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1993 Report of the Auditor General of Canada

Chapter 2—Follow-up of Recommendations in Previous Reports

Main Points

Introduction

Royal Canadian Mounted Police—Federal Law Enforcement—1990, Chapter 26

Background

Conclusion

Observations

Improved relations and clearer roles in enforcement
Continuing difficulties in implementing the legislation on proceeds of crime
Management information systems

Royal Canadian Mounted Police—Support Services to Canadian Law Enforcement Agencies—1990, Chapter 27

Background

Conclusion

Observations

Forensic laboratory services
Canadian Police Information Centre
Canadian Police College
Identification services
Law Enforcement Services—overall

Innovation within the Parliamentary Control Framework—1991, Chapter 5

Background

Conclusions

Observations

Guidance from the central agencies
Quota monitoring
Test fishing
Parliament may wish to consider reviewing the interpretation
A review of Treasury Board guidance on non-monetary transactions is needed

Capital Projects—Department of Public Works, Quality in the Constructed Project—1991, Chapter 6

Background

Observations

Vehicle Fleet Management—1991, Chapter 7

Background

Conclusion

Observations

Debt Management and Employee Pensions—1991, Chapter 8

Background

Scope

Conclusion

Observations

Long-term implications of alternative financing arrangements
Fiduciary responsibility
Information for Parliament

Financial Management and Control of Non-tax Revenue—1991, Chapter 9

Background

Conclusion

Observations

Monitoring by central agencies
Strategic planning and identification of revenue sources
Public disclosure

Department of External Affairs—Membership Payments to International Organizations—1991, Chapter 12

Background

Conclusion

Observations

Relevance and benefits of membership
Efforts to reform the UN system
Accountability for Canada's performance
Information to Parliament

Department of Fisheries and Oceans—Central and Arctic Operations—1991, Chapter 13

Background

Conclusions

Observations

Delegation to provinces
Fish habitat management
Arctic fisheries management
Science priority setting
Small Craft Harbours

Department of Indian Affairs and Northern Development—1991, Chapter 14

Background

Conclusion

Observations

Accountability framework
Backlog of on-reserve housing
Membership data
Specific claims
Indian Oil and Gas, Canada

Department of National Revenue—Customs and Excise—Customs Operations—1991, Chapter 15

Background

Scope

Conclusion

Observations

Travellers at land border crossings
Planning for physical facilities
Release of commercial goods
Illegal drugs
Hazardous materials

Department of National Revenue-Taxation— Taxpayer Services—1991, Chapter 16

Background

Conclusion

Observations

Understanding and responding to expectations
Telephone enquiries
Counter enquiries
Forms and publications
Determining the benefit and costs of services and activities
Accountability

Department of Public Works—Office Accommodation Planning and Leasing—1991, Chapter 17

Background

Scope

Conclusion

Observations

Operational review and government reorganization
Service and control roles of Department of Public Works
User pay for accommodation
Long-term planning and investment strategies
The planning and acquisition of leased office space

Department of the Secretary of State—Official Languages and Translation—Translation Bureau—1991, Chapter 20

Background

Scope

Conclusion

Observations

Costs
Human resource management and translators' performance
Client satisfaction and quality of texts translated
Management information

Main Points

2.1 Departments continue to make progress in correcting deficiencies, but progress is slow in some areas. Some issues have been outstanding for many years.

2.2 Innovation within the Parliamentary Control Framework - Action has been taken to address our concerns about quota monitoring and clarification has been sought on the test fishing matter. The clarification did not fully address our concern. Treasury Board should review the guidance it has provided on non-monetary transactions, to ensure that test fishing is brought into the parliamentary control framework. In addition, authority to carry out test fishing that includes giving access to fish in payment as well as for scientific purposes is still not resolved.

2.3 Debt Management and Employee Pensions - The Department of Finance and the Treasury Board Secretariat have improved information for Parliament on pension accounts, and Finance has completed a study of the implications of the present pension arrangements for its debt management. However, progress has been slow in the main areas of our concern - the long-term implications of alternative financing arrangements for the federal employee pension plans, and fiduciary responsibility.

2.4 Financial Management and Control of Non-tax Revenue - Non-tax revenue management continues to improve and is achieving tangible results. However, we still have some concerns about the financial management and control of this revenue.

2.5 Department of Indian Affairs and Northern Development - The Department has made some progress in addressing our observations and recommendations on specific claims and on Indian Oil and Gas Canada. A timely resolution is necessary for the long-standing issues of strengthening the accountability framework for funds paid to native organizations and resolving the on-reserve housing shortage.

Introduction

2.6 Departments are taking action to correct deficiencies noted in our previous Reports. Progress is slow in some areas. As discussed in Chapter 1, some issues reported in prior years continue to be found in current audits of the same programs and others. It is recognized that some issues are complex, but timely resolution of these deficiencies is desirable so that public funds are used efficiently and effectively.

2.7 Observations and recommendations made in our annual Report are normally followed up and their status reported two years after publication of the original chapter. This year, two follow-ups are reported in separate chapters and three have been deferred. Another was reported last year.

2.8 Issues similar to those in the 1989 chapter, "Federal Regulatory Review Process", are touched on in Chapters 25, 26 and 27, on Regulatory Review.

2.9 The 1991 chapter, "The Accountability Framework for Crown Corporations: Making It Work", is followed up in Chapter 4, "Crown Corporations: Accountability for Performance."

2.10 Follow-up of the 1991 chapter, "Department of Agriculture - Farm Safety Net Programs", has been deferred until 1994.

2.11 The issues raised in the two 1991 chapters on the Department of Supply and Services, "Management of the Government Procurement Service" and "Government Procurement and Industrial Development", will be followed up in 1994. This follow-up will be linked with the follow-up of the 1992 chapter on Department of National Defence, "Major Capital Projects - Industrial Development Initiatives", and with a planned government-wide audit of systems development, which will be a major vehicle for updating procurement approaches.

2.12 The 1991 chapter on the Department of Environment, "Conservation and Protection", was followed up with the 1990 chapter on the Department and the results were reported in the 1992 follow-up chapter.

Royal Canadian Mounted Police -
Federal Law Enforcement - 1990, Chapter 26

Background

2.13 In 1990 we reported on the RCMP's federal law enforcement activity, which involves detection and investigation of offences against federal statutes. Our main finding was that the RCMP's responsibilities for enforcing federal statutes were unclear and had remained so despite a number of studies over the years. This led to overlapping jurisdictions and operational problems between the RCMP and other federal departments. We also observed that working relationships between the RCMP and other departments needed significant improvement.

Conclusion

2.14 The Force has taken action on all the issues that we raised in 1990. In some cases the issue has been resolved; in others, action is ongoing.

2.15 We found that the RCMP has addressed the major issue of jurisdictional overlap and that the disputes between the RCMP and Canada Customs have been significantly reduced. The Force has made efforts to improve its management information systems for federal law enforcement.

2.16 At the same time, progress has been slow in implementing the legislation on proceeds of crime.

Observations

Improved relations and clearer roles in enforcement
2.17 In 1990 our recommendations were aimed at improving relations between the RCMP and Canada Customs on two fronts: customs enforcement and drug enforcement.

2.18 The RCMP and Canada Customs signed a memorandum of understanding in June 1991 to clarify the RCMP's role in enforcing the Customs Act . Relations between the RCMP and Canada Customs in customs enforcement have improved significantly since then.

2.19 In drug enforcement, the two agencies signed a statement of principles in February 1991 to define their respective roles and responsibilities at ports of entry, inland and internationally, for intelligence gathering and sharing and for public recognition. The situation has significantly improved. There are still some isolated incidents of lack of co-operation, and they are being addressed individually at the local level with the statement of principles as a benchmark.

2.20 In addition, in 1992 the Government of Canada established the Federal Law Enforcement Co-ordination Centre to promote overall co-ordination of all federal law enforcement activities. The overall question of jurisdictional overlap is a concern to the federal government and may be addressed further by the government reorganization announced in June 1993.

Continuing difficulties in implementing the legislation on proceeds of crime
2.21 In 1990 we observed that the various federal departments and agencies concerned with implementing the legislation on proceeds of crime (National Health and Welfare, Justice, the RCMP and the Treasury Board Secretariat) had been slow to resolve a number of issues.

2.22 There has been some progress since then, but we note that it was only in 1992 that pilot units (Integrated Anti-drug Profiteering units) to enforce the legislation were set up in three major centres (Vancouver, Toronto and Montreal) with funding from Phase II of Canada's Drug Strategy. These units are staffed with RCMP officers, federal Crown counsels, provincial and municipal police officers, forensic accountants and administrative support personnel. In addition, Bill C-123 ( Seized Property Management Act ), an Act concerned with the management of property seized or restrained, received royal assent in June 1993 and came into force in September 1993. This Act is an important element for complementing the legislation on proceeds of crime that came into effect in 1989.

2.23 The ultimate objective of the legislation was to help dismantle criminal organizations by removing both their financial power base and their motivation to remain in business. To date, the use of the legislation has been limited by delays in setting up the supporting infrastructure and in enacting the complementary legislation noted in the previous paragraph.

Management information systems
2.24 In 1990 we recommended that the RCMP improve its management information systems to manage its federal law enforcement activities effectively. Currently, the issues relating to management information systems have yet to be fully resolved but we note that efforts to correct them are ongoing. The Force has initiated corrective action that so far includes:

  • the creation of the central Corporate Management Information Branch;
  • the implementation of a new management information system in the RCMP's Commercial Crime Directorate;
  • a new management information system, currently in its final stages of development, for the Drug Enforcement Directorate; and
  • the commencement of an in-depth audit of its information systems.

Royal Canadian Mounted Police -
Support Services to Canadian Law Enforcement Agencies -
1990, Chapter 27

Background

2.25 In 1990 we reported on the four main specialized services that the Royal Canadian Mounted Police (RCMP) provides to the Canadian law enforcement community: forensic laboratories, police training, law enforcement information and fingerprint identification. The RCMP identifies these support services as its Law Enforcement Services.

2.26 Our 1990 chapter contained several recommendations and observations, which were concerned primarily with the following: lack of proper analysis of all options for replacing older full-service laboratories; the potential for misuse of the information available from the Canadian Police Information Centre; the need to examine the appropriateness of the Canadian Police College's current curriculum relative to its intended mandate; the RCMP's lack of co-operation and consultation with the law enforcement community about the means of providing fingerprint identification services; and lack of integration of the individual Law Enforcement Services into a single, more visible entity.

Conclusion

2.27 The RCMP has responded positively to our 1990 recommendations and has initiated corrective action on all of them. Corrective action has yet to be completed in three areas, as explained more fully under "Observations".

Observations

Forensic laboratory services
2.28 The RCMP has reduced the number of its laboratories from eight to six. It carried out studies and assessed other options before deciding to build a new forensic laboratory in Regina to replace its existing laboratory. However, we note that the full costing of options will need to be improved for future studies.

2.29 Further, these future studies will need to take into account the potential impact of significant technological changes that the future will certainly bring, such as the recent introduction of DNA technology.

Canadian Police Information Centre
2.30 Management is fully aware of the sensitivity of the information available from this system. It will consider introducing the use of personal identifiers in a future modernized version, which should enhance the capability to trace inappropriate use of the data. It recently issued a set of rules and a code of ethics stressing that access to the system and dissemination of the related information are for legitimate purposes only. Management will undertake to ensure, through regular audit activities, that all participating agencies in the system conform to the rules and the code of ethics.

2.31 We note that this is an aging system and management has determined that it will need to be modernized to meet user demand in the future. In our opinion, management needs to determine as soon as possible the remaining economic and technological life of this information system, and the role it will play in delivering police services.

Canadian Police College
2.32 The College has re-examined its philosophy and purpose and has developed a mission statement and related core values and guiding principles. These will serve as the basis for its new strategic and action plans and for the ongoing assessment of each course.

2.33 The College is currently reassessing the basic structure, composition and role of its Advisory Committee to include a non-police perspective. It has indicated that it will complete its strategic and action plans and set up its new Advisory Committee in the current year.

Identification services
2.34 The fingerprint identification services have completed the implementation of a state-of-the-art Automated Fingerprint Identification System. The external users of the system whom we contacted expressed a high degree of satisfaction with the quality of service now provided.

Law Enforcement Services - overall
2.35 The RCMP has approved a common mission statement for its Law Enforcement Services and has set up internal committees aimed at ensuring that those operations continue in full partnership with the Canadian police community. As a result of its review of Law Enforcement Services activities, and in conjunction with central agency requirements, the RCMP will be phasing in user fees for some of those services.

2.36 Among other specific corrective actions, we note that the RCMP has improved the consultation process with users of its Law Enforcement Services, especially those outside the RCMP.

Innovation within the Parliamentary Control Framework - 1991, Chapter 5

Background

2.37 The chapter examined the challenge faced by public service managers to reconcile with the parliamentary control framework their program initiatives to improve services while responding to financial constraints. We examined a number of such initiatives by managers in the Department of Fisheries and Oceans. We reported our concern that two of these practices - quota monitoring and test fishing - did not satisfy the requirements for parliamentary control.

2.38 In our opinion, the Department was not at arm's length from the financing arrangements for quota monitoring by the private sector. The process for collecting fees from fishermen for this service was not completely outside of government, and the revenues were not subject to parliamentary controls for collection, spending and accounting.

2.39 In the case of test fishing, we observed an exchange of special fishing rights to some fishermen in return for their services, which, in our opinion, is a non-monetary barter transaction. It was not clear that the Department had the authority under its enabling legislation to take this initiative. The Department reports test fishing in Part III of the Estimates.

Conclusions

2.40 In our follow-up we found that Fisheries and Oceans managers have taken action to address our concerns about quota monitoring. They also sought clarification on how they should proceed in the matter of test fishing. However, the clarifications obtained from the Department of Justice and Treasury Board Secretariat do not fully address our concern that the intent of Parliament clearly be followed. Parliament may wish to consider reviewing the broad interpretation of the Fisheries Act and Regulations that allows the Minister of Fisheries and Oceans to finance fisheries management programs through access to fish. The wording of the Treasury Board policy on non-monetary transactions does not bring significant non-monetary transactions that were identified in Chapter 5 into the parliamentary control framework. Treasury Board should review the guidance it has provided on non-monetary transactions to ensure that test fishing is brought into the parliamentary control framework.

Observations

Guidance from the central agencies
2.41 Prompted by our 1991 chapter, the Office of the Comptroller General held a video conference for government managers on the challenge they face to remain in control of their operations as public service renewal proceeds. Issues raised in the chapter were discussed and the videocassette is available through departmental libraries.

2.42 On 24 June 1993, Treasury Board issued a policy to bring non-monetary transactions within the parliamentary control framework. The policy was made retroactive to 1 April 1993.

Quota monitoring
2.43 Fisheries and Oceans managers have taken corrective action on quota monitoring. The financing of the arrangements for monitoring individual quotas are now at "arm's length" - exclusively provided by the private sector as planned. The nature of these arrangements has been reported to Parliament in Part III of the Estimates.

Test fishing
2.44 Fisheries and Oceans managers have sought a clarification from the Department of Justice of the authority for the test fishing arrangements. Despite the opinion obtained from the Department of Justice, we are not satisfied that the clarification resolves the matter from the broader perspective of parliamentary control over spending and revenue collection.

2.45 The interpretation from the Department of Justice is a technical legal argument based on a broad interpretation of section 7 of the Fisheries Act , which gives the Minister "absolute discretion" to issue fishing licences, subject to regulations. However, this opinion does not sufficiently take into account section 4 of the Act, which explicitly provides for the taking of fish for scientific fishing purposes.

2.46 Consequently, the authority to carry out test fishing that includes giving access to fish in payment as well as for scientific purposes is still not resolved.

Parliament may wish to consider reviewing the interpretation
2.47 The consequence of this interpretation means that the Minister of Fisheries and Oceans can use fish, or access to fish, as a means of financing fisheries management and control. Parliament may want to consider reviewing this interpretation of the enabling legislation.

A review of Treasury Board guidance on non-monetary transactions is needed
2.48 In our opinion, allowing some fishermen special access to fish in return for their services is a non-monetary barter transaction. We have seen no evidence to indicate any change in the nature of the transaction described in 1991 Chapter 5 (exhibits 5.3 and 5.4).

2.49 Fisheries and Oceans managers were advised by Treasury Board officials that test fishing is considered a cost-shared project rather than a non-monetary transaction under the policy, and thus the requirements for non-monetary transactions do not apply. There is a sharing of interests between fishermen and the Department; however, this does not change the nature of the barter arrangement. We do not agree that test fishing can be considered a cost-shared project.

2.50 Treasury Board should review its application of this term, since its effect is that a significant exchange - valued at $4.7 million in 1990 - remains outside the framework of parliamentary control over practices and procedures of the Government of Canada.

Capital Projects - Department of Public Works, Quality in the Constructed Project - 1991, Chapter 6

Background

2.51 The 1991 audit was a pilot audit to test new protocols or audit methodology. Only two buildings were examined, selected by the Department of Public Works from its National Capital Region Portfolio. One was the Crown-owned Phase IV of Place du Portage in Hull; the other was the Lionel Chevrier Building in Cornwall, a lease-purchase.

2.52 Following the audit of the major building elements, services and functions, we reported some 41 consolidated observations of a technical nature. The Department took immediate action on these findings where appropriate, planned other remedial action, and agreed to investigate the remaining findings for possible action or for incorporation into new construction projects.

2.53 Our follow-up focussed on the action taken by the Department in response to all of our pilot audit recommendations and observations. We reviewed the National Capital Region's action report and the documentation in support of action taken, as well as the corporate policies issued since 1991 that addressed our recommendations. Interviews were conducted with Public Works professional staff, Fire Protection Services of the Department of Labour, the Health and Safety committees of both buildings, and the owner and managers of the Chevrier Building.

Observations

2.54 We found that the Department acted promptly and responsibly to investigate all of our observations. It has completed most of the remedial work over the past two years at a cost of approximately $500,000 for the Place du Portage building, and with an additional capital expenditure of $900,000 for a direct digital control system to improve the efficiency of the dual-duct heating, ventilating and air-conditioning system, and floor area lighting. The Department has approved further funding for accessibility projects in the building, at a cost of $975,000, to meet the requirements of the Treasury Board Policy on Accessibility. Cost of remedial work undertaken on the Chevrier Building by the owner was in excess of $5000 and a further expenditure of $99,000 is planned to improve accessibility, to be funded by the Department.

2.55 The Department of Labour's Regional Fire Protection Services has monitored the remedial action taken and planned by Public Works with respect to fire safety issues, and is generally satisfied with the results. The major tenant Health and Safety committees of the buildings have expressed satisfaction with the responses by the Department and the management of the Chevrier Building.

2.56 Our recommendation that the Department examine the dual-duct system in Place du Portage, Phase IV, with the objective of modifying the system's operation to achieve greater economy, received considerable attention. The controls for the dual-duct system are being changed from pneumatic to direct digital control. The direct digital control system is expected to improve the operating efficiency of the heating, ventilating and air-conditioning system. More area lighting zones have been added, controlled by the direct digital control system with a view to achieving economy. Nevertheless, because of the design of the dual-duct system, operation outside normal working hours (7 p.m. to 7 a.m. and weekends) is still costly, budgeted at approximately $337,000 per year. For example, the entire system, serving at least five floors, must be activated to provide services to an average of 150 employees who work during the silent hours (normal Phase IV occupancy is about 4300).

2.57 Our chapter contained five other recommendations of a general nature that were accepted by the Department of Public Works, namely, on the need for life-cycle cost analysis, commissioning services, dispute resolution between design professionals, engagement of acoustics specialists and long-term repair and replacement plans. We are pleased to report that the National Capital Region of the Department has implemented all of these recommendations in works undertaken since 1991.

2.58 We commented on the fact that the Department of Labour had no enclosure testing requirements for existing halon-protected facilities. We have been advised by Labour that some 50 sites in the National Capital Region are presently being investigated by a consultant to determine the need for halon fire protection. Halon, which is a gas used as a fire suppressant, is not considered environmentally friendly. The polychlorinated biphenyls (PCBs) have been removed from the transformers in the vault of Phase IV.

2.59 Due to the diminished inspection service by the Fire Commissioner of Canada, Public Works has established a position of Chief, Fire Prevention and Construction Safety.

2.60 A major benefit from this audit has been that the technical audit methodology developed and field-tested in the pilot project has been modified and expanded by the Institute for Research in Construction, in collaboration with our Office and the Department of Public Works, for use by building owners and managers in the public and private sectors.

2.61 The audit protocols covering fire safety with few exceptions already form part of the Department of Labour's Fire Inspection Guide.

2.62 The Accommodation Branch of the Department of Public Works is the custodian of government general-purpose office buildings, a portfolio of 379 Crown-owned buildings, with a value of $2.6 billion, nine lease-purchase buildings, and 3068 leases, 4.8 million square meters in total, accommodating some 174,000 employees.

2.63 The cost of remedial work as a result of the audit, particularly on Phase IV, demonstrates that the Department of Public Works - indeed, the federal government - has a significant implicit commitment of future expenditures to repair and modernize its aging stock of buildings, to meet current demands for an adequate working environment and for access by staff and members of the public who are disabled.

2.64 Under Treasury Board Policy on Real Property Management, approximately 50 percent of federally held property is under the custodianship of departments other than Public Works. We urge all custodians of federal government realty to follow our general recommendations accepted by the Department in 1991.

Vehicle Fleet Management - 1991, Chapter 7

Background

2.65 Our 1991 chapter on vehicle fleet management reported significant management deficiencies, such as inadequate attention to transportation planning; the acquisition of vehicles without due regard to life-cycle costs and environmental concerns; the need to standardize fleets; underutilization of vehicles; a lack of established procedures to calculate taxable benefits to employees taking vehicles home; and delays in disposing of surplus vehicles. Moreover, most departments found that the existing vehicle information systems were not useful.

Conclusion

2.66 The government has initiated administrative changes to improve vehicle fleet management in departments and agencies. However, because implementation is at an early stage, it is premature to assess departmental initiatives undertaken to address our concerns.

Observations

2.67 The issues raised by our chapter are being addressed by an Interdepartmental Fleet Management Committee established by the Administrative Policy Branch of Treasury Board in January 1991.

2.68 The Administrative Policy Branch has also conducted workshops on Life Cycle Materiel Management and Fleet Management. In addition, an interdepartmental seminar on life cycle materiel management was held in Ottawa. The Branch also has produced videos on Life Cycle Materiel Management that deal with environmental issues. These videos are used in seminars and training courses offered by central agencies and departments.

2.69 To foster better vehicle management, the Branch has encouraged the use of private sector vehicle management services. Some of the initial advantages departments have reported include:

  • improved information for decision making;
  • easier identification and use of manufacturers' warranty programs;
  • better control of vehicle use, maintenance and repair costs; and
  • consolidated billing, resulting in reduced administrative overhead.
2.70 At the time of writing, seven departments had arranged for their vehicles to be managed nationwide by the private sector. According to the Treasury Board, this amounts to about 30 percent of the vehicles owned by government departments.

2.71 Although departments generally have assessed pilot projects as successful, it is too early to judge whether nationwide arrangements will be effective. Generally, it takes a year of experience for a department to resolve start-up problems and to be able to assess reliably the private sector service. The recently announced reorganization of departments and agencies may also slow down implementation.

2.72 The Surplus Crown Assets Act was amended in January 1993 to allow departments to dispose of surplus assets, either through the Department of Supply and Services or directly, subject to terms and conditions established by Treasury Board. The Administrative Policy Branch thinks that this amendment provides an incentive for the timely disposal of surplus assets, including vehicles. Six departments have conducted pilot projects involving the direct sales of assets.

Debt Management and Employee Pensions - 1991, Chapter 8

Background

2.73 Chapter 8 of our 1991 Report recommended that the government review the long-term implications of borrowing from federal employee pension accounts, consider establishing clear fiduciary responsibility for the pension plans, and provide better disclosure of employee pensions in the Public Accounts and the Estimates.

2.74 At hearings of the Standing Committee on Public Accounts in February and September 1992, the Deputy Minister of Finance, the Secretary of the Treasury Board and the Comptroller General made commitments to complete a joint study, by the end of summer 1993, on the long-term implications of current and alternative financing arrangements for the public service pension plans. As well, the Department of Finance undertook to perform an internal review of the implications of existing pension plan arrangements for the deficit and debt management. The Comptroller General also agreed to take under consideration the Auditor General's recommendation regarding disclosure of pension information in the Public Accounts.

Scope

2.75 Our follow-up focussed on actions taken by the central agencies involved to address our recommendations. We reviewed the formal responses to the Standing Committee on Public Accounts, and status reports provided by the Department of Finance, the Treasury Board Secretariat and the Office of the Comptroller General explaining what they have done. We also reviewed the Department of Finance's March 1993 internal study report on the implications of the existing pension arrangements for debt management. We interviewed staff of the Department of Finance and the Treasury Board Secretariat and reviewed documentation to substantiate the reported progress.

Conclusion

2.76 The Department of Finance and the Treasury Board Secretariat have improved information for Parliament on pension accounts, and Finance has completed a study of the implications of the present pension arrangements for its debt management. However, progress has been slow in the main areas of our concern - the long-term implications of alternative financing arrangements for the federal employee pension plans, and fiduciary responsibility. Further follow-up needs to be done in 1994.

Observations

Long-term implications of alternative financing arrangements
2.77 We recommended that the government undertake a study of the costs/benefits and long-term implications of alternative financing arrangements for its employee pension plans, including an evaluation of the implications of the current notional investment policy for the deficit, financial requirements and the public debt.

2.78 Department of Finance study. Finance's internal study addressed only the question of whether the existing pension arrangements limit the government's capacity to achieve its current debt strategy and its objective of increasing the fixed or long-term portion of the overall stock of debt. The study concluded that they do not. In fact, they help to achieve the chosen target. Given the assumptions used in the study, we tend to agree with this conclusion.

2.79 However, the study did not report on alternative assumptions of the government's financial requirements and pension debt, as it did for alternative assumptions of interest rate and fixed-floating debt mix. Although the assumptions of future financial requirements and pension debt growth used in the study were predicated on the government's fiscal and economic projections, one would still expect the study to have considered other plausible alternative assumptions. A sensitivity analysis taking into consideration other financial requirements and pension debt scenarios might also have been helpful, in determining whether pension-related debt will hinder debt management operations if financial requirements do not decline as projected, and/or if pension debt does not increase as anticipated. Continued monitoring and assessment would be prudent.

2.80 The Department indicated that it will continue to assess the impact of the pension account financing as part of its annual debt strategy exercise.

2.81 Joint Treasury Board Secretariat-Department of Finance study. Work has begun on the broader-based joint study on the implications of alternative financing arrangements for public service pensions (including market-based investment approaches). However, progress has been slower than planned.

2.82 An interagency working group was set up to analyze and assess the impact of current and alternative government pension financing arrangements on government expenditures, debt management, capital markets and the economy. The central agencies' plan called for this study to be completed by the end of September 1993. At the time of the follow-up, the study was not completed. We were informed that it will now be completed in early 1994.

2.83 We were also informed that the results of the joint study will be used by the President of the Treasury Board's Advisory Committee on the Public Service Superannuation Act, which has been asked to conduct a fundamental review of the public service pension plans, including such issues as their management, design and financial arrangements. The results of the Advisory Committee review are not expected before early 1994.

Treasury Board Secretariat's response: Unfortunately other priorities have prevented the Treasury Board Secretariat/Finance study from being completed as soon as expected. However, work is well under way and the study should be completed by early 1994.

Fiduciary responsibility
2.84 We recommended in 1991 that the government consider establishing clear fiduciary responsibility for federal employee pension plans.

2.85 No action has been taken in this area. Although it was not covered in the terms of reference of the joint Treasury Board Secretariat - Finance study, officials of the Treasury Board Secretariat informed us that the study will look at the concept of fiduciary responsibility. They also reported that the issue should be dealt with as an outcome of the Advisory Committee's deliberations.

Information for Parliament
2.86 We recommended that the government clearly present pension obligations as public debt in the Public Accounts. We also recommended that adequate information be provided in the Estimates to enable Parliament to review program details, including the present value of long-term obligations arising from government employee pension plans.

2.87 Improvements have been made in this area. In the latest Public Accounts and Estimates, Parliament was provided with additional information on public debt interest charges and the level of liabilities with respect to the Superannuation Accounts. There is an opportunity for further improvement in terms of providing pension information in a more understandable form.

2.88 In that respect, the central agencies indicated that the government is planning to produce an annual report to present its financial position and operating results in summary form. It will consider identifying specifically the key components of public debt, such as employee pensions, and will review the merits of grouping pension liabilities with unmatured debt.

Financial Management and Control of Non-tax Revenue - 1991, Chapter 9

Background

2.89 Our 1991 audit concluded that steps were being taken to improve financial management and control of non-tax revenue. There was a need for effective incentives, better information, and improved control. We reported the following particular matters in need of attention:

  • monitoring by central agencies;
  • strategic planning and identification of potential revenue sources;
  • collecting, controlling and accounting; and
  • public disclosure of non-tax revenue activity and performance.

Conclusion

2.90 Non-tax revenue management continues to improve and is achieving tangible results. However, we still have some concerns about financial management and control.

2.91 The Treasury Board Secretariat, including the Office of the Comptroller General, has been influencing non-tax revenue management. User fees are reported to have increased by $450 million over two years.

2.92 We note progress by the eight departments included in this follow-up. Although gains have been made, the implementation of user fees still faces the ongoing challenge of determining appropriate cost recovery.

2.93 Information for Parliament needs further work to provide meaningful public disclosure.

Observations

Monitoring by central agencies
2.94 Central agencies are monitoring non-tax revenues but could do it more completely. Central agency attention to non-tax revenues is part of the annual multi-year operational planning budget exercise for departments and agencies. We are informed that an annual status report is provided to Treasury Board ministers as part of this process. However, there is yet to be an evaluation of the implementation of the User Fee Policy as Treasury Board originally required by March 1993. We think this commitment should be followed through.

Strategic planning and identification of revenue sources
2.95 Departments have progressed in non-tax revenue management but sustained effort is required. All departments we followed up have taken action on matters reported to them. Although there is progress, departments can still have difficulty sustaining attention to non-tax revenue. The implementation of user fees is not without problems, including differentiating between mandatory and non-mandatory services, determining and allocating costs, and securing acceptance for fees.

2.96 For example, after more than four years and extensive consultation with interested parties, the Department of National Health and Welfare has been unable to meet its 1988 commitment to the Treasury Board for cost recovery in the pre-market evaluation of drugs. The Department informed us that its proposals were opposed by the pharmaceutical industry. In January 1992, the Minister commissioned an external review of the drug approval system. The Department is now engaged in an extensive policy review to design an efficient drug-approval process that includes consideration of various options for cost recovery. Meanwhile, $182 million has been spent over four years on drug approval activities. In the area of dosimetry services, cost recovery is on hold pending a final decision on privatization. In the operations of the Department's hospitals, the percentage of costs recovered for insured medical services increased from 57 percent to 66 percent over two years.

2.97 The Department of External Affairs took special action and collected more than $850,000 in overdue rents from over three hundred employees located around the world. The task now being undertaken by the Department is the implementation of a more permanent solution in the system of foreign service management, in order to keep overdue accounts to a minimum and avoid the necessity of special investigations.

Public disclosure
2.98 Information for Parliament needs further work. Although there has been some improvement, the Public Accounts and the Estimates still do not provide information on budgeted revenue that can be compared readily to actual. We also note that there is no analytical information to explain apparent shortfalls in "return on investments".

2.99 Another complex item still not well explained involves the "net revenues" of the Bank of Canada. When money is remitted by the Bank to the Department of Finance, it is not deducted from public debt charges, even though the money originates from debt securities of Canada. This can affect, by some $2 billion, the calculation of the government's "operating balance" (annual deficit excluding public debt charges) now used in reporting the budget performance of the government.

2.100 Accounting for the Bank of Canada requires further study because of the unique status and operations of the Bank. The issue of disclosure should be considered as part of the government's study of Crown corporation reporting in the Public Accounts or in a succinct annual financial report. In the meantime, the Department of Finance may wish to consider the treatment of Bank revenues in defining and reporting an operating balance for the Government of Canada.

2.101 We also have some concern that certain money made available to departments will not receive parliamentary scrutiny when annual Estimates are presented. Due to amendments to the Surplus Crown Assets Act , departments now have a non-lapsing generic statutory authority to spend additional money generated by the sale of surplus assets. This supplements funding levels previously voted to departments by Parliament. At present, Parliament does not receive information on the amounts involved when reviewing current Estimates.

Treasury Board Secretariat's response: We acknowledge that Bank of Canada profits could be classified in the financial statements either as a reduction in public debt charges or as profits of Crown corporations. We are reviewing the current presentation for this and similar items (such as interest earned in the exchange funds) with a view to improving their presentation in the Public Accounts. We also note that the amounts of the Bank of Canada profits are disclosed in the Public Accounts so that readers may make adjustments to suit their purposes.

Department of External Affairs - Membership Payments to International Organizations - 1991, Chapter 12

Background

2.102 In 1991 we reported on the management practices of the Department of External Affairs pertaining to its accountability for membership payments to international organizations. Recognizing the Department's central role in implementing Canada's foreign policy, we also commented on its arrangements for co-ordinating the involvement of other government departments and agencies in multilateral activities.

Conclusion

2.103 The Department has made progress in implementing certain of our recommendations. It has made an effort to clarify foreign policy objectives and assess the continuing relevance of membership in international organizations, and to strengthen co-ordination with other departments and agencies involved in multilateral activities. However, the Department points out that, in re-examining memberships, it is guided by decisions at the most senior political level. While reform is a continuing goal, the Department asserts that these memberships bring significant benefits to Canada, such as the development of international health regulations, irrespective of the relative efficiency of the organizations.

2.104 Awareness has been increasing among the Department's staff about the need to be more focussed in efforts to bring about reform of the United Nations system. However, there are two major constraints to achieving substantive results. First, the process of implementing change in the multilateral system is inherently slow. Second, increasing resource constraints and fundamental changes in the role of the UN make it difficult to devote the necessary attention to the UN reform process.

Observations

Relevance and benefits of membership
2.105 In 1991 we recommended that the Department more clearly define its foreign policy objectives with respect to multilateral activities. We recommended that it collect information to assess the benefits accruing from membership in international organizations and the degree to which its multilateral objectives are met, and use the information to decide on the nature and extent of its participation in multilateral co-operation.

2.106 The Department views membership as a given that follows long-established government policy: participation promotes and protects fundamental Canadian interests. The Department has produced a Foreign Policy Framework in which high-level objectives are defined for multilateral activities. These objectives are pursued through participation in individual international organizations whose stated objectives the Department considers to be compatible with, and to contribute to, those of Canada. At the request of External Affairs, other departments and agencies have provided it with documents that set forth their technical objectives and priorities, benefits of membership, and efforts to reform the administrative systems and financial management of the international organizations they are involved with in their spheres of activity and competence.

2.107 Also, the Department has withdrawn from membership in four multilateral trade institutions and did not join a fifth because the benefits of membership were insufficient. During the past year the Department has twice reconsidered the benefits of membership in certain other international organizations. The first review led to a decision to withdraw from the United Nations Industrial Development Organization. However, the second review, of membership in the International Labour Organization, the United Nations Educational, Scientific and Cultural Organization and the Food and Agriculture Organization, was viewed as inconsistent with basic government policy and was therefore discontinued.

Efforts to reform the UN system
2.108 We recommended that, in its efforts to improve the administration of international organizations, the Department set priorities, focus on organizations and programs that are most significant to Canada and pursue co-operation with developing countries.

2.109 The Department has become increasingly aware of the need to be more focussed in its efforts toward administrative reform of the organizations. However, it points out two constraints. First, reform is difficult and extremely slow, given the consensus that must be built among member nations and within organizations. Second, the extent to which Canada can affect the nature and pace of change depends on availability of resources. The Department indicated that government downsizing has forced it to deploy its diminishing resources to only the highest priorities. Reform at the UN, therefore, is becoming a lower priority.

2.110 The Department indicated that it nevertheless has had success in bringing about improvements in certain organizations. Canadians chair expert groups that have launched reform processes at the International Labour Organization (ILO) and the United Nations Educational, Scientific and Cultural Organization (UNESCO). Canada also took the lead at the 1993 World Health Assembly in achieving substantial budget reform, with support from a wide range of countries. The Department has made proposals for major changes to the administrative structure of la Francophonie and is playing a key role in the strategic planning of the Commonwealth Secretariat.

2.111 While recognizing the benefits of increased co-operation with developing countries, the Department has decided, in the face of scarce resources, that a collective effort by like-minded countries to monitor UN organizations is appropriate. It has increased its efforts to make the Geneva Group the focal point for evaluating their performance.

2.112 We note that administrative and management practices of some organizations, for example the UN Organization, the World Health Organization, the ILO, the Food and Agriculture Organization and UNESCO, will require further attention.

Accountability for Canada's performance
2.113 We recommended in 1991 that the Department communicate to other departments and agencies its definition of, and its accountability for, "high-quality Canadian participation in international organizations." The Department has provided a definition with three aspects: 1) projection of Canadian interests and objectives in multilateral forums; 2) co-ordination of Canadian foreign policy; and 3) placement of Canadians in positions of influence in international organizations.

2.114 The Department has also begun the process of concluding memoranda of understanding with other departments and agencies to clarify their respective roles and responsibilities.

Information to Parliament
2.115 In 1991 we recommended that the Department provide better information to Parliament to justify its use of resources in terms of the extent to which Canada is meeting its foreign policy objectives through multilateral channels. During the last two years, the Secretary of State for External Affairs and senior officials appeared before a parliamentary committee more frequently than in previous years to testify on multilateral issues. Because of resource limitations, the Department is asking for guidance from Parliament on its needs for additional information before undertaking to provide significant amounts of new written material.

Department of Fisheries and Oceans - Central and Arctic Operations - 1991, Chapter 13

Background

2.116 In our 1991 chapter, we reported that the Central and Arctic Region of the Department of Fisheries and Oceans was facing a number of significant demands and challenges in delivering its programs. Specifically, we made observations and recommendations in the areas of delegation to provinces, fish habitat management, Arctic fisheries management, science priority setting and small craft harbours. In our follow-up, we asked the Department to update its responses to the more significant observations and recommendations and to report its progress. Then we conducted interviews and reviewed documents to assess the extent of the progress.

Conclusions

2.117 In 1991, we recognized that many of the issues we raised and the demands the Region was facing were of a national or government-wide nature, were complex and difficult to address, and would require considerable time to resolve. Our follow-up confirmed this to be the case in several areas. No significant progress has been made in clarifying fisheries and habitat management roles and responsibilities with the provinces through formal agreements. Only limited progress is reported in efforts to improve information and databases on Arctic fish stocks. Some progress has been made in determining the impact of increasing reliance on outside sources to fund science programs and on options to stabilize such funding. In addition, progress has been satisfactory in promulgating guidelines and reporting progress on fish habitat management initiatives, in further developing co-operative management in the Arctic, in defining and communicating science priorities and plans, and in improving the management of small craft harbours in certain areas.

Observations

Delegation to provinces
2.118 In 1991 we reported a need to clarify fisheries and habitat management responsibilities with the provinces, through formal agreements and sub-agreements. We reported that General Fisheries Agreements were in place in two of the four provinces in the Region, and that there were no formal sub-agreements on specific areas of responsibility such as habitat and aquaculture. Our follow-up revealed that the situation remains unchanged, although informal mechanisms continue to exist. Such things as the constitution referendum and changes in provincial governments have contributed to making the resolution of these issues difficult and lengthy.

Fish habitat management
2.119 Cabinet has approved a departmental submission to address sustainable development issues and to start negotiations with the provinces on sharing fish habitat responsibilities. Although no formal habitat sub-agreements are in place, the Department hopes that the planned negotiations with the provinces will result in workable sub-agreements.

2.120 The Department has made noticeable progress in addressing our observations and recommendations in three other areas. Specifically, documented "Habitat Conservation and Protection Guidelines" developed from the Policy for the Management of Fish Habitat were recently issued in draft to departmental users. The Central and Arctic Region now has a habitat referral tracking system in place and a national system is being developed. A report to Parliament on the "Administration and Enforcement of the Fish Habitat Protection and Pollution Provisions of the Fisheries Act" was submitted for 1991-92 and will continue to be prepared annually.

Arctic fisheries management
2.121 The 1991 chapter noted that improved data on fish stocks were needed to meet the obligations of native land claim settlements. The settlement of native land claims, and the establishment of wildlife management boards under those claims to co-manage, with the Department, fisheries in the claim areas (among other things), continue to be key priorities for the Department in the Northwest Territories. Since 1991, two additional claims have been settled and it is hoped that agreement on another will soon be reached. The wildlife management boards under these claims are being set up, and include representatives nominated by the Minister, as is the case on existing boards. The extent to which fisheries issues will be addressed will depend on the directions taken and the decisions made by the boards, and on the funding to be made available through them. It is the Department's position that these boards should receive sufficient funding and be responsible for developing the information needed to manage fish stocks. However, funding allocated to the Department and the boards to meet the fisheries obligations under the three claims recently settled has been considerably lower than the amounts requested. This could continue to make the gathering of important fisheries information difficult.

Science priority setting
2.122 Our 1991 chapter observed that, with the increasing reliance on external funding of science projects, there was a risk that research could move away from departmental priorities or that a lack of such funding could put projects or programs in jeopardy. The Experimental Lakes Area program was used as a case example. Since then, the Department has undertaken two initiatives to address these concerns. First, in preparing a "Ten-year DFO Science Perspective", the Science Sector has developed "core business statements" that identify what it does, and has identified over twenty projects to be undertaken to address the key results it wants to achieve. One such project examined the pros and cons of outside funding. As a second initiative, the Region contracted out an examination of the future of the Experimental Lakes Area program, hoping to identify options to stabilize funding and therefore assure the program's continued operation. The contractor's report provided recommendations and options, and the Region is now actively pursuing these in more detail to determine if they are viable. In the meantime, the Experimental Lakes Area program continues to operate with small "A-base" funding and uncertain external funding.

Small Craft Harbours
2.123 In 1991 we recommended that the delegation levels for approval of projects be increased at the regional levels to improve the timeliness of project initiations and start-ups. This was considered by the Department, but no changes in the delegation levels were made. However, the Small Craft Harbours Branch reports that it is more active in the monitoring and expediting of project plans and proposals, resulting in much earlier project approvals to minimize start-up delays.

2.124 The Department has undertaken initiatives that address our recommendations on the extent of preventive maintenance in the harbours and on the involvement of departmental personnel with the Department of Public Works in inspecting and commissioning major projects.

Department of Indian Affairs and Northern Development - 1991, Chapter 14

Background

2.125 In 1991 we reported on the lack of an accountability framework for the funds administered by Indian bands and tribal councils, the need for a new approach to solve the on-reserve housing backlog and the need to develop and maintain an appropriate Indian population information system for funding purposes.

2.126 We also reported on the settling of specific claims. We recommended that DIAND and the government reassess the fundamental concepts and practices for settling claims. These included the independence of the Specific Claims Branch in DIAND, the roles of other federal departments such as Justice, and the application of claims policies and procedures.

2.127 In addition, our 1991 audit covered Indian Oil and Gas Canada (IOGC). We recommended that it improve its documentation of the production assurance it obtains from several sources relating to oil and gas royalties. In addition, we recommended that it issue reports on all of its oil and gas audits and document the disposition of its audit findings.

Conclusion

2.128 The Department has made some progress in addressing our 1991 observations and recommendations on specific claims and on Indian Oil and Gas Canada. However, the recommendations had not been fully implemented at the time of our follow-up review. Consequently, our review was limited and we were unable to determine the full extent of improvements. We will continue to monitor DIAND's corrective action and a subsequent audit will be considered at an appropriate time.

2.129 The issues pertaining to the accountability framework and housing backlog are complex and have been outstanding for many years. Resolution of these issues requires consultation and action by all the affected parties. The Department has made proposals to those parties for their consideration and is awaiting their decision. A timely resolution of these long-standing issues is necessary.

Observations

Accountability framework
2.130 The Department has taken certain steps to strengthen the accountability framework. A new information system, the Transfer Payment Management System, is currently being implemented to help regional management track the receipt of the necessary information from First Nations. The Department is also in the process of conducting "strategic reviews" to determine the minimum data requirements that will satisfy its accountability to Treasury Board. We believe this process should be accelerated.

Backlog of on-reserve housing
2.131 DIAND has indicated that its proposed on-reserve housing policy will address our recommendation that it resolve the housing shortage. In its fourth report in December 1992, entitled "A Time for Action", the Standing Committee on Aboriginal Affairs recommended that the Government of Canada bring DIAND's review of the on-reserve housing program, begun in 1975, to an immediate conclusion and present recommendations to Cabinet for a new on-reserve housing policy. We agree with this recommendation and encourage remedial action without undue delay.

Membership data
2.132 During 1993, DIAND conducted a pilot project with four bands in the Atlantic Region to collect the necessary data. We have not yet reviewed the results. However, we are concerned that appropriate population statistics are not being collected in the regions west of the Atlantic Region, which contain most of the Indian population in Canada.

Specific claims
2.133 In July 1993, DIAND reported several initiatives to address our 1991 recommendations. They include:

  • the federal government's creation of an Indian Specific Claims Commission, from whom claimants may seek redress if they are not satisfied with DIAND's decisions on individual claims;
  • intensified co-ordination between DIAND and Justice to facilitate claims processing;
  • preparation of an updated claims processing manual and the streamlining of certain claims procedures to facilitate the submission and evaluation of claims; and
  • increased co-operation between the federal and provincial governments to share the costs of settling treaty land entitlement claims.
2.134 We believe that these efforts can have a positive impact on the claims process and its results. According to DIAND, they have contributed, together with an increase in resources allocated to the claims process, to a faster disposition of claims. This should address the government's concern and our 1991 observations on the time required in prior years to decide a claim.

2.135 As DIAND continues to act on our 1991 recommendations, we encourage it to ensure that its new procedures contain appropriate safeguards to maintain claims assessment at an acceptable level of quality.

2.136 With respect to funding for claims research, DIAND advised us in August 1993 that it had increased its reviews of recipients' research plans and progress reports. However, DIAND confirms that, under its contribution arrangements, compliance audits of the use of research funds still are not required. Therefore, our 1991 observation still applies: we are concerned that accountability for these funds is weak. DIAND is further considering ways to address this issue effectively.

Indian Oil and Gas, Canada
2.137 In July 1993, IOGC reported several initiatives to address our recommendations. They include:

  • increased co-ordination of oil and gas production assurance between IOGC and the Alberta Energy Resources Conservation Board;
  • preparation of an updated program manual for obtaining production assurance related to royalties;
  • enhanced computer applications for analyzing production data received from oil and gas licensees; and
  • development of risk assessment criteria for the royalty audit environment, together with improved procedures for audit planning, reporting and disposition of findings.
2.138 We believe that these efforts can have a positive impact on the production assurance that IOGC obtains.

Department of National Revenue - Customs and Excise - Customs Operations - 1991, Chapter 15

Background

2.139 Our 1991 audit reviewed Customs' initiatives to streamline its operations in processing travellers and commercial goods at ports of entry. We also examined two of the many regulatory programs that Customs enforces at ports of entry - those involving illegal drugs and hazardous materials. In addition, we reviewed facilities at land borders as they relate to facilitation of travellers and drug interdiction.

Scope

2.140 Our follow-up consisted of a review of a status report prepared by the Department explaining its actions on our recommendations; interviews with headquarters and regional Customs staff; and a review of documentation.

Conclusion

2.141 The Department has taken action in response to all our recommendations, but work remains in some areas to address our concerns fully. Overall, the Department has made reasonable progress in most areas.

Observations

Travellers at land border crossings
2.142 In 1991 we recommended that the Department determine level-of-service standards for processing travellers at land border crossings. We recommended that it also expedite processing time at major ports, including reviewing the feasibility and applicability of the designated-lanes pilot test, and analyzing travellers' profiles at these ports. In March 1993, the Department completed a study to identify responsiveness indicators for setting standards of service to clients. Customs has planned to conduct surveys of travellers at 24 ports in 1993-94.

2.143 In early 1993 the Department completed an evaluation of a designated-lane pilot to simplify the entry of low-risk, frequent travellers at a major border crossing in British Columbia. The study noted that the pilot had been a success. It also identified certain exceptions, such as increased non-compliance and a need to improve signs. The Department has decided to extend the project, allowing frequent travellers to self-assess duties and taxes using a basket tariff approach, and to implement similar designated lanes at other major entry points. As of July 1993, other options were being pursued at some Customs ports.

Planning for physical facilities
2.144 In 1991 we recommended that the Department integrate port facility planning and management with operational requirements planning, develop and maintain a database of land border facilities and ensure that facilities provide adequate support for current and future operational needs. In response, a facilities working committee has been established to co-ordinate the collection and dissemination of information on operational initiatives. The Department has launched a multiphased facilities evaluation project based on a detailed analysis of 35 out of a total 107 sites; final results are expected in December 1993.

2.145 In 1991, we observed that approximately 60 percent of all land border crossings owned by Customs had not been subject to a site assessment. As of June 1993, the percentage was reduced to about 30 percent. The Department indicates that it will have complete information on the condition of all its land border facilities by December 1993.

Release of commercial goods
2.146 We recommended that the Department review and determine the level-of-service standard of release time for commercial goods. The Department maintained that implementing a complex measurement system would not be justified; instead, it would conduct surveys from time to time to gauge client satisfaction with release time. We note that regional Customs offices maintain records of average release times at the port level, but release times vary significantly depending on the port and type of transaction. As described in a June 1993 letter from the Secretary of the Treasury Board to department heads, the Department is expected to establish and publish service standards for its major services in 1993-94. In response to this directive, the Department has established a project team to develop client service standards for the commercial process.

Illegal drugs
2.147 In 1991 we recommended that the Department conduct a comprehensive department-wide risk assessment, leading to a more flexible and responsive departmental interdiction plan to counter international drug trafficking. Since then, Customs has established regional intelligence analysis units and flexible response teams. Further, the Customs Enforcement Directorate at headquarters has prepared intelligence threat-assessment reports on specific illegal drugs and has issued periodic intelligence bulletins to describe major problem areas or threats facing Customs. The Department is also expanding the detector dog service and implementing an integrated Customs enforcement system on a pilot basis. As of August 1993, Customs was in the process of drafting a departmental interdiction plan.

Hazardous materials
2.148 Our 1991 audit noted that there was no defined program in place at Customs for dealing with hazardous materials. Since then, the Department has implemented a training program and has made reasonable progress in drafting a directive related to processing shipments of hazardous waste. Also, Customs has had discussions with other departments to co-ordinate the handling of dangerous goods and hazardous products. While training needs related to dangerous goods are being identified, a more active role for Customs and requirements for training in processing hazardous products remain to be decided.

Department of National Revenue-Taxation - Taxpayer Services - 1991, Chapter 16

Background

2.149 In 1991 we audited certain taxpayer services and related products of the Department of National Revenue Taxation. We made recommendations in the areas of understanding and responding to expectations, determining the benefits and costs of services and activities, and reporting to Parliament. This year we followed up on the actions taken by the Department in response to our recommendations and observations. We examined various documents and status reports provided by the Department and reviewed its written statements and explanations.

Conclusion

2.150 The Department has taken action on most of our recommendations but additional work needs to be done in other areas. We note that since our 1991 Report the two programs of the Department - Taxation and Customs and Excise - are being integrated, and many of the client services may have to be reviewed by the Department from the perspective of both the programs.

Observations

Understanding and responding to expectations
2.151 In 1991, we recommended that the Department find ways to obtain ongoing feedback on those of its services that were not being covered by its existing feedback mechanisms (for example, consultative committees, questionnaires and focus groups). The Department has recently begun to collect data regarding who calls the general enquiries service and why they are calling.

2.152 Further, we recommended that the Department ensure that taxpayers are informed about where and how to lodge complaints and that it make the most effective use of complaints as a source of information. Complaints received through the Problem Resolution and Ministerial Correspondence programs are now analyzed, significant trends recorded and information provided to senior management. Feedback on complaints received by other areas of the Department is communicated weekly to senior management through its Service Enhancement Program. In order to make data collection and analysis more manageable, only six field offices participate at a time.

2.153 We recommended that the Department review its existing performance standards. The Department studied clients' acceptance of some of the standards that were in use in 1991 and has either confirmed them or revised them in light of clients' expectations.

Telephone enquiries
2.154 In 1991, we noted that the Department did not have reliable measures of levels of service that could be used throughout the year for its telephone enquiries service; we recommended that it develop such measures. The Department now has technology in place at local sites that permits the gathering of various level-of-service measurements. From November 1993 to February 1994, it will implement an interim program to roll up local data to provide regional and national measurements. The interim program eventually will be replaced by a more automated system that will make a greater range of data more easily available.

2.155 In 1991, we also observed that the general enquiries surveys conducted during the filing season in 1990 and 1991 were not designed to estimate the accuracy of replies to the general public. A similar survey was done in 1992 but not in 1993. Instead, a pilot survey was completed in the first quarter of 1993 to assist in the future development of a computerized system to measure accuracy.

2.156 In 1991 we reported that a departmental Task Force on Organizational Effectiveness had expressed concern about the use, during the busiest time of the year, of temporary employees with little experience or training as enquiries agents. This use carried with it a high risk that service standards would not be met. We recommended that the Department consider testing whether or not using a higher ratio of permanent to temporary staff, modifying training programs for temporary staff, conducting qualifying technical examinations, or other alternatives would affect accuracy. Budget constraints have caused National Revenue to largely curtail its use of temporary staff as enquiries agents. The Department has taken steps to improve the training program and has developed a selection tool to assess prospective agents' abilities, skills and personal qualities. Knowledge continues to be assessed without the aid of a technical examination.

Counter enquiries
2.157 We recommended that the Department collect information on waiting time at service counters for comparison to existing standards, and also determine whether it was feasible to obtain an objective measurement of the accuracy of replies to counter enquiries. The Department has developed methodology for measurement of counter waiting time, which it will use in the 1994 filing season. At the same time, National Revenue plans to study the effect of publicizing its service standards. However, the Department has stated that action on measuring the accuracy of replies given at the counter will depend on its experience with the accuracy measurement system for telephone enquiries.

Forms and publications
2.158 We recommended that the Department perform a study to estimate the benefits of making its publications easier to read and understand, and to ascertain, from the findings of the study, whether improving publications was being given appropriate priority and adequate resources. The Department recently adopted a process of "full readability review" for all its publications over time, to ensure that they adhere to plain language principles.

Determining the benefit and costs of services and activities
2.159 In 1991 we noted that the Department had not evaluated its various service programs to ascertain whether they were achieving their objectives and contributing to the accomplishment of the Department's mission, and were cost-effective. We recommended that the Department evaluate the costs of its service programs in relation to their contributions to stated objectives, and determine the appropriate allocation of resources. The Department completed a partial review of its Tax Information Phone System (TIPS) program in 1992. National Revenue's internal audit and evaluation unit has tentatively planned to evaluate one aspect of client assistance in 1993-94.

Accountability
2.160 We recommended that the Department develop, and report in Part III of the Estimates, measures of service quality in comparison to the corresponding standards. A review of Part IIIs for 1992-93 and 1993-94 indicates that the Department has made progress in reporting measures of quality for a few of its services. The Department expects that standards for the purpose of comparison will be ready for publication in the 1995-96 Part III.

Department of Public Works - Office Accommodation Planning and Leasing - 1991, Chapter 17

Background

2.161 In 1991 we examined the planning and acquisition of leased office space for accommodation of government employees. The Department of Public Works provides office accommodation to about 110 departments and agencies.

2.162 We concluded that there were long-standing, fundamental accommodation issues to be resolved: the service and control roles of the Department; user pay for accommodation; and long-term planning and investment strategies. Resolution of these issues could facilitate essential reforms in the planning and acquisition of leased office space.

2.163 We also observed that the Department's leasing practices were slow and cumbersome and that lease documents were overly detailed and complex. Our work confirmed what the Department had recognized: that it could and should be more responsive to the accommodation needs of its tenant departments and streamline its leasing operations.

Scope

2.164 Our follow-up consisted of reviewing the Department's June 1992 and 1993 status reports to the Public Accounts Committee on action taken in response to our 1991 recommendations, as well as discussing these reports with departmental officials. We did not examine any additional leasing transactions to determine the current status of leasing practices.

Conclusion

2.165 Officials of the Department of Public Works believe that they have satisfactorily completed the policy groundwork for successfully implementing the new procedures implicit in "shared accommodation leadership". The Department has requested the formal delegation for the authority to develop and enforce office accommodation policies and standards. At the time of writing this report, the Department had just received the delegated authority.

2.166 The Department has undertaken significant initiatives to improve the planning and acquisition of leased office space. Given the fundamental nature of our 1991 observations and recommendations and the recent government reorganization, successful implementation of the Department's accommodation and leasing initiatives is expected to take several years.

Observations

Operational review and government reorganization
2.167 In response to the issues we reported in 1991, the Department undertook a number of initiatives. However, they have been delayed as a result of other departmental priorities.

2.168 In November 1992, a consulting firm completed an operational review of the Department of Public Works. The consultants indicated that the Department could realize annual savings of $63-68 million by 31 March 1997 through a reduction of 1200-1300 person-years. These would come mainly from business planning and management and support activities.

2.169 On 25 June 1993, the Prime Minister announced a government reorganization. A new Department of Government Services is being created, which combines the former departments of Public Works and Supply and Services. The reorganization affects many tenant departments as well as measures planned in response to our 1991 recommendations. These measures are being continued by the new Department of Government Services.

Service and control roles of Department of Public Works
2.170 In 1991 we noted that Treasury Board was in the process of transferring authority to Public Works to develop and enforce office accommodation policies and standards. The formal delegation to the Department was the third of four phases of this process and was delayed by the government reorganization.

2.171 The Department has been preparing for this responsibility by drafting a new policy framework (called "shared accommodation leadership") for office accommodation and accommodation services. The proposed framework is based on two main concepts: shared accountability between Public Works and the tenant, and flexible departmental standards based on what people do in their jobs (their functional requirements). Public Works and tenants will share accountability through a Master Occupancy Agreement, which outlines space standards and a framework for accountability. The Department has also developed an office design guide and has established functional standards for individual workplaces. These are available to tenants to help them determine how much space they need and how to use it most effectively.

User pay for accommodation
2.172 The Department plans to evaluate the merit and impact of moving over the long term to a policy of charging tenant departments for office accommodation.

Long-term planning and investment strategies
2.173 Department initiatives to improve long-term accommodation planning are scheduled over several years; these initiatives require the involvement of a number of tenant departments/agencies that are now being redefined, as part of the government's reorganization. That reorganization will have an impact on the current and future office space requirements of departments; on long-term investment strategies; and on leasing strategies for major metropolitan centres.

2.174 Block 56, Vancouver B.C. Our 1991 Report outlined the history of this property since 1982. Block 56 was being used as a parking lot but development proposals were under consideration. In 1992 the property was sold to the City of Vancouver. The Department has entered into a lease-purchase agreement with the City for a major office building to be constructed on a portion of Block 56; the building will house tenants of the Department.

The planning and acquisition of leased office space
2.175 The Department of Public Works is seeking to improve significantly the planning and acquisition of leased office space, through a reorganization of the total process. As the second phase of its operational review, in 1992 the Department established a working group to streamline its processes for acquiring space for tenants by reducing the cycle time substantially and improving service delivery. The project represents part of the remedial action to address our 1991 observations on leasing practices. The working group has completed consultation with Public Works staff, tenants, industry and other government organizations. Senior management review of the working group's proposals is expected to continue into the fall of 1993.

Department of the Secretary of State - Official Languages and Translation - Translation Bureau - 1991, Chapter 20

2.176 Our 1991 audit of the Secretary of State dealt primarily with the management of cost, performance, human resources and contracting out at the Translation Bureau. We also reviewed the results obtained by the Bureau in recent years and analyzed the organization's work climate. It became clear that the Translation Bureau would have to undergo major changes to correct the weaknesses we identified and meet the challenges it was facing.

Background

2.177 Since our audit, several events have happened. In the spring of 1992, a new management team started at the Translation Bureau, and in June 1993 it was announced that the Bureau would join the Department of Government Services. During the same period, it completed two in-house studies aimed at streamlining and redirecting its activities. The government had announced in its April 1993 budget that the Translation Bureau would become a special operating agency by 1 April 1995. Effective on that date, the use of its services by the departments and agencies now dealing with the Bureau would be optional. In April 1994, the Bureau will begin a one-year trial period functioning as a special operating agency.

2.178 This redirection demands significant structural and cultural changes, since the Bureau will be obliged, on the one hand, to compete with the private sector and, on the other, to recover its costs. The Bureau is now in the midst of a complete re-engineering and restructuring process, which is focussed on both its in-house operations and its relations with suppliers and clients. Since February 1993, twelve working groups composed of Bureau staff and consultants have been involved in this undertaking. They are examining, among other things, issues related to new functions for production units, client services, logistics, human resource management and the need for accounting and management information systems. Most of these groups filed reports on 30 July 1993.

Scope

2.179 Our follow-up covered the actions taken by the Bureau in response to our observations and recommendations. In our opinion, our observations and recommendations remain entirely relevant to the requirements associated with the Bureau's status as a special operating agency. We analyzed the available reports and management data and reviewed the studies and other documents, including the working group reports. We also substantiated the progress achieved during discussions with staff and management.

2.180 In August 1993, at the end of our follow-up, management was planning the strategic decisions needed to implement the new operational structure and the special operating agency. Thus we could not verify in what measure these decisions will allow the special operating agency to implement our recommendations. The Bureau must submit its interim business plan for the special operating agency to the Treasury Board by November 1993.

Conclusion

2.181 In deciding the type of organization it wants to become, the Translation Bureau has given priority to resolving a basic issue. We also noted that it has followed up several of our observations and recommendations. Given the environment that has existed since our audit, we think the Bureau has made satisfactory progress so far.

2.182 Despite these efforts, however, we note that significant weaknesses still exist. We are particularly concerned about cost reduction, regular follow-up and analysis of results, human resource management strategy, performance standards and the comprehensive management information system. These are areas of particular interest that represent key success factors for the Translation Bureau and a special operating agency.

Observations

Costs
2.183 Exhibit 2.1 shows the elements that make up in-house and contract costs.

2.184 As we had recommended, the Translation Bureau has changed its cost determination method, allowing it to now determine the full cost per word translated in-house and contracted out. The Bureau has also decreased its indirect costs by 9.8 percent over the past two years. Moreover, it has eliminated the disparity that existed in 1990-91 between the direct cost per word translated in-house and contracted out. Thus, the direct cost per word is slightly higher for translation contracted out than the direct cost per word translated in-house. This change is a result of the combined effect of a reduction in direct in-house costs and an increase in direct costs of contracting out. Given that the average price paid to contractors has remained quite stable over the past two years, the increase in direct costs of contracting out is explained mainly by the direct costs related to contract management. These costs correspond essentially to the time spent in contract management activities by staff in production units and operations support services. Direct costs related to contract management add 29 percent to the price paid to contractors. This underlines the high cost of contract management for the Translation Bureau.

2.185 At the same time, although the full cost per word translated in-house has decreased by 16 percent since April 1991, it is still higher than the market price. The Bureau must therefore strictly control its costs and even reduce them.

2.186 Currently, the Bureau has a cost accounting system that enables it to determine the direct cost per word for in-house and contracted-out translation. Although management exercises budgetary and operational control, it does not use cost per word as a performance indicator to regularly monitor its direct costs. In September 1993, the Bureau was expecting to receive a proposal from its consultants for a cost accounting system that will meet its future needs and that will be adapted to its products and services.

Human resource management and translators' performance
2.187 In 1991 we recommended that the Bureau, in consultation with employees, develop a human resource management strategy, identify employees' skills, define its needs and monitor the work climate. The Bureau subsequently began to identify its translators' skills and improve certain human resource management practices - in particular, its recruiting and promotion procedures. In addition, the Bureau consulted with employees on numerous occasions, informed them of its decisions and monitored the work climate.

2.188 We also expected that the Bureau would develop a human resource management strategy. We observed that it has started with its working groups to define certain elements. However, we believe that the human resource management strategy should be part of the strategic decisions that management proposes to make in the near future.

2.189 Translators' performance is the main factor affecting the Translation Bureau's overall productivity and, consequently, its production costs. In 1991 we recommended that quantitative performance standards be established by employee group or by sector, and measures implemented to reward those who achieve or exceed these standards. Since our audit, the Bureau has not adopted performance standards to evaluate its translators' performance objectively and to set an optimum productivity level. Therefore, it is unable to determine whether the performance and production costs have reached an acceptable efficiency level. To compensate, however, management intends to determine expected staff performance levels in conjunction with the cost per word, which will be established in accordance with market price. As part of its redirection, it also began reflecting on incentives to encourage employees to optimize their performance. The Bureau should continue its efforts, together with the Treasury Board Secretariat, to adopt incentives based on the new organization's goals.

Client satisfaction and quality of texts translated
2.190 Client satisfaction and the quality of texts translated are key indicators for the Translation Bureau. To measure them, the Bureau still uses the Continuous Evaluation System. Its objectives and methodology have not been reviewed as we had recommended. Thus, the results of tests provide only general data once a year. For example, the Bureau evaluates the quality of translations without measuring them against the quality expected. Also, client satisfaction with delivery deadlines, the most important factor in client satisfaction, is no longer evaluated. To be effective, the Continuous Evaluation System, or any other mechanism, must help management regularly to make the decisions necessary for achieving established objectives.

Management information
2.191 We found that, in 1992-93, the Bureau improved its performance in terms of costs, productivity and quality of translations. However, it was unable to identify the underlying reasons. Indeed, we noted that management still has only annual general data, which are not subject to sufficient analysis to identify the factors that could explain performance.

2.192 As part of our follow-up, we analyzed the results of the Bureau's tests on the quality of delivered texts. We noted that major changes had been made since 1990-91 to the methodology of evaluating texts. We believe that the changes may explain, in part, the significant improvement in the quality of texts delivered, shown in the test results for the past three years. Moreover, our analysis of the overall productivity of official languages translation showed that close to half the increase in productivity was due to systemic changes in the breakdown of indirect time. Thus, the increase in productivity not related to these changes (1.9 percent per year) corresponds to the increase in productivity of 1.7 percent per year that we identified for the fiscal years 1986-87 to 1989-90.

2.193 During fiscal year 1994-95, the Translation Bureau proposes to acquire a comprehensive management information system to give it real-time access to information it needs to monitor its costs and performance. This should allow it to obtain timely management information and to provide Parliament with more complete information. The Bureau should also ensure that it regularly carries out the necessary analyses to follow up and explain its performance.