Auditor General’s Opening Statement

2012 Spring Report Press Conference—3 April 2012

Good morning. I am pleased to present my first report which was tabled in the House of Commons today.

The first chapter in this Report is about border controls on commercial imports. We found that while controls are generally working, they need to be better monitored.

We know the controls are generally working because we tested them, not because the responsible departments were able to tell us so. The Canada Border Services Agency and other departments need to be better at monitoring their controls at the border.

We found monitoring problems with controls reserved for higher-risk items, such as pharmaceuticals and pest control products.

Knowing whether border controls continue to work as intended will require better monitoring on an ongoing basis.

I would now like to turn to our chapter on replacing Canada’s fighter jets. We looked at the decision to replace the aging CF-18 fleet with the F-35 Lightning II. We found that National Defence did a good job of managing Canada’s participation in the US-led Joint Strike Fighter program to design and develop the F-35.

However, the Department did not acknowledge that the decision to purchase the F-35 was well underway four years before it was officially announced.

As a result, there were a number of significant problems with the decision making process. National Defence did not recognize and adequately address the risks inherent in this project. It did not cost the project adequately, omitting some important cost elements.

And finally, the Department did not provide Parliament with complete cost information or fully inform decision makers about the risks of this program.

National Defence did not exercise the diligence that would be expected in managing a 25 billion dollar commitment. It’s important that a purchase of this size be managed rigorously and transparently.

The third chapter in our report looks at how the Department of Finance manages the government’s interest-bearing debt.

Interest charges on the public debt limit the policy choices available to government. Last year interest payments amounted to 11.4 percent of government expenses. Improved reporting on the interest-bearing debt not only helps managers manage but also helps Canadians understand what they can afford as a nation.

We found that Finance Canada has in place sound tools and practices to manage Canada’s interest bearing debt. However, it needs to provide more information to decision makers, and Canadians, about how well the debt management strategy is performing.

We also found that while Canada is a world leader in recording public sector pension liabilities in its financial statements, the information needs to be easier to find in order to be understood by a broader audience.

Our fourth chapter is about the Canada Revenue Agency’s non-filer/non registrant program. Income tax is the single most important source of government revenue.

The non-filer/non registrant program is relatively small but it assessed 2.8 billion dollars in additional taxes, interest, and penalties in each of 2009–10 and 2010–11. The Agency gets a good return on its investment from this program.

Our chapter suggests ways the Agency could improve that return with its current level of investment.

The fifth chapter of our report is on Transport Canada’s oversight of civil aviation. Transport Canada has moved to an approach that puts the onus on aviation companies to develop safety management systems in accordance with regulations.

Transport Canada then oversees the companies’ compliance with the regulations.

Though Canada has an excellent aviation safety track record, Transport Canada needs to be diligent in its oversight of the safety systems of aviation companies.

We found that some aspects of surveillance are working well. But there are weaknesses in how Transport Canada plans and conducts its surveillance activities. In 2010–11, it completed only about two thirds of planned inspections, even though only higher-risk companies are selected for inspection in a given year.

Transport Canada has made progress in moving to a new regulatory framework. Now it must resolve the significant weaknesses in surveillance that we identified.

My Report also presents the Main Points of our special examination reports on three Crown corporations, issued to the respective boards of directors throughout 2011.

We found no significant deficiencies in the systems and practices of the Canadian Dairy Corporation, the Canadian Race Relations Foundation, and the Public Sector Pension Investment Board.

I am now ready to answer any questions about the Report.