This Web page has been archived on the Web.

1992 Report of the Auditor General of Canada

Chapter 3—Follow-up of Recommendations in Previous Reports

Main Points

Introduction

Elections Canada—1989, Chapter 10

Background

Conclusion

Observations

Planning, Analysis and Documentation
Contracting Procedures
Reporting to Parliament

The Departments of National Revenue—Taxation and Finance—Charities, Non-Profit Organizations and the Income Tax Act—1990, Chapter 10

Background

Conclusion

Scope

Observations

Charitable Organizations
Late filing
Revocation of charitable status
Penalties for non-compliance
Donation receipts
Information to the public
Information on non-compliance
Non-Profit Organizations
Filing Requirements
Commercial activities

Immigration—Management of the Immigration Program—1990, Chapter 12

Background

Conclusion

Areas of Reasonable Progress
Areas of Slow Progress

Immigration—Foreign Delivery—1990, Chapter 13

Background

Conclusion

Areas of Reasonable Progress
Areas of Slow Progress

Immigration—Refugees—1990, Chapter 14

Background

Conclusion

Areas of Reasonable Progress
Areas of Slow Progress

Immigration—Control and Enforcement—1990, Chapter 15

Background

Conclusion

Areas of Reasonable Progress
Primary Inspection Line (PIL)
Medical Screening
Entrepreneurs
Investigations
Minister's Permits
Areas of Slow Progress
Security Screening
Obligations of Transportation Companies
Removals
Field Operations Support System

Consumer and Corporate Affairs—1990, Chapter 16

Background

Conclusions

Observations

Intellectual Property Directorate
Corporations Directorate
Protection of Information
Marketing Practices Branch

Department of Energy, Mines and Resources—Surveys, Mapping and Remote Sensing Sector—1990, Chapter 17

Background

Conclusion

Observations

Department of the Environment—1990, Chapter 18; Conservation and Protection—1991, Chapter 11

Background

Conclusion

Observations

Program Evaluation
Comprehensive Environmental Strategy
Great Lakes Water Quality Agreement
Compliance and Enforcement Activities
Provincial Court Decision on the Canadian Environmental Protection Act
Accountability Reporting

Department of Indian Affairs and Northern Development—Northern Affairs Program—1990, Chapter 19

Background

Conclusion

Department Of National Defence—Human Resource Management—1990, Chapters 20, 21, 22 and 23

Conclusion

Observations

Military Personnel Management System
Merit Assessment
Military Conditions of Service
Commissioning Plans for Officers
Training for Senior Officers
Official Languages Training
Training Efficiency and Economy
Medical Support
Departmental Performance Reporting

Department of National Revenue Taxation—Enforcing the Income Tax Act—1990, Chapter 24

Background

Scope

Conclusion

Observations

Search Warrants
Keeping Parliament Informed
Selection of Taxpayers for Enforcement Activities
Filing of Information on Magnetic Media
Additional Research
Human Resources

Office of the Superintendent of Financial Institutions—1990, Chapter 25

Background

Conclusion

Observations

Self-governance and Self-regulation by Deposit-taking Institutions
Monitoring of Deposit-taking Institutions
Risk Assessment Process
Reliance on External and Internal Auditors
Canadian Payments Association (CPA)
Compliance with Legislation
Co-ordinating Efforts with the Canada Deposit Insurance Corporation (CDIC) and Provincial Regulators
Professional Development and Training
Security of Information and Conflict of Interest

Department of the Secretary of State—Citizenship—1990, Chapter 28

Background

Department of Multiculturalism and Citizenship—Citizenship Registration Activity

Conclusion

Observations

Department of the Secretary of State—Social Development

Conclusion

Department of the Secretary of State—Education Support—1990, Chapter 29

Background

Conclusion

Observations

Post-secondary Education Support
The Canada Student Loans Program
Information to Parliament

Department of Transport—Airports—1990, Chapter 30

Conclusion

Main Points

3.1 Departments continue to make progress in correcting deficiencies, although it is slow in some areas.

3.2 Immigration —Departments involved in these activities have made good progress in implementing some of our recommendations. Improvements have been or are being made in the management of immigration levels, the automation of immigration activities at missions abroad, the control over access to the refugee system, and the initial refugee hearing process, but overall efficiency gains have yet to materialize in the foreign delivery of the Immigration Program. Medical screening procedures have also been reviewed and improvements made at Customs' primary inspection line. More needs to be done, however, in several areas including paper burden, training of personnel, development of efficiency norms and resource allocation abroad, security screening and removals.

3.3 Department of the Environment - Conservation and Protection - The Department has made satisfactory progress in many areas within the programs examined in 1991, including the release of its comprehensive environmental strategy, the Green Plan. However, with respect to the implementation of the Canadian Environmental Protection Act (CEPA) and sections 36 to 42 of the Fisheries Act, areas requiring further attention are identification of standards of environmental quality, levels of compliance required to achieve these standards, and assessment of the effectiveness of regulations. The 7 August 1992 ruling of the Superior Court of Quebec on CEPA, and the mandatory parliamentary review of the administration of the Act, might influence future action in these areas. In the Great Lakes, the federal program co-ordination structure has been strengthened, but action to implement changes is slow.

3.4 Department of National Defence - Human Resource Management - Progress has been satisfactory on some recommendations. Much remains to be done in several cases. The Department still needs to re-evaluate its Official Languages Program implementation in order to respond to identified needs. Work is still required to ensure that relevant, cost-effective and timely training is provided. The level of medical support required in peacetime to support unique military needs has yet to be defined.

3.5 Department of the Secretary of State - Education Support - In the area of Post-Secondary Education Support, progress has been slow. As for the Canada Student Loans Program, the Department is undertaking corrective measures. However, more needs to be done in formalizing and implementing agreements with provinces and in improving the management information system for student loans.

3.6 Department of Transport - Airports - While the Department has had some success with runway expansion, it still lacks a clear management strategy and a plan for financing capital needs.

3.7 Reporting to Parliament - This issue is addressed in Chapter 6 of this Report. A number of follow-up audits this year have indicated that problems identified previously have not yet been fully resolved.

Introduction

3.8 Departments are taking action to correct deficiencies noted in our Report. Progress is slow in some areas.

3.9 Observations and recommendations made in our annual Report are normally followed up and reported in the Report, two years after the original chapter is published. This year, follow-up has been cancelled on three chapters, and deferred on three others.

3.10 The issues raised in the 1990 chapter on the Crown Corporation Audit Regime were followed up and reported in 1991, Chapter 4, The Accountability Regime - Making it Work. Issues relating to reporting performance will be further reviewed during audits to be completed in the next few years.

3.11 The 1990 chapters on Values, Service and Performance and Efficiency in Government: A Special Study were not audits but studies. Studies are done to increase understanding of important and complex issues, and usually there are no recommendations. Among other things, the insights gained during a study may help us in subsequent audits. Therefore, no formal follow-up is carried out.

3.12 Follow-up on the 1990 Information Security Audit has been deferred until 1994. Departmental internal audit groups are required to conduct an internal audit of compliance with the Government Security Policy in their departments, by the end of 1993. Therefore, we decided that it would be appropriate to defer review of these reports, and of the actions taken by the departments and central agencies to address the deficiencies noted in our 1990 chapter.

3.13 Follow-up on the two 1990 audits of the RCMP - Federal Law Enforcement and Support Services to Canadian Law Enforcement Agencies - has been deferred to 1993.

Elections Canada - 1989, Chapter 10

Background

3.14 Our 1989 chapter on Elections Canada presented observations and recommendations with respect to the electoral process, election support, reporting to Parliament and co-ordination with other electoral offices.

Conclusion

3.15 Considerable progress has been made by Elections Canada in addressing recommendations and observations noted in our 1989 Report.

3.16 We recognize that, given the recommendations of the Royal Commission on Electoral Reform and Party Financing, possible amendments to the Canada Elections Act, and the passing of the Referendum Act, Elections Canada is faced with an evolving environment that has placed heavy demands on its resources. Also, it should be noted that the ultimate test for some of the implemented changes will be an election and/or a referendum; until that happens it may be difficult to assess some areas adequately.

3.17 While Elections Canada has taken some steps to address all of our recommendations, further work is needed in the following areas.

Observations

Planning, Analysis and Documentation
3.18 In 1989 we recommended that Elections Canada adopt a more formal approach to its work and place greater emphasis on planning, analysis and documentation. In our follow-up, we noted that it has established procedures for the preparation of budgets, including those for the costs of holding an election. Also, it has carried out a review of its organizational structure with a view to formalizing the lines of responsibility. As to the documentation of policies and procedures generally, Elections Canada has not yet developed a manual, and many policies and procedures are in draft form. We understand that it plans to formalize them in a manual in the near future.

3.19 Elections Canada has not yet developed a strategic plan for its operations. However, in 1991 it appointed a Director, Strategic Planning and International Services, with responsibility for developing a strategic plan. In early 1992 a consultant completed a review of the planning process to assist in developing an approach to strategic planning. Elections Canada plans to take action on the consultant's report when resources become available.

Contracting Procedures
3.20 Elections Canada has made improvements to its contracting procedures. Although the Chief Electoral Officer is not subject to government contract regulations, Elections Canada has indicated that it is voluntarily following them where appropriate. However, the contract files are not well organized, and it is difficult to determine whether all the required supporting documentation exists for all contracts. In addition, the draft contracting policy has not yet been formalized. Elections Canada is aware of these problems and is planning to rectify them.

Reporting to Parliament
3.21 In 1989 we recommended that Elections Canada discuss with the Department of National Revenue - Taxation the availability of information on the cost of election tax credits for reporting to Parliament. Elections Canada now reports the cost of such credits in its Part III Estimates. However, the information provided in the 1992-93 Estimates is outdated and incomplete. Elections Canada plans to continue its discussions with National Revenue - Taxation with a view to obtaining more complete and up-to-date information.

The Departments of National Revenue - Taxation and Finance - Charities, Non-Profit Organizations and the Income Tax Act - 1990, Chapter 10

Background

3.22 Our 1990 chapter on Charities, Non-Profit Organizations and the Income Tax Act presented observations and recommendations on the administration of the Income Tax Act with respect to charities and non-profit organizations.

Conclusion

3.23 The departments of Finance and National Revenue - Taxation are addressing some of our concerns. However, we are still concerned that there may be no effective penalty for non-compliance. We are also concerned that it is still possible for charities to circumvent the intent of the Income Tax Act pertaining to allowable business activities and that certain legislative rules pertaining to non-profit organizations need to be clarified.

Scope

3.24 As a follow-up we reviewed a status report prepared by the Department of National Revenue - Taxation explaining the action it has taken on our observations and recommendations. We also conducted interviews and reviewed related documentation.

Observations

Charitable Organizations
Late filing
3.25 Our 1990 audit concluded that not levying the mandatory late-filing penalty, delaying revocation of registration for failure to file annual returns, not instituting legal proceedings to enforce the filing requirement, and reinstating revoked registrations acted as disincentives for charities to meet the legislative requirement for filing.

3.26 Our follow-up found that, after consultations with charities, the Department of National Revenue - Taxation "concluded that a late-filing penalty was not as effective as revoking registration" and that "the penalty would only serve to further reduce the already scant resources available to a charity's beneficiaries." The Department also believes that "voluntarism should not be discouraged through undue threat of penalties for non-compliance." It is therefore studying proposals to amend the Income Tax Act to exclude registered charities from the late-filing penalty imposed under section 162(7).

3.27 The Department is now revoking the registration of charities that do not comply with the filing requirement. The initiation of revocation proceedings imposes costs on a charity and is not necessarily less costly than a late-filing penalty. The costs could include administrative costs, accounting costs and professional fees. It is also important to remember that revocation of a charity's registration may result in the imposition of a revocation tax due within one year of the effective date of revocation. This penalty tax is equal in amount to the assets that the charity has not disbursed to qualified recipients.

Revocation of charitable status
3.28 Our review of files in 1990 found no evidence of any follow-up to determine whether revocation tax was due from charities whose registrations had been revoked for failure to file, or from those requesting revocation of their status. Our follow-up found that the Department is addressing our concerns.

Penalties for non-compliance
3.29 Our 1990 audit noted that when a registered charity contravened the provisions of the Income Tax Act - apart from not filing and committing fraud - the only sanction available to the Department of National Revenue - Taxation was to exercise its right to revoke registration. The legislation does not provide the Department with the power to levy a monetary penalty or to tax unrelated business profits earned by the charity.

3.30 Our follow-up found that, starting in January 1993, almost all information provided with the Public Information Return will be available to the public on request. The Department of National Revenue - Taxation believes this measure should prove a very potent incentive for charities to comply with the requirements of the Income Tax Act, because the donating public would have access to material previously considered confidential. The Department is also placing more emphasis on educating the charity sector about the requirements of the Income Tax Act.

3.31 The Department's position with respect to sanctions is as follows:

"The Department agrees that some form of sanction is required to ensure that charities honour their obligations under the Income Tax Act; however the nature of these sanctions must necessarily differ because of the particular nature of the charities sector and the peculiarities of their problems. For example, the funds are given to these organizations, largely made up of volunteers, for charitable purposes only.
Bearing in mind the intent of the tax incentive, any such sanctions should ensure that the charitable objectives do not suffer unduly because of any negligence or wrongdoing on the part of those administering the charity.
To enforce current sanctions, the Department will:
  • more strictly adhere to the annual revocation cycle;
  • increase the number of restricted audits;
  • do random follow-up audits of revoked charities; and
  • ensure revoked charities appropriately distribute their assets and/or pay their revocation tax."
3.32 We support these initiatives. However, they do not adequately deal with our concern that there may be no effective penalty for non-compliance. If a charity contravenes the Income Tax Act, its registration may be revoked, and, as previously stated, revocation may result in the imposition of a penalty tax. To avoid this penalty and preserve their assets, the principals of a charity can incorporate a new charity, which the Department must register if it satisfies the requirements of the Act. The assets of the old charity can be transferred to the new charity. Given this legislative framework, if a charity contravenes the Act by, for example, carrying on an unrelated business, the new charity that it creates may end up keeping any profits earned. Thus it would profit from non-compliance. This is a disincentive for a charity to comply with the Act and it could be unfair to a competing private sector business.

Donation receipts
3.33 Our 1990 audit found that although the Department of National Revenue - Taxation did examine donation receipts, it did not have an appropriate audit program to determine their validity.

3.34 The Department is now addressing our concerns. It has advised us that a mainframe program, in the final stages of design, will assist in the comprehensive monitoring of charities. This program will provide the technology to match taxpayer receipts and to identify non-complying charities for post-assessment.

3.35 In 1990 we reported that it was possible for charities to circumvent the intent of the Income Tax Act pertaining to allowable business activities.

3.36 In our follow-up we found that the Department of National Revenue - Taxation, after consulting with the charity sector, will use an interpretation of "related business" based on the tests set out by the Federal Court of Appeal in the case of Alberta Institute on Mental Retardation v. The Queen. The Department's position will be explained in greater detail in a December 1992 publication devoted exclusively to business activities. Because the law has not been amended we are still concerned that charities will be able to circumvent the intent of the Income Tax Act pertaining to allowable business activities.

Information to the public
3.37 We found in 1990 that relevant, accurate and complete information was not always available to the public through the Public Information Return.

3.38 The Department is now addressing our concerns. Among other things, a revised information return has been prepared, standards for financial statements will be developed, and the public will be advised that the Department does not assume responsibility for the accuracy or completeness of the Public Information Return.

Information on non-compliance
3.39 We reported in 1990 that the Department of National Revenue - Taxation did not have a program to analyze examination data and provide the information necessary for management to evaluate the extent of voluntary compliance with the law.

3.40 The Department is now revising the annual information return to assist its audit activities. We support this initiative. We believe that it is important not only to identify non-complying charities but also to try to find out why they did not comply. We were informed that the Department has undertaken some projects to monitor the reasons for non-compliance.

Non-Profit Organizations
Filing Requirements
3.41 In 1990 we expressed concern that because there were no annual filing requirements for all non-profit organizations, the Department of National Revenue - Taxation had not developed a compliance program to secure an effective check on the right of such organizations to enjoy exemption from taxation.

3.42 Consultations between the departments of Finance and National Revenue - Taxation have been ongoing since then. A detailed ways and means motion to amend the Income Tax Act was tabled in Parliament on 19 June 1992, requiring non-profit organizations to file annual returns for fiscal years ending in 1993 and thereafter.

Commercial activities
3.43 Our 1990 audit also found that certain legislative rules needed to be clarified. We commented on the fact that in a 1983 decision (The Gull Bay Development Corporation v. The Queen), the Federal Court - Trial Division held that if profit from a commercial activity is used to fund social and welfare objectives, the organization is not operating for a profit. This may enable a non-profit organization to carry on any type of commercial activity. We also pointed out that there are circumstances that enable members to benefit from an organization's tax-exempt status.

3.44 In the course of our follow-up the Department advised us that it considers "that the case confirms that a non-profit organization may conduct a commercial operation where the activity itself is the means of carrying out the non-profit organization's objectives". In its view, "this does not sanction the conducting of a commercial activity that has nothing to do with carrying out the non-profit organization's objectives other than supplying profits to achieve those objectives". National Revenue-Taxation has advised us that the information received on the new annual returns for non-profit organizations will be used to determine the significance, if any, of the incidence of non-profit organizations conducting commercial activities that have nothing to do with carrying out the non-profit organizations' objectives.

3.45 We are still concerned that certain legislative rules need to be clarified. We are unable to provide Parliament with reasonable assurance that the law is sufficiently clear to see that only organizations "organized and operated exclusively for social welfare, civic improvement, pleasure and recreation or for any other purpose except profit" are entitled to exemption from tax as non-profit organizations.

Immigration - Management of the Immigration Program - 1990, Chapter 12

Background

3.46 In 1990 we reported on four major areas of the Immigration Program: the overall management of the Program, the delivery of immigration activities abroad, the processing of refugee claims in Canada, and control and enforcement activities. Each of these topics formed the subject of a separate chapter in our report to Parliament. The same approach has been used to report on our follow-up.

3.47 Two significant events have occurred since our last audit. First, Employment and Immigration Canada (EIC) focussed considerable effort on reviewing several key Program management and control mechanisms, and the Minister of Employment and Immigration recently proposed a series of important amendments to the Immigration Act. Bill C-86 was tabled in the House of Commons in June 1992 and was subsequently referred to a legislative committee for study. According to EIC, the primary aims of the proposed amendments are to improve the management of the immigrant selection system, preserve the integrity of the Program, better protect Canadian society, and make the refugee status determination process simpler, fairer and more efficient. We found that the text of Bill C-86 addresses many of the observations and recommendations made in our 1990 Report.

3.48 The other event, in August 1992, was the transfer of responsibilities for foreign delivery of the Immigration Program from External Affairs and International Trade Canada to Employment and Immigration Canada (EIC). This transfer should clarify the accountability of stakeholders and improve the co-ordination of Program activities as a whole. EIC and the Department of National Health and Welfare (NHW) were also discussing the transfer of NHW's Division of Immigration Overseas Health Services to EIC.

Conclusion

3.49 In addition to the above-mentioned elements, EIC has made reasonable progress in response to several of our observations and recommendations concerning the overall management of the Immigration Program. For instance, Program co-ordination infrastructure has been improved and steps have been taken to better manage immigration levels. EIC has also made reasonable progress in the areas of cost recovery and Program evaluation.

3.50 On the other hand, given the importance of training to the delivery of the Program, we feel that EIC management should pay more attention to this question. We have also noted that the quality of information to Parliament still needs to be improved.

Areas of Reasonable Progress
3.51 C o-ordination of the Immigration Program. There have been significant improvements in the Program's co-ordinating infrastructure. Following a Treasury Board directive, an interdepartmental committee on resources allocated to immigration was formed, comprising representatives of 12 departments and agencies involved in the Program. The main purpose of this committee is to facilitate the preparation of quarterly reports to Treasury Board on levels of immigration, overall Program expenditures and revenue from cost recovery. A co-ordinating committee at the assistant deputy minister level has also been set up to handle issues of policy and overall Program orientation. EIC has also set up committees responsible for liaison with other departments.

3.52 Following the transfer of responsibilities for immigration operations abroad, EIC and External Affairs signed an agreement that sets out a new division of responsibilities and resources. EIC and the Department of National Health and Welfare (NHW) were also discussing the transfer of NHW's Division of Immigration Overseas Health Services to EIC. However, few changes have been made to the other interdepartmental agreements that existed in 1990.

3.53 Management of immigration levels. In 1990 we reported that planned immigration levels had been significantly exceeded for the previous three years. In October 1990, EIC announced annual immigration levels based on a five-year plan and replaced "range" levels with specific levels for each class of immigrants. Instructions were given to External Affairs to improve management of the number of immigrants selected abroad. In 1991 the total number of immigrants was six percent less than the overall planned level. Since August 1992, EIC has been responsible for processing immigrant applications abroad.

3.54 Bill C-86 provides for a new immigration level management system that would group immigrant classes into three streams, only two of which would be subject to annual fixed limits.

3.55 Immigration cost recovery. EIC reacted positively to our recommendation that it clarify the basis for setting fees and that it periodically review the costs of providing immigration services and the related fees. EIC has adopted a basic policy of recovering as much of the cost as possible, taking into account the fees charged in other countries. A plan was developed to raise fees over a period of three years. EIC is also looking into the possibility of charging fees for a number of other services that currently are being provided free of charge.

3.56 Program evaluation. In 1990 we found that a number of key Program components had not been evaluated. EIC has since prepared a plan for evaluating the entire Program over a period of seven years. For example, a pre-evaluation assessment of the settlement component has been carried out. An evaluation of the primary inspection line at ports of entry has been completed in co-operation with National Revenue-Customs and Excise. EIC was also carrying out a pre-evaluation assessment of activities abroad.

Areas of Slow Progress
3.57 Training of personnel with immigration responsibilities. In 1990 we found that some personnel with immigration responsibilities were not adequately trained and that responsibilities for training were not clear.

3.58 Although improvements have been made in EIC's internal operational training program, more needs to be done to ensure that all personnel with immigration responsibilities possess the knowledge and skills necessary to discharge their duties. EIC still has no system for needs identification, recording of training received and validation of training. It is therefore unable to monitor its own training activities. No new monitoring mechanism has been established with respect to operational training by other stakeholders.

3.59 Information to Parliament. We noted in our 1990 Report that information to Parliament on the Immigration Program was incomplete and fragmented. Since then, EIC has restructured its Estimates Part III. Budgeted Immigration Program costs are now grouped and disclosed under one heading. The various program activities are listed, as well as the related costs. Reference is also made to the other departments and agencies involved in Program operations. But EIC's Part III still does not set out standards for assessing the performance of specific operations.

3.60 Information on immigration activities and costs of other stakeholders in the Program are either disclosed separately in their Estimates (Part III) or are buried among their other activities. Consequently, the information provided to Parliament is still fragmented.

Immigration - Foreign Delivery - 1990, Chapter 13

Background

3.61 In 1990 we reported on the delivery of the Immigration Program outside Canada by the Department of External Affairs. The Department's role involved processing immigrant and visitor visa applications, including a growing enforcement and control activity designed to prevent illegal entry into Canada.

3.62 Responsibility for the delivery of the Immigration Program abroad was transferred to Employment and Immigration Canada (EIC) in August 1992. A Memorandum of Understanding between EIC and External Affairs specifies in more detail the responsibilities of each department and the resources to be transferred.

Conclusion

3.63 The Department of External Affairs has made good progress in implementing some of our recommendations. The benefits in terms of improved overall efficiency have yet to materialize. Improvements have been made in the management of target levels, automation of immigration activities at missions, and use of locally engaged program officers. The Department is developing mission-specific efficiency norms and enhancing the role of internal audit. There has been little progress in streamlining the processing procedures aimed at reducing the paper burden in the system.

3.64 Our 1990 chapter indicated a concern with the imbalance in the allocation of resources in various regions of the world. The Department had taken a decision to start reallocating resources based on changes in workload for each of the missions. However, implementation plans were delayed when the government announced the transfer of the Department's responsibilities for the foreign delivery of the Immigration Program to EIC. EIC informed us that it intends to carry out these plans.

Areas of Reasonable Progress
3.65 Management of target levels. We recommended in 1990 that the Department put measures in place to meet EIC's requirements for a predetermined number of landings and to overcome the missions' wide deviations from assigned targets. Our recommendations included: taking into account relative demand in setting targets; formally involving Heads of Missions in the target-setting process; and adjusting mission targets during the year.

3.66 The Department has put measures in place to achieve these objectives. Mission targets were developed that took into account a number of factors including the relative volume of cases processed the previous year at each mission as well as the relative backlogs at each mission. A database was created to allow mission targets to be established on a component basis. The Department informs us that Heads of Missions are now increasingly involved in setting targets. Throughout 1991, performance was closely monitored and adjustments were made to individual mission targets. The successful implementation of these measures is reflected in the fact that deviations from the 1990 and 1991 global targets were respectively 5 percent and 3 percent compared to a deviation of 33 percent in 1989.

3.67 Automation. The Department responded positively to our recommendation that there be a worldwide acceleration in the automation of immigration activities, particularly at high-volume missions. Between April 1990 and the end of March 1992, the Department installed the Computer Assisted Immigration Processing System (CAIPS) in Paris, Manila and all missions in the United States. Prior to 1990, it had installed the system in Hong Kong and London. In addition to the foregoing the Department has installed automation equipment at 31 missions not scheduled for early CAIPS installation. ( see photograph )

3.68 Locally engaged program officers. We recommended that the Department should convert more Canada-based officer positions to locally engaged program staff positions. The Department responded by increasing the proportion of locally engaged program staff.

3.69 Internal audit. In 1990 we recommended that the Department's Internal Audit Division be requested to provide an audit conclusion to both the departmental Audit and Evaluation Committee and the Canada Employment and Immigration Commission on the degree of compliance with the Immigration Act and Regulations and its related policies and procedures. This has been done. In our report we also recommended that the Committee should direct Internal Audit to provide an audit conclusion on the system for measuring and reporting on the efficiency of immigration operations, on both a mission and a global basis. Although the Department is receptive to this suggestion, no action can be taken until the mission-specific efficiency norms that are now under development have been completed. Internal Audit is committed to implementing this recommendation once the efficiency norms are in place.

3.70 Medical screening procedures. In our 1990 Report we observed that medical screening procedures were inefficient and management controls weak. We recommended that the Department, in consultation with EIC and the Department of National Health and Welfare, introduce risk-based sampling procedures that reduce the amount of checking done by Canadian-based medical officers and develop a better system for monitoring the performance of designated medical practitioners.

3.71 An interdepartmental committee, chaired by EIC, conducted a Medical Inadmissibility Review and concluded that risk-based sampling procedures were not an acceptable option because inadmissible persons could be admitted to Canada. However, EIC indicated that this issue needs once again to be further examined before a final decision can be made. The Department of Health and Welfare has also revised and documented its guidelines for selecting, training and assessing the performance of designated medical practitioners. Their performance was reviewed at some European missions.

Areas of Slow Progress
3.72 Efficiency norms and resource allocation. In 1990 we recommended that External Affairs develop mission-specific efficiency norms for both the length of time and the amount of resources necessary to process visa applications abroad, to use in better allocating departmental resources and adjusting staff levels. Although no mission-specific efficiency norms have been set, the Department has established global "length of time" norms covering that aspect of immigrant processing work, up to and including the paper screening of the application. In addition, global norms have been set for the elapsed time between the finalization of a case and the typing and issuance of immigrant visas. The Department has developed a database that links EIC data on processing abroad and landings in Canada, in order to establish norms for the other aspects of the immigrant processing work.

3.73 The Department has contracted with Consulting and Audit Canada to develop a resource allocation model, by developing and quantifying the work units for immigration and visitor visa services and by developing and applying workload standards for these units of work. Input data was collected during field visits conducted in April 1992. The usefulness of this exercise will depend on how the norms are used to improve the level of service and utilization of resources.

3.74 Our 1990 chapter indicated a concern with the imbalance in the allocation of resources to various regions of the world. External Affairs had taken a decision to start reallocating resources based on changes in workload for each of the missions. However, implementation plans were delayed by the transfer of External Affairs' responsibilities for the foreign delivery of the Immigration Program to EIC. EIC informed us that it intends to carry out these plans.

3.75 Streamlining procedures. The 1990 audit observed an excessive paper burden and recommended that the Department, in consultation with EIC, examine ways to streamline procedures and to simplify the use of immigration forms and documents at missions abroad. The Department has developed, also in consultation with EIC, plans to streamline procedures supporting the delivery of the Immigration Program abroad. The implementation of this recommendation should be facilitated by the recent reorganization whereby EIC will have responsibility for both immigration policy and foreign delivery of the program. No tangible results in the form of reduced paper burden can be shown yet. However, EIC is confident enough to introduce, in December 1992, a generic visa that will replace numerous documents now in use. Moreover, External Affairs has recently hired a consulting firm to develop a "quality of service" implementation plan, that will, upon completion in late 1992, train managers to identify inefficiencies and correct them. Further, an action plan has been developed by the Department to evaluate procedures, techniques and materials used in program delivery, with a view to identifying inefficiencies and then developing procedural and management models to correct them. Plans are also under way to improve on the issuance of student authorizations, to revise and reformat the Immigration Manual and to review the Pre-application Questionnaire.

3.76 Waiving of interviews. Our 1990 Report recommended that the Department assess the risks of fraud at each mission and issue guidelines to assist mission staff in determining the most appropriate balance between waiver practices and degree of risk at that mission. The Department has replied that the recommendation is being addressed within the context of a project that will examine all aspects of visa office performance. This project is in the very early stages of development, and it is unlikely that guidelines will be developed before the end of 1992.

Immigration - Refugees - 1990, Chapter 14

Background

3.77 Our 1990 chapter contained observations and recommendations aimed primarily at increasing the efficiency of the new refugee status determination system that came into force 1 January 1989 under the Immigration Act. We also examined the backlog clearance program set up for the 85,000 cases that were still unprocessed as of 31 December 1988.

3.78 As mentioned in paragraph 3.47, the Minister of Employment and Immigration recently tabled a series of amendments to the Immigration Act. Some of these amendments deal with the refugee status determination system. The intent of the proposed amendments is primarily to reserve access to the system to those who are truly in need, to streamline the system to encourage expeditious and cost-efficient decision making, and to ensure that decisions are acted on promptly. The proposed amendments address many of the observations and recommendations that we made in 1990.

Conclusion

3.79 Employment and Immigration Canada and the Immigration and Refugee Board (IRB) have made reasonable progress toward correcting some of the deficiencies that we noted in 1990. Improvements have been or are being made in several areas: control over access to the system, streamlining of the initial hearing process, scheduling of hearings and control over interpreters.

3.80 Progress has been slower in other areas. The number of hearing adjournments is still high, for example. More needs to be done in personnel training. In general, refugee claimants still do not undergo medical examinations and security checks until they request permanent residence. Regarding the backlog of claims, EIC does not expect to complete this process before March 1993.

Areas of Reasonable Progress
3.81 Safe return. In 1990, we noted that the safe return provision in the Immigration Act had never been put into practice. It was one of the reasons why the number of claims processed in Canada was far greater than the volume projected when this legislation was being prepared.

3.82 Employment and Immigration Canada recognizes that international co-operation is needed to manage and resolve the refugee issue. Bill C-86 therefore replaces the concept of a "safe third country" with a series of measures for sharing responsibilities in determining refugee status, including bilateral agreements with certain countries signatory to the Geneva Convention on Refugees. These agreements would make it possible to process claims for refugee status in the first country where the claimant found asylum. EIC, in co-operation with External Affairs, is currently discussing such agreements with other countries.

3.83 Streamlining the initial hearing process. In 1990 official hearings were held even in cases where the representative of the Minister of Employment and Immigration felt that claimants had a credible basis for making a refugee claim. Following a pilot study, EIC adopted a simplified inquiry process, which eliminates official hearings for claims that are not challenged by the Minister's representative. Bill C-86 would simplify the refugee status determination system even further by eliminating the initial hearing completely.

3.84 Scheduling of hearings. As of 31 March 1990, the refugee status determination system had encountered significant delays and 23,500 claims were pending at various stages of the process. Since then, the process has incurred no further delays and has kept pace with new claims. This is due not only to the improvements in the scheduling of hearings but also to the increase in resources allocated to the system, and to other steps taken by EIC and the Immigration and Refugee Board. However, as mentioned in paragraph 3.88, little progress has been made with regard to adjournments. The number of cases pending as of 31 March 1992 represented about three months of work for EIC and the Immigration and Refugee Board.

3.85 Interpreters. In our initial audit, we recommended that EIC and the Immigration and Refugee Board ensure that interpreters are qualified, have proper security clearance, and are not in a conflict-of-interest situation. EIC and the Immigration and Refugee Board have since developed an accreditation program that includes testing to determine the competence of interpreters by ensuring that they meet a prerequisite language standard. The test was first administered to a group of interpreters in 1991.

3.86 Security checks are now required for all interpreters. All interpreters are also required to sign a declaration of any possible conflicts of interest. At present, security checks have been completed for about half of the interpreters who have passed the accreditation test.

3.87 Because the pool of interpreters is limited, EIC and the Immigration and Refugee Board continue to use existing interpreters whose test results and security clearance remain pending.

Areas of Slow Progress
3.88 Adjournments. In 1990 we found that 33 percent of initial hearings and 27 percent of second hearings were adjourned. Each adjournment delayed the process by one month. Despite efforts by EIC and the IRB to decrease adjournments, the situation has not improved. In 1992, 40 percent of first hearings and 29 percent of second hearings were adjourned. As in 1990, adjournments are due mainly to legal counsel not being ready to proceed and to the fact that there is insufficient time scheduled for completion of hearings. The average amount of time required to process a claim at both hearings is now 8.5 months, compared to 9 months in 1990.

3.89 Training. In 1990 we noted that the training given to Case Presenting Officers (CPOs) was inadequate. Since our audit, all but a few of the new CPOs in main offices across the country have taken the national basic training course. To meet important training needs of experienced CPOs, EIC developed an advanced course which was offered on a pilot basis in March 1992. In light of the anticipated changes to the Immigration Act, further offerings of this course have been postponed.

3.90 Medical examinations and security checks of claimants. In 1990 we recommended that medical examinations and security and criminality checks be conducted promptly following the receipt of claims for refugee status. No progress has been made in this area since our audit. In general, claimants still do not undergo medical examinations and security checks until they apply for permanent residence, several months after their arrival in Canada.

3.91 An interdepartmental committee on the medical inadmissibility of immigrants has recommended that claimants, when making their claims, each be given medical instructions and that a system be set up to ensure that claimants undergo medical examinations within 60 days of receiving these instructions. These recommendations are included in the proposed amendments to the Act tabled in the House of Commons in June 1992.

3.92 Investigations. Our 1990 audit revealed that EIC had not taken any steps to trace backlog claimants who had failed to respond to a notification to appear. Since then, EIC has made efforts to increase the number of investigations, but further improvement is needed. Between the start of the backlog clearance program and 31 March 1992, 32,900 people have failed to respond to a notification to appear. During this same period, 20,500 investigations were conducted and people were located in half of these cases.

3.93 Backlog clearance. In 1990 we expressed doubts about the capacity of the system to eliminate the backlog within the budgetary limits and by the deadline of 30 September 1991 set by EIC. By 31 March 1992 the backlog of cases had not been eliminated; EIC announced that the remaining claims would be processed in full by 31 March 1993.

3.94 Since our audit, 10,000 new cases have been added to the backlog. This has increased the workload and altered the initial schedule, which was based on a total of 85,000 cases. All the Backlog Canada Immigration Centres have been closed, with the exception of those in Toronto and Mississauga, and cases not finalized have been transferred to regular Canada Immigration Centres.

3.95 As of 31 March 1992, there were 41,600 cases that remained to be finalized, the majority of them in Ontario. About 19,000 of these cases were awaiting a decision; another 9,000 were awaiting landing, which is the last stage in the process. Thus, a great deal of work remains to be done to finalize all backlog cases.

3.96 As to costs, EIC and the Immigration and Refugee Board had spent, as of 31 March 1992, a total of $114 million to process backlog cases. Another $5 million had been used for language training and settlement assistance. EIC and the IRB expect to process the entire backlog of cases within the approved budget of $181 million.

Immigration - Control and Enforcement - 1990, Chapter 15

Background

3.97 The Canadian immigration control and enforcement system is structured around three main intervention points: overseas screening, port of entry examinations and inland control and enforcement. In 1990 we raised concerns about the operational effectiveness of some key control and enforcement activities.

3.98 As mentioned in paragraph 3.47, the Minister of Employment and Immigration recently proposed, through Bill C-86, a series of amendments to the Immigration Act. Some of these proposals impact on control and enforcement activities at all three intervention points. The intent of the proposed amendments is to better protect Canadian society from those who break our laws and to curtail abuse of our immigration system. They address many of the observations and recommendations that we made in 1990.

Conclusion

3.99 The various departments involved in enforcement and control activities have made good progress in implementing some of our recommendations. For instance, medical screening procedures are being streamlined and improvements made at Customs primary inspection line. Immigrant entrepreneurs are now subject to better controls and measures have been taken to increase the efficiency and effectiveness of investigators. Employment and Immigration Canada (EIC) is also in the process of streamlining the use of Minister's permits.

3.100 In other areas, progress has been slow. Decisions about whether to admit immigrant applicants who have been the subject of security concerns by the Canadian Security Intelligence Service after 1990, are still pending in most cases. Although measures taken by EIC have resulted in an overall increase in the number of removals, we found that, as in 1990, either the carrying out of removal orders affecting refugee claimants is delayed or their effect is cancelled in a majority of cases.

Areas of Reasonable Progress
Primary Inspection Line (PIL)
3.101 Lookout information. In 1990 we noted the lack of appropriate immigration lookout information and deficiencies in the format and use of the existing information. Since our audit, an automated system has been integrated with the Customs system and installed in major airports, making possible a more systematic check on whether travellers seeking to enter Canada are the subject of immigration lookout notices.

3.102 We noted little progress, however, in the management of lookout information at land border points. EIC has attempted, without real success, to set up provisional mechanisms for improving the management of lookout notices. Customs is presently testing an electronic licence plate reading device that could eventually help to remedy the situation.

3.103 PIL performance measurement and feedback. In 1990 there was no performance measurement system for immigration-related work, and feedback information on referrals was limited. Since then, EIC, in consultation with Customs, conducted the first-ever comprehensive evaluation of PIL effectiveness from the standpoint of immigration. A final report had not been issued at the time of our follow-up. The two departments have yet to define what constitutes regular and meaningful feedback on cases referred to EIC by Customs.

3.104 Training of customs officers. In 1990 we noted that training of customs officers on immigration matters was limited and inconsistent. Since then, Customs has taken steps at the local level to update the knowledge of experienced customs officers and to provide basic training to many students recruited as customs officers. However, minimum standards regarding content, documentation, presentation and duration have not yet been applied to all of this training developed at ports of entry. The sessions are still not evaluated or validated.

Medical Screening
3.105 The Immigration Act specifies two medical criteria for denying prospective immigrants and visitors entry to Canada: "danger to public health or safety" and "excessive demands on health and social services". We noted in 1990 that some medical procedures to identify danger to public health or safety were inconsistent, and that the determination of what constitutes excessive demand was very subjective.

3.106 As indicated in their responses to our Report in 1990, EIC and the Department of National Health and Welfare (NHW) tasked a special Medical Inadmissibility Review Committee with reviewing all medical conditions and related issues to ensure that the current medical guidelines for inadmissibility are appropriate, just, and compatible with current medical opinion. The issue of danger to public health was examined and the Committee recommended that current mandatory testing for VDRL (syphilis) be removed to ensure consistency in the application of medical inadmissibility criteria. The Committee also examined the criterion of excessive demand and reported that there was a need to define what constitutes excessive demand with reference to the availability, accessibility and cost of health and social services required.

3.107 EIC, in conjunction with National Health and Welfare, recently approved those recommendations of the Committee. The government has also proposed an amendment to the Immigration Act that would, by regulations, better define excessive demand. However, the departments acknowledge that it will take time to compile information on available services, the demand on those services and their costs across Canada, before the regulations can be implemented.

Entrepreneurs
3.108 Our follow-up review found that substantial progress had been achieved in the management of the entrepreneur program. EIC has modified its procedures to include a provision for imposing conditions on all entrepreneurs and has put in place a computer-based monitoring system. EIC also initiated inquiry proceedings for some entrepreneurs it considered did not comply with conditions.

Investigations
3.109 Since 1990, EIC has increased the resources allotted to investigations and related enforcement activities. The efficiency of investigators has been improved by providing them with direct access to the Canadian Police Information Centre files, through the use of terminals in several of the major immigration centres. The quality of information available to investigators and managers has also been improved.

3.110 Bill C-86 would authorize the use of fingerprints and photographs to secure positive identification of refugee claimants. EIC is also evaluating new technology designed to reduce the use of fraudulent documents to gain entry into Canada.

3.111 The workload of investigations in one region that we noted was high in 1990 remains substantial. However, a detailed analysis done by EIC has shown that the actual number of cases involving serious criminality, which could result in removals, is relatively low and these cases are given high priority by EIC.

Minister's Permits
3.112 We observed in 1990 that pro-forma activities (carried out for the sake of form) had a serious impact on efficiency. In Bill C-86, the government proposes measures that would reduce the incidence of such activities associated with minor infractions by visitors and foreign students. However, pro forma activities related to removal orders have not been eliminated. EIC has expressed a concern that any mechanism to override or dispense with a removal order without the individual leaving Canada might undermine the enforcement process. We still believe that the process used is inefficient and should be given further study.

3.113 In 1990 we recommended that EIC take steps to monitor and analyze the use of Minister's permits. The Minister's 1991 report to Parliament on this matter reflects a change toward the recommended direction.

Areas of Slow Progress
Security Screening
3.114 Admission to Canada. In 1990 we noted that only a small percentage of immigrant applicants, who were the subject of security concerns by the Canadian Security Intelligence Service (CSIS), were denied admission to Canada. We also reported that the majority of security cases awaiting decisions by EIC involved people who were already living in Canada. Furthermore, criminal checks were incomplete.

3.115 Since our audit, EIC has reached decisions on most of the cases pending in 1990. In the vast majority of cases, the applicant was accepted as a landed immigrant. We noted, however, that decisions for most of the briefs issued after 1990 were still pending, especially where they involved persons already living in Canada. On the other hand, CSIS states that often the information available is not sufficient to support a denial of admission to Canada, although there are national security concerns. In most cases, foreign agencies do not provide criminal intelligence (as opposed to criminal record information) and therefore criminal checks continue to be incomplete. The situation consequently remains similar to what we reported in 1990.

3.116 Effectiveness of screening activities. We recommended in 1990 that EIC evaluate, in collaboration with CSIS and External Affairs, the effectiveness of their security screening activities. EIC has yet to do so following the approval and implementation of amendments to the Immigration Act regarding inadmissibility criteria relating to security and criminality.

3.117 A pilot project on security screening activities abroad, which was just starting at four posts at the time of our 1990 audit, has since been expanded to include all posts. An evaluation of this pilot project is planned for 1992-93, which should be an important element of a future effectiveness evaluation.

Obligations of Transportation Companies
3.118 Since 1990, negotiations between Justice and transportation companies have resulted in the collection of some $3.2 million for amounts assessed prior to 1 January 1989. An amount of $2.2 million was written off. However, collection of fines and detention costs imposed since that date remains problematic. Many companies continue to systematically contest all fines and detention costs. Bill C-86 would introduce administrative means of recovering costs associated with infractions by transportation companies. This approach would replace, for the most part, the use of fines to promote compliance with the Act.

Removals
3.119 Our follow-up has shown that the measures taken by EIC have increased the overall number of removals. As in 1990, however, the carrying out of removal orders affecting refugee claimants is delayed or their effect is cancelled in a majority of cases. EIC has noted that as the number of removal orders has increased, the proportion of individuals who hide when due to report for removal has grown substantially. The cost of locating these individuals is significant, and EIC has stated that budgetary considerations limit the number of removals.

Field Operations Support System
3.120 Our 1990 audit found that access to the Immigration Field Operations Support System (FOSS) and the quality of data it contained needed to be improved. Our follow-up has shown that the situation has not improved significantly. The last two years have seen continued reliance by immigration enforcement operations on locally developed systems to generate required management and operational data. EIC is undertaking certain initiatives to improve the situation.

Consumer and Corporate Affairs - 1990, Chapter 16

Background

3.121 In 1990 we reported on the implementation and administration of six major Acts by the Department of Consumer and Corporate Affairs (CCA). They were the Bankruptcy Act, the Canada Business Corporations Act, the Patent Act, the Competition Act, the Weights and Measures Act, and the Electricity and Gas Inspection Act. We also reported on the administration of the Trade-marks Act which, along with the Patent Act, is the responsibility of CCA's Intellectual Property Directorate (IPD). Our follow-up reviewed the action taken by the Department to address our 1990 observations and recommendations.

Conclusions

3.122 We found that the Department has addressed most of the recommendations that we made in 1990. However, our concerns in the Intellectual Property Directorate (specifically the Patent Office and the Trade-marks Office) and in the Corporations Directorate have not been resolved. The Department believes that the initiatives that are under way will allow it to respond to these concerns. Finally, some action has been taken on our recommendation in the Marketing Practices Branch, but progress has been slower than expected.

Observations

Intellectual Property Directorate
3.123 The Patent Office is part of the Intellectual Property Directorate (IPD). It is responsible for granting patents and disseminating information related to patents. In 1990 we found that service levels in the Patent Office had declined substantially over the preceding five years and were unlikely to improve. We also found that there was a lack of a quality assurance component in the patent examination process. We recommended that the Patent Office review its forecast of future workloads, develop a strategy for meeting its planned level of service and improve its quality assurance function.

3.124 Since our audit, the Patent Co-operation Treaty, which started to come into effect in 1990, and the implementation of the new Patent Act (1987) have significantly changed the patent application and examination process. The Department has also continued the development of the Canadian Automated Patent System (CAPS), which is expected to be fully operational by 1996.

3.125 In order to respond more effectively to demands in the area of patents as well as to its other responsibilities, the IPD sought and recently received the authority to become a Special Operating Agency (SOA). In the case of the Patent Office, the Department believes that the procedural changes, the development of CAPS, and the flexibility provided by SOA status will allow it to reduce backlogs, assess and meet client needs, develop performance measures and establish a quality control function. The Department also believes that SOA status will provide the means to fully address our concerns about service standards and overtime use in another part of the IPD, the Trade-marks Office.

3.126 While the Department's actions to date seem reasonable and appropriate, the concerns underlying our observations and recommendations remain unresolved at the time of our follow-up.

Corporations Directorate
3.127 The Corporations Directorate regulates the creation and existence of federally incorporated corporations. In our 1990 audit we found that it had no procedure for assessing the currency or accuracy of information it held. Our follow-up found that this concern has not yet been resolved. However, the Directorate has initiated a major automation project to manage the estimated 14 million documents it currently holds. The Department believes that, when fully implemented, the data and imaging system (DISCO) will provide quicker processing and allow for the redeployment of resources from clerical functions to compliance and quality control related functions.

Protection of Information
3.128 In our audit we found physical security risks to the information held by the Patent Office, the Trade-marks Office, and the Corporations Directorate. These risks have not yet been fully addressed, although the Corporations Directorate has taken steps to control access to its premises. The Department expects that the automation initiatives in these three areas will resolve the issue of information protection.

Marketing Practices Branch
3.129 The Competition Act prohibits misleading advertising and other deceptive marketing practices. Our audit found that the proportion of possible violations of the Act that were investigated had dropped well below the objective set by the Branch and that investigations were becoming increasingly costly. We also found weaknesses in the Branch's ability to set investigation priorities. We recommended that the Bureau review current practice and develop a strategy to maximize program efficiency and effectiveness.

3.130 The Branch has taken some action on our recommendation, although progress has been slower than expected. Management is developing a strategy in the form of a new business plan that, among other matters, is intended to deal with the issues raised by the audit. Implementation is expected to begin in April 1993. The Branch is also implementing a compliance-oriented strategy to resolve lesser priority cases through alternative (non-criminal) means. Finally, during 1993-94 the Department expects to further consider whether it should recommend amendments to the Competition Act that might, among other things, allow for more effective and efficient administration of the marketing practices provisions.

Department of Energy, Mines and Resources - Surveys, Mapping and Remote Sensing Sector - 1990, Chapter 17

Background

3.131 In our 1990 chapter on the Surveys, Mapping and Remote Sensing Sector, we made observations and recommendations with regard to the need for analyzing options for the future of its digital mapping program.

3.132 Between 1980 and 1990, the Department spent about $33 million dollars on establishing a National Topographic Data Base (NTDB). The NTDB attempts to deal with the question of how to produce or revise paper maps efficiently, while meeting the emerging need for digital map information.

3.133 At the time of our audit, we could not find adequate plans and analysis guiding the development of the NTDB and substantiating its contribution to the Sector's overall objectives. We also questioned the efficiency gains and cost justification for digital stereocompilation of topographic data.

3.134 Our follow-up focussed on the action taken by the Department of Energy, Mines and Resources in response to our recommendations and observations. We reviewed studies and supporting documents supplied by the Department and conducted interviews to substantiate its progress since 1990.

Conclusion

3.135 We found that management has conducted the studies and analysis suggested in our 1990 report. The Sector has also established targets and performance indicators related to its digital mapping activities.

Observations

3.136 One of our recommendations suggested that the Department conduct a study to define the essential federal and national topographic data requirements with cost-benefit analysis on the various options for meeting these requirements.

3.137 The Sector conducted a user needs study that identified user requirements and four alternatives for meeting them, as well as a cost-benefit analysis for each. The study also suggested that the Department's "program with respect to topographic information must change to be more in line with user needs and emerging technologies."

3.138 The Department has considered the conclusions and recommendations of the user needs study and is acting upon them. Specifically, the Sector has indicated that it will be curtailing its stereocompilation activities.

3.139 Our second recommendation in 1990 involved the identification and monitoring of strategic milestones and measurable benefits for the digital mapping program over the next 10 years. The Sector has now established targets and performance indicators which will be used in developing its multi-year operational plan and in monitoring results against the plan.

Department of the Environment - 1990, Chapter 18; Conservation and Protection - 1991, Chapter 11

Background

3.140 In 1990 we identified a number of deficiencies in the Department's program evaluation activities. We stated that the Department needs to improve the coverage and quality of its evaluations and to report these evaluations in a fair and balanced manner. We also commented on the jurisdictional complexities relating to environmental matters, noting that Canada lacks a comprehensive strategy for dealing with the environment. As well, we reported some of our preliminary findings with respect to the slowness of implementation of the Canadian Environmental Protection Act (CEPA). We stressed the need for co-ordinated environmental action, including enforcement, by all levels of government.

3.141 Our 1991 audit report went more deeply into the Department's compliance and enforcement activities and its implementation of the Canadian Environmental Protection Act and of sections 36 to 42 of the Fisheries Act. We reiterated the need for the federal government and the provinces to clarify their respective roles and responsibilities for compliance and enforcement activities. We pointed out that priorities for these activities had not been clearly defined; that they were not adequately monitored and evaluated; and that there was insufficient information for their management and control.

3.142 In 1991 we also reported on weaknesses in the strategic and operational planning of the Great Lakes Action Plan for the clean-up of the Great Lakes. At the operational level, for example, there was no Remedial Action Plan strategic framework, containing realistic goals and deadlines, to guide the implementation of the 17 Remedial Action Plans for areas of concern. In our opinion, such deficiencies have slowed progress in dealing with the serious toxic pollution of these water bodies.

3.143 Finally, we reviewed the quality of information presented in three important accountability documents, with an emphasis on reporting on compliance and enforcement activities and the Great Lakes Water Quality Agreement. We found several deficiencies in reporting, particularly with respect to planned and actual results.

Conclusion

3.144 We are encouraged by the Department's positive response to our reports. The Department has made satisfactory progress in dealing with most of the observations and recommendations. In some cases, however, there is still more to be done. The observations below highlight areas where significant progress has been made and those where we feel improvements are still needed.

Observations

Program Evaluation
3.145 The Department now has plans to obtain effectiveness information on most of its significant programs. We found that the quality of the 1991 evaluation of Ice Services was significantly better than that of four of the five evaluations examined in our original audit. However, there is still progress to be made in the areas of sampling and questionnaire design and on the range of issues to be addressed.

Comprehensive Environmental Strategy
3.146 With the release of the Green Plan in December 1990, Canada now has a comprehensive environmental strategy. Over the next few years, this Office will be auditing several programs under the Green Plan.

Great Lakes Water Quality Agreement
3.147 We are pleased to note the Department's positive response to our observations and recommendations dealing with the Great Lakes Water Quality Agreement. The Department has prepared in draft the "Federal Provincial Strategy for the Great Lakes Ecosystem" and is in the process of consulting non-government organizations (NGOs) and stakeholders before finalizing it. The document creates a strategic framework within which all aspects of the program, including the development and implementation of Remedial Action Plans (RAPs), are integrated. While it includes a timetable for the completion of RAP reports, each of these will have more specific objectives and deadlines once responsibilities and financial commitments have been determined. As noted below, we remain concerned about program co-ordination.

3.148 Program co-ordination. The Inter-departmental Committee on Water (ICW) has formed a RAP Steering Committee that will advise it on both policy and operational matters and improve interdepartmental co-ordination. This is a positive step. However, only one ICW meeting (November 1991) and one Steering Committee meeting (February 1992) have taken place since our 1991 audit was completed. The benefits gained from this process change could be lost if the Department does not show leadership by setting the pace of meetings, impressing on members the importance of personal participation and setting agendas to ensure timely decisions are taken on important policy and operational issues.

Compliance and Enforcement Activities
3.149 Subsequent to our 1991 audit, the Department established the Office of Enforcement. The Office is dedicated to enforcing the environmental regulations, training enforcement personnel and monitoring enforcement activities and compliance levels. The Office has begun to formulate a set of standardized enforcement guidelines and has set priorities for inspection as part of the National Inspection Plan for 1992-93. Also, it has significantly improved its ability to enforce environmental regulations. However, the Department still has not identified standards of environmental quality or the degree of compliance required to achieve a given level of environmental quality, nor has it assessed the effectiveness of existing regulations. The Department is developing alternative methods for achieving compliance including the use of economic instruments, educational programs and promotions and pollution prevention initiatives. The Department still has insufficient information on compliance and enforcement. Its computerized information system is, however, expected to be in operation by December 1993.

3.150 Regulation of toxic substances. In 1991 we noted that the priority substances assessment program had completed reports for only three of the forty-four substances on the priority list and that the Department would not complete the remaining reports by 1994 as originally scheduled. Since then the Department has significantly advanced the number of reports nearing completion. The Department has indicated that the release of reports for sixteen substances will be completed by March 1993 and the assessment of the remaining substances will be completed on schedule before February 1994.

3.151 Since the 1991 audit, a comprehensive management system has been implemented to support the program by tracking progress and providing the information needed to anticipate, identify and resolve problems on an ongoing basis.

Provincial Court Decision on the Canadian Environmental Protection Act
3.152 The impact of the 7 August 1992 ruling of the Superior Court of Quebec on the administration of CEPA is unclear at this time.

Accountability Reporting
3.153 The Report to Parliament on the Administration and Enforcement of the Canadian Environmental Protection Act (CEPA). The Department has made significant improvements to the 1991 CEPA report. It provides more complete information on the Department's activities under the Act and answers more of the reader's questions. However, the report still does not point out the extent to which the Department is meeting the objectives of the Canadian Environmental Protection Act. In order to measure the achievement of its objectives, the Department is developing an evaluation framework for a parliamentary review of the administration of CEPA in 1993.

3.154 Part III of the Estimates for 1990-91 and 1991-92. In its 1992-93 Estimates the Department responded to several of our concerns about completeness of information and providing information on significant constraints to program success. There is still room for improvement in the reporting of planned and actual performance in terms of results and related resources. The Department's Part III Estimates provide some broad information on proposed government-wide Green Plan spending targets and expected results and refers the reader to the progress report entitled "Canada's Green Plan - The First Year" for more detailed information on the government-wide Green Plan. We have not audited this latter report, but we have noted that it does not provide a comprehensive picture of planned and actual Green Plan spending.

Department of Indian Affairs and Northern Development - Northern Affairs Program - 1990, Chapter 19

Background

3.155 In 1990 we reported on how DIAND carries out its legislative mandate for managing Crown lands in Canada's North. We focussed on selected aspects of land, water and mineral resource management. We also reported on the Department's disclosure of the costs of comprehensive land claim settlements. DIAND generally concurred with our recommendations for improvement.

3.156 This year, we enquired into the Department's progress in implementing our 1990 recommendations. In March 1992, it reported to us on several initiatives it had undertaken.

Conclusion

3.157 In general, it would appear that DIAND has made satisfactory progress in its reported initiatives respecting water and mineral resource management and cost disclosure of comprehensive land claim settlements. However, we are not in a position to comment on the effectiveness of these initiatives, because some of them had not been fully implemented at the time of our follow-up enquiry. We will consider performing a further review when appropriate.

3.158 With respect to land management, we are unable to determine whether or not DIAND's current approach to land use planning is reasonable in the circumstances.

3.159 We noted in our 1990 audit that the ways in which land is used can involve many complex decisions. These relate to issues such as development opportunities, environmental protection and threats to aboriginal cultures. In our view, although approved land use plans may not provide complete solutions, their absence could mean that these issues are not being appropriately addressed.

3.160 During our follow-up review, DIAND informed us that due to resource constraints, the Land Use Planning Program for the North was wound down in early 1991. This resulted in delays in the planning approval process. DIAND further indicated that land use planning functions would continue through the comprehensive land claims process and other departmental activities.

3.161 We therefore asked DIAND to provide information on the extent of land use planning coverage from all significant sources. DIAND responded that approximately 33 percent of the Northwest Territories and 10 percent of the Yukon are covered by approved land use plans and/or by a land use planning component in a land claim settlement. The extent of land use planning through other departmental activities was not reported to us.

3.162 We further noted that DIAND has not conducted a recent evaluation of how well land use decisions are being made and implemented. This is partly because comprehensive land claim settlements were finalized only recently. Consequently, the appropriateness of the current approach through the claims process and other activities is largely unknown.

Department Of National Defence - Human Resource Management - 1990, Chapters 20, 21, 22 and 23

3.163 This report focusses on recommendations made in 1990 in eight main areas: the military personnel management system, merit assessment, military conditions of service, commissioning plans for officers, senior officer training, official languages, training efficiency and economy, and medical support. It also covers recommendations made in 1984, 1987 and 1988 on departmental performance reporting.

Conclusion

3.164 Our follow-up audit indicated a varied response to our recommendations. While progress on some has been satisfactory, in several cases much remains to be done.

Observations

Military Personnel Management System
3.165 In our 1990 audit we reported that the Department did not have the management tools needed to understand the dynamics of the human resource management system, and the long-term effects of various policy decisions.

3.166 The Department of National Defence (DND) has since acquired a human resource management modelling and simulation capability. This has the potential to resolve most of the issues we raised concerning the overall management of the process.

3.167 In 1984 and again in 1990, we recommended that DND review its Military Occupational Classifications (MOCs) structure in the context of longer-term force development. The Department has initiated a military occupation structure review. This review will rely on a definition of "military essentiality" and is intended to produce a comprehensive management tool that can be used for force structure design; it is intended to redress imbalances between officers and non-commissioned members, operations and non-operations within MOCs, and support and operations classifications. DND is now in a position to utilize its recently acquired modelling and simulation capability to assess the long-term personnel policy and force structure impacts from this initiative.

Merit Assessment
3.168 In 1990 we recommended that the merit assessment process be subject to a major review.

3.169 National Defence has initiated studies on some aspects of changes in the officer merit process and plans to begin an in-depth review of the merit system. We intend to follow-up on the Department's progress at a later date.

Military Conditions of Service
3.170 Our 1990 chapter on military conditions of service examined a range of services and benefits intended either to adjust for special military conditions or to develop military commitment and a military ethos. We noted that direct pay and allowances alone cost the Department $3.3 billion, or 29 percent of its 1989-90 budget.

3.171 Since 1990, National Defence, with the support of the Treasury Board Secretariat has acted positively on our recommendations. The roles and responsibilities of the National Defence/Treasury Board Secretariat Advisory Committee on Military Pay and Other Conditions of Service have been revised. A broadly based review of key elements of conditions of service is now under way. Given the current context of widespread changes to the Public Service, this issue may be the subject of an in-depth audit as early as 1995.

Commissioning Plans for Officers
3.172 Our 1990 Report recommended that National Defence periodically evaluate the efficiency and effectiveness of its commissioning plans. We pointed out that the Department spends between $18,000 and $47,000 per student per year, depending on whether the officer cadet is sent to a civilian university or to a military college. The Department had never made an overall evaluation of cost-effectiveness for commissioning options, nor had anyone been given responsibility for doing so.

3.173 Our follow-up audit found that, although a committee had been established to co-ordinate the administration of the plans, no single office was responsible. An evaluation of the plans has been initiated, though not completed.

Training for Senior Officers
3.174 Our 1990 audit identified a lack of training for senior and general officers in war-fighting skills required to command large formations. We identified a need for the Department to provide more operational command skills training and employment experience.

3.175 Since our 1990 chapter, the Department has taken, or has made plans to take, a number of actions to address deficiencies.

  • The "Rendezvous" series of major land force exercises has been modified to increase war-fighting training for senior officers.
  • Senior officers have been sent on the British Army Higher Command and Staff Course for the last two years.
  • The Canadian Forces will offer a Joint Warfare Seminar of three to five days next winter at the Canadian Forces Command and Staff College. This is intended to be the first step to scope the overall requirement for senior officer operational training.
  • The Department plans a review of formation commander training needs.
  • A course for academic training in military history and the art of war has been proposed for senior and general officers.
3.176 Nevertheless, the Department recognizes that because of its small force and funding constraints, the proposed training still falls short of that provided by other armed forces.

Official Languages Training
3.177 Background. In our 1990 Report, we recommended that National Defence redefine the goals of its Official Languages Program in terms of the number of bilingual positions required and the proficiency levels needed to meet clearly defined operational requirements.

3.178 We reported that this program had cost the Department about $500 million since 1980 and was expected to cost $1.4 billion over the next 15 years. There were 7,600 individuals on language training in 1990-91.

3.179 The Department's Official Languages Program is operated separately from that of the Public Service Commission of Canada because of unique National Defence operational requirements. DND must also respect the provisions of the Official Languages Act.

3.180 Additionally, National Defence has developed an internal policy known as the "bilingual officer corps". This does not require that all officers be bilingual, but that the officer corps must be structured in such a way that all bilingual positions can be manned continuously by bilingual people. Under this policy, starting in 1997, promotion to the rank of lieutenant-colonel will normally be restricted to bilingual officers.

3.181 Development of management goals. In response to several of our findings, the Department told us that it would work with Treasury Board officials to develop a Letter of Understanding to set clear and measurable objectives for the official languages training program, including the refinement of attainable goals. A Letter of Understanding was signed by the Department and the Treasury Board in June 1991 and contains commitments to improve management and reporting in many areas, including needs definition, utilisation of bilingual personnel, posting, and planning and control. At the time of our follow-up, the Department had not yet reported to Treasury Board officials on their progress. Our follow-up reflects the situation as of summer 1992.

3.182 Policy on definition of needs. Since 1990 the Department has responded to our recommendations by reviewing its policy on the identification of bilingual positions and is in the process of redefining its bilingual requirements to comply with the Official Languages Act. The bilingual officer corps policy has not been re-examined yet.

3.183 Program management still inefficient. Our follow-up found that the efficiency and effectiveness of language training programs have not improved. In order to meet the bilingual officer corps policy, DND has given all officers the opportunity to become bilingual. This approach appears very expensive and at the current level of resources does not seem to be an advantageous way of meeting DND's linguistic obligations. We found that in 1990-91 language programs produced only about 30 percent of what was required and projected under the 1990 plan. The Department recognizes that it is spending a great deal of resources just to maintain the status quo and that a fundamental review of language targets and implementation options is needed.

3.184 Our follow-up also observed that language training programs continue to have many deficiencies.

  • Annual goals specifying how many people should be qualified at particular linguistic levels are not determined.
  • Accountability for the achievement of these goals is not clearly defined.
  • The Department's plans still do not focus training resources to address the acute shortage of bilingual Anglophones. We noted in 1990 that the Canadian Forces' language system is designed to offer a low level of training to many, rather than to train fewer individuals to the minimum proficiency level. In 1989 the 9,000 Anglophones at the language level closest to becoming bilingual were not given priority access to resources that would have enabled them to become effectively bilingual. In 1990-91, 75 percent of the student population was still registered at the beginner level of the program.
  • DND's new decentralized program for 4,000 students across Canada does not have adequate performance data on students, such as success rate, attrition rate and number at each proficiency level. Without such data, the Department cannot properly manage the language program or report reliably on its full costs.
  • Only 24 percent of the candidates who took the 1990-91 non-commissioned member basic French course qualified as bilingual.
3.185 Senior officials told us that they are planning certain corrective measures. They intend to assign greater priority to increasing the skills of those who are close to being bilingual, to improve accountability at all levels, to increase resources for program monitoring and to increase funding for the decentralized program. These measures should enhance the efficiency and effectiveness of language training programs, but at this time they cannot determine by how much.

3.186 Bilingual posting priorities not implemented. DND has not implemented our recommendation to incorporate bilingual posting priorities into its language training. There is still no departmental posting policy to assign bilingually trained individuals from all courses to positions designated as bilingual, while respecting operational tasking priorities. The current departmental bilingual manning policy affects only the 250 or so graduates each year of the continuous French course. Although this course lasts a full year and costs over $80,000 per person, in 1990-91 only 66 percent of its graduates were actually assigned to a bilingual position.

3.187 Our audit indicated a 1.4 percent increase in the number of bilingual positions filled with bilingual personnel in 1989 and a 0.2 percent increase in 1990, even though the Department's objective is 5 percent per year.

3.188 The language factor in the merit system. In 1990 we reported that the Treasury Board had not provided direction on how to integrate language skill requirements into the merit assessment process for an institution such as the Canadian Forces. National Defence has adopted a policy of awarding merit points to individuals for having been motivated to learn the second language as well as for actually acquiring second language skills. Our follow-up indicates that consultations between Treasury Board and departmental officials would be necessary to develop policies suited to institutions that appoint individuals to rank rather than position.

3.189 Our 1990 audit stated that there was a need for clearer guidelines for merit boards on how to apply a language factor in merit assessment. In order to gauge the progress made, our follow-up audit examined the current guidelines used to assess the language factor. We also reviewed merit board files of majors promoted to lieutenant-colonel in 1991, to assess the boards' application of the language factor.

3.190 Our follow-up could find no rationale for the merit assessment language factor of 5 percent, nor how it contributes to the Department's goal of a bilingual officer corps by the year 1997. The merit system did not establish a minimum requirement in terms of language capability, and awarded the same value or greater to a candidate's perceived motivation to learn the second language as to a candidate's actual bilingual capability.

3.191 The current system, including the low percentage of merit points, the lack of minimum requirements and the disproportionate importance attributed to motivation, appears inadequate to motivate enough individuals to become proficient in their second language by 1997. In fact, our follow-up review of promotion files indicated no significant increase since 1989 in the percentage of bilingual Anglophone majors promoted to lieutenant-colonel.

3.192 Our follow-up also found that the application of the criteria was seriously inconsistent within and between merit boards. We found that over 50 percent of the time, the bilingual score given to individuals did not follow the guidelines or did not compare with scores awarded to their peers. Our examination also indicated that merit assessment included standards that were no longer valid. One quarter of lieutenant-colonel promotions were based on language test results that had expired or on no data at all.

3.193 Minister's study group established. At the time of our follow-up, the Minister of National Defence set up a study group to report on the use of French and Francophone participation in the Canadian Forces. We held discussions with the study group and are keeping abreast of its activities.

3.194 Conclusion. Our follow-up audit indicates that the Department still needs to re-evaluate its Official Languages Program implementation in order to better respond to identified needs under the Official Languages Act and ensure effectiveness and efficiency in its posting and merit systems, while respecting "sharp-end" operational priorities. Our findings are supported by officials of the Office of the Commissioner of Official Languages.

Training Efficiency and Economy
3.195 In 1990 we found that 62 percent of individual training delivered by the Canadian Forces Training System was not relevant to trainees' present jobs or duplicated what they already knew. This training cost $165 million per year. While difficulties of this type would be present in any large training system with complex requirements, we recommended that the Department review its processes for planning and delivering individual training to confirm that the system is efficient and responsive to the needs of users, and that it regularly review the relevance of course content.

3.196 In June 1992 the Department began a Financial Accountability in Individual Training initiative intended to link training more directly to operational requirements, delegate authority to those actually responsible for training, provide adequate cost and budget information to training managers, and carry out verification of training. Departmental officials told us that positive results from this project are not expected before three or four years.

3.197 At present, while reviews of course content through validations are being done by all Commands, the number of completed validations remains low. In 1990-91, 40 courses were validated out of approximately 1,700 for the whole Canadian Forces. The Department plans to complete 51 validations in 1991-92 and another 54 in 1992-93. Officials told us that they expected the number to increase when new validation tools, now under development, become available. However, the Department does not know the extent to which it has been able to eliminate unnecessary training.

3.198 We recommended in 1990 that the Department compare costs between its own school system, civilian colleges and institutes of technology. We reported that National Defence should identify where Canadian Forces schools cost more and should use this information to reduce its costs. By way of example, in 1990 we reported that it cost $265,352 for a CF Fleet School to train a marine engineering technician, whereas it cost $71,923 in the community college system.

3.199 The Department has contracted out training in a number of significant, but isolated, initiatives. It has also amended its training policy to make option analysis a requirement, despite not yet having applied it on a case-by-case basis. In addition, the Financial Accountability in Individual Training initiative is designed to encourage decision makers to select the most economical training method by holding them financially accountable.

3.200 In 1990 we recommended that National Defence ensure that equipment contracts require that the type and quality of training provided will meet departmental needs, before acceptance of the product. For example, in 1990 we reported concerns that the Canadian Patrol Frigate Project did not require the contractor to provide adequate training capacity for the first six ships.

3.201 Since 1990 the Department has changed its standard contract to require contractors to specifically state what course evaluation and validation will take place. However, it still does not require that courses be validated before payment is made, as we recommended.

3.202 Our 1990 report recommended that National Defence increase efforts to synchronize training with delivery of equipment and ensure that opportunity costs of non-productive equipment are considered during contract negotiation. The Department has issued instructions that increase emphasis on this issue.

Medical Support
3.203 The DND medical support system costs at least $230 million per year. Our 1990 audit recommended that National Defence determine the minimum dedicated medical support system needed in peacetime to support unique military needs and to act as a basis for expansion to meet wartime needs. We also recommended that alternatives designed to improve efficiency be considered, since the Department's peacetime medical system costs in our sample were 86 percent higher than the average for similarly sized civilian hospitals.

3.204 The Department is attempting to identify all Regular Force medical support personnel requirements for quick-response forces used to support contingency operations. National Defence continues to have difficulty determining the minimum peacetime dedicated medical support system that could be mobilized to meet multiple contingency needs. The Department has yet to define medical support requirements for circumstances more demanding than contingency operations and to determine how they would be mobilized. Consequently, minimum peacetime medical staff levels to support wartime operations cannot be defined.

3.205 Since our 1990 audit, officials indicated that National Defence reduced expenditures in 1991-92 for medical support by $1.5 million over the previous year. The Department is undertaking a study to identify the optimal means of providing peacetime hospital services in the Prairie and Pacific regions. The Department has taken positive steps to rationalize its hospital system by downgrading two of its Canadian Forces Hospitals (CFHs) to smaller base hospitals. This resulted in a surplus of 59 positions, the majority of which will be used to meet existing and new program requirements within DND. However, the Department's redistribution of 24 positions to other CFHs could increase the peacetime cost per patient. DND has indicated a reluctance to further reduce the size of the medical system until the medical support requirements for contingency operations have been fully identified. The need for an approved force structure for peace and war was identified in our 1984 report and has been the object of follow-up since then. Chapter 18, which deals with the CF Reserves, comments further on this issue.

Departmental Performance Reporting
3.206 Our 1984 Report recommended that DND co-ordinate information on performance measurement, program evaluation, internal audit, and operational feedback, in order to provide comprehensive, timely information to senior officials on the extent to which defence objectives are being achieved and tasks are being carried out.

3.207 The Department considered various alternatives in accountability reporting at National Defence Headquarters, and in February 1990 opted for group business plans. However, our follow-up audit found that Headquarters has still not developed any policy for producing these plans.

3.208 In 1984 and again in 1987 we recommended that the Defence Activity Performance Management System (DAPMS) assign the full range of costs against tasks and provide performance data on support and logistic services. Since that time, National Defence has dropped the DAPMS and developed the Operational Readiness and Effectiveness System (ORES) to report on the operational capability of the Canadian Forces. ORES is based on tasks developed from the 1988 Canadian Forces Development Plan (Provisional). While ORES is a significant step forward, it is not designed to assign costs to tasks, and its data is not yet complete or usable.

3.209 In 1988 we recommended that DND develop a series of indicators for defence capabilities and peacetime defence performance measures suitable for publication in Part III of the Estimates. During our follow-up audit, officials informed us that alternatives are still being actively considered, but no decision has yet been taken to implement our recommendation.

Department of National Revenue Taxation - Enforcing the Income Tax Act - 1990, Chapter 24

Background

3.210 In 1990 we audited the enforcement activities of the Department of National Revenue - Taxation. This chapter was considered in December 1990 by the House of Commons Standing Committee on Public Accounts.

Scope

3.211 Our follow-up review focussed on the actions taken by the Department of National Revenue - Taxation in response to our recommendations and observations. We reviewed various status reports by the Department, conducted interviews and analysis and examined documentation.

Conclusion

3.212 National Revenue - Taxation has taken action on all of the recommendations and observations in our 1990 chapter. Progress has been reasonable in implementing several recommendations. However, more work needs to be done in other key areas, including filing of information slips on magnetic media, and research to determine the effectiveness of present enforcement activities.

Observations

Search Warrants
3.213 In 1990 we noted that it often took several months of departmental review to finalize a search warrant, and recommended that the Department find ways to reduce the time required. The Department has responded by moving the authority to approve search warrants to the directors of most field offices. This process should be completed by November 1992. The Department believes that this change will result in a significant reduction in the time it takes to approve a search warrant.

Keeping Parliament Informed
3.214 In 1990 we suggested that the Department make changes in its Estimates Part III. The Department has significantly improved its presentation of information in Part III. This topic is covered in more detail in Chapter 6 on Information for Parliament.

Selection of Taxpayers for Enforcement Activities
3.215 Our 1990 Report suggested that the Department could improve the effectiveness of its selection of taxpayers for enforcement actions. Since that time the Department has increased training and its use of automated selection methods to address this concern.

Filing of Information on Magnetic Media
3.216 In 1990 we noted that the rate of filing of T4s and T5s on magnetic media was quite low. We suggested that the Department attempt to increase the rate to at least 80 percent and consider making magnetic media filing mandatory if reasonable levels of voluntary compliance were not being achieved. The Department has made progress: the proportion of T5s on magnetic media has increased from 38 percent in 1990 to an estimated 66 percent in 1992. The Department expects to meet a goal of 80 percent compliance in the 1993 taxation year.

3.217 Improvement in the rate of filings for T4s on magnetic media has been slower. Filing has increased to 27 percent in 1992 from 20 percent in 1990 but the vast majority of T4s are still filed manually. The Department has stated that it expects voluntary rates of filing to increase to 40 percent in 1993 and 43 percent in 1994. It has also committed to reviewing the need for mandatory magnetic filing at the end of 1993.

Additional Research
3.218 In 1990 we recommended that the Department perform more research to assist development of enforcement policies and practices and to provide feedback on existing activities. The Department cites several areas where additional effort has been placed in the last two years. However, this effort has been more directed to areas other than those noted in our audit observation. For example, the Department has indicated that its recent efforts have gone into areas such as client satisfaction reviews and additional consultations with various advisory groups. Little recent work has been done in the area of research to determine the effects of the Department's enforcement activities on the behaviour of taxpayers. Without such research, the Department cannot assure itself that its present enforcement policies and practices are as effective as they could be. The Department has committed to reviewing its research operations and requirements.

Human Resources
3.219 In 1990 we recommended that the Department improve its human resource information and planning systems and strengthen the training of its personnel. Since our audit, the Department has taken several steps to implement these recommendations. It has updated the training profiles of its enforcement personnel. In the spring of 1992 it started a process designed to determine the gap between the training employees currently have and the amount they should have been given. It has also embarked on the development of a new Personnel Management System. The first part of this system became operational in the spring of 1992. Current plans call for the system to be in full operation by the fall of 1994.

Office of the Superintendent of Financial Institutions - 1990, Chapter 25

Background

3.220 In 1990 we reported on three activity areas of the Office of the Superintendent of Financial Institutions (OSFI): deposit-taking institutions; regulatory policy; and management services. We recommended that OSFI ensure that procedures are fully in place for monitoring institutions; improve risk assessment processes relating to the solvency and soundness of deposit-taking institutions; strengthen procedures and practices with respect to reliance on external auditors; improve compliance procedures; give higher priority to achieving better co-ordination with the Canada Deposit Insurance Corporation and provincial regulators; and install better staff training processes.

Conclusion

3.221 In our follow-up, we found that OSFI has taken steps to address most of our recommendations. However, in several areas progress has been slower than expected. We recognize that heavy demands have been placed on OSFI's resources because of recent difficulties in some segments of the financial services sector.

3.222 We were advised by OSFI that the new legislation governing financial institutions, which was proclaimed this year, has also affected the timing and method of implementation of many of our recommendations.

3.223 As we stated in our 1990 chapter, the importance of effective and timely monitoring cannot be overemphasized and OSFI should continue to make every effort to further strengthen its role.

Observations

Self-governance and Self-regulation by Deposit-taking Institutions
3.224 In our 1990 chapter, we recommended that OSFI formalize, in its examination framework, its expectations of the boards of directors and operating management of deposit-taking institutions in respect to self-governance and self-regulation. OSFI advised us that it had not acted on this recommendation because of the anticipated changes in the responsibilities of boards of directors contained in the new legislation governing deposit-taking institutions. OSFI said that it is now in the process of making appropriate additions to its examination framework in respect of self-governance and self-regulation to reflect the thrust of the new legislation.

Monitoring of Deposit-taking Institutions
3.225 In 1990 we made several recommendations to improve OSFI's monitoring procedures.

3.226 Specifically, we recommended that OSFI have access to a comprehensive database on deposit-taking institutions. OSFI has recently prepared a plan to develop such a database and expects its implementation to begin shortly. In the meantime, OSFI is using alternative sources of information for monitoring institutions.

3.227 In response to our recommendation that OSFI conduct regular financial analysis of individual deposit-taking institutions to identify emerging risks, we noted that more financial analysis is being done now than before. However, analytical procedures have not been formalized to ensure regularity and consistency. In some cases, the breadth of analysis carried out and provided to the examiners is not sufficient to permit full utilization of this information by them. Also, in several cases, data obtained and used for financial analysis were not current.

3.228 We recommended that OSFI strengthen its procedures for conducting studies of system-wide and sectoral issues. In our follow-up, we noted that there continues to be a need for more extensive and pro-active coverage of such issues. OSFI has recently established a program for conducting studies in the 1992/93 fiscal year; if implemented, these would provide a more comprehensive coverage of relevant issues.

3.229 We were unable to fully assess the implementation of our recommendation that OSFI's examiners periodically contact the management of institutions. We found that, except in the case of troubled institutions, few such contacts were documented in OSFI's files. However, OSFI advised us that its examiners were indeed making periodic contacts, even though limited records were being maintained on file.

3.230 With respect to our recommendation for the consolidation of procedures for troubled institutions, OSFI has recently prepared a crisis management plan and has improved the co-ordination between its investigations unit and its examiners in order to achieve a more concerted monitoring effort.

Risk Assessment Process
3.231 In 1990 we recommended that OSFI strengthen its procedures for assessing risk in the specialized areas of treasury and EDP and securities subsidiaries of deposit-taking institutions. We also recommended that there be detailed criteria established for the specific approach used by OSFI in measuring the risk profile of a deposit-taking institution.

3.232 In our follow-up, we observed that OSFI had made some improvements in the coverage of treasury and EDP risk in terms of the number of institutions examined and the quality of examination. OSFI, however, needs to further improve its coverage of these high-risk areas by rigorously examining a greater number of institutions. In respect of security subsidiaries of deposit-taking institutions, OSFI has developed and implemented improved procedures for assessing risk from their operations. As to the overall approach to measuring the risk profile of an institution, OSFI has only recently developed the detailed criteria needed for this purpose. The approach is being field-tested.

Reliance on External and Internal Auditors
3.233 In response to our recommendations on reliance, OSFI examiners have improved their understanding of the differences between the role of external auditors and the mandate of OSFI in conducting examinations. In recognizing the differences, OSFI is now conducting more independent work in high-risk areas such as treasury and EDP. However, the examiners do not always state how the reliance has affected the scope of their examination work. With respect to reliance on internal audit, we noted some improvement in OSFI's procedures. However, in a number of cases, there continues to be a lack of information on file on the extent to which internal audit has covered significant internal controls and how it has affected the scope of OSFI's examination work.

Canadian Payments Association (CPA)
3.234 We recommended that OSFI carry out a full scope examination of CPA. OSFI has not done this. However, it has obtained a legal opinion which states that its present examination is sufficient to meet the mandate given it under the Canadian Payments Association Act.

Compliance with Legislation
3.235 We recommended that OSFI improve its compliance testing procedures. OSFI has made some improvements in compliance testing. With respect to banks, however, it relies primarily on external auditors for verification of compliance, with limited testing carried out by its own examiners. Before such reliance is placed, OSFI should determine the nature of compliance work done by external auditors and its adequacy for OSFI's purpose. OSFI advised us that the delay in implementing our recommendation was due to a decision not to revise its compliance procedures until the new financial services legislation had been introduced. It has further stated that since this has now occurred, it has established a compliance division to provide a more co-ordinated approach to compliance testing.

Co-ordinating Efforts with the Canada Deposit Insurance Corporation (CDIC) and Provincial Regulators
3.236 We recommended that OSFI immediately enter into a memorandum of understanding with CDIC and co-ordinate, as appropriate, supervisory roles with provincial regulators to achieve consistency in supervision.

3.237 OSFI and CDIC have been working on a memorandum of understanding since 1989. A number of drafts have been prepared, but an agreement has not yet been signed, as some issues are still to be resolved.

3.238 In 1991 OSFI, under the lead of the Department of Finance, joined its provincial counterparts in an effort to harmonize supervision of regulated financial institutions. There is a need for continued effort by all parties.

Professional Development and Training
3.239 We recommended that OSFI give immediate attention to developing and implementing improved training plans for its staff. OSFI has strengthened its professional training and development by conducting a needs analysis, allocating budgets to line managers and providing some of the necessary training to staff.

Security of Information and Conflict of Interest
3.240 We recommended that OSFI conduct a risk and threat assessment of its operations and implement proper procedures to safeguard security of information. In addition, we recommended that its procedures relating to conflict of interest be improved.

3.241 OSFI prepared a threat and risk assessment of information systems in 1991 and an implementation plan in May 1992. However, procedures to ensure information security are not yet fully in place. We noted that procedures relating to conflict of interest have been improved.

Department of the Secretary of State - Citizenship - 1990, Chapter 28

Background

3.242 Our 1990 audit of the Department of the Secretary of State covered the Citizenship Registration activity and grants and contributions in Citizenship Development. We also looked at information for Parliament on these two activities.

3.243 Organizational change. Citizenship Registration and Promotion activities were transferred from the Department of the Secretary of State to the Department of Multiculturalism and Citizenship, following its establishment 21 April 1991. The organization of the new Department was approved by Treasury Board in December 1991. The Citizenship Development activity (now called Social Development) remained at Secretary of State.

3.244 Scope. Our follow-up reviewed the measures taken by both departments in response to our observations and recommendations. In addition to reviewing formal representations made by management and relevant documentation, we interviewed departmental representatives in national headquarters and in three citizenship courts. We did not visit the Registration Centre in Sydney, Nova Scotia.

Department of Multiculturalism and Citizenship - Citizenship Registration Activity

Conclusion

3.245 Our follow-up indicates that the new Department has either corrected or is taking satisfactory action on most of our recommendations. In particular, the Department has undertaken an important project called the Citizenship Registration System that will address many of our recommendations. This is a new computerized system, budgeted at over $9 million, which is being developed and will be implemented by the middle of 1994-95.

3.246 In addition to initiating the new Citizenship Registration System, the Department has taken some measures to improve its activities. For example, citizenship cards are now more difficult to falsify; the Royal Canadian Mounted Police (RCMP) are notified when, as a result of a request for fingerprints, a citizenship application is abandoned; some citizenship courts are better equipped; new application forms for citizenship and proof of citizenship have been developed; and a pilot project to improve productivity by five percent in the current year has been initiated at the Sydney Registration Centre.

3.247 The Department should pursue its efforts to establish productivity standards for citizenship courts and implement the new Citizenship Registration System as quickly as possible.

Observations

3.248 The Citizenship Act needs to be improved. Our 1990 Report noted that the Department of the Secretary of State had been considering the need for certain amendments to the Citizenship Act since 1985. We were informed by the new Department that a proposal for a new Act was prepared and submitted to the Minister early 1992.

3.249 Corporate planning process - improvements are necessary. In 1990 we recommended that the Department of the Secretary of State quantify its operational objectives and link operational planning to strategic planning. Given that the organization of the new Department was approved only in December 1991, no operational plan framework was prepared for 1992-93. We have been informed that the planning exercise for 1993-94 has started.

3.250 No standards established for turnaround time. We had noted the absence of standards for turnaround time to apply for a grant or a proof of citizenship. Standards have since been approved by the Deputy Minister and will become effective when the new Citizenship Registration System becomes operational in 1994-95.

3.251 In the meantime, efforts have been made, in Toronto, to meet a proof of citizenship processing time of one month, through a pilot proof-application centre. The Sydney Registration Centre gives priority to these proof applications.

3.252 Risk of irregularities in the use of citizenship cards. In 1990 we recommended that the identification numbers of cards reported lost or stolen be communicated to the Passport Office and Customs and Excise. Although preliminary discussions were held with these departments in 1991, no further action has been taken. The Department intends to resume discussions soon.

3.253 Problems identifying persons with a criminal record. In connection with the problem raised by the RCMP, that existing procedures did not positively identify persons with criminal records, we recommended that the routine fingerprinting of all applicants for Canadian citizenship be considered. We note that the Minister for Multiculturalism and Citizenship has decided not to adopt this policy, which would provide positive identification of applicants.

3.254 Information for Parliament. We had recommended that Part III of the Estimates reflect the cost of individual elements of Citizenship registration in a way that allows the total cost to be determined, and that it provide performance information. The Department plans to comply with these recommendations for 1993-94.

Department of the Secretary of State - Social Development

Conclusion

3.255 Our follow-up shows that the Department has taken satisfactory corrective measures on the points raised in our 1990 Report, except for our recommendation that it provide performance information in Part III of the Estimates. The Department plans to provide such information for 1993-94.

Department of the Secretary of State - Education Support - 1990, Chapter 29

Background

3.256 In 1990 our audit of the Department of the Secretary of State focussed on all Education Support programs, including post-secondary education support and the Canada Student Loans Program (CSLP). We did not audit the Official Languages in Education Program.

3.257 The Department appeared before the Standing Committee on Public Accounts twice in June 1992. The Committee studied an audit note on the CSLP that was published in our 1991 Report. The Committee also deliberated on a number of elements discussed in Chapter 29 of the 1990 Report.

3.258 Scope. Our follow-up included a review of the action taken by the Department in response to our recommendations. We examined management's official response to the Standing Committee on Public Accounts, as well as relevant documents and other reports. We limited our meetings to members of the Department's staff.

Conclusion

3.259 The Department has made satisfactory progress toward undertaking corrective measures in the area of Canada Student Loans Program (CSLP). However, more needs to be done in formalizing agreement with provinces. We stress that amendments to the Canada Student Loans Act and Regulations are urgently needed. On matters relating to post-secondary education support, we note minor progress.

Observations

Post-secondary Education Support
3.260 Objectives. In 1990 we noted that national objectives in post-secondary education had not been clearly defined. Although the government has taken a number of initiatives, and discussions with the provinces have taken place, national objectives in the area of post-secondary education have yet to be formulated.

3.261 Federal co-ordination. The Department has made increased efforts to fulfil its mandate as the federal co-ordinator for post-secondary education, using existing mechanisms and developing new ones as the need arises. In our view, these mechanisms still are not sufficiently comprehensive to meet the mandate.

The Canada Student Loans Program
3.262 Approved ceilings are exceeded. In 1990 we pointed out the need for the Department to establish appropriate controls on authorized ceilings for loan amounts. In our follow-up, we found that loan allocations to provinces had again been exceeded, this time by $165 million for the 1991-92 lending year. The Department has initiated corrective measures in compliance with the legislation.

3.263 Designation of post-secondary education institutions. We had recommended that the Department clearly define what constitutes a post-secondary education institution for the purposes of the CSLP, as well as the eligibility criteria to be used in designating these establishments. The Department and the provinces have jointly developed a policy and criteria for identifying these institutions, which are to be implemented beginning 1993-94 loan year.

3.264 Student loans granted in excess of need. In 1990 we found that loans in excess of need were being granted to students who had made erroneous declarations of their resources or had dropped out of their course of studies. Seven provinces currently apply identification and recovery measures with respect to federal loans in excess of need. Departmental and all provincial officials have agreed, starting in August 1992, to establish mechanisms to be used by provinces in the recovery of federal loans granted in excess of need. In addition, Bill C-76, presently in first reading, will have an effect on reducing interest subsidies, but does not constitute a revision of the Canada Student Loans Act with respect to the recovery of loans in excess of need.

3.265 Monitoring and auditing of loan applications. In 1990 we recommended that what constitutes a satisfactory scholastic standard be clearly defined and that an audit plan focussing on provincially administered activities be developed. The Department and provincial officials have agreed on comprehensive requirements for a satisfactory scholastic standard to be applied for loan year 1993-94. Furthermore, the Department has proposed an accountability framework that includes operational and compliance audits, to be implemented by August 1993.

3.266 Need to improve the management of accounts receivable. In 1990 we pointed out the need to improve the management of accounts receivable. Since February 1992 the Department, in conjunction with National Revenue-Taxation, has established a program to recover defaulted loan money from tax refunds. A total of $18 million was recovered between April and August 1992. The Department is also negotiating with financial institutions for the adoption of other measures to improve the recovery rate. Other initiatives established by the Department, such as a performance grid, the monitoring of collection agencies and a more active follow-up action process, have increased the 1991-92 recoveries. Such mechanisms, as well as other alternatives that should be developed, are necessary for sound management.

3.267 High default rate. In 1990 we found that lenders had made little effort to recover loans that had been granted to students. At the time of our follow-up, discussions were under way with lending institutions with a view to sharing the risks of default. As at 31 March 1992, some $964 million in federal loans were in default and were in collection.

3.268 Management tools. All of our audits since 1986 have revealed significant deficiencies in the management information system. We note improvements to the system and we urge the Department to continue this work. The Department and the provinces are currently examining the question of developing a common management system. Talks have been held with the banks concerning electronic data interchange. A program evaluation is planned, and a final report is expected by March 1994.

Information to Parliament
3.269 A number of improvements have been made in the 1992-93 Estimates Part III. The Department, however, has not produced an annual report for the Canada Student Loans Program since 1988. Moreover, the Department should continue to improve the report to Parliament on federal and provincial post-secondary education support in order to better demonstrate the links between financing and objectives.

Department of Transport - Airports - 1990, Chapter 30

Conclusion

3.270 While the Department has had some success with runway expansion, limited progress has been made in other areas. The Department still lacks a clear management strategy and plan for financing capital needs and must still adapt to the deregulated commercial environment.

3.271 Runway expansion. In 1990 we noted that after years of planning, runway expansions at Pearson and Vancouver Airports remained unresolved. In June 1992 the runway expansion at Vancouver was approved and announced publicly. An Environmental Assessment and Review Panel has reviewed the plans for runway expansion at Pearson and the Department is awaiting the Panel's recommendation. Construction of runways could take three years to complete.

3.272 Federal role in airports. In 1990 we reported that the Department needed to re-examine its role in providing airport services in Canada; it needed to develop criteria setting out the conditions under which federal funding would be provided to airports, and a plan to rationalize federal asset holdings and financial involvement in airports. Terms of reference for a study to address these issues were developed, but the Department is now modifying them to account for local airport authorities as well as other government initiatives.

3.273 The Department also has not yet clearly defined its future strategic role in airports. It has developed a decision model for the use of private sector financing, but not an overall policy framework.

3.274 Planning. In response to the need to address the $1.4 billion shortfall over five years between capital needs and funding from traditional sources, the Department has developed a business plan outlining operational and capital requirements and a capital investment plan that outlines the needs of airports over the next five years. The plan now shows a shortfall of $1.8 billion, which includes $1.5 billion for the planned runway expansion and terminal revitalization at Pearson Airport.

3.275 Commuter facilities. The Department has completed construction of a satellite holdroom and walkway for commuter traffic at Halifax Airport, overcoming difficulties that we noted in 1990. The commuter facility project at Vancouver Airport is now the responsibility of the Vancouver International Airport Authority.

3.276 Cost recovery. Many issues that we identified in 1990, such as an outdated landing fee structure, inconsistent application of general terminal fees, shortcomings in the terminal building rental policy and loss of fuel concession fees, were to be addressed by a replacement of the 1978 Cost Recovery Policy. The Department indicates that a decision on a proposed cost recovery policy has been delayed by economic conditions.

3.277 Regulations. Despite efforts by the Department, regulations have not been revised to allow airports to operate in a more businesslike manner and to provide line managers with a rate and fee setting process that is responsive to market conditions.

3.278 Financial information. We recommended in 1990 that the Department provide line managers with key financial tools, such as a commercial cost accounting system, a billing system and a fixed asset accounting system. The development of an Integrated Departmental Financial System is under way, with core requirements scheduled for implementation in late 1993-94. Completion is expected by 1995-96.

3.279 Parking. We estimated in 1990 that annual revenue losses of $4.5 million could be prevented through improved equipment to control parking revenue. We also observed that the Department was slow in replacing parking meters with newer equipment and estimated that at six airports we reviewed, replacement could save $1 million to $2 million per year. The Department states that upgrading of parking equipment has been delayed at larger airports because of fiscal restraints and impending airport transfers. The Department has replaced meters at some airports, but not at the airports we reviewed.

3.280 In addition, we found in 1990 that airports were losing up to $5 million annually because of tenant parking in public parking structures. The Department states that if public parking continues to grow, some of the tenant parking will have to be moved.

3.281 Post-project review of Terminal 3. In 1990 we suggested the development of an improved methodology for future private sector developments based on a post-project analysis of Terminal 3. The Department states that such a review is nearing completion.

3.282 Long-term financial implications. We estimated that there would be an initial revenue shift of $11 million annually to Terminal 3 above the original $25 million that the Department had forecast because of changes to the project, such as the satellite terminal and the transfer of more airlines to Terminal 3. The Department has since agreed to pay the developer to reacquire control of taxis and limousines at the terminal, resulting in a net cost to the Department. The Department's terminal-related revenues from Pearson Airport for 1991-92 declined by $38 million from the previous year. Of this, $4.7 million was because of reduced passenger traffic. The remaining $33.3 million can be attributed to the operation of Terminal 3.

3.283 Although the Department knows the short-term financial impact of these changes, it still has not analyzed the long-term financial implications. Furthermore, it has not updated its original analysis to determine if benefits from the private sector option exceed the cost of the changes. The impact on revenues of a possible merger of Canada's two largest airlines would also need to be considered.

3.284 Terminals 1 and 2 at Pearson Airport. The Department has requested proposals from private concerns for the renovation and operation of both terminals. It is unclear how Air Canada's prior funding of renovations will be taken into account if a third party operates Terminal 2.

3.285 Airport transfers. We noted in 1990 that the Department will have to manage new risks, such as evaluating the potential financial viability of local airport authorities involved in the transfer of airports. The transfers of airports to authorities in Vancouver, Calgary, Montreal and Edmonton have recently been completed. Discussions with local groups on potential future airport transfers are under way in several other cities.