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1982 Report of the Auditor General of Canada

16.1 The Auditor General is an Officer of Parliament, governed by the mandate set out in the Auditor General Act, reproduced as Appendix A to this Report. Pursuant to that mandate, the Auditor General has stated that his mission is as follows:

    - To make independent examinations of the accounts of federal departments and agencies and of other entities for which he is the appointed auditor, and to express his opinion on their integrity.
    - To make such independent examinations and inquiries as he considers necessary, and based on them, to report on whether or not there were significant deficiencies in the management control systems and practices in the audited entity during the period under examination; thereby providing reasonable assurance, where possible, that:
      - public assets are safeguarded and controlled;
      - transactions are lawful and proper;
      - financial, human and physical resources are managed with due regard to economy and efficiency and procedures are in place to measure and report the effectiveness of programs.
    - To call attention to anything that he considers to be of significance and of a nature that should be brought to the attention of the House of Commons, to communicate his findings and observations to management of the audited entity and to make any constructive recommendations he may have.
    - To maintain the stature of his Office, share its expertise with domestic and international colleagues, and contribute to the development of comprehensive audit methodology and practices.
    - To manage his Office with due regard for economy, efficiency and effectiveness, ensuring professional and administrative competence and adherence to applicable government policies.

Organization of the Office

16.2 During the past year there have been significant developments in the organization of the Office of the Auditor General. These changes have been designed to make audits more efficient and cost-effective, to enable the Office to improve its service to audited organizations and to meet the needs of its principal client, the House of Commons.

16.3 Our new, simplified organization is a response to the Government's Policy and Expenditure Management System (PEMS). Audit operations are organized so that the PEMS' 10 major expenditure areas or envelopes are audited by teams which concentrate in those areas. This provides for greater continuity within envelopes, increasing understanding of issues and improving relationships with clients.

16.4 The overall direction of the Office is the responsibility of the Executive Committee, comprising the Auditor General and the Deputy Auditors General. The Auditor General is the Chairman of this Committee.

16.5 There are now four Branches in the Office. The Audit Operations Branch is the heart of the organization. The other branches, Professional Services, Administrative Services and the Executive Office essentially serve to support the work of Audit Operations. Exhibit 16.1 shows the organization of the Office.

(Exhibit not available)

Audit Operations

16.6 The Audit Operations Branch plans and conducts the audits of federal departments and agencies and of other entities for which the Auditor General is the appointed auditor.

16.7 The Branch is organized on an envelope system with responsibilities for auditing some 150 entities, distributed to 10 envelopes. The Branch employs some 260 auditors in Ottawa and in seven regional offices located in Halifax, Montreal, Toronto, Winnipeg, Regina, Edmonton and Vancouver. It also uses specialist staff of the Professional Services Branch to assist in conducting comprehensive and government-wide audits. To supplement its own staff resources, Audit Operations makes extensive use of professionals from the private sector either on individual service contracts or through the Public Service Commission's Interchange Canada Program.

16.8 Members of the Branch and the Auditor General attend meetings of the Public Accounts Committee as witnesses and give evidence with regard to matters presented in the Auditor General's Report. The Branch co-ordinates the Office's relationship with the external auditors of those Crown corporations where the Auditor General is not the appointed auditor.

16.9 Audit Operations is responsible for the audit assignments of students enrolled in programs leading to designation as a Chartered Accountant, Certified General Accountant or Registered Industrial Accountant. The aim is to provide them with practical experience to meet prerequisites for professional accreditation. Auditors from developing countries, participating in an international assistance program, are assigned to the Branch to obtain training and practical experience in comprehensive auditing.

16.10 Audit Operations Branch staff are regularly called upon to participate in special projects initiated by the Executive Office, Professional Services and Administrative Services branches. These projects include international audits, government-wide projects, development of audit methodology, financial and administrative tasks, and professional development courses.

Professional Services

16.11 The Professional Services Branch supports the Audit Operations Branch by providing the additional knowledge and skills needed to carry out comprehensive audits. This is achieved through a combination of written guidance and training programs prepared for professionals in audit operations, and by supplying advice or specialists to perform audits. To ensure the process is effective, the Branch also performs a quality control function. Four groups make up the Branch: Standards, Methodology and Research; Professional Development; Control Evaluations; and Computer Audit.

16.12 The Standards, Methodology and Research group is responsible for developing and maintaining auditing standards, managing auditing methodology development, providing functional direction for issues related to Crown corporations, and conducting auditing research. Methodology, in the form of Audit Guides, is made available to staff to assist in the conduct of audits in specific areas. This past year has been particularly productive in capturing comprehensive auditing methodology for purposes of ensuring greater quality and consistency in the work we do as well as sharing such methodology with other legislative auditors in Canada and around the world. An outstanding example of this was the publication of "An Approach to Comprehensive Auditing" which has been made available both to our staff and to the management of organizations where we do our audits. Audit Guides dealing with such subjects as "Auditing of Procedures for Effectiveness" and "Evaluation of Internal Audit" were also produced during the year. Standards and procedures are assessed through post-audit quality review. Changes are conveyed through issuing Accounting and Auditing Bulletins and revising the Office's Comprehensive Auditing Manual. 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 Professional Development group is responsible for training and development and for the career development program of the Office. It also provides training and development assistance to some outside organizations through the Canadian Comprehensive Auditing Foundation. The responsibilities of the Professional Development group include designing, developing and delivering training and development courses for all Office staff in both official languages, and providing assistance in career planning related counselling services. During the year, the group provided some 2,330 training days internally and 780 training days in courses outside the Office. There were 26 in-house training courses for staff.

16.14 The Control Evaluations group provides professional specialist advice and assistance to comprehensive audit teams. This is done by ensuring that qualified staff are assigned to audits, maintaining an inventory of consultants capable of providing necessary services, providing functional guidance during the audit and by ensuring quality control.

16.15 The Computer Audit group provides expertise and methodology in the areas of value-for-money assessments of expenditures on electronic data processing and financial control assessments in computerized systems. It has the facility for analysing information held on computer files through the use of specially created audit software. In addition, sampling specialists assist in designing and analyzing sampling plans.

Administrative Services

16.16 The Administrative Services Branch provides all central support services throughout the Office and ensures compliance with applicable administrative, financial, official languages and personnel policies. These services are offered through five groups.

16.17 The Administration group provides administrative support services including information and library, mail and messenger, materiel, records, word processing, audio-visual, graphics, accommodation, telecommunication, receptionist and security services.

16.18 The Contract Administration group negotiates all contracts for professionals and monitors their engagement. This includes extensive use of the Public Service Commission's Interchange Canada program whereby private sector professionals are brought into the Office for assignments of up to two years.

16.19 The Comptroller's group administers the Office's financial management control and information systems and provides financial planning, systems development and electronic data processing services.

16.20 The Personnel group is responsible for personnel management including recruitment, compensation planning and services, staff relations and human resource planning. From time to time this group also assists the Office with government-wide audits of payroll costs management.

16.21 The Official Languages group develops and implements the Office's policies on bilingualism.

Executive Office

16.22 The Executive Office is responsible for a number of matters of direct personal concern to the Auditor General. These include reports to Parliament, parliamentary liaison, communications, strategic planning, legal matters, and relations with international and provincial Auditors General and related institutes and associations in the accounting and management consulting professions. These services are provided through three groups.

16.23 The Reports group is responsible for editing and producing reports to Parliament, providing reporting guidelines to audit teams and editorial service for material written for internal and external distribution. The principal product of the group is the annual Report of the Auditor General to the House of Commons.

16.24 The Parliamentary Liaison group is responsible for co-ordinating the Office's relations with Parliament and the Public Accounts Committee (PAC) of the House of Commons. This involves audit team preparation for PAC hearings and assistance to Committee members and staff. This group also helps to ensure that the reports to Parliament reflect the needs of Members.

16.25 The Communications group is responsible for internal and external communications in the Office. This includes production of Office publications such as AG Magazine and OAG News, relations with the media and responding to inquiries from the public.

Adviser to the Auditor General

16.26 The Auditor General has two main groups of outside advisers. Both groups include 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, F.M.C., President, Thorne Stevenson & Kellogg

James J. Macdonell, F.C.A., Chairman, Canadian Comprehensive Auditing Foundation

H. Marcel Caron, F.C.A., Executive Partner, Clarkson Gordon

Edward W. Netten, C.A., Managing Partner, Price Waterhouse Associates

Warren Chippindale, F.C.A., Chairman and Chief Executive Partner, Coopers & Lybrand

Robert M. Rennie, C.A., Chairman of the Board, Touche Ross & Co.

Gordon H. Cowperthwaite, F.C.A., Chairman, Peat, Marwick, Mitchell & Co. and Peat, Marwick & Partners

Eddie C. Wilburn, F.C.A., former Senior Partner, Deloitte Haskins & Sells

Kenneth S. Gunning, F.C.A., Executive Partner, Thorne Riddell

16.21 The Independent Advisory Committee on Government Accounting and Auditing Standards is comprised 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:

Rodney J. Anderson, F.C.A., Executive Partner, Clarkson Gordon

Guy Martin, C.A., Partner, Raymond, Chabot, Martin, Paré & Associés

Kenneth F.Y. Baynton, C.A., Partner, Thorne Riddell

Edward W. Netten, C.A., Managing Partner, Price Waterhouse Associates

Donald A. Brown, C.A., Executive Partner, Coopers & Lybrand

Ronald B. Robinson, F.M.C., Partner, Thorne Stevenson & Kellogg

Alan J. Dilworth, F.C.A., Managing Partner, Touche Ross & Co.

Professor L.S. Rosen, F.C.A., Faculty of Administrative Studies, York University

Alwyn D. Lloyd, C.A., Senior Partner, MacGillivray & Bruneau

William R. Sloan, F.C.A., Partner, Arthur Andersen & Co.

P. Howard Lyons, F.C.A., Partner, Deloitte Haskins & Sells

W. Ross Walker, F.C.A., Senior Partner, Peat, Marwick, Mitchell & Co.

Reporting Responsibilities

16.28 Four sections in the Auditor General Act detail our responsibility to report to Parliament.

16.29 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. Finally, 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.

16.30 The Auditor General is also required to express an opinion, as either the auditor or joint auditor, on the accounts of 34 agency and proprietary Crown corporations, in accordance with section 77 of the Financial Administration Act, and 50 departmental Crown corporations and other entities, including the accounts of the Governments of the Yukon Territory and Northwest Territories and their agencies. As well, the Auditor General is the external auditor of the International Civil Aviation Organization (ICAO).

Office Resources

16.31 The growing complexity of government operations, the sophistication of modern accounting systems and audit techniques and the changing and expanding responsibilities of the Audit Office require a skilled staff of high quality. The Office attempts to recruit and develop highly qualified people in accounting and auditing as well as a variety of other fields. Among the professionals in the Office are engineers, sociologists, economists and graduates in many other disciplines. Members of the staff have more than 90 post-graduate degrees, including 10 doctorates.

16.32 The Office staff includes some 135 members who have the designation of Chartered Accountant (CA), another 30 Registered Industrial Accountants (RIA) and 42 Certified General Accountants (CGA).

16.33 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.

1 August
1982

31 March
1982

31 March
1981

Principals
Directors and Managers
Supervisors and Auditors

58
100
137

55
92
126

50
76
134

Other audit staff
Administrative support staff

68
162

62
163

69
153

525

498

482

National Capital Region

434

418

401

Other Regions

91

80

81

525

498

482


16.34 During 1981-82, greater efficiency and cohesion in the work of the Office was achieved when over 114 members of the administration staff, located in another building, moved to the Office's headquarters. This move, coupled with internal reorganization, has produced savings both in terms of financial resources and operational efficiency and should reduce the proportion of overhead to operating costs in the coming year. A continuing effort is under way to reduce overhead costs as much as possible.

Use of Private Sector Resources

16.35 While the Office moves toward increasing the number of full-time professional staff to carry out comprehensive audits, it continues to make use of resources from the private sector. Experienced professionals join the Office under the Public Service Commission's Interchange Canada Program or serve through professional service contracts. A variety of specialized knowledge and experience is thus available to the Office on a cost-effective basis when it is required. This intermixing of skills has proved to be an enriching experience for professionals in both the public and private sectors. At 1 August 1982, the Office had 15 participants associated under Interchange Canada, and 221 men and women from the private sector under professional service contracts.

International Activities

16.36 Through its long association with the United Nations and other international organizations, Canada has acquired a wide reputation in public sector auditing that is recognized by countries and organizations around the world. The work of the Audit Office is also well known and respected by the International Organization of Supreme Audit Institutions (INTOSAI), where the Auditor General serves on the governing board, the United Nations, where Canada is on the Panel of External Auditors, NATO, where we serve on the Board of Audit; and the association of Commonwealth Auditors General.

16.37 Canada has been the external auditor of the International Civil Aviation Organization (ICAO) since it was formed in 1947. ICAO is a United Nations specialized agency based in Montreal. Its aims and objectives are "to develop the principles and techniques of international air navigation and to foster the planning and development of international air transport." We reported this year that significant action has been taken by ICAO to implement recommendations arising from our 1978 financial management and control review. ICAO is continuing to revise its financial regulations and make improvements in budgetary control procedures. The concepts of comprehensive auditing are being applied in our work at ICAO, and this important international organization has welcomed and implemented many of the recommendations that have been made as a result.

16.38 The Office has been involved in several other significant international activities over the past year. When the People's Republic of China was faced with developing the legislative audit function called for in its proposed new constitution, it sought advice from the United Nations. Canada, the United States and Japan were identified as countries in the forefront of government auditing. As a result, the United Nations sponsored a group of four senior Chinese officials to review the nature of legislative auditing in Canada. The group was given detailed briefings on the work of the Office and also had the opportunity to review public sector audit arrangements at the provincial level in British Columbia and at the municipal level in Ottawa. The visit of this Study Group to Canada demonstrated the high regard in which Canada's auditing accomplishments are held throughout the world. Other high level delegations from the United States, Czechoslovakia and Mexico, as well as numerous individuals from around the world, also visited the Audit Office last year.

16.39 The Audit Office is becoming increasingly involved in international assignments for Canadian auditors. Under the Public Service Commission's Interchange Canada and International Programs, Canadian auditors are working with the Asian Development Bank in Manila, the Auditor General's Office in Nairobi, the NATO Board of Audit in Brussels, and the Auditor General of Vanuatu, formerly the New Hebrides.

16.40 The international horizons of the Audit Office are further broadened by the International Audit Office Assistance Program. This program is financed by the Canadian International Development Agency and administered by the Canadian Comprehensive Auditing Foundation. The facilities of the Audit Office are used in both the training and fellowship components of the Program. The Canadian Comprehensive Auditing Foundation, working with our staff, has conducted a training course for public sector auditors from Latin American countries in Bogota, Colombia, and for English-speaking African nations in Nairobi, Kenya. Further courses are planned for French-speaking African nations and for Asian countries. Auditors from Chile, Ghana, Kenya, Malaysia, Peru, the Philippines, St. Lucia and Singapore have completed the fellowship component of the Program in the Office of the Auditor General of Canada. Similar one-year assignments in the Audit Office are currently being undertaken or planned for Fellows from Brazil, Colombia, Jamaica, Malaysia, Nepal, Nigeria, Sri Lanka, Tanzania, Thailand and Trinidad and Tobago.

16.41 These international activities are an important part of the work carried on by the Office of the Auditor General, and we look forward to new opportunities where Canada can both learn and contribute knowledge in the area of public sector and legislative auditing around the world.

Official Languages

16.42 Appearing before the Special Joint Committee of the Senate and the House of Commons on Official Languages on 24 November 1981, the Auditor General reiterated his commitment to make the Office truly bilingual. His intention is to create both an environment where office employees may work in the language of their choice and a capability to serve the clients of the Office in both official languages. A specialized language training program has been developed for the Office. Staff members are encouraged to make greater use of both official languages in meetings and presentations.

Retirements

16.43 Deputy Auditor General W. Wallace Muir, who headed the Finance and Administration Branch, retired after 18 years in the Public Service. Deputy Auditor General William F. Nelson, who headed the Human Resources Branch, retired after 19 years.

16.44 Other members of the Audit Office who retired before 1 August 1982, and their period of service in the public service, were: J. Colin Orme, B. Comm., RIA, a Senior Auditor, 34 years; J. Angus Wyatt, BA, CA, an Audit Director, 34 years; Robert J. Ince, B. Comm., an Auditor, 33 years; Paul Douville, a Compensation Systems Project Assistant, 31 years; Lucille M. Tessier, a Clerk, 24 years; Mary E. Smith, a Secretary in our Halifax Office, 19 years; Edward P. Deck, RIA, a Senior Auditor in our Regina Office, 15 years; Carmen Côté, a Secretary, 13 years and Amélie Wells, CGA, a Senior Project Officer, 6 years.

Estimates and Expenditures

16.45 Exhibit 16.2 presents the estimates and expenditures of the Office, by activity and by object. Expenditures in 1981-82 rose by $5,246,000 or 19.7 per cent over 1980-81. However, the cost of the Office in relation to the federal government's budgetary estimates dropped from .0477 per cent in 1980-81 to .0462 per cent in 1981-82, or less than five cents for every $100 of government spending as set out in the Estimates. It should be noted, however, that the responsibilities of the Office include the audit of many billions of dollars of non-budgetary expenditures and receipts not included in the Estimates, such as the Unemployment Insurance and Canada Pension programs, the activities of Crown corporations and government loan and guarantee programs. Estimates for the 1982-83 fiscal year show that the rate of increase in expenditures for the Office has declined. Since 1980-81, Appropriations to the Office have consistently decreased below the 1980-81 Appropriations in constant dollars.

(Exhibit not available)