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Opening Statement to the Standing Senate Committee on Security and Defence

2001 Report of the Auditor General

Mr. Chairman, thank you for the opportunity to meet with the Committee. I am very pleased to present my first report as Auditor General of Canada and I hope that you will find the information useful. I am accompanied today by Peter Kasurak, Principal, responsible for our audits of the National Defence. Shahid Minto, Assistant Auditor General, responsible for our work on the Canada Customs and Revenue Agency is also available. We understand that the Committee's primary area of interest is Defence so I will keep my comments on the customs and revenue chapters brief. We would be very pleased to appear before the Committee at a later date should you wish to examine the issues more in-depth.

I would like to start by highlighting an issue common to these audits as well as many others—inadequate information. By that, I mean a failure by departments to collect, to analyze, and to use information in a way that would enable them to make better decisions, to manage risks and to improve their programs and services.

In our audits, we found examples of inadequate information to manage the maintenance of major military equipment, and to oversee cross-border commercial shipments, and travellers to Canada.

Good information is the essential first step in good management. Without it, managing risk intelligently is not possible.

I will turn now to Chapter 10 in the December Report.

NATIONAL DEFENCE — IN-SERVICE EQUIPMENT

Military readiness is composed of four basic things: people—the military people in place and their qualifications; the equipment—whether it's on hand and whether it's serviceable; training, which is individual, collective, and joint, that is, more than one service involved; and finally, enablers such as command-and-control and intelligence systems. Together, that package forms what we understand to be readiness.

Our report on National Defence In-Service Equipment provides Parliament with its first set of comprehensive statistical data for a major component of readiness of equipment. Today I would like to tell you:

• what we found concerning the state of equipment readiness;
• what we learned about the Department's ability to manage equipment readiness; and
• what I think needs to be done to respond to shortcomings our work identified.

The State of Equipment Management

In general, the information needed to manage equipment is unavailable. The information that is available is inadequate, incomplete, and often inaccurate. Our report goes into some detail on this issue, but I would like to cite just a few examples:

• None of the armed services has standards or targets for how ready its equipment should be.
• We could find only 41 percent of the required post-exercise reports that document problems and lessons learned, and facilitate corrective action. The rest were either not completed or had been lost.
• Navy maintenance data are inaccurate due to posting of data up to two years after operations, use of estimates rather than actual measures, and loss of data due to bad diskettes, server crashes and failure to back-up data.

The State of the Canadian Forces' Equipment

The statistics that are presented in this audit were complied by us. They indicate that the equipment owned by the Army is in good shape, the Navy is holding its own, but that Air Force equipment is deteriorating and is in general decline:

• From 1989 to 1998 the Army was able to maintain the activity rates of its key combat and combat support vehicles and to increase the use of some. It has been able to keep deployed equipment available for use almost 90 percent of the time. It is experiencing some problems in keeping up with preventive maintenance and in keeping vehicles available for training in Canada.
• The Navy has been able to maintain its activity, that is, the number of days its fleets are at sea each year. But it is also unable to keep up with scheduled maintenance and is facing a "bow wave" of deferred work on the Patrol Frigate. This could cause availability, life expectancy and cost problems in the future.
• The Air Force picture is much more adverse: annual flying hours for the Sea King, Hercules and Aurora have all steadily declined over the last five years. Aircraft availability is low, ranging from 30 to 60 percent (except for the Griffon helicopter, which is new). Moreover, availability is declining for the Sea Kings, Auroras, and Hercules, and mission aborts are increasing for all types except the Griffon.

We also found that the supply system is rarely able to meet urgent demands. And there is a shortage of maintenance personnel. Overall, 13 percent of positions are vacant and 15 percent of those on the job have not completed the training required for their rank. Almost 40 percent of the training required to do specific jobs in individual units has not been taken.

Due to limitations of the data maintained by National Defence, we could not determine how operations and training have been affected overall. Nevertheless, there are strong indications that maintenance problems with Hercules, Sea King and Aurora aircraft have limited training and operations. Delays in obtaining spares, prioritization of transportation of spares, and "mission fatigue" of maintenance technicians appear frequently in unit reports.

Action Required

Money alone will not solve the problems identified by this audit. In our report, we note that there has been a lack of management discipline visible in the failure to set targets and goals and to ensure the quality of management information. There has to be the will to assess operations and training and to learn from them in a systematic manner.

The Department is already taking action through the roll-out of its Materiel Acquisition and Support Information System (MASIS) and its new Supply System. However, the new Supply System will not arrive until next summer, and MASIS, not until 2004.

In addition, the Department has to set maintenance performance targets and start measuring how well it is meeting them. There is not enough slack in the system to allow complacency. These deadlines must be met.

CANADA CUSTOMS AND REVENUE AGENCY

We have completed two audits in recent years of the Customs program at the Canada Customs and Revenue Agency. In 2000 we dealt with travellers coming to Canada and this year we covered commercial shipments entering Canada. In both audits, we focussed on how the Agency was managing the risks it faces at the border. Those risks include inadmissible people trying to enter Canada and people trying to bring illegal or restricted goods into Canada. About 111 million travellers and 11 million commercial shipments enter Canada every year.

In both of these audits, we raised concerns about the lack of information to fully assess risks and to ensure that the Agency's activities were effective.

Travellers to Canada

In the 2000 travellers audit, we found that the Agency's risk assessment was incomplete. At the border, Customs officers conduct the initial interview with people entering Canada. Officers decide whether to let the person enter Canada immediately or whether the person needs to be referred to another department or agency, such as Citizenship and Immigration Canada. These decisions are based on an assessment of risk, and officers need information to make them. We found the Agency did not have important information it needed from a variety of departments and agencies to fully assess the risks its inspectors face in these situations.

We also reviewed the training that officers received. We noted that Customs provides a mandatory intensive course to new recruits. However, after taking the initial training, many long-term officers had not received refresher training in several key areas. Training for term employees and students was uneven.

Commercial shipments entering Canada

In the audit on commercial shipments, we found that the Agency is using a risk management approach to determine which shipments present the greatest risk to Canadian society. The Agency wants to focus on high-risk shipments and let the others pass through quickly. Keeping legitimate trade flowing is essential for the health of the Canadian economy.

The Agency has worked hard over the past decade to improve its ability to identify high-risk shipments. However, we raised several concerns dealing with the efficiency and effectiveness of the Agency's targeting of high-risk shipments.

The Agency has a stable and flexible inspection regime for examining shipments that it decides are high-risk. Finally, the information the Agency collects on its examinations is not sufficient to tell it whether its targeting activities are leading to more enforcement actions. Nor does the Agency know if it is doing more, or more in-depth, examinations of high-risk shipments than in previous years. In other words, the Agency does not know whether its approach to risk management is working.

Action required

We recommended that the Agency:

• strive to obtain the information it needs from other departments and agencies to do its job well,
• improve the efficiency and effectiveness of its targeting processes,
• improve its employee training programs, and
• assess the effectiveness of its risk management approach.

The Agency has agreed with our recommendations, but has not committed to specific deadlines for implementing them.

CONCLUSION

In concluding, Mr Chairman, I want to reassure the Committee that I place a very high priority on the well-being of Canadians. And their safety and security figures prominently on the list of priorities I have set for the Office. We have done a lot of audit work in the past on defence, customs, immigration, and policing issues, and I intend to continue to inform Parliament of the government's management of these important issues.

Thank you, Mr. Chairman. We would be pleased to respond to questions.