reviewed by parliamentary committees

56

57

maintain or increaseFootnote2

maintain or increaseFootnote2

Key users of our reports and the organizations we audit respond to our findings

Percentage of reservations that are addressed from one financial audit to the next

57Footnote3

11Footnote4

100

100

Percentage of performance audit recommendations substantially or fully implemented four years after their publication (as reported by departments)

84

90

75

75

Percentage of significant deficiencies that are addressed from one special examination to the nextFootnote5

50

n/aFootnote6

100

100

  • 1 The survey of parliamentarians was not carried out in 2008–09. Return to reference 1
  • 2 There is no numeric target for these indicators as they depend on the number of sitting days and other factors beyond our control. Return to reference 2
  • 3 The result for 2007–08 is restated because compliance-with-authorities reservations and "other matters", as well as accounting and financial auditing reservations, are now included in the calculation of the indicator. Return to reference 3
  • 4 We issued 108 financial audit opinions which contained eight reservations. There had been nine reservations in 2007-08 of which only one was addressed. Return to reference 4
  • 5 In light of the change in the Financial Administration Act to the frequency of special examinations, we will be reviewing the appropriateness of this indicator. Return to reference 5
  • 6 For all eight special examinations completed in 2008–09, they either did not have significant deficiencies in the previous special examination, or there was no previous special examination as they were newly created Crown corporations. Return to reference 6

 

Summary of our organizational performance measures

Objectives and indicators

2007-08
Actual

2008–09
Actual

2008–09
Target

2010–11
Target

Our work is completed on time and on budget

On time

Percentage of financial audits completed on timeFootnote7

  • federal Crown corporations with statutory deadlines

100

91

100

100

  • other federal organizations with statutory deadlines

94

95

100

100

  • federal organizations with no statutory deadlines

81

84

70

80

  • territorial organizations

59

48

55

60

Percentage of performance audit reports completed by the planned tabling date as published in the Report on Plans and Priorities

90

97

90

90

Percentage of special examination reports delivered on or before the statutory deadline

75

75 (6/8)

100

100

On budget

Percentage of audits completed on budgetFootnote8

Financial audits—federal Crown corporations

54

53

70

80

Financial audits—other federal organizations with statutory deadlines

50

47

70

80

Financial audits—federal organizations without a statutory deadline

47

76

70

80

Financial audits—territorial organizations

28

65

55

80

Performance audits

48

90

70

80

Special examinations

25

75 (6/8)

70

80

Our audit reports are reliable

Percentage of internal practice reviews that find the opinions and conclusions expressed in our audit reports are appropriate and supported by the evidenceFootnote9

n/a

95 (21/22)

100

100

External peer reviews find our quality management frameworks are suitably designed and operating effectivelyFootnote10

n/a

n/a

n/a

AllFootnote10

We provide a respectful workplace

Percentage of employees who believe the Office is either an above-average place to work or one of the best places to work

88Footnote10

n/aFootnote11

80

80

Percentage of management who meet our language requirements

  • assistant auditors general and principals

83

85

100

100

  • directors in bilingual regions

75

76

75

75

Percentage representation relative to workforce availability for

  • women

131

118

100

100

  • people with disabilities

114

119

100

100

  • Aboriginal peoples

140

97

100

100

  • members of visible minorities

83

74

100

100

Percentage retention of audit professionals

86

88

90

90

  • 7 "On time" for financial audits means the statutory deadline where one exists (usually 90 days after year end), or 150 days after the year end where no statutory deadline exists. Return to reference 7
  • 8 "On budget" means that the actual hours to complete an audit did not exceed the budgeted hours by more than 15 percent. Return to reference 8
  • 9 As of 2008–09, this indicator replaced "Percentage of internal practice reviews that find our audits in compliance with our QMFs." Return to reference 9
  • 10 The Office is currently undergoing a peer review led by the Australian National Audit Office, the results of which we will report in mid-2010. Return to reference 10
  • 11 The employee survey results shown were received in June 2008 and were reported in the 2007–08 Performance Report. We conduct employee surveys every two years. Return to reference 11

Appendix II

Performance audits and studies planned
(Titles subject to change)

2010-11

Federal performance audits

Spring 2010

 

Auditor General

 

  • Electronic Health Records in Canada—An Overview of Federal and Provincial Audit Reports
  • Aging Information Technology Systems
  • Modernizing Human Resource Management
  • Rehabilitating the Parliament Buildings
  • Sustaining Development in the Northwest Territories
  • Scientific Research—Agriculture and Agri-Food Canada
  • Special Examinations of Crown Corporations—2009

Fall 2010

 

Auditor General

 

  • Conflict of Interest
  • Animal Diseases—Canadian Food Inspection Agency
  • Management and Control in Small Entities
  • Facilitating Commercial Transactions—Canada Border Services Agency
  • Military Helicopters—National Defence
  • Registered Charities—Canada Revenue Agency
  • Regulation of Banks—Office of the Superintendent of Financial Institutions
  • Service to Canadians
  • Canada's Economic Action Plan

 

Commissioner of the Environment and Sustainable Development

 

  • Environmental Petitions
  • Ocean Pollution
  • Monitoring Water Resources
  • Adapting to the Impacts of Climate Change
  • Assessing Cumulative Environmental Impacts

Other

 

Commissioner of the Environment and Sustainable Development

 

  • Federal Sustainable Development Act required letter to the Minister of the Environment with comments on whether the targets and implementation strategies contained in the draft federal sustainable development strategy can be assessed.

Territorial performance audits

  • Northwest Territories—Health and Social Services
  • Yukon—Department of Health and Social Services
  • Nunavut—Health Programs
  • Northwest Territories—Deh Cho Bridge Project

2011-12

Federal performance audits

Spring 2011—Status Report

 

Auditor General

 

  • Special Examinations of Crown Corporations—2010
  • Financial Management and Control
  • Internal Audit
  • Large Information Technology Projects
  • Military In-Service Equipment—National Defence
  • Indian and Northern Affairs Canada
  • National Police Services—Royal Canadian Mounted Police
  • Regulation of Medical Devices—Health Canada
  • Reserve Force Pension Plan—National Defence

 

Commissioner of the Environment and Sustainable Development

 

  • Progress against Kyoto Protocol Implementation Act

Fall 2011

 

Auditor General

 

  • Business Risk ManagementAgriculture and Agri-Food Canada
  • Tobacco Transition ProgramAgriculture and Agri-Food Canada
  • AdmissibilityCitizenship and Immigration Canada
  • Drug SafetyHealth Canada
  • InfrastructureDepartment of National Defence
  • ContractingPublic Works and Government Services Canada

 

Commissioner of the Environment and Sustainable Development

 

  • Petitions Annual Report
  • Environmental Science
  • Land-Based Pollution Emergencies
  • Environmental Monitoring Systems
  • Environmental Enforcement

Other

 

Auditor General

 

  • End of Mandate ReportApril 2011

Territorial performance audits

  • Northwest Territories—Status Report

Special examinations planned

2010-11

  • Canadian Dairy Commission
  • Freshwater Fish Marketing Corporation
  • National Arts Centre Corporation
  • Telefilm Canada

2011-12

  • Public Sector Pension Investment Board
  • Canadian Air Transport Security Authority
  • Canadian Race Relations Foundation