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1983 Report of the Auditor General of Canada

Synopsis

8.1 Since May 1982, the Canada Employment and Immigration Commission (CEIC) has adopted action plans for examining its mission, putting a new planning and accountability process in place, analysing functional responsibilities and revitalizing employment services. It is too early to determine the extent to which these actions will have the desired effect.

8.2 Organizational structure. Generally, the dividing line between functional and operational responsibilities is not clear; respective roles in the two areas are not well defined or understood. Functional managers have not always ensured that there was a continuous monitoring of operations. The organizational structure makes it difficult to co-ordinate promotion of programs offered to the public.

8.3 Planning. In 1982, the Commission made important changes to improve the planning process and integrate it into the management process. However, there is still a need for this new process to provide information in the annual operational plans that will show clearly the links between these plans and the CEIC's overall objectives.

8.4 Unemployment Insurance benefits. The systems for Decision Monitoring and the Report on Hirings are working well. In the regions, however, managers do not ensure uniform application of quality control and quality assurance. In addition, the Commission does not analyse the overall cause of errors detected by this control. Investigation and control systems implemented by the Commission to reduce the number of overpayments are centred mainly on detection; the preventive aspect is neglected.

8.5 Direct Job Creation. Generally, contribution projects are selected in accordance with program objectives and criteria. However, for the three Direct Job Creation projects we examined, the monitoring of projects was not properly supervised and the results of the monitoring activities not adequately documented.

8.6 Counselling and Placement. The national Employment Services group exercises little direction or co-ordination over the regions. As a result of these and other weaknesses, it is difficult for the Commission to determine whether it is delivering the most appropriate programs to the clients who need them most.

8.7 Personnel. Human resource planning is not an integral part of the Commission's long-term planning process; the Commission does not determine its future human resource needs in a detailed and systematic manner. Consequently, it cannot be sure that it has the human resources necessary and appropriate for the efficient and effective implementation of changes which might have to be made as a result of the economic situation. There is a duplication of effort in developing training programs and material because the Commission does not have in place the mechanisms needed to co-ordinate its training activities.

8.8 Systems and Procedures. In a period when the volume of benefit payments is high, the Systems and Procedures group carries out well its responsibilities for issuing unemployment insurance cheques. However, policies, directives and data processing standards are too general and not up to date.

8.9 Efficiency. The CEIC has developed standards, productivity measures and an information system to collect basic data, but efficiency was not being measured by the system.

8.10 Effectiveness. Since 1978, the quality of evaluation studies has improved. There is a growing use of these studies by the Commission, but at the time of our audit there was no procedure for following up recommendations made by the Evaluation group.

8.11 Internal Audit. Management of Internal Audit does not have a staffing plan to ensure that its staff will have the necessary competence, experience and specialization to provide effective services to the Commission.

8.12 Information for Parliament. The deficit of the Unemployment Insurance Account for the 1982 period exceeds $2.5 billion, and forecasts indicate another major deficit for 1983.

Overview

8.14 The Commission is responsible for all employment, unemployment insurance and immigration programs; the Department is responsible for ensuring that federal employment and immigration policies and programs are developed and implemented effectively and for providing information on these to the public.

8.15 The National Headquarters of the Department and the Commission is located in Hull. The operations of the Commission are decentralized and are carried out in 10 regional offices and more than 800 permanent and temporary service points. The Commission uses some 27,000 person-years.

8.16 The Department's two divisions - Strategic Policy and Planning and Public Affairs - are located at National Headquarters. Although most Employment and Immigration activities are carried out by the Commission, a Department of Employment and Immigration was created so there would be a minister responsible for the portfolio and the traditional relationship with the central agencies would be maintained.

8.17 In addition to the Chairman and Vice-Chairman, the Commission has two Commissioners, one appointed in consultation with organizations representing workers and the other in consultation with organizations representing employers. This structure allows labour and management to be represented in formulating, approving and implementing programs affecting employers and workers. The National Headquarters is made up of seven groups. Four of these are concerned with programs offering services to the public - Employment, Insurance, Labour Market Development, and Immigration. The other three - Personnel, Finance and Administration, and Systems and Procedures - provide professional, technical and administrative services.

8.18 The organization chart of Employment and Immigration Canada, set out in Exhibit 8.1, shows the structure of the Commission and the Department.

Exhibit not available

8.19 The Commission administers four programs: Employment and Insurance, Immigration, Annuities, and Administration. The objective of the Employment and Insurance program is to further the attainment of Canada's economic and social goals by realizing the full productive potential of human resources. The Employment Services, Insurance and Labour Market Development groups manage this program. The Immigration program administers the admission of immigrants and visitors in accordance with the economic, social and cultural interests of Canada. The Annuities program administers contracts entered into under the Government Annuities Act. This program is administered by the New Brunswick region. The objective of the Administration program is to provide efficient and timely support services to the Department and the Commission.

8.20 Funding from parliamentary appropriations for both the Department and the Commission is provided in the government Social Affairs envelope. A summary of the funds administered and disbursed by the Department and the Commission for 1982-83 is given in Exhibit 8.2. Allocation of person-years is given in Exhibit 8.3.

Exhibit not available

Audit Scope

8.22 CEIC has a highly decentralized structure. National Headquarters provides functional guidance and services to regions; the regions are responsible for providing services and programs to the public. We analysed the organizational structure of CEIC in the context of this relationship.

8.23 We examined strategic and operational planning procedures, human resource planning, and electronic data processing planning and system development. We also reviewed the operational control mechanisms for Employment and Insurance program activities, such as Insurance Benefits Services, Direct Job Creation and Employment Services; the management process for personnel training; and the procedures for controlling and evaluating CEIC's operations.

8.24 We visited National Headquarters, 5 of the 10 regional offices - Nova Scotia, Quebec, Ontario, Manitoba and British Columbia - and more than 30 Canada Employment Centres (CECs).

8.25 Last year, the Immigration Program was the subject of a comprehensive audit by our Office. It was reported in Chapter 7 of the 1982 Report.

8.26 Since the arrival of a new Deputy Minister/Chairman in May 1982, the Commission has adopted action plans and taken several corrective measures. These include examining CEIC's mission, adopting a new planning and accountability process, analysing functional responsibilities and undertaking a project to revitalize employment services. It is too early to determine the extent to which these actions will have the desired effect.

Observations and Recommendations

Organization

8.28 Senior management and other managers are required to respond to many demands, both internal and external, including those of central agencies. To make it possible to hold such officials accountable, it is important to define the roles, responsibilities and authority of each.

8.29 In addition, the Commission's organizational structure calls for a combination of operational and functional management. Functional management elaborates on policies and guidelines approved by senior management and defines work processes and methods which must be followed by operational employees who are not answerable to functional directors. It is very important that functional responsibilities be clearly delineated, so those to whom such responsibilities have been assigned can carry out appropriate follow-up and control procedures corresponding to the authority delegated to them.

8.30 We examined the organizational structure, including operational and functional components, and their interaction, to determine whether they were conducive to planning, decision-making, control, communication and accountability. This included examining the operations of both the Department and the Commission with regard to the objectives and responsibilities stated in their governing legislation. We also examined a sample of management positions at National Headquarters and in the regions, with regard to the definition of their roles, responsibilities, authority and involvement in the decision-making process.

8.31 At the time of our audit, we noted that the dividing line between functional and operational responsibilities was not clear; roles for the respective functions were similarly not well defined or understood. Functional managers have not always ensured that there was continuous monitoring of operations. As a result, operational managers were similarly not always held accountable for operating with due regard to economy, efficiency and effectiveness. For example, in January 1983, in the different regions, the ratio between support personnel (finance, administration, personnel and public affairs) and the personnel serving the public varied greatly. These ratios are shown below:

Management's comments: Employment and Immigration Canada (EIC) has just completed a reorganization to provide a clearer enunciation and clarification of assigned responsibilities of the National Senior Executive Heads. In conjunction with this reorganization EIC is currently establishing an updated policy of functional direction and authority which will further define specific responsibilities at the executive level of the organization. In addition EIC has implemented a planning and Accountability Process which establishes the required linkages between the planning, budgeting, controlling and evaluation aspects of management and puts into place through the establishment of individual Managerial Contracts with executive levels the framework necessary for ensuring accountability throughout the organization.

8.33 We observed that there continue to be difficulties resulting from the fusion in 1977 of the Unemployment Insurance Commission and the Department of Manpower and Immigration. Because of the recent economic situation, there has been a rapid growth of new programs and a consequent need for additional human and financial resources. Decentralization, which has come about for geographic and political reasons, requires the involvement of a larger number of people.

8.34 In the past few years, many new initiatives were taken rapidly to reduce social and economic hardships. Numerous programs, many of a limited duration, were set up to deal with specific situations. To execute these programs, separate temporary modules were created. When the programs acquired a more permanent status, the modules were incorporated in parallel with the existing structure. Such a structure requires a large number of experts, advisers, co-ordinators, analysts, liaison agents and so on.

8.35 The organizational arrangements result in a sporadic and uncoordinated promotion of programs for the public and unclear liaison activity. Employers can, as a result, be contacted by several different officers of the Department or the Commission.

8.36 In evaluating their organizational structure, the Department and the Commission should give special attention to co-ordinating promotional activity and communication with the public.

Management's comments: Recognizing the need for continuous review of its programs to ensure that they meet the needs of its clients, EIC has undertaken two specific initiatives in this area. Firstly, a revitalization of its Employment Services activities, to provide an orientation of these activities more clearly focused on the employers' needs and requirements. Secondly, a consolidation of the various job creation programs administered by EIC, to enable a more precise rationalization of these programs with respect to overall government priorities.

Strategic and Operational Planning

8.38 Strategic planning. The Planning Environment Document (1982-87) does not provide enough information for strategic planning. The information collected and used for analysing the environment and preparing the document did not include an analysis of CEIC's strengths and weaknesses, identify issues, challenges and alternative strategies, or integrate results from program evaluations and internal audit. In addition, the process for developing the document involved relatively few people in National Headquarters and regional support groups. Senior program and operational management was not sufficiently involved in the process.

8.39 Without a structured process that involves senior management and more complete information, strategic and operational plans may not address, sufficiently ahead of time, the significant social and economic issues that will have an effect on CEIC.

8.40 CEIC should ensure that the planning process:

- involves greater participation by senior management;

8.41 Operational planning. The present planning process does not ensure that long-term operational plans are linked to objectives, short-term operational plans and resource requests. CEIC cannot determine systematically whether long-term plans of various groups and regions are co-ordinated and will therefore contribute to achieving its mission and overall objectives. In addition, it is to determine whether short-term plans and resource allocations will provide for achievement of CEIC's priorities, objectives and long-term plans.

8.42 CEIC's planning process should link long-term operational plans to objectives, to short-term plans, and to resource requests.

Management's comments: The emphasis has so far been placed on implementing the process for the next planning year, and the longer-term operational planning remains to be addressed. It is anticipated that this will be developed in the context of a revised Operational Planning Framework and the Multi-Year Operational Plan.

Programs

Unemployment Insurance

Exhibit not available

8.44 Unemployment Insurance services are provided by regional offices and 272 Canada Employment Centres across the country. National Headquarters has functional authority over the regions in carrying out the program.

8.45 The Unemployment Insurance Program is made up of six distinct groups of activities:

- Claims processing - includes all the activities related to determining eligibility for Unemployment Insurance benefits.

- Investigation and Control - involves implementing policies and procedures designed to prevent, detect and deter dishonest or fraudulent practices.

- The Interview program - is a control procedure to verify systematically the initial and continuing eligibility of claimants.

- Regional Computer Centres - are responsible for data processing installations as well as for data processing operations and payment of benefits.

- Premium reduction and revenue collection - involves processing applications for reduction of unemployment insurance premiums, registering qualified employers with Revenue Canada-Taxation, and operations related to the transfer to the Commission of premiums collected by Revenue Canada.

- Policy development - involves maintaining the legislative base of the Unemployment Insurance program and developing related policies and procedures.

8.47 In 1978, the Commission began corrective action to remedy these control deficiencies. The Record of Employment was modified, and our 1982 study showed that this resulted in a decrease in the estimated amount of overpayments.

8.48 The Commission also introduced the Decision Monitoring system and the Report on Hiring system and modified the quality control and quality assurance procedures. We therefore focused our audit on these systems as well as on the Investigation and Control and the Interview program activities.

8.49 We visited National Headquarters and six CECs in each of the five regions audited and analysed 576 claimant files for 1982.

8.50 Decision Monitoring. The Decision Monitoring system was put in place in 1979 to verify that all applications for benefits and all decisions processed by the Regional Computer Centre had been properly authorized and approved by agents and properly recorded. This system was operating satisfactorily in the regions we visited. It satisfied the control requirements for processing benefits and supplied adequate information to control backlogs.

8.51 Report on Hiring. The Report on Hiring system involves asking employers to supply to the Commission, on a voluntary basis, information on newly hired employees. This helps the Commission to identify claimants who are employed or who have unreported income. In 1982-83, the Commission recruited more than 15,000 new employers, bringing the total number of participating employers to 71,500 out of a possible 550,000; that is, to 13 per cent of all employers. This new control has identified $12 million in overpayments of Unemployment Insurance benefits. This initiative was successful and we encourage CEIC to continue its efforts to solicit employers' participation in the program.

8.52 Quality control and quality assurance. Quality control is the means used to ensure that the work done on a benefit claim is complete, accurate, reviewed, processed and communicated without delay to the claimant. This is done at the CEC level by Insurance Services advisers before benefits are paid.

8.53 Quality assurance, or evaluation of the quality control function, is also carried out at the CEC and involves checking the claims that were subjected to quality control. This operation only occurs when the processing of the benefit claim is complete, but it must be done in each CEC at least once a year by regional Insurance Services advisers.

8.54 National Headquarters has not enforced the requirement that the regions implement the quality control program, and four of the five regions visited had not attained the standards of the program. CEIC reports show an overall decrease of 18 per cent in the number of benefit claims which were subject to quality control. At the same time, initial applications for benefits had increased 21 per cent.

8.55 The Commission is not certain that all benefits paid are subject to the same level of review and that all errors and problems have been identified. Quality control has not achieved the improvement in the quality of processing benefit claims expected by the Commission. We believe that, in a period when there is a heavy volume of benefit payments, application of this control is particularly necessary to identify errors caused by the high volume.

8.56 The error rate identified by quality control was 23.8 per cent at 31 March 1983; this has not changed since 1981. Of these errors, 31.7 per cent would have resulted in overpayments and 16.2 per cent in underpayments, the remainder having no monetary effect.

8.57 Because quality assurance checks were not always carried out, review of quality control was not adequate in two of the five regions visited. In addition, the error rate identified by quality assurance in files already reviewed by quality control was 17.2 per cent for the fiscal year 1982-83. Of these errors, 32.8 per cent had a monetary effect.

8.58 It is obvious that the problems identified by quality control and quality assurance are not being corrected, in spite of the training given to Insurance Services personnel. We did not find any system in place to evaluate the effectiveness of the training provided to Insurance Services personnel on the basis of problems identified by quality control and quality assurance.

8.59 In carrying out the quality control and quality assurance functions, it is important to have experienced personnel. However, some of the regions we visited relied solely on the experience of Insurance Services advisers and also did not use checklists to ensure a uniform and complete application of the quality control and quality assurance functions.

8.60 National Headquarters should:

8.62 We also noted that there was no procedure in place to allow Insurance Services advisers to ensure that all errors identified had been corrected. Consequently, the possibility exists that overpayments and underpayments which have been identified by quality control and quality assurance will not be recorded and collected or paid.

8.63 National Headquarters should:

- set up a reporting system to provide the information necessary to analyse the causes of overpayments and underpayments so it can identify the appropriate corrective action to take. The reporting system should also provide the information necessary for evaluating the quality control and quality assurance functions in the regions; and

8.64 Investigation and Control. The objectives of Investigation and Control are to prevent, detect and deter abuses and fraudulent practices regarding Unemployment Insurance benefits. However, the emphasis has been on detection rather than on prevention and deterrence. Of 16 projects undertaken by Investigation and Control at National Headquarters during 1982-83, only 2 can be considered as preventive, and they were dropped. Also, CEIC has not attempted to measure the deterrent effect of the control systems in place. Consequently, the Commission has neglected the development of systems and procedures which could prevent and deter fraud and abuse of the Unemployment Insurance Benefit system. Approximately 80 per cent of available human resources are assigned to detection of overpayments.

8.65 The functional group at National Headquarters has not carried out sufficient studies to enable it to evaluate the possible impact of the detection activities of Investigation and Control on the degree of compliance with the Unemployment Insurance Act, 1971. Without such studies, it is difficult to assess the impact of Investigation and Control activities.

8.66 In 1982-83, the Commission determined that, for each dollar spent on Investigation and Control activities, it identified $2.81 in overpayments. However, there was no analysis to establish whether this was the most cost-effective combination of investigation activities. Although the value of overpayments identified increased by 37 per cent from 1981 to 1982, without an analysis of the effectiveness of the Investigation and Control activities it is difficult to attribute this increase to the quality of investigation, since the value of benefits paid during 1982 increased by 76 per cent.

8.67 National Headquarters should:

- determine the effectiveness of the various Investigation and Control activities;

8.69 National Headquarters' Investigation and Control group should develop an information system to provide adequate information for carrying out its mandate.

Management's comments: Investigation and Control results are being computerized and Quality Control/Quality Assurance information will be integrated into the reporting system. Also a management system is being developed to provide budgeted versus actual information by region and by program on resources utilized, activities carried-out and results obtained.

8.70 Interview program. The objective of this program is to ensure that claimants are available for work and to confirm, through interviews, that they are eligible for benefits. The application of the Interview program has often been restricted in the regions because of the large number of claimants. Regional management has restricted its application to categories of claimants in demand occupations or to those going from one type of claim to another. Our audit indicated that three of the five regions visited carried out less than 75 per cent of the total interviews planned at the beginning of the year. In our opinion, the restricted application of the Interview program leaves too many claimants without contact with CEIC agents for long benefit periods. This situation could lead to abuse.

8.71 National Headquarters should review the Interview program policy regarding the appropriateness of the selection of claimants to be interviewed.

Management's comments: A revised policy with regard to the application of the Interview Program was issued to the Regions in June 1983.

8.72 Record of Employment (ROE). Our 1978 Report identified serious deficiencies in the Record of Employment system. Our current audit showed that the Commission has remedied most of these deficiencies satisfactorily. However, we noted that National Headquarters eliminated the computerized control of blank ROEs in October 1982, but did not replace the control. Each region has had to devise and implement its own system. ROE controls in three of the five regions visited were weak. It is essential that the Commission control these forms adequately, since they form the basis for calculating the benefits to be paid and the length of time they will be paid.

8.73 National Headquarters should issue guidelines on the control of blank Record of Employment forms.

Management's comments: Manual procedures for the control of the issuance of blank Records of Employment have been developed and a monitoring methodology for this system is presently under consideration.

8.74 Unemployment Insurance Account. Our audit report to the Minister of Employment and Immigration on the financial statements of the Unemployment Insurance Account for the year ended 31 December 1982 disclosed that unidentified overpayments and underpayments still exist.

Labour Market Development

8.76 To attain these objectives, CEIC is responsible for carrying out the Employment Training, Direct Job Creation, and Labour Market Planning and Adjustment programs through its Labour Market Development group and the regions.

8.77 National Headquarters prepares and defines national policies for these programs, provides functional guidance to the regions, and controls and monitors application of the policies in the regions. Regional Headquarters, the Job Creation branches and the CECs are responsible for program delivery.

8.78 Employment Training includes Institutional Training - which involves management of adult occupational training allowances and purchase of courses from the provinces - Industrial Training, Critical Trade Skills Training, and the Skills Growth Fund.

8.79 Direct Job Creation includes management and support of 12 contribution programs aimed at job creation. The most important of these are the New Employment Expansion and Development (NEED) program, Canada Community Development Projects (CCDP), Summer Canada, Unemployment Insurance job creation projects, the Local Employment Assistance Program (LEAP), and the Program for the Employment Disadvantaged.

8.80 Labour Market Planning and Adjustment includes the Manpower Consultative Service, Work Sharing, Industry and Labour Adjustment programs, Canadian Industrial Renewal programs, Agricultural Employment programs and Foreign Workers Policy and Human Resource Planning initiatives.

8.81 Audit scope. Our audit of the Labour Market Development sector was concentrated on two activities of this program - Direct Job Creation and Labour Market Planning and Adjustment.

8.82 We audited the selection and monitoring of job creation projects in the Nova Scotia, Quebec and British Columbia regions. We also examined the CCDP, LEAP and Summer Canada programs, which account for approximately 65 per cent of total Direct Job Creation expenditures. At the time of our audit, the NEED Program, which is now very important, had just been announced and was too new to be included in our audit.

8.83 For Labour Market Planning and Adjustment, we examined the Work Sharing program. This program expanded during 1982; $83 million in benefits was paid through the Unemployment Insurance Account. We conducted these audits at National Headquarters, in regional offices in Nova Scotia, Quebec, Ontario and British Columbia, in the regional Employment Development Branches and in CECs.

8.84 Selection and monitoring of contribution projects. CCDP has existed since 1980, and its objective is to create term employment opportunities in high unemployment areas. Projects must support national and provincial priorities.

8.85 LEAP started in 1973 and aims at employment and skills development for disadvantaged groups, particularly women, natives, the disabled and those living in remote areas. Projects may be funded for a maximum of four years.

8.86 Since 1980, Summer Canada has created career-oriented jobs for students. This is done by supporting projects sponsored by local non-profit organizations or by federal departments and agencies.

8.87 Wages and overhead costs for projects under these three programs are paid by contributions. Under LEAP, contributions can also cover capital expenditures.

8.88 Our examination of the selection of contribution projects covered Summer Canada and CCDP. Our audit showed that project selection for these programs complied with criteria, job creation objectives and CEIC's procedures.

8.89 Our findings are different for monitoring of projects, where we examined three programs. CEIC's operational guides and checklists, and the narrative report forms prepared in the regions using these guides, do not provide information needed by project officers on how to test expenditures for account verification purposes. For example, determination of the extent of testing and choice of high-value items are not covered. Also, financial checklists do not specify clearly enough the requirement to ensure that expenditures are related to project activities.

8.90 Reports prepared by regional project officers on monitoring visits to contribution projects for the three programs examined did not provide enough information on the extent of expenditures examination and monitoring work performed. They also did not provide supervisors with the information necessary for assessing the quality of the work done during the visit.

8.91 CEIC directives covering the monitoring of contribution projects do not require the preparation of a schedule for either regular or financial monitoring visits. Without visits at appropriate intervals, projects in difficulty may not receive the support they need to improve the situation, and action may not be taken to stop payments of contributions where necessary.

8.92 Supervision of monitoring activities for the three programs examined showed several weaknesses. Many on-site monitoring visit reports were not signed by supervisors as proof of review; supervisors accepted incomplete financial monitoring reports; and final reports were not always requested from project sponsors. In addition, many LEAP files which we audited were not correctly set up - their content was not uniform from project to project, and documents were not accurately filed. These weaknesses indicate failure to follow CEIC procedures and Treasury Board terms and conditions, which could lead to payments that are not allowable under the agreement.

8.93 National Headquarters should establish directives for:

- determining the extent of account verification work for contribution projects;

8.94 Work Sharing. The objective of the Work Sharing program is to avoid lay-offs by providing income support payments and Unemployment Insurance benefits to those who are prepared to share their jobs by working only part time. To this end, the employees, the employer and CEIC must enter into an agreement. This program was reintroduced at the end of 1981 and was scheduled to terminate in May 1983; however, because of economic conditions, it was extended until May 1984.

8.95 The Internal Audit Bureau of CEIC audited this program a few months before our examination. Although several weaknesses noted by the internal auditors had been corrected at the time of our audit, some still remained.

8.96 Our audit revealed that monitoring of compliance with the conditions of agreements between employers and employees is not systematic, planned and organized. This is because CEIC directives on monitoring of agreements are not precise, and no useful management information system has been developed. As a result, it is possible that CEIC can continue agreements although employees or employers have ceased to comply with the terms and conditions.

8.97 National Headquarters should develop directives to specify the scope of monitoring work to be performed on work sharing agreements and establish a useful management information system.

Management's comments: An automated monitoring system has been developed and is in use. This system contains all information on the benefits and data related to the agreement. A more general guideline on monitoring is also being prepared.

8.98 CEIC directives require that quality control should be exercised on Work Sharing decisions. However, in three of the four regions visited, quality control activities had not been carried out in any of the CECs since the program was reintroduced in 1981. Without this quality control, there is an increased risk of errors and overpayments.

8.99 National Headquarters should ensure that quality control is exercised in all regions on eligibility decisions for the Work Sharing program, as required by CEIC directives.

Management's comments: Work Sharing claimants files are now subject to the same quality controls as are regular Unemployment Insurance Benefits.

Employment Services

8.101 Employment Services objectives are to:

- assist and effect placement of job seekers in job vacancies;

- encourage mobility of persons with skills that are in demand; and

- identify special clients (women, natives, handicapped, etc.) and help them locate services and obtain employment.

8.103 The emphasis in the past few years on positive action, combined with the general economic situation, has complicated the employment counsellors' job.

8.104 At the time of our audit, the labour market was providing few job offers. Because the number of placements has been declining for several years, some regions instructed their counsellors to try to develop the market by soliciting employers to increase the number of job offers. Other regions have tried to transfer some of their Employment Services resources to the Unemployment Insurance program.

8.105 Audit scope. In our audit, we tried to determine what strategies and objectives existed for the Employment Services function and to what extent the strategies were being followed. We also examined the management processes used to develop and evaluate the quality of placement and counselling activities and the performance of employment counsellors. We visited a number of CECs in the five regions we audited.

8.106 Counselling and Placement. The scope of the CEIC's mandate, management's emphasis on certain activities and the pressure from minority groups have led to Employment Services and Labour Market Development setting up a multiplicity of programs, tools and services. However, the Commission has not rationalized the programs and services that employment counsellors offer to employers and job seekers.

8.107 Our examination revealed the absence of a national strategy for dealing with employers as clients. For example, determining the objectives to be achieved in terms of overall market penetration and target industrial sectors is done only on the initiative of the regions. Although encouraging efforts were being made in some regions and at the local level to develop marketing approaches, no overall strategy for development of this function was evident. Without a national strategy, it is difficult for CEIC to determine whether it is delivering its services to the clients who need them most and whether it is offering these clients the most appropriate programs. Thus, it is difficult to get the right match between the services offered by the CEIC and the needs of employers and to measure the efficiency and effectiveness of these activities.

8.108 Also, National Headquarters has not given regular and full functional direction in the regions. For example, the orientation given to staff who deliver employment services is not well directed. In addition, activities of employment counsellors vary among regions and even among CECs; the counsellor can be either a counselling or placement specialist, a specialist in employer visits or a generalist. As a result, services given by employment counsellors lack uniformity, and national objectives might not be pursued.

8.109 The Commission should develop a national strategy for providing required services to job seekers and employers at the regional level. National Headquarters should clearly exercise its functional direction role.

Management's comments: A national strategy will be developed as part of the Revitalization of Employment Service including a clarification of roles and responsibilities.

8.110 During our audit, we examined files for both job seekers and employers. We noted that the documentation was inconsistent in quality and completeness and did not provide counsellors with sufficient knowledge about clients. For example, some job seekers' files did not provide data on their work histories. The large number of interviews that counsellors must conduct prevents them from putting enough emphasis on information gathering and following up on missing information.

8.111 The limited information in clients' files makes it more difficult to provide quality referrals by matching vacancies with the best qualified clients and to measure the outcome of the services delivered.

8.112 CEIC should develop directives to ensure that documentation in client files is complete and up to date to permit the most appropriate job matches.

Management's comments: EIC is now introducing a new type of interview in its CECs. It will facilitate the identification of worker clients requiring special assistance and, therefore, more complete documentation. For employer clients, an improved manual record file is being introduced immediately; later a computerized file will be available. Better job matches will result from both initiatives.

8.113 The lack of uniformity regarding data currently collected on placement and counselling services makes it impossible to measure performance and assess the quality of services provided to clients on a national basis. Managers have only limited information for resource allocation and control and service improvement. CEIC seems to attach more importance to the placement and counselling processes than to their results. The number of placements and counselling interviews is monitored; however, the cost and quality of service are not measured. In addition, the Commission does not use national standards to measure the performance of employment counsellors.

8.114 The Commission should use time and quality standards to measure the performance of counsellors and assess the quality of service provided to clients.

Management's comments: Time standards have recently been developed for most of the placement and counselling activities and the standards are now being introduced nationally. A system of measuring individual assistance effectiveness, soon to be implemented, will provide information required for sound management decisions on services to worker clients.

Management Controls and Support Functions

Personnel

8.116 Personnel functions are highly decentralized - personnel management at National Headquarters has functional authority for all activities related to human resource management. There are personnel specialists both at National Headquarters and in each of the 10 regions. Approximately 60 per cent of these specialists are in the regions, and the remaining 40 per cent are at National Headquarters. At the regional level, all personnel managers are directly responsible to a regional executive director or director general.

8.117 The current economic situation with its high rate of unemployment has had a significant impact on the management of human resources in CEIC. Although the rate of employee turnover has slowed within CEIC in 1982-83, the Unemployment Insurance workload increased considerably while placement activities decreased. This required managers to hire approximately 3,000 additional personnel and to reorganize the tasks of Insurance sector personnel.

8.118 In the past two years, CEIC personnel functions have been the subject of many audits conducted by central agencies. There have been audits of classification and staffing, performance review and employee appraisal and management of overtime. These studies have brought about noticeable improvements in the management of human resources in the Commission. However, this audit and those previously conducted have revealed that Corporate Personnel Services has experienced difficulties in fulfilling its role of functional direction.

8.119 Our audit of human resource management was conducted at the National Headquarters and in four of the regions. We focused our review on human resource planning and on training.

8.120 Human resource planning. At National Headquarters and in some regions, management placed emphasis on the human resource planning function and showed its commitment by setting up human resource committees in the autumn of 1982. Nevertheless, there were varying degrees of expertise and time devoted to this function within CEIC. Consequently, in some regions, fairly comprehensive planning processes are in place for human resources, while at National Headquarters and in other regions processes are inadequate to meet organizational goals effectively.

8.121 In CEIC as a whole, human resource planning is not seen as a component of the other planning activities. It is therefore not sufficiently linked to strategic, operational and financial planning. We also noted that there is little contact between national and regional planning and analysis groups regarding human resource issues. Without an integrated human resource planning process, CEIC cannot ensure that it is making the most effective use of its thousands of employees.

8.122 The Commission does not specify its long-term human resource requirements in a comprehensive or systematic fashion. It makes no detailed quantitative forecasts beyond one year and does not identify the types of human resources needed for the long term. The Commission cannot be sure that it has the appropriate human resources necessary for efficient and effective implementation of changes expected in the organization or changes that might have to be made because of the shifting economic situation.

8.123 At present, the Commission has limited information on its existing human resources - information that is needed for planning purposes. The various personnel management information systems do not include sufficient information on the makeup of the organization's work force (experience, type of position, education, mobility, etc.). Planning is restricted by the limited information on the composition, capabilities and aspirations of personnel.

8.124 The Commission has begun a project to improve its personnel information system to meet the needs of human resource planning. This system is to be operational by 1985.

8.125 The Commission should:

- develop a comprehensive, uniform and coherent human resource planning process, linking strategic, operational and financial planning with the personnel function; and

8.126 Training. The Commission has appointed a co-ordinator responsible for reporting on the training function to Treasury Board Secretariat (TBS) and to CEIC management. However, the co-ordinator does not have the information required to perform this role adequately. Although National Headquarters identifies annually the projected training activities throughout CEIC for reporting to TBS, there is no ongoing requirement for those responsible for training activities to advise the training co-ordinator about new activities as they arise. In addition, National Headquarters does not monitor the extent to which regions evaluate their training activities or the results of the evaluations. As a result, the training co-ordinator is not in a position to advise regions on the status of training activities in other regions or to report to management on the training methods used in CEIC.

8.127 We found a duplication of effort in the development of training programs and materials. Many responsibility centres and different levels in the organization develop their own training programs and materials. National Headquarters has not centralized the gathering and dissemination of training programs developed throughout the organization that could be common to more than one region. An example is the number of different performance evaluation courses which are given in most regions. National Headquarters did not supply a basic model to help the regions to develop these courses. As a result of this duplication of effort, training costs are higher and there is a lack of standardization in the information given to employees on subjects of national importance.

8.128 National Headquarters should:

- require training personnel in both National Headquarters and the regions to supply information to the training co-ordinator to enable him to carry out his responsibility for co-ordinating and reporting on training activities;

Systems and Procedures Group

8.130 The main responsibilities of this group are to develop, implement and maintain computer systems for use in national programs; to develop and administer policies and plans for EDP and related manual systems; to supply consulting services of a general management nature; and to provide form design services. The group is also responsible for operating the data centre in Hull.

8.131 Data processing is decentralized in 10 data centres. The regional data centres report administratively to the region in which they are located. However, National Headquarters has functional responsibility for these centres.

8.132 Most of the current systems use batch processing. However, the majority of systems now being developed will be on-line, and some will be supported by data bases. Data processing within the Department and the Commission is not restricted to conventional financial and administrative information. The wide scope of CEIC's programs has required the development and implementation of many operational computer systems, and these systems have become essential to the successful operation of the programs they support.

8.133 For the fiscal period 1982-83, the Commission's budget for data processing was approximately $60 million, of which $20 million was for the Systems and Procedures group. Data processing uses 930 person-years, of which 400 are at National Headquarters and 530 are in the regional computer centres.

8.134 We examined the management procedures and methods used by the Systems and Procedures group to direct and administer all its activities. These include planning new computer applications, utilizing resources, both human and material, and developing and implementing systems as required.

8.135 We reviewed the EDP Policy Standards and Procedures Manual, the planning process and plans that result from the process, and a sample of seven systems being developed or maintained. We examined, where appropriate, the organization, planning and control mechanisms and the methods used to plan, develop, implement and evaluate after implementation.

8.136 The Commission has computerized almost all systems for its programs. The Unemployment Insurance program has the highest profile; the Systems and Procedures group is responsible for developing and modifying the EDP systems relating to this program. The group carries out these responsibilities well; in our previous studies on errors in insurance benefits paid, we found that the systems complied faithfully with the acts and regulations.

8.137 Direction and management. In the complex and dynamic environment in which the Commission operates, it is essential that policies, standards and procedures are developed, kept up to date and followed.

8.138 The EDP Policy Standards and Procedures Manual issued in February 1980 has not been revised since June 1980. Many directives and standards are very general, such as those relating to the planning process and to the organization and control of projects. As well, the manual does not mention the development of data bases or on-line systems. As a result, the quality and relevance of the work done depend, to a great extent, on the experience of EDP personnel.

8.139 The personnel assigned to planning and developing projects do not always follow the standards and directives specified.

8.140 The Systems and Procedures group should up-date its EDP Policy Standards and Procedures Manual. There should also be a procedure in place to ensure compliance with the Manual.

Management's comments: The EDP Policy Standards and Procedures Manual was issued in 1980 and updated once since. Another update will be undertaken shortly. With the updating of the Standards Manual, enforcement of standards by managers will be given increased emphasis.

8.141 Planning for EDP. Our audit revealed that the EDP planning process was not well defined or communicated throughout the Commission. The information needs and projects of users that have an impact on data processing were not identified in a systematic, regular and formal manner. It was difficult to establish links between existing data processing plans - the operating plan, the multi-year plan and the plan submitted to Treasury Board. The long-range EDP plan was poorly defined and documented; further, it did not integrate and co-ordinate all the elements or resources such as projects, materiel, personnel and organizational structure. The operational plan contains few qualitative or quantitative elements relating to projects or activities for the coming year.

8.142 Consequently, the EDP planning process provides a limited amount of useful material for determining whether EDP projects and activities will meet the Commission's short and long-term goals, whether human and financial resources are adequate, and whether the performance of the Systems and Procedures group is satisfactory.

8.143 The Systems and Procedures group should specify and document its EDP planning process and integrate it with the Commission's. It should also specify the contents of EDP plans and ensure that they are integrated with one another and are complete.

Management's comments: EIC complies with planning requirements, as directed by Treasury Board, through the Annual Information Technology and Systems Plan. In addition to individual project plans developed and presented to Project Steering Committees, the Senior Steering Committee on Systems and Procedures, and Treasury Board, annual work plans are submitted with the budget. As of 1983-84, these work plans are formalized through CEIC Management Contracts with the Deputy Minister. This newly implemented process will provide a mechanism for integrating and linking the various plans.

8.144 Organizing and managing projects. The EDP Policy Standards and Procedures Manual defines the development and administration process for projects in a general way. As a rule, the work plans we examined did not show, or showed only some of, the following information about projects: the anticipated date of termination of activities; the persons responsible for planned activities; the estimated time and cost; and the qualitative and quantitative results anticipated.

8.145 As well, the control reports we examined did not set out systematically and regularly the resources and time actually spent on the project, the corresponding budgeted cost and time for the various activities, and the activities planned but not carried out.

8.146 As a result, the Commission's senior management has little integrated information for evaluating project plans, ongoing projects and the performance of project teams.

8.147 The Systems and Procedures group should define and document in greater detail the process required for detailed planning of projects and the controlling and reporting processes.

Management's comments: In recognition of the growing complexity of the systems effort in EIC, a new system of project authorization was implemented April 1, 1983. The recent establishment of the Senior Steering Committee on Systems and Procedures chaired by the Associate Deputy Minister/Vice-Chairman will ensure that senior management has adequate information for planning, controlling and assessing EDP processes.

8.148 Evaluation of EDP systems after installation. According to our criteria, evaluations of EDP systems - of differing importance and frequency depending on the system - are necessary to determine:

- the human and material resources used in developing and implementing the system, to enable a comparison to be made between resources used and those budgeted; and

- whether the system satisfies - and continues to satisfy - the processing and information needs of the users from the point of view of time frames, benefits, costs and other considerations.

8.150 We found that the Systems and Procedures group had done a partial evaluation of some EDP systems after they had been developed and implemented.

8.151 The Systems and Procedures group should ensure that all major EDP systems are evaluated after installation and periodically thereafter.

Management's comments: In the past few years, major systems have been assessed by independent consultants as well as our internal Planning and Analysis branch and our Strategic Policy and Planning group. As resources are available, more post-implementation review will be conducted.

8.152 Planning for the recovery of processing capability. At the time of our audit, the policies, directives and procedures for recovery of processing in case of extended interruptions of service in data processing centres were either incomplete or outdated. Such policies should cover organizing, planning and administering contingency processing activities in case of equipment failure, sabotage or natural disasters. Their absence could delay program delivery unnecessarily or result in a lack of economy.

8.153 The Systems and Procedures group should specify and communicate policies, directives and procedures for organizing, planning and administering contingency processing activities.

Management's comments: Contingency policies, plans and procedures exist for critical batch processing systems and were last updated in July 1982. Sufficient equipment exists currently to back up all batch processing systems. A detailed study is presently under way with respect to equipment requirements to back up the on-line system. This study is expected to be completed in early fall 1983.

Employment and Immigration Information System

8.155 The objective of EIIS is to satisfy the organization's needs for information on its programs, operations and resources. It is a computerized modular system which gathers various data, produces reports and supplies information to users at all levels of the organization. EIIS produces reports using financial data, data on personnel and data on the operations of the Commission.

8.156 We divided EIIS users into two types: operational users and management users. Operational users are those who work with the system; for example, the finance group, which uses information produced by the "non-salary" expenditure module. Management users control their responsibility centres using EIIS reports.

8.157 Our audit concentrated on the quality of EIIS and its information. As well, we reviewed the use made of the system by sampling different organizational levels and locations in the Commission. We found that, as a rule, the system meets the needs of operational users better than those of management users.

8.158 Data are being entered in duplicate and triplicate. For example, information on documents for the personnel module is coded and entered for EIIS and for the Department of Supply and Services (DSS). Information from other documents is also coded and entered for the Personnel Management Information System. Information for the "non-salary" expenditure module is coded for EIIS and DSS and then entered twice, once for DSS and a second time for EIIS. Efforts are already being made to eliminate this duplication and to achieve greater integration of systems.

8.159 EIIS has been the subject of complaints, especially from management users, with regard to its lack of accuracy and the lack of timeliness of its reports for controlling daily operations. However, our audit showed that EIIS accurately processes the data it receives. To resolve the daily control problem, CEIC will need to use new EDP techniques. In this context, it is currently upgrading certain parts of EIIS through the use of on-line enquiry techniques. However, the development of such a complex system requires substantial amounts of resources and time. For example, the Regional Personnel Support system will not be operational before 1985.

8.160 Volume reports contain so much information that managers need to have it summarized manually before they can use it in the decision-making process.

8.161 The Commission should:

- consider integrating the data entry process so there is only one coding and data capture operation;

Performance Measurement

8.163 Our audit covered mainly the systems and information used by the Commission to measure and control efficiency. It was conducted at National Headquarters and in two regions, Quebec and Ontario, which have the largest number of human resources - a total of 14,600 person-years. We visited three CECs in each of these provinces, in addition to the regional offices.

8.164 We assessed national policies on efficiency and productivity and their implementation in both regions. We also conducted tests on the reliability of operational data in five of the six CECs visited in Ontario and Quebec. In addition, we reviewed CEC time and production reports and considered whether engineered standards could be used to determine efficiency levels within CECs.

8.165 Accuracy and reliability of performance indicators. National Head-quarters performance measurement policy clearly assigns responsibility for controlling input data reliability to the regions. CEC managers and supervisors collect and report time and production data. These operational data and the reports produced are used to monitor and control work backlogs and productivity levels. In Ontario and Quebec, procedures relating to performance data accuracy - that is, for the data collection process, reliability monitoring and follow-up procedures for each CEC - have not been adequately specified and followed.

8.166 As a result, performance data accuracy is not being regularly and systematically checked, and the degree of reliability of performance indicators is unknown.

8.167 National Headquarters should ensure that regions develop procedures to establish performance data reliability.

Management's comments: EIC has undertaken a quarterly monitoring of data integrity with a follow-up conducted in each region. A data integrity liaison mechanism is now in place when program managers detect questionable data. These efforts will continue.

8.168 Use of performance indicators and of engineered standards. The Com-mission's policies on the use of performance indicators are too general to guide managers. Moreover, the regions did not appear to be well informed about the role of performance indicators at the national level.

8.169 Engineered standards have been developed by National Headquarters for 62 per cent of the person-years amenable to work measurement, or approximately 10,000 person-years. These standards have been applied at the national level to assess the impact of procedural changes and to determine resource requirements to meet rapidly increasing demands for service. They have not been used in the CECs to measure and report on efficiency.

8.170 Based on a review of data and reports covering 18 operational units in 3 CECs in Ontario, we found that:

- productivity levels were not compared to standards in the production reports;

- production items reported related closely to the national engineered standards;

- reports generally indicated daily activity and were not accumulated on a weekly or monthly basis;

- reports covering previous months had not been retained; and

- reports provided an inadequate indication of productive time used to process work; in many cases, productive time used was not indicated in these reports.

8.172 In our opinion, reports could readily be modified to permit the application of the Commission's standards. Applying the standards would improve the usefulness of these reports, both for day-to-day efficiency controls and for productivity improvement.

8.173 The Commission should modify the Employment and Immigration Information System so that managers can make greater use of its engineered standards, particularly as a means of measuring, controlling and improving efficiency in CECs.

Management's comments: The EIIS improvements requested are currently available using the EIIS Management Reports Module. Further refinements to these reports are also planned for the current year.

Program Evaluation

8.175 Our audit examined the program evaluation studies which had been done, as well as the management and organization of the evaluation function.

8.176 The Department of Employment and Immigration is one of the most experienced in the field of program evaluation. An analysis of the studies carried out shows that quality has improved considerably during the past few years. Among other improvements, the Department now uses more appropriate and diversified methods and more complete data bases. The result is more complete and better quality information on program effectiveness.

8.177 With respect to management and organization of the evaluation function, we noted that annual plans for evaluation were not followed. According to the Department, these plans were unrealistic partly because of the presence of supernumerary staff due to the 1977 integration. At 31 March 1983, this prevented the staffing of seven positions, or 20 per cent of the professional evaluation staff. We also noted that the execution of evaluation projects had not been adequately controlled in the past.

8.178 We found examples of evaluation studies being used; for example, the study on the Canada Manpower Industrial Training Program was reflected in the modification of the Adult Occupational Training Act. Nevertheless, the Department did not have appropriate procedures for monitoring implementation of the recommendations made as a result of evaluation studies.

8.179 Since January 1983, the Department has taken steps to rectify these shortcomings in its program evaluation activities.

8.180 Effectiveness indicators. There are few effectiveness indicators relating to CEIC's long-term objectives. This makes it difficult for the Commission to evaluate the achievement of its objectives.

8.181 The Department's approach emphasizes integrating effectiveness indicators developed during evaluation studies with strategic plans. We observed that, for evaluating client training programs, the Commission had developed and applied indicators relating to the employment prospects and earning potential of people who had taken training courses. It had also implemented an information system to identify professions where demand exceeds supply. For Employment Services, quality indicators could be developed for placements made through CECs.

Internal Audit

8.183 Planning. We did not find, in either the long-range or the annual audit plan, specific factors of materiality and risk used to determine the order and category of priority of each audit area. As a result, some of the more important and significant audit areas or projects may not be examined because of a lack of human or monetary resources.

8.184 The Internal Audit Bureau should document clearly, in its long-term and annual plans, how elements of materiality and risk are used to determine the order of priority for audit areas or projects.

Management's comments: EIC will address this issue in the long-range and annual plans to be completed during 1983-84 by the Internal Audit Bureau.

8.185 Human resources. The need for human resources is summarized in the long-range plan in person-weeks only. The annual plans for 1983-84 break down the person-weeks between operational staff and auditors. There is no summary of the mixture of resources required, in respect to level of competence, experience and specialities, to execute the plan.

8.186 Since Internal Audit does not have a well established staffing plan, there is no guarantee that all human resource needs in terms of numbers and the mix of qualifications will be met.

8.187 As a result, there is a risk that the staff assigned to an audit project by the Internal Audit Bureau may not possess the skills required, and the Bureau may not be able to obtain the mix of competence, experience and specialities necessary to carry out its mandate.

8.188 The Internal Audit Bureau should identify its personnel needs in terms of level of competence, experience and specialities. Before hiring people to complete its staff requirements, the Bureau should prepare a staffing plan which clearly responds to its needs.

Management's comments: EIC has a staffing plan for 1983-84 which reflects its personnel requirements according to levels of expertise and experience, while making due provision for specialization and the need for flexibility in order to respond and react to changing circumstances and conditions.

8.189 Reports. Our review of internal audit reports revealed that the Bureau has not established standards for the format and content of audit reports. Reports would be much more useful to senior management if they contained a summary of important points and were sent to managers responsible for taking corrective measures.

8.190 The Internal Audit Bureau should develop guidelines for the format, content and distribution of its audit reports.

Management's comments: EIC will develop a policy during 1983-84 covering format, content and distribution of audit reports.

Information for Parliament

8.192 We examined this document, which was the first the Commission had presented, and believe it represents a significant improvement over the information previously reported to Parliament. The Commission indicated that other areas and information will be added, including counselling interviews and labour market development initiatives. In the preceding sections of this chapter, we pointed out weaknesses in the planning process as well as the fact that performance indicators are not applied on a national scale. Improvements in these areas will allow the Commission to supply more meaningful information to Parliament.

8.193 Part III of the Estimates for 1983-84 for Employment and Immigration Canada does not give information on the revenues of the Unemployment Insurance Account. Without this revenue information, parliamentarians cannot be informed of the financing of the Account on a multi-year basis. To remain within the spirit of the Treasury Board policy, the Commission should have included in its expenditure plan sufficient information to allow Members of Parliament to understand and appraise the operations of the Unemployment Insurance Account, one of the main socio-economic programs CEIC administers. The availability of such information is indicated by the fact that the Minister of Finance included the five-year financial forecast for the Unemployment Insurance Account in the 19 April 1983 Budget.

8.194 Nevertheless, we would like to draw Parliament's attention to the extent of the deficit of the Unemployment Insurance Account at 31 December 1982. The economic situation is the principal cause of the high rate of unemployment and benefits paid. This has resulted in an unprecedented deficit in the Unemployment Insurance Account of $2.4 billion. Exhibit 8.4 gives the operating figures for Unemployment Insurance in recent years.

Exhibit not available

8.195 According to the forecast for the years 1983 to 1987 presented by the Minister of Finance in the 19 April 1983 Budget, the accumulated deficit of the Account will be $4.2 billion at the end of 1984. After this date, the deficit is forecast to decrease gradually in 1985, 1986 and 1987 and be eliminated at the end of 1987.

8.196 These economic projections are tentative and are only approximations, especially for the medium term (1985 to 1987). The forecasts for the Account in the Budget are based on a maximum unemployment rate of 12.4 per cent in 1983, to be reduced gradually to 8.8 per cent in 1987. As well, the Budget assumes that the employee's share of premiums will remain at $2.30 for every $100 of insurable earnings in 1983 and 1984. The premiums will increase to $2.40 in 1985 and $2.65 in 1986, and decrease to $2.20 in 1987.

8.197 If the actual annual deficits were higher than forecast, the Government would have to select one or more of the following options for eliminating them: increase employer or employee premiums or both; decrease the benefits paid to claimants; increase the government's share of expenses; or amend the method of financing the Unemployment Insurance Account.