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1993 Report of the Auditor General of Canada

Assistant Auditor General: Elwyn Dickson
Responsible Auditor: Bill Rafuse

Main Points

18.1 Seniors are one of the fastest-growing population segments in Canada. Expenditures for seniors programs administered by the Department of National Health and Welfare were $30 billion in 1992-93. Benefits paid under the Old Age Security, Guaranteed Income Supplement and Canada Pension Plan programs accounted for 99 percent of the total.

18.2 Within the Department, the development of seniors policy and programs is unco-ordinated and fragmented; some duplication and overlap result. The Department plans to develop a federal policy on aging by 1995, in part to encourage departments and agencies to act collaboratively.

18.3 Service standards for seniors programs have yet to be developed in accordance with government policy. The Estimates Part III and annual reports are not fulfilling their role as accountability documents for these programs. Commitments to the Public Accounts Committee concerning tabling of statutory annual reports for the pension programs were not met.

18.4 The Old Age Security and Canada Pension Plan programs have been successful in partially replacing income lost on retirement and have contributed in large part to the reduction of poverty among seniors. The cost of these pension programs will increase rapidly in step with the aging of the Canadian population. More and better information on the operations of these programs, including their future costs, is necessary for informed consideration of their effectiveness and affordability.

18.5 We observed significant deficiencies in the management of the Canada Pension Plan program. Overpayments in the Canada Pension Plan and Old Age Security programs range from $120 million to $220 million each year. Existing systems and procedures are inadequate to identify, control and collect these overpayments.

18.6 The quality and level of service for Canada Pension Plan disability appeals and pensions telephone service is unacceptable to both departmental managers and the public. A major project to improve the administration and delivery of the pension programs by 1997 is well under way. It is too soon to know if the deficiencies we identified will be addressed and rectified.

18.7 The $200 million Seniors Strategy was established in 1988 without a needs assessment and with little planning for implementation. Accountability for the results of the Strategy was not specified, and the overall effectiveness of this initiative is unknown. The Strategy was renewed in 1993 without reliable, complete and timely information on the results of the first five years of spending.

18.8 The Department ensures that agreements are properly established for projects funded under New Horizons and the Seniors Independence Program and that program recipients comply with the terms and conditions of the arrangements. The administration costs associated with these programs, however, are high.

Introduction

18.10 Certain programs delivered by the Department of National Health and Welfare are designed to promote and strengthen the income security of Canada's seniors. The Department also supports the development of a broad range of services to meet the changing needs of seniors, with particular attention paid to health and social integration.

18.11 Seniors are one of the fastest-growing population segments in Canada. Projections by Statistics Canada indicate that the number of seniors will increase until the early part of the next century (see Exhibit 18.1 ). The population over 65 years of age was 3.2 million (11.6 percent of the Canadian population) in 1991 and is projected to rise to 6.6 million (18.1 percent) by 2021.

18.12 In our 1985 Report, the chapter on public pension management focussed on the pension programs - Old Age Security and the Canada Pension Plan - administered by the Department of National Health and Welfare. The audit assessed the adequacy and accuracy of financial information provided to Parliament and evaluated the systems and procedures in place for managing these programs. Prior to that, in 1982, we reported on the administration of the Department's New Horizons program.

Background

18.14 National Health and Welfare's involvement in health and social programs for seniors originates mainly from the broad provisions of the Department of National Health and Welfare Act . The application of these provisions to income support programs required amendments to the Constitution Act . The first, in 1951, provided for federal participation in old-age security pensions. The second, in 1964, related to the Canada Pension Plan and the decision to include survivors and disability benefits irrespective of age.

18.15 The Department's programs for seniors reflect this broad mandate. The principal programs and their expenditures are presented in Exhibit 18.2 .

Audit Objective and Scope

18.17 Scope. The scope of the audit included all National Health and Welfare seniors programs (see Exhibit 18.3 ). Certain benefits payable under the Canada Pension Plan are not directed toward seniors. These include disability and orphans benefits, as well as survivors pensions paid to those under 65 years of age. We reviewed the administration of the Canada Pension Plan in general and did not focus on these non-seniors programs. However, in the areas of pension overpayments and appeals, we found that disability cases were a major concern. Therefore, to provide a complete picture of the issues in those two areas, we have included these findings in this chapter.

18.18 This year's Report of the Auditor General of Canada includes chapters on the government-wide audits of internal audit and program evaluation. National Health and Welfare was one of several departments examined in these audits. The internal audit and program evaluation functions at National Health and Welfare were reviewed in general, with particular attention to recent work on seniors programs. Our findings specific to these programs are reported in this chapter.

18.19 During the planning phase of the audit, we found that there was no "elder care" program in place for First Nations communities. Although certain services are provided when necessary, the Department has not allocated resources, developed policies, defined services or set standards for home nursing. However, a consultation process with First Nations communities is under way to determine the health care portion of home care needs for seniors on reserves. In the absence of a specific program and in light of this current initiative, we did not include First Nations elder care in our audit scope.

18.20 The Canada Assistance Plan was also not included in the scope of the audit. Under this program, the federal government shares with the provinces and territories the cost of providing social assistance and welfare services to persons in need. A small portion of these payments represents cost sharing for seniors in long-term care institutions. We reported on the Department of National Health and Welfare's administration of the Canada Assistance Plan in 1989 and conducted a follow-up in 1991.

Observations and Recommendations

General Matters

Seniors programs lack co-ordination

18.23 We concluded that within the Department of National Health and Welfare there was a lack of central co-ordination for seniors policy and program development and communications.

18.24 Several program changes introduced in 1988 through the Seniors Strategy have resulted in a diffusion of responsibility within National Health and Welfare. The creation of the position of Minister of State for Seniors in 1987 resulted in increased communications and programming activity related to seniors. The Seniors Secretariat was established to increase the level of communication with seniors and to provide services to the new Minister of State. Two new seniors programs were created, and the funding level of a third was expanded. Funding was also increased for the National Advisory Council on Aging and the Department's Policy, Planning and Information Branch.

18.25 An important thrust of the 1988 Seniors Strategy was to improve communications with seniors. The Seniors Secretariat and the National Advisory Council on Aging were each given responsibilities in this regard, and funds were allocated to improve telephone service for the pension programs. The number of publications directed to and about seniors increased significantly during the five-year period of the 1988 Seniors Strategy. Foremost among them is the Seniors Guide. It provides information on the various federal programs and services available to seniors and lists addresses and telephone numbers of departments and agencies.

18.26 Since 1988, two million copies of the Seniors Guide have been distributed, and every month it is mailed to some 19,000 new Old Age Security pension recipients. In addition, the Seniors Secretariat produces newsletters on a regular basis, and information pamphlets are produced for each of the seniors programs. One objective of these communication activities is to make seniors more aware of programs and their requirements and benefits. However, the Department does not have current information on its success in achieving this objective.

18.27 More recent initiatives have also affected the administration and delivery of seniors programs. Examples are the merger of the Social Services Branch and the Health Services and Promotion Branch, and the shift of responsibility for program delivery to the regions. The result has been a consolidation of some activities related to seniors programs, with further fragmentation of responsibility for others. Several key activities remain unco-ordinated, and there is some duplication of effort.

18.28 For example, policy development related to seniors issues is carried out independently in several different areas of the Department. Liaison with other departments and jurisdictions also is not co-ordinated. The roles and activities of the National Advisory Council on Aging and the Seniors Secretariat overlap in critical areas, particularly in liaison with national, provincial and local associations, institutions and groups involved in aging or representing the aged, and in the research and communication of information on issues relevant to seniors. Communication with seniors has been given high priority in recent years. However, co-ordination between the communications related to income security programs and those directed toward other seniors programs could be improved.

18.29 We also found a lack of co-operative program planning with the provincial governments, particularly related to New Horizons and the Seniors Independence Program. The Seniors Secretariat and National Health and Welfare's regional offices carry out similar roles in priority setting and planning for seniors programs.

18.30 The Department has acknowledged that current program planning and delivery take place in an unco-ordinated and fragmented fashion. The National Advisory Council on Aging has called since 1991 for "a national multi-sectoral (income security, health, social services and housing) aging policy that involves all levels of government." The 1993 Seniors Strategy, "Aging Together", includes the development of a federal policy on aging to enable parties to act responsively and collaboratively. The intended approach is to prepare a federal discussion paper for public consultation leading to a policy framework, guiding principles and action plans by the spring of 1995.

Service standards have not been implemented

18.32 The 1992 federal Budget specifically called for departments to develop and publish standards for service, based on consultation with clients, that clearly spell out service levels and costs. The Treasury Board defines these standards as performance objectives for the delivery of government products or services to the public. Good service standards are client-oriented and might address, for example, delivery dimensions such as timeliness, accessibility and accuracy.

18.33 The Department set up a service standard committee in 1992 to ensure that all branches and regions develop and implement service standards in keeping with the federal service standard initiative. In phase one, the committee was to focus on service standards that impact on individual Canadians. Some work has been undertaken by the Income Security Programs Branch, but the committee itself has been inactive, and little of substance has been accomplished. The latest Estimates planning document identifies the development of an accountability framework, with service standards and performance indicators, as a new initiative for 1993-94.

18.34 We concluded that in the area of service standards, the Department has suffered from a lack of sustained focus and of continuity of leadership. The development and publication of service standards and the reporting of performance against these standards would help to focus management and client attention on the quality and level of service being offered.

18.35 Currently, the Department is providing a poor quality of service to its clients in the areas of Canada Pension Plan medical appeals and telephone calls regarding pensions. In fact, client service for Canada Pension Plan appeals has been declining for many years (see paragraphs 18.83 to 18.88). We were advised that service standards for appeals will not be implemented until the current backlogs have been eliminated.

18.36 For seniors who are dealing with the Department on pension matters, most of the contact is with the 69 full-time and 208 part-time client service centres by phone, by letter, or in person. No doubt the greatest frustration is with the telephone service. This is not a new problem. We commented on the poor level of telephone service in our 1985 Report, noting that the Department had identified the problem in 1977 and that it was getting worse. That trend has continued.

18.37 The Department's client service centres and regional offices handle four million telephone calls a year, but another seven million are dropped or are abandoned by callers. The Department's 1993-94 operational plan reported that "ongoing monitoring of the delivery of telephone service to clients indicates that the level and quality of service are continuing to decline." The plan stated that technological and organizational change would provide marginal improvement only. The solution may lie in reducing the need to phone the Department.

18.38 We found that the Department had not determined why so many seniors try to contact the Department by telephone. Some of the reasons lie in ineffective communications and inefficient administrative practices such as those described in this chapter. One such problem is related to forms design. There are fourteen Old Age Security and Canada Pension Plan forms that seniors may be required to complete. Only one of these, the Old Age Security application form, conforms with the Department's own guidelines for communicating in print with seniors.

18.39 The lack of service standards and of regular measurement of service levels contributes to a lack of accountability for program performance. Seniors, the public and parliamentarians are unable to determine what reasonable service expectations are for these programs and how well the Department is meeting them.

18.40 Under the heading of service standards, the Estimates Part III for 1993-94 presents accountability information on the level and quality of telephone service for income security programs. We found this information to be incomplete. It does not state what the service standard is, or indicate that the level and quality of service is declining. Clearly, in this case, the Estimates are not providing the accountability called for by the government's service standards initiative or the Department's own client service action plan.

The quality of program reviews varies

18.42 This year we conducted government-wide reviews of these two functions (Chapters 7, 8, 9 and 10), and National Health and Welfare was included in both of these reviews. To link these reviews with our audit of seniors programs, we examined recent audit and evaluation reports on both pension and contribution programs for seniors.

18.43 We examined three audits of seniors programs conducted by the Department's Internal Audit Division and concluded that, in each case, the assignment was adequately planned and there was sufficient documentation to support the audit findings. We did identify opportunities to improve the risk assessment conducted in support of the annual internal audit plan.

18.44 We examined planning, coverage, quality, findings and use of results from evaluation studies of seniors programs. We found that the respective 1989 and 1992 evaluation studies of New Horizons and the Seniors Independence Program did not meet our criteria in those areas. Some of our findings with respect to these studies are presented in paragraphs 18.106 to 18.108.

18.45 We found that the 1992 Old Age Security evaluation appropriately covered the expected effects of the program. We concluded that the evaluation findings were reliable. The evaluation study was completed only recently, however, which limited our ability to assess its use by the Department.

Accountability documents are not doing the job

18.47 The management representation is a statement confirming the quality of the Part III process and product. The Department, however, views the management representation primarily as a transmittal letter for the Part III submission. We see the representation as having the much more important role of attesting to the integrity of the Department's Estimates submission.

18.48 In the course of our audit, a number of deficiencies in the Part III information related to seniors programs came to our attention. For example, the reporting of program evaluation findings was unsatisfactory in terms of both timing and content. Several other deficiencies are described in this chapter.

18.49 The Department has a long history of being late in tabling its annual reports. Delays in tabling the annual reports required for the Canada Pension Plan and the Old Age Security programs diminish accountability for the seniors programs. The Public Accounts Committee, in its Eighth Report, in September 1992, commented, "Annual reports on major programs such as Old Age Security, the Canada Pension Plan and Family Allowance are all late. Your Committee wonders whether Health and Welfare Canada has demonstrated the will to produce its statutory reports on time by putting in place the appropriate mechanisms." Based on our review of the situation, the answer appears to be no.

18.50 The Department made a commitment to the Public Accounts Committee to table the 1989-90 and 1990-91 annual reports for Old Age Security and the Canada Pension Plan in October 1992. This commitment was not met. The Department now plans to table these reports before the end of December 1993. We believe that reports tabled up to three years late are of little value to parliamentarians or others.

18.51 To improve the overall planning for seniors programs and the reporting of results, the Department should:

• in developing the federal policy on aging, ensure the co-ordination of planning, delivery and communications for pension programs and other seniors programs;
• establish service standards in accordance with government policy and report performance against these standards to Parliament and the public; and
• ensure that the information on seniors programs contained in the Estimates Part III is accurate, complete and presented in a meaningful way, and that statutory annual reports are tabled on a timely basis.

Health Canada agrees that a great deal of developmental work is still required regarding service standards and is committed to making significant progress in the next year.

Health Canada will review this recommendation, in the context of government restructuring, to determine what changes are needed in the Estimates. A post-tabling, independent review will also be considered; it would lead to changes, if required, one year in arrears. In addition, the need for improvement in the timeliness of submitting statutory annual reports is recognized.

Pension Programs

Pension program costs will rise significantly in future years

18.53 It is generally accepted that the pension programs have been effective in meeting their objectives of partially replacing income that is lost on retirement and reducing the level of poverty among the elderly. The Economic Council of Canada, in its 1992 report entitled The New Face of Poverty , stated, "Today, senior citizens are much better off than were their parents when they retired. . . . Most of this lessening in the overall presence of poverty reflects a major reduction in its incidence and depth among the elderly population, thanks to better income security programs for those aged 65 and older."

18.54 A recent evaluation of the Old Age Security program carried out by the Department reached similar conclusions. The 1992 evaluation report concluded that, in terms of adequacy and earnings replacement, the program was generally fulfilling its role within the retirement income system. A program evaluation of the Canada Pension Plan is now under way. Exhibit 18.6 shows the improvement in seniors' income status over the ten-year period from 1981 to 1991.

18.55 Benefits paid under the Old Age Security and Guaranteed Income Supplement programs in 1992-93 totalled $19.1 billion. Canada Pension Plan benefits, excluding disability and orphans payments, were $10.7 billion in the same year. Over the last five years, these benefits have grown from a total of $22 billion to $30 billion. The rapid increase is the result of inflation (both programs are fully indexed to the consumer price index) and the greater number of seniors, who are also living longer.

18.56 Like the Canada Pension Plan, Old Age Security is a pay-as-you-go pension program - in fact, even more so, as Old Age Security does not have a contingency reserve such as the Canada Pension Plan has. Old Age Security benefits are paid on a current basis from general revenues of the government. The aging of the Canadian population (that is, the increasing percentage of the population over age 65) will have doubled the real (constant dollar) cost of the Old Age Security program by 2021 (see Exhibit 18.7 ).

18.57 The same demographics will also double the cost of the Canada Pension Plan program over roughly the same period. In this case, however, the increased cost will be borne by the contributors to the Plan. As a result, today's combined (employer and employee) contribution rate of 5 percent will double by 2016 and climb to 13 percent by 2030. The payment of future Old Age Security benefits, like Canada Pension Plan benefits, is dependent on future generations being willing and able to pay the contributions required. Information on future costs should be readily available for both programs.

Little information is produced to improve public understanding of the Canada Pension Plan

18.59 Recent surveys show that confidence in public pension plans has been eroded and attitudes toward overall pensions and retirement planning have been affected. According to a survey conducted for the Department, 98 percent of Canadians have heard of the Canada Pension Plan. However, only 13 percent of Canadians believe it will be available to all Canadians in the future; 50 percent of the respondents believe it will be limited at some point and 28 percent believe it will not exist at all.

18.60 The Department of National Health and Welfare, as administrator of the Canada Pension Plan, publishes information on the Plan in the Estimates and annual reports. However, it produces very little information on the unique features of the Plan or how it is financed, or other information designed to improve public understanding of the Plan. The Minister of Finance, who has specific responsibilities under the Canada Pension Plan (Act) , has produced some good information on the Plan's financing, but this was not widely distributed.

18.61 It is important that people know what their benefits and the cost of providing them will be. The public should be provided with complete and timely information on the administration and affordability of the Canada Pension Plan. For the benefit of parliamentarians and other readers, we present some basic information on the Plan gathered from a variety of sources in Exhibit 18.8 .

The management framework for the Canada Pension Plan is unstructured

18.63 The key point is that the Canada Pension Plan, unlike Old Age Security, is financed by contributors, rather than from the government's general revenues. The principle, therefore, should be that decisions are taken after due consideration of service to the Plan's clients and of the bottom-line impact on the fund. Bottom line means that both administrative and benefit costs must be considered together; for example, spending one administration dollar to save four benefit dollars would be a sound decision. Decisions have not always been based on such considerations.

18.64 Although plans exist at the Income Security Programs Branch level, no single plan exists to guide the overall management of the Canada Pension Plan. Such a plan would help to ensure that benefits are paid to the right person, at the right time, in the right amount, in compliance with the legislation and in a cost-effective manner. Responsibility for achieving the plan would be clearly assigned.

18.65 A number of the Canada Pension Plan initiatives presently under way would be part of the plan. These include the communications strategy, the disability reassessment project and the record-of-earnings project. Through these projects, the plan would answer such questions as: What do we want to achieve? Where are we now? What are the targets? How will we measure our progress? Who is accountable for achieving results? Problem areas such as overpayments and telephone service would also be addressed through this plan.

18.66 The Canada Pension Plan communications strategy is one initiative that could benefit from the discipline of a plan. The strategy was costed at $8 million to $10 million over a five-year period to 1997-98. Year-one (1993-94) activities and expenditures have begun with some preparatory work, including the development of a business plan. However, the strategy was not justified on a benefit-cost basis, and there has been no senior management approval of either the strategy or the budget as a whole.

18.67 The question of decision making and approvals for Canada Pension Plan initiatives such as this is an important one. Does the Minister receive the necessary information to ensure that his/her responsibilities as Plan administrator are being properly exercised? A clear decision-making and accountability structure is required.

18.68 The principles and practices of good management discussed for the Canada Pension Plan would also apply to the Old Age Security program. The following section on overpayments outlines the weaknesses in both programs. The high losses occurring through overpayments increase program costs and compromise the integrity of the programs.

Serious deficiencies exist in the management of pension overpayments

18.70 We reviewed the systems that existed and the practices that were being followed in the Department with respect to pension benefit overpayments. We concluded that the detection, recording and recovery of overpayments were not being managed in a cost-effective manner. We found that most overpayments could be related to deficiencies in two key program activities - Canada Pension Plan disability reassessment and Guaranteed Income Supplement renewal. The systems and procedures in place for the recording, control and collection of overpayments fell far short of meeting minimum standards for such accounts.

18.71 Overpayments result when payments are made to individuals who are either not eligible for the benefit at all or not entitled to as high a benefit as they are receiving. Past efforts to prevent and detect overpayments have been minimal and largely ineffective. A new overpayment policy introduced in 1991 helped in the write-off of overpayments, but not in identification and recovery activities. In 1992, the Department wrote to the Treasury Board proposing that recoveries of overpayments should be reinvested in recovery/control-type activities relating to the statutory programs. It was suggested that ". . . such an approach would achieve significant savings for the Canadian taxpayer." No decision has been taken on this proposal.

18.72 National Health and Welfare does not maintain information on the extent of overpayments. We developed an estimate of the total figure by combining information from several sources in the Department (see Exhibit 18.9 ).

18.73 In February 1993, in a report on overpayments in the Old Age Security and Canada Pension Plan programs, the Department projected a conservative figure of $70 million with an upper limit of $108 million. These figures do not include projected overpayments related to Canada Pension Plan disability reassessment and Guaranteed Income Supplement renewal activities.

Two program areas generate the majority of overpayments

18.75 The Department confirmed our findings early in 1993. Its report concluded that reassessments based on evidence of employment earnings need to be carried out on a regular basis. "Not doing so has resulted in extremely high overpayments which may never be completely recovered. Failure to carry out this task ensures substantial losses to the Plan." This conclusion was based on the results of a 1991-92 pilot project. It reviewed 320 cases where income tax records indicated substantial earnings in years when the individual was receiving disability benefits. With 170 cases still under investigation, 46 reassessments have been finalized and overpayments of $1.2 million recorded.

18.76 In the spring of 1993, a disability reassessment project was launched to address deficiencies over the short and long terms. The first priority was reassessment of the high-risk group of disability pension recipients who have reported earnings to the Department of National Revenue. Lists of these recipients are received quarterly but are from 1 to 1½ years in arrears. Persons receiving disability benefits can have earnings from employment for several years before the situation is discovered and recovery action is begun. Over the long term, the disability reassessment activity will be incorporated into the new client service delivery network scheduled for completion in 1997. Although return on investment is a project consideration, the Department has not specified the amount of overpayments it expects to identify and recover during the course of the reassessment project.

18.77 The Guaranteed Income Supplement renewal process is another major cause of overpayments. In the Audit Notes chapter of our 1991 Report, we noted that significant overpayments and underpayments of Guaranteed Income Supplement benefits were occurring every year.

18.78 In August 1992, the Department informed the Public Accounts Committee that the procedures had been rewritten to achieve a uniform and more rigorous review of Guaranteed Income Supplement renewal applications. These new procedures were to be in place for the processing of 1993 renewals. Our audit found that some new procedures had been developed but were not applied consistently. For the most part, corrective actions did not prevent mispayments from occurring in the first place. Many eligible Canadians still do not receive the pension supplement to which they are entitled.

18.79 The process for determining entitlement to Guaranteed Income Supplement benefits is inherently inefficient. Benefit entitlement is based on the applicant's estimate of prior year's income and is later adjusted, if necessary, to reflect the actual income as determined by National Revenue's income tax assessment. The direct administrative costs alone associated with the annual renewal process are roughly $4 million. The Department's most recent projection indicates annual Guaranteed Income Supplement benefit overpayments of up to $40 million. We were informed that the Department is contemplating income data transfers to verify income as tax returns are processed, thereby eliminating a major portion of the overpayments.

18.80 The systems and procedures in place for recording and collecting overpayments are completely inadequate. Benefit clerks are responsible for account maintenance, including the recording and recovery of overpayments, but the Department does not monitor the process on a regular basis to ensure that appropriate action is taken. Amounts collected are not regularly aggregated by individual office or region. On a national basis, overpayment information is aggregated only at year-end for reporting in the Public Accounts. The figure for recorded overpayments (Old Age Security and Canada Pension Plan accounts receivable) at 31 March 1993 was $70 million.

18.81 The Department could not provide us with complete or reliable data even for the overpayments that were recorded. Year-over-year changes in the overpayment figures could not be accounted for.

18.82 In short, the Department does not have proper control of the overpayment situation. Benefits are paid to those not entitled to receive them. Existing systems do not allow managers to quantify the amounts involved or to manage their collection efficiently. Moreover, the Department is not organized for enforcement activities such as the recovery of overpayments.

The Canada Pension Plan appeals process is severely backlogged and inefficient

18.84 For Old Age Security, an applicant can request reconsideration of his/her application for a pension and, if not satisfied with the decision, can appeal to an Old Age Security Review Tribunal. We found that the two-level appeals process for the program works well for the relatively few cases that are received. The process is simple, quick and informal, and cases are heard in the area where the appellant lives.

18.85 Under the Canada Pension Plan (Act) , there are three levels of appeal. The first, to the Minister, is administered by the Department; the second is to an independent Canada Pension Plan Review Tribunal; and the third is to the Pension Appeals Board.

18.86 Over 90 percent of appeals relate to claims for Canada Pension Plan disability benefits. Here, the statistics are alarming. Over the past five years, the percentage of disability claims denied rose steadily and now stands at 44 percent. Over the same period, the percentage of those denials that were appealed also increased, from 36 percent in 1988-89 to 60 percent in 1992-93. Prior-year statistics indicate that the majority of these appeals will be successful.

18.87 Past strategies to deal with the backlog of first-level appeals were unsuccessful. At the end of March 1993, the backlog exceeded 17,000 cases. The waiting time for a Canada Pension Plan first-level appeal is now almost a year. Taking a case through the three levels of appeal takes, on average, two to three years. Current efforts to clear the backlog of cases at first level will likely move the backlog to the Review Tribunals.

18.88 The first level of the appeals process is severely backlogged and inefficient. The situation - old systems, poor communications, insufficient resources - has reached the point of being unacceptable to both managers and clients. The cost of correcting this situation is significant and will be borne by the Canada Pension Plan. Late in 1992, the Department started action to clear the first-level backlog, using contract and term staff. As a result of this initiative, the cost of the appeals process will increase by more than $3 million in 1993-94. The total cost of the process will be $8 million to $10 million in that year.

A major redesign of pension program delivery is under way

18.90 The redesign project will extend to 1997 at a cost of over $250 million and is expected to address and resolve many specific program problems. Several of these involve areas where the level of service to clients is unacceptable, such as telephone service and the appeals process. Others are areas where hundreds of millions of dollars of benefits are being paid improperly. Exhibit 18.10 shows estimated expenditures over the life of the project.

18.91 These problems are not new ones; in fact, as we noted earlier, many have existed for years. Several previous initiatives to upgrade income security programs systems and practices were planned. Some, such as improvements to the former Family Allowances program, were completed, while others were not. Meanwhile, the workload related to the Old Age Security and Canada Pension Plan programs continued to increase due to demographic factors. At the same time, resources were constrained and the limitations of the existing computer systems - developed 25 years earlier - became clearer. The situation finally reached the point in 1991 where a $250-million solution was considered necessary.

18.92 We reviewed the redesign project to determine whether there was compliance with generally accepted criteria for large systems development projects, including those with significant information technology components. We also audited for compliance with Treasury Board policies and guidelines for major Crown projects. We found that the management structure and process for the project complied in all material respects with these criteria.

18.93 We had a particular interest in the accountability framework for the income security programs redesign project. Although planning began four years ago, the project will have few quantifiable benefits until implementation is well under way in 1995. Some $30 million had been spent as of 31 March 1993 (see Exhibit 18.11 ).

18.94 The primary means of reporting to Parliament on the redesign project is through the major Crown projects addendum to the Estimates Part III. We reviewed the addendum and other related information in the 1993-94 Part III and found that it met the reporting criteria set by the Office of the Comptroller General. We did note that two 1993-94 project cost figures that differed by $3.5 million were presented in the document without explanation. Periodic reporting of project results to the Treasury Board is also required, and we reviewed the first such report submitted in January 1993. That report also met the stipulated reporting requirements.

18.95 The high costs associated with present problems - in terms of both overpayments and poor service - will continue until solutions are implemented. Delays in the implementation of solutions are very costly. By the Department's estimate, benefit overpayments of $1 billion could occur and remain undetected until implementation is completed in 1997. At this stage of the redesign project, however, it is not possible to determine the extent to which program delivery deficiencies, such as overpayments, will be addressed and rectified.

18.96 The Department should seek to improve public understanding of the pension programs by:

• presenting information on projected future costs of the Old Age Security and Canada Pension Plan programs in the Estimates Part III and annual reports; and
• communicating more and better information to Canada Pension Plan contributors and beneficiaries on the Plan's benefits, financing arrangements and present and future costs.

• for the Canada Pension Plan, develop a management framework that incorporates a clear decision-making structure and an annual plan to help ensure that administrative responsibilities are appropriately discharged;
• implement measures for the prevention, prompt identification and recovery of overpayments using, to the fullest extent possible, information available from the Department of National Revenue; and
• develop improved systems and procedures for the control and collection of known overpayments.

In the case of the Canada Pension Plan, information such as projected rates of contributions, currently contained in the actuarial report of the Office of the Superintendent of Financial Institutions, could be included. A CPP communications team has recently begun to implement a strategy to provide Canadians with increased information. Communications are a key concern of the Canada Pension Plan Advisory Board which has set up a sub-committee to help the Department address some of the misconceptions which exist.

As the Auditor General has noted, many organizations are involved in the administration of the Canada Pension Plan. Given this administrative structure, work began in June 1993 focussing on the types of effectiveness information needed to better manage the Canada Pension Plan from a corporate perspective and to better report on the performance of the CPP as a corporate entity. This work was recently presented to a sub-committee of the Canada Pension Plan Advisory Board and will be discussed at the next full meeting of the Board at the end of September 1993.

The Branch is actively discussing with Revenue Canada two areas where the use of earnings information will prevent and detect overpayments.

A formal operational review of the application of the policy dealing with overpayments was completed in March 1993. This review showed that the policy was generally well applied, but some weaknesses do exist. As a follow-up, a working group was established in April 1993 to identify and recommend ways to strengthen the identification of Canada Pension Plan overpayments, the recovery and the control of known overpayments. The working group has also been tasked with identifying means to prevent overpayments.

In addition, the Branch is currently conducting two projects to identify, as early as possible, beneficiaries of disability benefits who return to gainful employment so the disability benefits under the Canada Pension Plan may be stopped as soon as possible after eligibility ceases. These projects are also aimed at automating the process of identification of ineligible beneficiaries to prevent the accumulation of overpayments while minimizing the resources required to maintain control of statutory costs.

Seniors Strategy

The 1988 Seniors Strategy was poorly planned and organized

18.99 The original five-year budget of $197 million was later reduced to $183 million by government-wide expenditure reductions. Only $144 million was actually spent. The Strategy was renewed in 1993 with $170 million to be provided over the next five years (see Exhibit 18.12 ).

18.100 The Department made little effort at consultation and needs analysis prior to the launching of the 1988 Seniors Strategy. Without this analysis, it is difficult to know if the Strategy was focussed on the most important issues affecting seniors and to assess the appropriateness of the Strategy components in addressing these needs.

18.101 Objectives were not set for the Strategy as a whole or for any of the new program components. Funds were allocated to the different branches within the Department, but no mechanism was put in place to capture and report overall financial performance. The lack of organization and clear objectives at the Strategy level may have contributed to a lack of focus at the program level.

18.102 We also found a lack of planning with respect to implementation of the Strategy. For example, the Seniors Independence Program suffered organizational and start-up problems, and just 20 percent of the first year's budget was actually spent. Only after two years of operation did the program managers set out a framework to provide direction for implementation and a basis for setting priorities, improving public information and training staff.

Contribution arrangements for seniors programs were well managed

18.104 We did note that delivering the New Horizons program costs significantly more than the Seniors Independence Program. In 1992-93, roughly 25 cents of every New Horizons program dollar went to administrative activities. This was because New Horizons contributions are allocated on the basis of federal electoral districts, requiring staff to travel to each district and assist seniors in preparing submissions for funds. The Treasury Board has asked the Department to review these programs with a view to reducing the level of resources needed for program administration.

The Seniors Strategy was renewed without a full accounting for the results of the first five years

18.106 In general, we found that management had neither reviewed the purposes and results of seniors programs to assist in planning for the renewal nor evaluated the 1988 Strategy as a whole to determine if it was successful. New Horizons was last evaluated in 1989, one year after a decision was taken to increase the program funding level by 50 percent. Recent evaluation activity has focussed principally on the Seniors Independence Program.

18.107 We found that the evaluation findings cited in the 1993 Strategy renewal documentation were misleading with respect to the effectiveness of both programs. The findings of the 1989 New Horizons evaluation were referred to, even though no attempt had been made to update them. Based on our review of the evaluation study, we concluded that the Department's findings with respect to program results were not valid.

18.108 A 1992 study of the Seniors Independence Program did not gather data on the results of expenditures, nor did it evaluate the program against its goals of increased independence and quality of life for seniors. Nevertheless, the study report concluded that program funds were well spent toward the intended accomplishments and that the program had already made some important and positive differences to seniors.

18.109 The lack of an accountability framework for the Seniors Strategy is a significant deficiency. The Department's Estimates do not describe the Strategy, reveal its expenditures or report on its achievements. For example, in the 1993-94 Estimates Part III, although the Strategy is mentioned several times, the programs that comprise it are not identified. Nor are the expiry of the 1988 Strategy and the impact on program funding levels explained. Because the Strategy was not established as a distinct initiative, it is also difficult to determine who is answerable for its success or failure.

18.110 Overall, we concluded that information available for decision making with respect to the Seniors Strategy renewal was inadequate. Implementation of the renewed Strategy has begun without the benefit of reliable, complete and timely information on the results of the initial Strategy.

18.111 To improve accountability for Seniors Strategy program results, the Department should:

• carry out an assessment of the 1988 Seniors Strategy and use the results to improve implementation of the strategy renewal; and
• identify the Seniors Strategy as a distinct initiative in the Estimates, presenting current and future financial data as well as information on the performance and effectiveness of the Strategy programs and components.

Health Canada will review the recommendation concerning Estimates presentation, in the context of government restructuring, to determine what changes are appropriate and possible, given the structure of the Estimates.