1981 Report of the Auditor General of Canada
Chapter 16—Organization and Programs of the Office of the Auditor General
16.1 The responsibilities of the Auditor General are set out in the Auditor General Act of 1977, reproduced as Appendix A to this Report. Four sections in the Act detail the Auditor General's responsibility to report to Parliament.
- - Section 6 requires the Auditor General to express an opinion on the financial statements of the Government of Canada.
- - Section 7 requires the Auditor General to report annually to the House of Commons anything that he considers to be of significance and of a nature that should be brought to its attention, including cases where public funds have been expended without due regard to economy or efficiency, or where procedures have not been established to measure and report the effectiveness of programs, where such procedures could appropriately and reasonably be implemented.
- - Section 8 enables the Auditor General to make a special report to the House of Commons on any matter of pressing importance or urgency that, in his opinion, should not be deferred until his annual Report is tabled.
- - Section 11 permits the Auditor General to inquire into and report on matters in response to requests from the Governor in Council. Under this section, the Office continued its examination of the Oil Import Compensation Program, referred to in Chapter 15 of this Report.
Organization of the Office16.3 On 12 September 1980, James J. Macdonell retired as Auditor General of Canada. Michael H. Rayner, Deputy Auditor General, Planning/Reports/Standards Branch, carried out the duties of Auditor General from September 1980 through March 1981. Kenneth M. Dye, F.C.A. was appointed Auditor General of Canada, effective 1 April 1981. The plan of organization at 1 August 1981 is shown in Exhibit 16.1.
(Exhibit not available)
16.4 The overall direction of the Office is the responsibility of the Executive Committee, made up of the Auditor General and the Deputy Auditors General and chaired by the Auditor General. The Management Committee is made up of the Deputy Auditors General and the Assistant Auditors General and co-ordinates professional matters and audit programs, assisting the decision-making of the Auditor General and the Executive Committee.
16.5 The Departments and Agencies Branch employs approximately 250 professional staff who plan, conduct and report the comprehensive and financial audits of departments, agencies and certain Crown corporations. The Branch is responsible for following up audit recommendations made in previous Reports. Regional offices in Halifax, Montreal, Toronto, Winnipeg, Regina, Edmonton and Vancouver report to the Departments and Agencies Branch. Audits of government organizations with headquarters in regional centres or which administer major portions of their programs in the regions are undertaken by these offices.
16.6 The Corporations Branch is responsible for developing comprehensive audit methodology for Crown corporations. The Office is currently working with a "laboratory group" of Crown corporations, and the experience acquired with this group will assist in developing the Office's approach to comprehensive auditing of Crown corporations generally.
16.7 The Corporations Branch has primary responsibility for co-ordinating the Office's relationship with the external auditors of those Crown corporations for which the Auditor General is not the designated auditor. As auditor of the Accounts of Canada, the Auditor General relies on the work of other auditors.
16.8 The Control Evaluations Branch provides professional support to comprehensive audit teams in the areas of management systems and electronic data processing controls. The Branch also plans and conducts government-wide and special studies in these areas and plays a leading role in comprehensive auditing methodology development.
16.9 The Branch consists of three groups. One group is responsible for providing advice and assistance to teams auditing organizations' procedures for measuring and reporting effectiveness; a second, dealing with management systems, conducts government-wide reviews or audits of management systems and processes with emphasis on economy and efficiency. This group also supplies professional support to comprehensive audit teams. The third group, Computer Audit Services, provides expertise and methodology in the areas of value-for-money assessments of EDP expenditures and financial control assessments in computerized systems, and the facility for analysing information held on computer files through the use of specially created audit software. In addition, sampling specialists assist in the design and analysis of sampling plans.
16.10 The Planning/Reports/Standards Branch, which consists of six groups, is concerned with comprehensive auditing standards and a number of professional activities that support the quality of audit operations. A major responsibility is co-ordinating the preparation of the annual Report to the House of Commons and maintaining liaison with the Standing Committee on Public Accounts, Members of Parliament, central agencies of government and the Office's legal advisers.
16.11 The Financial Reporting and Accounting Standards group co-ordinates the audit examination of the accounts and financial statements of the Government of Canada. It recommends to the Auditor General the audit opinion and observations on the main financial statements of Canada and on changes in the principles and practices that are proposed from time to time by government and by the Canadian Institute of Chartered Accountants. It provides review and advice to audit teams concerning financial disclosure and accounting principles for Crown corporations and government agencies. The group is also responsible for carrying out audits of certain central agencies of government and is involved in the project to reform the Estimates and Public Accounts being conducted by the Office of the Comptroller General.
16.12 The Auditing Standards/Methodology/Research group is responsible for developing and maintaining auditing standards, managing auditing methodology development and conducting auditing research. Standards and procedures are assessed through post-audit quality review, with resulting changes communicated by Accounting and Auditing Bulletins and revisions to the Comprehensive Auditing Manual . Methodology is made available to staff through Audit Guides and Bulletins to assist them in carrying out audits. Research in auditing is conducted to develop ways of improving audits and to ensure that the most appropriate and efficient audit tools and techniques are adopted.
16.13 The Parliamentary Liaison group is responsible for co-ordination of the Office's relations with the Public Accounts Committee and other House of Commons committees, audit team preparation for hearings of the PAC, and assistance to the Committee, its Clerk and research staff. Combined with the Reports function, it helps to ensure that the Office's reports to the House meet the needs of the Members.
16.14 The Reports group is responsible for central review and editing of the annual Report to the House of Commons and for its production. The group also provides reporting guidelines to audit teams, and edits and revises project reports, special reports and other material written in the Office for internal and external distribution.
16.15 The Program Planning group is responsible for developing systems to co-ordinate the Office's short and medium-term plans, including audit work to be undertaken by the Office over the five-year cycle. Through regular information and analysis provided by the Priority Resource Allocation and Management System (PRAMS), the group assists the Executive Committee with co-ordinating the allocation of professional staff and financial resources among the Branches.
16.16 The Professional Development group is responsible for training and development courses, including comprehensive auditing courses, and related activities for Office staff. One of the responsibilities of the group is to provide students-in-accounts with training opportunities to meet the specific requirements of recognized professional accounting accreditation bodies.
16.17 The Finance and Administration Branch administers the Office's financial and management control and information systems. It also negotiates all contracts for auditing and consulting professionals and monitors their engagement. The Branch provides administrative support services, including library, mail and messenger, materiel, records, word processing, accommodation, telecommunication and security services.
16.18 The Human Resources Branch has responsibility for personnel management, including recruitment, compensation planning and services, staff relations, implementation of bilingualism policies and human resource planning. It also assists with the Office's government-wide audits of payroll costs management.
16.19 Advisers to the Auditor General. The Auditor General has two main groups of outside advisers. Both groups are made up of leading members of the accounting and management consulting professions. The Panel of Senior Advisers counsels the Auditor General on the application of comprehensive auditing, with particular emphasis on public sector corporate entities. Members of the Panel are:
Kenneth G. Belbeck, C.M.C., President, Thorne Stevenson & Kellogg
James J. Macdonell, F.C.A., Chairman, Canadian Comprehensive Auditing Foundation
H. Marcel Caron, C.A., Executive Partner, Clarkson Gordon
Edward W. Netten, C.A., Managing Partner, Price Waterhouse Associates
Warren Chippindale, C.A., Chairman, Executive Committee and Managing Partner, Coopers & Lybrand
Robert M. Rennie, C.A., Chairman and Executive Officer, Touche Ross & Co.
Gordon H. Cowperthwaite, F.C.A., Chairman, Executive Committee, Peat, Marwick, Mitchell & Co. and Peat, Marwick and Partners
Eddie C. Wilburn, F.C.A., Senior Partner, Deloitte Haskins & Sells
Kenneth S. Gunning, F.C.A., Executive Partner, Thorne Riddell
16.20 The Independent Advisory Committee on Government Accounting and Auditing Standards is made up of senior representatives of accounting firms, management consulting firms, and the academic community. The Committee reviews major documents, such as the opinion and observations on the annual financial statements of the Government and the Office's Comprehensive Auditing Manual and Audit Guides. Members are:
W. Ross Walker, F.C.A., Peat, Marwick, Mitchell & Co.
P. Howard Lyons, F.C.A., Deloitte Haskins & Sells
Rodney J. Anderson, F.C.A., Clarkson Gordon
Guy Martin, C.A., Raymond, Chabot, Martin, Paré & Associés
Kenneth F.Y. Baynton, C.A., Thorne Riddell
Edward W. Netten, C.A., Price Waterhouse Associates
Donald A. Brown, C.A., Coopers & Lybrand
Ronald B. Robinson, C.M.C., Thorne Stevenson & Kellogg
Alan J. Dilworth, F.C.A., Touche Ross & Co.
Professor L.S. Rosen, F.C.A., York University
Alwyn D. Lloyd, C.A., MacGillivray & Co.
William R. Sloan, F.C.A., Arthur Andersen & Co.
Assistance to the Standing Committee on Public Accounts16.21 Designated senior members of the Office attend all meetings of the Standing Committee on Public Accounts to provide explanations concerning matters raised in the Auditor General's annual Reports to the House of Commons. The Office also assists the Sub-committee on Agenda and Procedure in planning the Committee's schedule for its review of the annual Reports.
International Activities16.22 The Auditor General of Canada is the external auditor of the International Civil Aviation Organization (ICAO), a United Nations specialized agency with headquarters in Montreal. In addition to presenting an annual report to the United Nations General Assembly, the Auditor General is required to express his opinion on the financial statements of ICAO and on the status of funds held by ICAO as Executing Agency for the United Nations Development Program. The annual audit report of ICAO for the year ended 31 December 1980 emphasized the need for changes in financial management and control procedures and revisions to the financial regulations. The report recommended improvements in such areas as the collection of assessments under the Regular Program, the calculation of assessments under Joint Financing Agreements, and in financial management of the Technical Assistance Program.
16.23 Although Canada ceased to be a member of the United Nations Board of Auditors in June 1980, the Auditor General continues, by virtue of his ICAO responsibilities, to be a member of the Panel of External Auditors of the United Nations, the Specialized Agencies, and the International Atomic Energy Agency. The Panel's twenty-third Regular Session was held in Vienna in October 1981 and considered the Canadian proposal for restructuring the United Nations Board of Auditors, among other subjects.
16.24 Senior members of the Office participated in a number of other international activities. The Auditor General took part in meetings of the Governing Board of the International Organization of Supreme Audit Institutions (INTOSAI) in Vienna in May 1981 and led the Canadian delegation to the XIth Conference of Commonwealth Auditors General in Kingston, Jamaica in October 1981.
16.25 During the year, four prominent auditors from developing nations worked in the Audit Office as part of a Fellowship program administered by the Canadian Comprehensive Auditing Foundation. The program is designed to help developing nations upgrade their public sector auditing capabilities. In addition to the practical experience of working on comprehensive audits, the Fellows take part in a series of formal training programs arranged by the Professional Development group. Participating this year were Lucita Andres from the Philippines Commission on Audit, Dorus Odamtten of the Directorate of the Ghana Government Audit Service, Fong Heng Boo of the Singapore Government's Audit Department and C. Nesarajah from the Office of the Auditor General of Malaysia.
Co-operation with Professional Organizations16.26 Canadian Institute of Chartered Accountants. Assistant Auditor General J.J. Kelly has been seconded for 30 months to the Canadian Institute of Chartered Accountants to assist in the development of public sector accounting and auditing standards. In addition, Deputy Auditor General D. Larry Meyers is a member of the recently established committee on public sector accounting and auditing standards. The Auditor General, and Deputy Auditor General Michael H. Rayner, have also been involved in various committees of the CICA.
16.27 Canadian Comprehensive Auditing Foundation. On 1 April 1981, E.F. McNamara, Assistant Auditor General, Control Evaluations Branch, joined the Canadian Comprehensive Auditing Foundation under an executive interchange agreement. During his two years with the Foundation, he will serve as Director, Methodology and Professional Development.
Canadian Conference of Legislative Auditors16.28 Co-ordinating task force on the audit of federal income tax records. Federal-provincial tax collection agreements define the extent to which provincial legislative auditors are permitted to audit the taxes collected and the various tax credits distributed on behalf of their provinces by the federal government.
16.29 At their annual meeting in July 1981, Canada's legislative auditors reviewed the progress of a task force which had been established early in 1979 to address concerns expressed by provincial legislative auditors regarding the federal role in collecting provincial taxes. The task force consisted of representatives from two provinces and members of the Office of the Auditor General of Canada.
16.30 Provincial legislative auditors wanted additional audit assurance to support their opinions on their provincial income tax revenue and credits because the tax collection agreements, in effect, prevent them from auditing most aspects of a taxpayer's return. Their second major concern was that, if each provincial legislative auditor were to audit to the extent permitted under the provisions of the agreements, there would be considerable duplication of effort. From the point of view of officials and staff of the Department of National Revenue - Taxation and the Department of Finance, the duplication would cause significant disruption and inconvenience.
16.31 The task force, therefore, undertook to review this Office's audit programs, findings and reports relating to assessing, proper allocation and accounting for personal and corporate income tax and various provincial tax credits and to report whether the concerns expressed by provincial legislative auditors were adequately addressed in the audit work. This will provide the provincial legislative auditors with additional audit assurance that they can use in formulating their opinions on their provincial income tax revenue and credits while, at the same time, remaining within the strict provisions of the federal-provincial tax collection agreements.
16.32 At their special meeting in Toronto on 13 September 1981, the legislative auditors agreed to rely on the Office of the Auditor General of Canada. Accordingly, new procedures were agreed upon that will provide provincial legislative auditors affected with appropriate assurances on income tax matters.
16.33 Legislative Auditors' Annual Meeting. The Canadian Conference of Legislative Auditors held its ninth annual meeting in St. Andrews, N.B. in July 1981. At the same time, the chairmen of federal and provincial Public Accounts Committees held their third annual meeting. A joint meeting of legislative auditors and Public Accounts Committee chairmen was also held. Guest speakers included the Honourable Richard B. Hatfield, Premier of New Brunswick, Bruce McDonald of William Mercer Limited, James J. Macdonell, Chairman, Canadian Comprehensive Auditing Foundation, and Harry G. Rogers, Comptroller General of Canada.
Resources of the Office16.34 Human resources. At 1 August 1981, 203 members of the Office were qualified for membership in the recognized accounting associations. Of the other members of the Office's professional staff, 49 held other qualifications, and 62 students-in-accounts were enrolled in programs leading to accounting designations.
16.35 The Office continues to make extensive use of resources from the private sector to supplement its own staff resources. In addition to providing a variety of skills and knowledge that the Office does not require on a permanent basis, these professionals have an enriching influence. They join the Office either on individual professional service contracts or through the Public Service Commission's Interchange Canada Program. Since 1974, 147 partners and managers from major public accounting and management consulting firms have joined the Office for varying periods of time and, at 1 August 1981, the Office had 21 people associated under Interchange Canada. At the same date, another 229 were under professional service contracts.
16.36 The following table presents a profile of the full-time staff of the Office. It excludes persons serving on Executive Interchange agreements or those on professional service contracts.
|31 March |
|Principals, including Executive
and Management Committee
|Directors and Managers||79||76||79|
|Supervisors and Auditors||124||134||125|
|Other audit staff||75||69||84|
|Administrative support staff||153||153||147|
|National Capital Region||410||401||382|
16.37 Members of the Audit Office who retired before 1 August 1981 were: George R. Atkinson, an Audit Supervisor with 24 years in the Public Service, and Dan G. Crone, the Director of Administration, with 15 years in the Public Service.
16.38 Official Languages. In implementing our Official Languages Program during the last year, emphasis was placed on taking corrective action in some problem areas identified by the Commissioner of Official Languages with respect to "service to the public" and "full participation" of the two official language groups. The Office has made significant progress in these areas as witnessed by the Commissioner's appraisal of the OAG in his 1980 Annual Report. During the current fiscal year, the Office will concentrate its efforts on various "language-of work" issues. Emphasis will be placed on improving the effectiveness of the Office's existing bilingual capability in accordance with the Auditor General's commitment to make the Office truly bilingual.
16.39 Estimates and expenditures. Exhibit 16.2 presents the Estimates and Expenditures of the Office, by Activity and by Object.
(Exhibit not available)
16.40 Office organization. The Office is being reorganized to meet effectively its newly stated objectives with due regard for economy and efficiency. This reorganization will occur during the winter of 1981-82 and will be reported in the 1982 annual Report.