This Web page has been archived on the Web.

1990 Report of the Auditor General of Canada

Main Points

31.1 This chapter describes the organization and activities of the Office, particularly some of the work the Office conducts that is not readily apparent (paragraph 31.11).

31.2 During 1989/90 the Office was appointed auditor of major new Crown corporations (31.13).

31.3 Due to financial and other constraints, the audit cycle of value-for-money audits in departments and agencies is slipping (31.24).

31.4 Consistent with a renewed emphasis on investment in people, the Office has placed a high priority on training and development (31.40).

31.5 The technological sophistication of audited organizations will have increasing impact on the Office (31.45).

31.6 The Office's work in the international arena is showing results (31.53).

31.7 A symposium on communication, hosted by the Office, underlined the challenge for better communication with legislators (31.62).

Introduction

31.8 The legislative mandate for the activities of the Office comes from the Auditor General Act and the Financial Administration Act (FAA). Evolving from this mandate is a mission statement describing how the Office serves accountability through audit.

31.9 Section 7.1 of the Auditor General Act requires that the Auditor General "shall report annually to the House of Commons on the work of his Office". The preceding chapters of this annual Report describe the results of audit work completed by the Office during the past year. Other work by and within the Office is the subject of this chapter.

Legislative Auditing

31.10 The two most visible results of the Office's work are the annual Report to the House of Commons, and the Auditor General's annual opinion on the financial statements of the Government of Canada.

31.11 Less apparent is the substantial effort invested in other statutory responsibilities. This includes traditional audit work supporting opinions on the financial statements of over 100 Crown corporations and government agencies. Moreover, at least once every five years the Office must conduct a special examination in each Crown corporation of which it is the appointed auditor.

31.12 The Office conducts annual attest audits and cyclical value-for-money audits for the governments of the Yukon and Northwest Territories. It reports the findings directly to the respective legislative assemblies. Beyond Canada, the Auditor General is the auditor of bodies such as the International Civil Aviation Organization.

31.13 The Auditor General was also recently appointed auditor or joint auditor of the following entities:

  • The International Atomic Energy Agency (United Nations)
  • Canada Mortgage and Housing Corporation
  • Enterprise Cape Breton Corporation
  • Federal Business Development Bank
  • Harbourfront Corporation
  • Marine Atlantic Inc.
  • VIA Rail Inc.
  • National Tripartite Price Stabilization Plans (Department of Agriculture)

Other Activities

31.14 Section 11 of the Auditor General Act provides authority for the Office to carry out other activities. These are in addition to those explicitly specified in the Auditor General Act and the FAA. If, in his opinion, it does not interfere with his primary responsibilities, the Auditor General may inquire into and report on other matters at the request of the Governor in Council.

31.15 Following a review of its work, the Office concluded that the authority for a number of its long-standing activities should be formalized. This would be done by Section 11 requests from the Governor in Council. Subsequent discussions with government officials led to a number of such requests related to the following entities:

  • CBC Pension Board of Trustees and its subsidiaries
  • CBC Newsworld channel and Employee Assistance Program
  • Royal Canadian Navy Benevolent Fund
  • Royal Canadian Air Force Benevolent Fund
  • Canadian Army Welfare Fund
  • Canadian Forces Personnel Assistance Fund
  • National Tripartite Stabilization Plans
31.16 Other Section 11 requests are now in process. When they become operative they will be published in future annual Reports.

Organization

31.17 The first Report of Auditor General Kenneth Dye to the House of Commons was in 1981. It showed an organization comprising seven Deputy Auditors General and six Branches -- an organizational structure that was then serving the Office well. At the vanguard of a new approach to auditing in the public sector - value-for-money auditing - the Office had new methodologies to develop. It had new auditing standards to establish. It had the challenge of applying newly developing technology. Moreover, the Office was beginning a concentrated program to upgrade the skills of its staff. At the same time it was recruiting dynamic people with new ideas to meet the challenge of the eighties.

31.18 During the past decade the Office has evolved, undergoing a number of reorganizations. Although there was an overall growth in staff from 551 to 619 over that period, the Office consolidated operations under three Deputy Auditors General in two Branches.

31.19 Exhibit 31.1 provides an overview of the Office's present organization effective 1 November 1989.

Exhibit not available

Audit Operations Branch

31.20 Seventy-two percent of the Office's resources are assigned to the Audit Operations Branch. This Branch performs or oversees all audit work carried out by the Office. Its responsibilities include attest audit work in support of the Auditor General's opinion on the financial statements of the Government of Canada. It also provides audit opinions on the statements of over 100 Crown corporations and government agencies. Audit Operations conducts comprehensive audits of government organizations, and special examinations in Crown corporations. The largest concentration of auditors is in the National Capital Region. Staff also work in regional offices in Vancouver, Edmonton, Winnipeg, Montreal and Halifax.

Professional and Administrative Services Branch

31.21 Audit teams in the field rely on support from the Professional and Administrative Services Branch. This Branch provides not only the standard support services related to finance, personnel, official languages and facilities and materiel management activities, but also technical and professional support. The Branch is responsible for professional development and training of staff. It co-ordinates methodology development and professional practices in auditing. It provides word processing and library services. Without these elements the auditors in the field could not effectively and efficiently do their jobs. The Branch receives about 24 percent of the Office's funds.

Auditor General Group

31.22 Reporting directly to the Auditor General are certain corporate functions. These include Program Evaluation and Internal Audit, Legal Services, Parliamentary Liaison, International Liaison and Public Affairs. These activities use about four percent of the Office's resources.

The Audit Cycle

31.23 In the past ten years, the Auditor General has tabled 165 chapters on value-for-money audits in his annual Reports to the House of Commons. This reflects tremendous effort by a dedicated professional staff.

31.24 His predecessor envisioned reporting on all, or almost all, government programs at least once in the life of a Parliament -- about every five years. We now know that, given the size and complexity of government, this would be possible only if funds for the Office were increased by about fifty percent. In addition, experienced talent would have to be readily available to do the work. Neither is likely.

31.25 Instead, based on a risk assessment, the Office has developed an audit cycle appropriate to each organization it audits. This cycle may be from five years to ten years. For many organizations, the cycle has slipped from the optimum in the past two years.

The Cost of Auditing

31.26 Always in the foreground is the question of how much it costs to audit.

31.27 The Office is probably unique among government organizations in the public reporting of its costs. Included in the Office's Part III of the Estimates of Canada are the costs of all its audit work. These costs are "fully loaded", in that they include not only total expenditures from the Office's appropriation, but also include the cost of services provided to the Office by other government organizations -- accommodation, for example.

31.28 But the costs of individual audits do not tell the entire story. The Office's audit universe grew significantly over the past ten years. Information from the Public Accounts of Canada, taken from the most recent available ten-year period and shown graphically in Exhibit 31.2 illustrates this trend.

Exhibit not available

31.29 The Office has been successful in keeping auditing expenditures well below the rate of growth in its audit universe.

Program Evaluation and Internal Audit

31.30 Self-assessment and the willingness to innovate are indicators of a well-performing organization. The Program Evaluation and Internal Audit Group of the Office is a catalyst for these indicators. The Group evaluates operations and management practices in the Office and recommends needed innovations or improvements.

31.31 Areas evaluated during 1989/90 include:

  • the use of Audit Advisory Committees. These committees are part of the quality assurance program for audits. The types of expertise used for Audit Advisory Committees are indicated in Appendix E. The evaluation judged the committees to be working well.
  • the style and format of the annual Report, with a view to improving its readability. This annual Report reflects recommendations made in part by the Group.
  • the effectiveness of the Office Library and the Parliamentary Liaison Group in supporting the work of the Audit Operations Branch. The Branch rated both the professionalism and the level of service as high.
  • the quality of project management in carrying out value-for-money audits. Recommendations concerning budgetary control and monitoring will be implemented when the new MIS-2000 system is operational (see paragraph 31.47).
31.32 In addition to these evaluations the Group followed up on recommendations of previous evaluations and internal audits.

31.33 The Group was also actively involved in the Office Stress Management Program. It co-ordinates stress management training for all employees wishing such assistance.

Methodology Development

31.34 Methodology development refers to the Office's process for researching, developing and issuing formal guidance to its staff about professional work.

31.35 The Office develops such guidance in consultation with experts and general practitioners both in and from outside the Office. The Office takes into account the research, development and standard-setting activities of professional bodies. To help ensure the acceptance of its criteria, the Office also seeks input from public sector managers.

31.36 The Office's Methodology Development Committee, which co-ordinates research and development work, is chaired by the Auditor General. The Professional Practices Group also supports the Committee.

31.37 Substantial progress was made in 1989/90 on research and development activities. Some highlights include:

  • approval of a revised and consolidated Comprehensive Audit Manual;
  • publication of a guide on the audit of financial statements of Crown corporations and other entities;
  • analysis of opportunities for reducing the cost of attest audits and improving their effectiveness and publication of related guidance to staff;
  • implementation of a practice-exchange program encouraging practitioners to share lessons learned from their experiences; and
  • an interim evaluation of the effects of a key component of the electronic briefcase (AUDITPRO) on audit practice (see also paragraph 31.46).
31.38 Progress is continuing on the development and/or update of the following audit guides :

  • Auditing Human Resource Management;
  • The Authority Dimension of Comprehensive Auditing;
  • Follow-up of Public Accounts Committee Recommendations on Previous Audit Work;
  • Scoping Value-for-Money Audits;
  • Auditing Regulatory Programs; and
  • Fraud Detection and Investigation.
31.39 As well as reviewing projects directly undertaken by the Office, the Methodology Development Committee co-ordinates the Office's input to research plans of the Canadian Comprehensive Auditing Foundation. During 1989/90 the Office actively participated in a Foundation research project on reporting the results of value-for-money audits.

Professional Development Activities

31.40 Professional development activities are essential to maintaining the professional competence of an audit office, and to ensuring a constant flow of qualified staff and state-of-the-art methodology.

31.41 During 1989/90 the Office's Professional Development Group:

  • designed and developed new courses, including a five-day course on the Audit of the Public Accounts of Canada.
  • presented 90 different courses internally in 213 offerings to 2,070 participants.
  • funded 580 days of external training.
  • provided over 1,000 days of professional conference attendance.
31.42 All of the above represent more than 5,000 days of professional development activities. This amounted to 8.4 days per staff member.

31.43 It is the Office's position that a professional organization should make a substantial, albeit judicious, investment in people. Accordingly, the Office has moved some funds from audits to ensure that training programs are not at risk. This will affect the cycles of value-for-money audits mentioned in paragraph 31.25.

Technology

31.44 The Office's future rests with its people -- but the influence of technology is pervasive.

31.45 Departments, agencies and Crown corporations audited by the Office are becoming technology-intensive. People joining the Office are, in most cases, arriving with some measure of computer literacy. The Office must strive to provide these people and its present staff with the technological tools they need.

31.46 In the past ten years the technological environment of the Office has changed dramatically with the development of:

  • IDEA-Interactive Data Extraction and Analysis -- a software package which allows an auditor to enter a client's data into a microcomputer and manipulate it with ease and flexibility.
  • AUDITPRO -- a software package which helps convert audit working papers into electronic form. It links, indexes and organizes audit documents using common commercial software packages.
  • the OAG audit database on CD-ROM which will contain public sector audit information from a number of countries, including the United States, Great Britain and Australia.
31.47 In early 1991 the Office also expects to bring a new management information system on-line -- the MIS-2000, started in the fall of 1988. This will replace the present system, used since 1982. The MIS-2000 will meet the Office's needs into the 21st century.

31.48 Each year since 1981/82 the Office has spent an average of $1 million on technology development. Every staff member with the need has, or has access to, a micro-computer. The Office must continue indefinitely to make a substantial investment in technology development. Otherwise it risks losing the state-of-the-art advantage its work now enjoys. Indeed, Canada is recognized worldwide as a leader in legislative auditing, and in applying technology to auditing.

31.49 This technological advantage, coupled with the calibre of people the Office has attracted over the past decade, provides a solid base for the future.

Official Languages

31.50 The Office strives to meet its commitment to maintain a sufficient level of bilingual resources in day-to-day operations. This is required when communicating with the general public. It is also required in conducting audits and providing employees with the opportunity to work in the language of their choice.

31.51 In responding to the latest Official Languages Status Report, the Treasury Board Secretariat noted that the Office was "meeting its obligations with respect to service to the public in a most satisfactory manner, in addition to exercising an effective program management".

The International Scene

31.52 Members of the Office take pride in their contribution over the past ten years to international assistance programs, and in the transfer of knowledge to less developed countries.

International Audit Office Assistance Program

31.53 The Office is particularly proud of the success of the International Audit Office Assistance Program, funded by the Canadian International Development Agency through a non-government organization -- the Canadian Comprehensive Auditing Foundation. The program provides fellowships to senior legislative auditors from developing countries. It gives them an opportunity to spend one year immersed in a Canadian environment. Here they become exposed to advanced techniques in public sector auditing. In most cases the Fellows spend their year working with this Office.

31.54 This year marks the tenth anniversary of the program; so far 34 countries have participated, sending more than 80 Fellows to Ottawa.

International Federation of Accountants (IFAC)

31.55 There is a growing awareness worldwide of the need for proper accounting and auditing in the public sector. Four years ago IFAC created a new Public Sector Committee with the Auditor General of Canada as its first chairman.

31.56 Currently the Committee comprises senior public sector officials from Australia, France, the Netherlands, Great Britain, Zambia, Indonesia, Canada and the United States.

31.57 The goal of the Committee is to improve and harmonize audit practices and accounting standards; to this end, it has published guidelines, monographs and a survey questionnaire. The publications deal with such areas as the preparation and audit of financial statements of government-owned "business enterprises". They also deal with the objectives of government financial statements and the range of information that public sector financial statements might convey.

INTOSAI Development Initiative (IDI)

31.58 The IDI is a training program of the International Organization of Supreme Audit Institutions (INTOSAI). Since its establishment in April 1986, the Secretariat has been attached to the Office of the Auditor General of Canada.

31.59 As of December 1989 IDI had been involved in training activities in all INTOSAI regions. Twenty-five seminars and workshops, for 490 participants from 105 Supreme Audit Institutions, accounted for 157 seminar/ workshop days. Various Supreme Audit Institutions contributed 43 resource persons to this effort.

31.60 The IDI has also developed an information exchange program. Its main element is the International Directory of Information for Audit Training. Distributed in five languages to 150 member institutions, it contains training models and 90 course outlines. These were contributed by 17 Supreme Audit Institutions.

31.61 At the XIII Triennial Congress of INTOSAI, held in Berlin in June 1989, IDI reported on its first three years. A further three-year program was approved by the membership.

Symposium on Communicating Audit Information in the Nineties (SCAN)

31.62 Carrying out the Office's program implies more than auditing. Until the Office reports audit findings, an audit is not complete. In reporting those findings, how do we as legislative auditors know whether we are getting across the right message? How do we know whether the message is getting across right?

31.63 These questions were the basis for a "Symposium on Communicating Audit information in the Nineties" hosted by the Office in May 1990. This three-day event attracted a broad spectrum of participants from North America and abroad. Attending were experienced legislative performance auditors, legislators, representatives of the media, communication consultants and public sector auditees.

31.64 If diversity of thought and ideas was an indication, the symposium was an outstanding success. Participants described their ways of getting out the message. They ranged from desk-top publishing to videos, from shorter and simpler reports to more frequent reporting by auditors, from speaking tours to the use of "media gimmicks".

31.65 The symposium provided food for thought on how legislative auditors could do a better job of communicating their message. It addressed means of more effectively competing to get their paper to the top of the enormous pile of information on a legislator's desk.

31.66 A report on deliberations at the symposium is being prepared. Some of the key contributors have served as an informal advisory committee. The report will be of special interest to the legislative auditing community. It is designed as a collection of prescriptions to better communicate legislative audit information.

Costs of Crown Corporations Work

31.67 Pursuant to Section 132 of the Financial Administration Act (FAA), where it is the appointed auditor, the Office must provide an annual audit report on each parent Crown corporation and its wholly owned subsidiaries. This report includes an opinion on their financial statements and an opinion on compliance with specified authorities. It may also include reporting on any other matter deemed significant. Section 147 of the FAA requires that the Office report the costs of preparing these annual audit reports on Crown corporations (see Exhibit 31.3). These costs are "fully loaded", as described in paragraph 31.27.

Exhibit not available

31.68 Section 138 of the FAA requires that, at least once every five years, each parent Crown corporation named in Schedule III of the FAA (and its wholly owned subsidiaries) undergo a special examination. This requirement is distinct from the requirement for annual audit reports described above.

31.69 The objective of a special examination is to determine whether a corporation's financial and management control and information systems and its management practices can provide reasonable assurance that:

  • assets have been safeguarded and controlled;
  • financial, human and physical resources have been managed economically and efficiently; and
  • operations have been carried out effectively.
31.70 In 1989/90 the Office completed seventeen special examinations. The "fully loaded" costs of these special examinations is shown in Exhibit 31.4.

Exhibit not available

Financial Resources

31.71 The Office provides details supporting its resource requirements in Part III of the Estimates of the Government of Canada. For the fiscal year 1990/91 the Office's Part III document was tabled in the House of Commons in February 1990. It shows an increase in requirements over 1989/90 of $5.2 million.

31.72 Salaries account for about half of this increase. The remainder reflects new audit assignments. These include major Crown corporations, work in the Yukon and Northwest Territories and work in new government departments. Also, at the request of the Minister of Agriculture, the Office now provides audit opinions on certain price stabilization programs.

31.73 Exhibit 31.5 provides a comparative overview of the Office's appropriations and expenditures.

Exhibit not available