Opening Statement to the Standing Committee on Public Accounts

2010–11 Performance Report and 2012–13 Report on Plans and Priorities of the Office of the Auditor General of Canada

15 May 2012

Michael Ferguson, 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 2010–11 Performance Report and our 2012–13 Report on Plans and Priorities.

With me today is Lyn Sachs, Assistant Auditor General of Corporate Services and Chief Financial Officer; and Andrew Lennox, Attest Audit Product Leader.

We are privileged to support Parliament’s oversight of government spending and performance. We provide objective information, advice, and assurance from the financial audits, performance audits, and special examinations of Crown corporations that we conduct each year.

All of our audit work is conducted according to Canadian Auditing Standards and Canadian Standards on Quality Control. We subject our System of Quality Control to internal practice reviews and to external reviews by peers to provide assurance that you can rely on the quality of our work.

2010–11 Performance Report

During our 2010–11 fiscal year, the period covered by our most recent performance report, we used $86.7 million of the $88.3 million in parliamentary appropriations available to us. In light of the fiscal climate at the time, we did not seek additional funding in the 2009–10 and 2010–11 fiscal years. Rather, we sought opportunities to reduce our expenses and redeploy auditors within the Office. We employed the equivalent of 629 full-time employees during the 2010–11 fiscal year, a decrease of three from the year before.

With these resources, we completed in 2010–11 148 financial and performance audits, and special examinations of Crown corporations, including work done by the Commissioner of the Environment and Sustainable Development. Parliamentary use of our work remained high: The Office participated in 46 hearings and briefings, and parliamentary committees reviewed 62 percent of our performance audits.

Our 2010–11 Performance Report contains a number of indicators of the impact of our work and measures of our operational performance. Our targets and actual performance results are attached to this statement.

For the 2010–11 fiscal year, our performance report shows that almost all of our indicators of impact remained positive. Senior managers in the organizations we audited assessed the value of our work more highly than they had in the past three years. Our measures of organizational performance also remained generally positive, though we were unable to sustain the significant gains we made in 2009–10, when we delivered more than 85 percent of our financial audits on-budget.

Our Office also continued to be recognized as a workplace of choice, placing on the top employer lists for four major awards. While there were areas for improvement, overall, the Office had successful years in 2009–10 and 2010–11 under the leadership of my predecessor, Sheila Fraser.

2012–13 Report on Plans and Priorities

In planning for the 2012–13 fiscal year, our first priority is to continue to successfully deploy our Renewal of Audit Methodology, or RAM, project. The adoption of international standards in 2010 and 2011 led to significant changes in accounting and auditing in Canada. Our RAM project was undertaken to respond to these changes as well as to respond to findings of our internal practice reviews, feedback from our auditors, and recommendations of the 2010 international peer review of our Office.

The majority of the work on this project has been completed, meeting its deadlines and financial budgets. This year, we will focus on training, change management support, and monitoring the application of our new audit methodology. The completion of this project at the end of 2012 will return approximately $2.2 million to our audit operations, which we are including in our budget reduction proposal.

Our second strategic priority is to begin to implement our Strategic and Operating Review, or budget reduction, proposal. In July 2011, we received a letter from the Minister of Finance encouraging us to adhere to the spirit and intent of this government initiative. We undertook a thorough and comprehensive review of the Office. We have analyzed all of our legislative audit practices with a view to concentrating our efforts where they will best serve Parliament and territorial legislatures. While we believe that all of our work is valuable, some audits are less critical than others. We have used this review as an opportunity to assess how our resources are best deployed, based on risk and value. We have also reviewed all of our internal processes and services to identify opportunities for operational efficiencies.

This proposal will result in a budget reduction of over $6.5 million for the Office and a staff reduction of approximately 10 percent by fiscal year 2014–15. It will not only generate cost savings but will provide more consistency in our audit efforts across federal organizations. We are working with the government to ensure that the necessary legislative changes to our mandate are implemented.

The proposed reductions in our audit work predominantly affect our financial audit practice and will result in about 18 fewer financial audits. The legislative and other changes we proposed will focus our financial audits on the areas of greatest risk. We propose to continue our work as the financial auditor of the majority of Crown corporations and of Officers of Parliament, recognizing their unique responsibilities and accountability relationships.

The one legislative change we propose outside of our financial audit practice would discontinue our assessments of the performance reports of Parks Canada, the Canadian Food Inspection Agency, and the Canada Revenue Agency. We were required by legislation to do this work when these agencies were created. Legislation does not require us to do similar work on performance reports of any other government organization. We believe Parliament requires high-quality performance information from all federal organizations. Therefore, we will continue to include performance reporting as a topic for consideration in our performance audit practice.

The majority of our interaction with Parliament is through our performance audit practice. We conduct audits that examine the efficiency, economy, and environmental impact of all major federal government departments, agencies, and other organizations. As a result of our Strategic and Operating Review, we are proposing no reductions to our performance audit work in 2012–13.

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

Mr. Chair, that concludes my opening statement. We would be pleased to answer your questions. Thank you.

Appendix I

Indicator Table 1—Summary of our indicators of impact

Objectives and indicators 2009–10
Our work adds value for the key users of our reports.  
Percentage of audit committee chairs who find our financial audits add value 95% 81% 90%
Percentage of parliamentary committee members who find our performance audits add value 93%1 N/A2 90%
Percentage of board chairs who find our special examinations add value 80% See footnote #3 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 85% 89% 80%
Percentage of departmental senior managers who find our performance audits add value 56% 74% 70%
Percentage of Crown corporation chief executive officers who find our special examinations add value 90% See footnote #3 80%
Key users of our reports are engaged in the audit process.  
Number of parliamentary hearings and briefings we participate in 35 46 Maintain or increase4
Percentage of performance audits reviewed by parliamentary committees 68% 62% Maintain or Increase4
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 28%5 26%6 100%
Percentage of performance audit recommendations examined in our follow-up audits where progress has been assessed as satisfactory   62%  
Percentage of significant deficiencies that are addressed from one special examination to the next 50%
(1 of 2)
(1 of 1)7

1 The results shown for the 2009–10 fiscal year are from the survey of parliamentarians conducted in June 2010.

2 There was no survey of parliamentarians in the 2010–11 fiscal year, due to the federal election.

3 Due to the small number of respondents, percentage results are not presented. The feedback we have received has been positive and consistent with our targets.

4 There is no numeric target for these indicators since they depend on the number of sitting days there are in Parliament. Instead, the target is to maintain the percentage of parliamentary hearings and briefings we participate in, relative to the number of sitting days, and to maintain the percentage of audits reviewed by parliamentary committees.

5 This result has been restated to include only those reports that were issued in the current fiscal year. Previously, reports were included when the audit work was completed but the report not yet issued.

6 In completing our financial audits in the 2010–11 fiscal year, we found that only 8 of the 31 reservations contained in our 2009-10 financial audit opinions had been addressed by the organizations we audited.

7 For one of the four special examinations completed in the 2010-11 fiscal year there had been a significant deficiency in the previous special examination. This significant deficiency was addressed.

Indicator Table 2—Summary of our organizational performance

Objectives and indicators 2009–10
Our work is completed on time
Percentage of financial audits completed on time1
  • federal Crown corporations with statutory deadlines




  • other federal organizations with statutory deadlines2




  • federal organizations with no statutory deadlines




  • territorial organizations




Percentage of performance audit reports completed by the planned tabling date as published in the Report on Plans and Priorities 96% 92% 90%
Percentage of special examination reports delivered on or before the statutory deadline 100%
(10 of 10)
(4 of 4)
Our work is completed on budget
Percentage of audits completed on budget3
  • Financial audits—federal Crown corporations




  • Financial audits—other federal organizations with statutory deadlines




  • Financial audits—federal organizations without a statutory deadline




  • Financial audits—territorial organizations




  • Performance audits




  • Special examinations

(9 of 10)

(2 of 4)


Our audit reports are reliable
Percentage of internal practice reviews that found the opinions and conclusions expressed in our audit reports were appropriate and supported by the evidence4 100%
(18 of 18)
(18 of 19)
External peer reviews find our quality management frameworks are suitably designed and operating effectively Mostly5 n/a6 Yes
We provide a respectful workplace
Percentage of employees who believe the Office is an above-average place to work 78%7 n/a8 80%
Percentage of management who meet our language requirements
  • assistant auditors general and principals




  • directors in bilingual regions




Percentage representation relative to workforce availability for
  • women




  • people with disabilities




  • Aboriginal peoples




  • members of visible minorities




Percentage retention of audit professionals 89% 89% 90%

1 "On time" for financial audits means the statutory deadline where one exists (usually 90 days after the year end), or 150 days after the year end where no statutory deadline exists.

2 The National Battlefields Commission is excluded from this calculation as its statutory deadline is only 60 days after the year end.

3 "On budget" means that the actual hours to complete an audit did not exceed the budgeted hours by more than 15 percent.

4 This indicator replaces "the percentage of internal practice reviews that find our audit in compliance with our quality management frameworks."

5 An international peer review found that our quality management system (QMS) was suitably designed. It found that for the performance audit and special examinations practices, the QMS was operating effectively and that for the annual audit practice, the QMS was generally operating effectively (although made recommendations to address two implementation issues.

6 There was no external peer review in the 2010–11 fiscal year.

7 The employee survey results shown were received in May 2010.

8 There was no employee survey in the 2010–11 fiscal year. It is a biennial survey.

9 The 2009–10 result has been restated from 84% as previously reported due to a change in calculation method.

Appendix II—Planned Reports

All titles and dates subject to change

Reports to the House of Commons

Spring 2012

Report to the Board of Internal Economy of the House of Commons

  • Administration of the House of Commons

Report to the Senate Committee on Internal Economy, Budgets and Administration

  • Administration of the Senate
Fall 2012
  • Grants and Contributions
  • Professional Service Contracts in the Public Service
  • Cyber Security Strategy
  • Military Infrastructure—National Defence
  • Transition of Ill and Injured Military Personnel to Civilian Life—Veterans Affairs Canada
  • Science and Technology Grants and Contributions—Industry Canada
  • Long Term Fiscal Sustainability—Finance Canada

Commissioner of the Environment and Sustainable Development

  • Protecting Marine Biodiversity
  • Offshore Petroleum Boards
  • Financial Assurances for Environmental Risks
  • A Study of Federal Support to the Fossil Fuels Sector
  • Environmental Petitions
Winter 2013
  • Public Safety and Anti-Terrorism Initiative
  • Protecting Government Information and Assets in Contracting
  • Evaluating the Effectiveness of Programs
  • Collections—Canada Revenue Agency
Spring 2013
  • Official Development Assistance
  • Recovery of Employment Insurance Overpayments
  • Surveillance of Chronic Diseases—Health Canada
  • Delivering Search and Rescue Services—National Defence
  • Food Safety Recalls—Canadian Food Inspection Agency
  • Support to the Truth and Reconciliation Commission
  • Special Examinations of Crown Corporations—2012

Commissioner of the Environment and Sustainable Development

  • Protecting Biodiversity
  • Status Report
  • Audit Note—Species at Risk

Reports to Northern Legislatures

  • Status Report—Yukon (June 2012)
  • Capital Projects of the Yukon Hospital Corporation (February 2013)
  • Income Security Programs—Northwest Territories (March 2013)

Special Examination Reports* to Boards of Directors of Crown Corporations

  • Old Port of Montreal Inc.
  • Farm Credit Canada
  • Canadian Broadcasting Corporation
  • Royal Canadian Mint
  • Laurentian Pilotage Authority
  • Canada Employment Insurance Financing Board
  • Canadian Museum of Civilization Corporation
  • Canada Lands Company Limited

*Submitted special examination reports are available on Crown Corporations’ websites.