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1983 Report of the Auditor General of Canada

Introduction

18.1 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:

    - 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 Canadian 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

18.2 The organization of the Office of the Auditor General is designed to produce efficient and cost-effective audits, thereby serving audited organizations constructively and meeting the needs of its principal client, the House of Commons.

18.3 The overall direction of the Office is the responsibility of the Auditor General. He exercises this responsibility as Chairman of an Executive Committee, comprising the Deputy Auditors General.

18.4 The Office contains four Branches. 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 18.1 shows the organization of the Office.

Exhibit not available

Audit Operations

18.5 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. The organization of the Branch reflects the Government's Policy and Expenditure Management System (PEMS). The 10 major expenditure areas or envelopes of PEMS are audited by teams that concentrate in those areas. This approach provides greater continuity in the audit process and improved understanding of issues, resulting in better relationships with clients.

18.6 The Branch employs some 260 auditors in Ottawa and in seven regional offices located in Halifax, Montreal, Toronto, Winnipeg, Regina, Edmonton and Vancouver. They are responsible for auditing approximately 150 entities, covering the 10 major expenditure areas. The Branch also uses specialist staff of the Professional Services Branch to assist in conducting comprehensive and government-wide audits.

18.7 Senior staff of the Branch attend meetings of audit committees of some departments and Crown corporations. The Branch also co-ordinates the Office's relationship with the external auditors of those Crown corporations where the Auditor General is not the appointed auditor.

18.8 Audit Operations is responsible for the audit assignments of students on the staff who are enrolled in programs leading to the designation of Chartered Accountant, Certified General Accountant or Registered Industrial Accountant. During these assignments, students receive the practical experience needed to meet requirements for such professional accreditation.

18.9 Audit Operations Branch staff are regularly called on 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

18.10 The Professional Services Branch supports the Audit Operations Branch by providing, through five groups, 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 that the audit process is effective, the Branch also performs a quality control function.

18.11 The Crown corporations group is responsible for providing direction and advice on general accountability issues relating to Crown-owned entities with a view to ensuring greater consistency and efficiency in audits conducted in Crown corporations. During the year, this group held a one-day workshop on "Legislative Auditing in Crown Corporations", attended by private sector auditors of Crown corporations and other involved in legislative audits.

18.12 The Standards, Methodology and Research group is responsible for developing and maintaining auditing standards, managing auditing methodology development, and conducting auditing research. Audit Guides dealing with such subjects as "Auditing EDP: Planning the EDP Audit" and "Auditing the Planning of Capital Assets" as well as Accounting and Auditing Bulletins on various accounting and auditing topics were produced during the year. This methodology is shared with other legislative auditors in Canada and around the world. Standards and procedures are assessed through post-audit quality review with resulting changes communicated to staff, and auditing research is conducted to develop further ways of improving audits.

18.13 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 and related counselling services. During the year, the group provided some 2,951 training days internally and 778 training days in courses outside the Office. There were 29 in-house training courses for professional and administrative staff.

18.14 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 performing a quality control function. In addition, the group plays a leading role in planning and executing government-wide audits.

18.15 The Computer Audit group provides expertise and methodology in assessing whether value for money has been achieved in expenditures on electronic data processing and in the evaluation of financial controls in computerized systems within the government.

Administrative Services

18.16 The Administrative Services Branch provides all central support services throughout the Office. It is responsible for and provides advice on the administration of applicable administrative, contracting, financial, official languages and personnel policies. Its services are offered through five groups.

18.17 The Administration group provides administrative support services including library, mail and messenger, office supplies and equipment, file maintenance, word processing, audio-visual, graphics, accommodation, telecommunications, receptionist and security services.

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

18.19 The Comptroller's group is responsible for and provides advice on the financial planning and reporting of the Office's resource requirements, providing EDP services and systems development, and establishing procedures, systems and controls for managing the financial administrative activities of the Office.

18.20 The Official Languages group advises senior management on interpretation of government official languages policies as they apply to the Office and develops and implements the Office's official languages policies and programs.

18.21 The Personnel group is responsible for developing and administering personnel policies, practices and programs. These include staffing, classification, compensation, pay and benefits, staff relations and human resource planning. From time to time, this group also assists the Office in government-wide audits of payroll costs management.

Executive Office

18.22 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, public affairs, internal communications, strategic planning and legal matters. Also included are relations with international and provincial Auditors General and related institutes and associations in the accounting and management consulting professions. These services are provided through four major groups.

18.23 The Reports group is responsible for editing and producing reports to Parliament and providing reporting guidelines to audit teams and an editorial advisory service for material written for internal and external distribution. The annual Report of the Auditor General to the House of Commons is the principal product of the Office and is subject to central review, edit and technical verification by the Reports group.

18.24 The Parliamentary Liaison group co-ordinates the Office's relations with Parliament and the Public Accounts Committee (PAC) of the House of Commons. This involves preparation for PAC hearings and assistance to Committee members and staff. The group also helps to ensure that reports to Parliament meet the needs of Members to adequately oversee the expenditure of public funds.

18.25 The Public Affairs and Communications Advisory groups are responsible for internal and external communications of the Office. This includes relations with the media, responding to inquiries from the public and producing Office publications.

Advisers to the Auditor General

18.26 The Auditor General has two main groups of outside advisers. Both groups include leading members of the accounting and management consulting professions.

18.27 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

J.R. Brown, F.C.A., Senior Partner, Peat, Marwick, Mitchell & Co.

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

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

Gordon H. Cowperthwaite, F.C.A., Chairman, Canadian Comprehensive Auditing Foundation

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

Giles R. Meikle, F.C.A., Senior Partner, Deloitte Haskins & Sells

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

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

18.28 The Independent Advisory Committee on Government Accounting and Auditing Standards comprises 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:

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

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

Ronald G. Gage, F.C.A., Partner, Clarkson Gordon

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

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

Michael H. Rayner, F.C.A., Partner, Price Waterhouse Associates

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

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

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

Reporting Responsibilities

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

18.30 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. This includes 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 17 of this Report.

18.31 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 of Canada is the external auditor of the International Civil Aviation Organization (ICAO).

Public Accounts Committee

18.32 The Auditor General and senior members of his staff attend meetings of the Public Accounts Committee as witnesses and give evidence on matters presented in the Auditor General's Report.

Office Resources

18.33 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, including engineering, sociology, economics, political science and many other disciplines.

18.34 The Office staff includes 159 members who have the designation of Chartered Accountant (CA), another 35 are Registered Industrial Accountants (RIA) and 57 are Certified General Accountants (CGA).

18.35 The following table presents a profile of the full-time staff of the Office.

31 March
1983

31 March
1982

Principals
Directors and Managers
Supervisors and Auditors

59
105
146

55
92
126

Other audit staff
Administrative support staff

68
158

62
163

536

498

National Capital Region

441

418

Other Regions

95

80

536

498


18.36 To supplement its own staff resources, the Office makes extensive use of professionals from the private sector either on individual service contracts or through the Public Service Commission's Interchange Canada program. These professionals provide a variety of specialized knowledge and experience not required on a full-time basis. This approach has proven to be cost-effective and benefits both Office staff and the private sector practitioners. At 31 March 1983, the Office had 13 participants associated under Interchange Canada and 245 individuals engaged from the private sector under professional service contracts, representing 89 person-years on an annual basis.

18.37 During the year, the Office continued to use up-to-date techniques and equipment in its auditing and management practices. Computer-assisted auditing is becoming a major element in our audit work. The Office is also actively developing and implementing a variety of office automation techniques such as the use of micro-computers. A network, providing computer graphics, typesetting and word processing intercommunications, was installed to expedite production of our various statements and reports. In addition, to monitor the efficiency of the work of the Office, systems were developed to include all personnel in our computer operated time reporting system.

International Activities

18.38 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 have a representative on the Board of Audit; and the association of Commonwealth Auditors General.

18.39 The Auditor General of Canada is the external auditor of the International Civil Aviation Organization (ICAO), a specialized agency of the United Nations, based in Montreal, that deals with inter-governmental concerns in the field of civil aviation. In addition to expressing his opinion on the financial statements of ICAO, the Auditor General submits an annual report on his work to the ICAO Assembly. The report for the year ended 31 December 1982 emphasized the need to improve electronic data processing capability within the organization and to strengthen the internal audit function. In addition to the audit work carried out in ICAO's headquarters in Montreal, our audit staff worked on assignment for ICAO in Iceland and Denmark.

18.40 Since 1982, the Office has been involved in an international effort to assist the Peoples' Republic of China in developing the legislative audit function called for in its new constitution. Following last year's United Nations-sponsored visit by four senior Chinese officials who reviewed the nature of legislative auditing in Canada, members of our staff have been in contact with Chinese officials to assist them in setting up their own audit structure.

18.41 The Audit Office continues to be involved in international assignments for Canadian auditors. Canadian auditors are working with the Asian Development Bank in Manila, the NATO Board of Audit in Brussels, and as the Auditor General of Vanuatu. Other arrangements are in the planning stage.

18.42 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. During the year, the Canadian Comprehensive Auditing Foundation, working with our staff, conducted a training course for public sector auditors from English-speaking African nations in Nairobi, Kenya, and for Asian countries in Manila, Philippines. Further courses are planned for French-speaking African nations and for the Arabic-speaking countries. Auditors from Chile, Ghana, Kenya, Malaysia, Peru, the Philippines, St. Lucia, Singapore and Trinidad and Tobago 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 by other Fellows from Colombia, Malaysia, Nepal, Sri Lanka, Tanzania and Thailand.

18.43 During the year, prominent international legislative auditors visited the Office. They included Gordon Downey, Comptroller and Auditor General of the United Kingdom, Charles Bowsher, Comptroller General of the United States, and his predecessor Elmer Staats, E.W. Gregoire, Auditor General of Trinidad and Tobago, and Muhammed Aboud, Controller and Auditor General of Tanzania.

18.44 These international contacts and activities are an important part of the work carried on by the Office of the Auditor General. 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

18.45 The most recent report of the Commissioner of Official Languages expresses this opinion: "In addition to setting standards for good financial behaviour, the Office of the Auditor General of Canada may be on the way to becoming a model of linguistic probity. In 1982 it gave priority to developing more functional bilingualism among its employees and to increasing Francophone participation." While noting "the long-standing problem of under-representation of Francophones in senior positions", the report added: "The Auditor General's priority is to make sure that the current incumbents of bilingual positions are able to function competently in both languages."

18.46 Consistent with the Auditor General's commitment to make the Office functionally bilingual, a broader thrust was given during the year to language training and development activities. A total of 37 employees participated in our in-house language training and development workshops; two completed full-time training, and 16 enrolled in the Public Service Commission's evening courses. The Language Knowledge Examination was administered to 57 employees.

Retirements

18.47 Members of the Audit Office who retired before 31 March 1983, and their period of public service were: Frédérick A. Bélanger, BA, B.Comm., CGA, an Audit Director, 34 years; Stephen J. Maubach, B.Comm., CA, a Senior Auditor, 11 years; and Robert W. Storey, CGA, an Audit Manager, 37 years.

Appropriations and Expenditures

18.48 Exhibit 18.2 presents the appropriations and expenditures of the Office, by activity and by object. Expenditures in 1982-83 rose by $2,217,000 or 6.9 per cent over 1981-82. The cost of the Office in relation to the federal government's budgetary estimates dropped from .0468 per cent in 1981-82 to .0441 per cent in 1982-83, or less than five cents for every $100 of government spending as set out in the Government's spending Estimates. It should be noted in this respect that the responsibilities of the Office also include the audit of 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 Office for the 1983-84 fiscal year have been maintained at the level of 1982-83 appropriations, in constant dollars.

Exhibit not available