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1996 November Report of the Auditor General of Canada

Matters of Special Importance

Main Points

Introduction

Part I: Specific Issues of Importance

Progress in Government Management, and the Work of the Auditor General

Action on previous audits
Parliament plays an important role in improving government management
The potential for cost savings
The pace of action must keep up with the pace of events

The Risks of Undermanagement in the CPP Disability Program, and Elsewhere

Child tax benefits and GST credits
There are many possible reasons for undermanagement

The Importance of Service Quality

Are departments properly managing service quality?

Previous Challenges Remain

Strengthening the tax system
Stronger financial management and control
Managing the risks of information technology
Ethical standards in government
Administrative decentralization: clarifying the role of central agencies
Better co-ordination among organizations
Renewing the management of human resources

Part II: Information and Accountability

Creating a Better Appreciation of Government's Financial Condition

Government Needs to Do More to Account to Parliamentarians and Canadians

Restoring confidence in government: why information on results matters
Dealing with public perceptions of government: the case of CIDA
What needs to be done: thoughtful, not indiscriminate, information on results
Recent efforts show promise
Progress has been hindered by insufficient will

Government Change Means that Accountability, Too, Must Change

Why accountability matters
What modern accountability involves
The challenge of accountability in joint programs: lessons from the Infrastructure Works program and from First Nations
Improving accountability in practice

Part III: Matters Affecting Our Office

The Commissioner of the Environment and Sustainable Development: A Status Report

Part IV: Conclusion

Ample Reason for Optimism

We All Must Deal with These Challenges

Main Points

1. Each year this chapter draws together issues that I believe are particularly significant. The federal government of today is a government undergoing considerable change. With this change, new issues emerge and some old issues take on new significance.

2. Better accountability. My overarching concern this year is accountability. In my first Report as Auditor General in 1991, I considered this one of the most important issues facing government. Changes in the way government operates make it even more pressing now. Good accountability is particularly difficult in the growing number of joint programs and other new service delivery models being introduced - problems illustrated by our audit of the Canada Infrastructure Works program. Agreement is needed on the elements required for good accountability, and these must reflect the changing nature of government, such as the move toward partnerships and joint programs.

3. Better information for Parliament and Canadians. One of the elements required for good accountability is better information for Parliament and Canadians, especially information on what has been accomplished with taxpayer dollars. In the past I have been frustrated by the lack of action on this issue. The problem is not technical. It is a question of will - in almost all cases, some sort of results information can be gathered that would improve understanding of program performance. Based on work under way to revamp reporting to Parliament, I am now cautiously optimistic about the chances for progress.

4. Unfortunately, improving information on results has rarely been a high priority. There is sometimes concern that information on results may provide ammunition to critics. Genuine progress depends upon organizations looking beyond this to see public reporting as a valuable tool. In this time of resource restraint and skepticism about government, it is imperative to be able to demonstrate results clearly and convincingly. Even when results are negative, an astute institution publicly acknowledges its weaknesses and explains how it is addressing them.

5. Some jurisdictions have enacted legislation requiring that government provide a full accounting for performance. This is an idea that deserves consideration.

6. The government has adopted many of our past recommendations to improve information on its financial condition, but its efforts should not be regarded as complete. I believe that an important next step is for government to enhance its annual report by incorporating indicators being proposed by the Canadian Institute of Chartered Accountants.

7. Better accountability, including better information for parliamentarians and Canadians, must become a government priority. I intend to contribute wherever possible to improved accountability, through audits and other initiatives, such as assurance on the performance reports of the new Canadian Food Inspection Agency.

8. Better service quality. The quality of service provided by government matters: the first-hand encounters Canadians have with government services leave lasting impressions. Recent research by others and our examination of government telephone services have found that service quality needs significant improvement. The government has made numerous commitments to improve the management of service quality but progress has been slow and uneven. Most departments have not established service standards or reported their results.

9. The risks of undermanagement. Government programs require close management attention and good controls, particularly programs involving large expenditures that can escalate rapidly. Our audit of the Canada Pension Plan - Disability program, and of the Child Tax Benefit and the GST Credit programs, found deficiencies in a number of key administrative controls, creating an undue risk that benefits may be paid to those not eligible. The risks involved are considerable - CPP Disability pays out close to $3 billion in benefits annually, and child tax benefits and GST credits amount to $8 billion annually.

10. Past issues remain. I comment in this chapter on a number of past issues that are still relevant:

  • The need to strengthen the tax system continues to be evident from audits of the past year. Parliamentarians from all parties have encouraged us to maintain our audit emphasis on the performance of the tax system.
  • My staff continue to find significant problems in financial management and control.
  • Sound project management principles and effective risk management continue to be lacking in information technology projects involving billions of dollars of expenditures. Of four large systems audited this year, only one managed risk effectively. We are encouraged by efforts being taken by the Treasury Board Secretariat to address these problems.
  • A deputy ministerial task force examining values and ethics in the federal government has been advocating many of the measures we recommended in our 1995 ethics study - a step toward further strengthening the ethical base within government.
  • For administrative decentralization to be successful, accountabilities between the Treasury Board Secretariat and other government organizations need to be clearly articulated.
  • Besides the attention that has been given to better policy co-ordination, there is a need for better operational co-ordination, as illustrated by the lack of co-ordination among the partners in the Canadian criminal justice system that we found in our audit of Correctional Service Canada - Reintegration of Offenders.
  • I continue to be concerned about the need to streamline the structures and rules that govern how public servants are managed. Some encouraging steps have been taken, but our audit this year of the classification system showed that much remains to be done.
11. Cost savings opportunities. I believe that highlighting potential cost savings is one of the most important ways our audits can make a difference, especially in this time of resource restraint. Significant potential savings were noted in our audits of the past year, particularly audits of materiel management, information technology projects, National Defence productivity and CPP Disability.

12. Establishing the Commissioner of the Environment and Sustainable Development. In amendments to the Auditor General Act last December, we were gratified to be given additional environmental audit responsibilities to complement the environmental audits we have conducted in recent years. I have appointed Mr. Brian Emmett as the Commissioner of the Environment and Sustainable Development and we expect to issue the first of our new annual "green" reports in the first quarter of 1997.

13. Further thoughts. I believe it is important not to overlook the aspects of the federal government that are positive. Contrary to what many seem to believe, government often takes action on my Office's findings and recommendations - not always to the extent that we would like, or as quickly, but action all the same. The government has begun taking a more strategic approach to government programs, rethinking matters that were once beyond question.

14. Still, the challenges facing the federal government are many - witness the long list of issues contained in our audits this year, themselves covering only a fraction of government activities. These challenges are made more daunting by the ever-increasing pace of change in society. They will require more concerted effort than has often been evident in the past.

Introduction

15. This chapter each year draws together issues and themes that I consider to be of particular significance. It covers not only the chapters in this volume of my Report, but also our May and September chapters, continuing issues from past years, and matters arising from our annual financial audits and the other initiatives in which we are involved.

16. So, although the list of issues in this chapter may be long, it highlights only a small portion of our work.

17. Again this year, the backdrop for much of my commentary is the theme of change. Welcome or not, changes are happening everywhere in society - from the global economy all the way down to the family structure.

18. The relevance of these changes to my own work is that they are affecting government, often in ways that are not yet entirely clear.

19. Parliamentarians - indeed, all Canadians - expect me to concern myself with how well government is functioning. It is not enough that I focus on current issues ; the important matters are often newly emerging issues, or old problems that are taking on new significance.

20. This year, I am highlighting one overarching concern - the need for better accountability, including the need for better information for Parliament and Canadians. Again, this is hardly a new concern, but it is taking on new significance in our changing environment. Before turning to this topic, there are a number of other specific matters that I believe warrant the attention of parliamentarians and other Canadians.

Part I: Specific Issues of Importance

Progress in Government Management, and the Work of the Auditor General

21. A number of analysts have concluded that one of the most important changes in recent years has been a loss of confidence in governments. A recent study by Ekos Research Associates asked Canadians for their views on a number of government services. In every area except health care, most respondents were dissatisfied.

22. Many Canadians probably imagine that I too have a negative view of government, since part of my job as Auditor General is to identify problems. Of course, our audits do uncover problems. We highlight these issues to improve government, not condemn it, because good government is important to all Canadians.

23. Before discussing some of these issues, I think it is important also to recognize the positive, because there is much that government is doing well. To me, one development stands out as particularly significant: the federal government has begun taking a more strategic approach to government programs and services, beginning with the Program Review exercise of 1994. Departments have been rethinking matters that were once beyond question. New fiscal realities have been a major impetus for this type of change.

24. At a more specific level, our audit chapters contain many positive messages. In some cases our conclusions are generally favourable, as on the administrative consolidation of Revenue Canada ( Chapter 20 , September) and on the implementation of the payment process for $1.2 billion in interim payments under the Western Grain Transition Payments Program ( Chapter 28 ). But even audits that are highly critical contain important messages about areas that are working well. All too often, these get overlooked in the attention given to the negative aspects of our reports.

Action on previous audits
25. It is also important to recognize that government acts on many of our audit findings. It is not true, as some would contend, that government seldom deals with the issues we raise or the recommendations we make.

26. We normally re-examine the situation described in each of our audit chapters within two years to see what improvement has been made. This year, we report the results of such work in Chapter 38 (Follow-up of Recommendations in Previous Reports), and in other chapters throughout our Report. A number of these follow-up audits describe genuine progress in addressing our original audit findings. In the management of food safety, for example, the government has moved to consolidate all federally mandated food inspection and animal and plant health programs into a single food inspection agency, for which legislation has been tabled in the House of Commons.

27. For the past two years in our Part III Estimates (annual budget documents ), we have compiled information on the action taken on recommendations of previous reports. In our 1996-97 Estimates, we report on the status of about 600 recommendations from 1989 to 1993. This information is based on only limited monitoring, but it does provide a general indication of the extent to which government has acted on our recommendations. Our audit staff judged progress to be satisfactory for over 60 percent of those recommendations we were able to follow up. Action is not always as extensive or prompt as we would like, but it represents progress all the same .

28. In considering the many criticisms in this chapter and elsewhere in our reports, I think it is important not to lose sight of the fact that, for the most part, departments consider these criticisms to be constructive and they take steps to deal with the underlying problems.

Parliament plays an important role in improving government management
29. At times, government organizations disagree with our findings. Even when there is no disagreement, departments don't always give audit findings the priority they warrant. In these cases, by exploring and bringing attention to the issues involved, parliamentary scrutiny can make the difference between action and inaction .

30. In recent years, I have been pleased to see a growing interest by parliamentary committees in the work of our Office. In 1995-96, we appeared at 18 hearings of the Public Accounts Committee and at 13 hearings of 9 other committees.

31. As a matter of course, the Public Accounts Committee reviews each of our reports, selecting certain chapters on which to hold hearings. Following hearings, the Committee tables its own reports in the House and the government responds by setting out the action it proposes to take.

32. In this way, the Public Accounts Committee has often been instrumental in prompting government organizations to act . For example, its report after hearings on our 1993 program evaluation chapters encouraged stronger leadership by the Treasury Board Secretariat and asked our Office to report back on commitments made by the Secretariat during the hearings. As our May 1996 Chapter 3 noted, action to strengthen evaluation has been taken since the hearings, much of which we attribute to the attention given by the Committee.

33. For chapters that were not the subject of hearings, the Public Accounts Committee in recent years has requested progress reports from the responsible departments. This no doubt helps to spur action. This spring, a motion was introduced in the House of Commons by a member of the Committee, calling for the government to introduce legislation requiring all departments and agencies to table a specific response to the Auditor General's reports. It was heartening to see parliamentarians from all parties endorse this motion in a vote on June 18.

34. There are signs, too, that periodic reporting by our Office has begun to contribute to more prompt correction of problems. For example, some of our recommendations in October 1995 for better information about public sector deficits and debt were promptly incorporated by the government into the Budget consultation exercise and further endorsed by the Standing Committee on Finance. (Chapter 9 - 1995)

35. Over the years, parliamentary committee reports following our audits have generally supported our conclusions and recommendations, with few exceptions. An unusual situation occurred this year in relation to our observation on an advance ruling that had facilitated the tax-free movement from Canada of assets held in family trusts (Chapter 1, Other Audit Observations, May 1996).

36. Although the September 1996 report of the Standing Committee on Finance expressed the Committee's gratitude "for having directed Parliament's attention to these tax provisions", it did criticize the way we had presented the issue. In particular, the report stated that we had disclosed more information about certain taxpayers than was necessary, although it did not suggest we had breached any laws concerning confidentiality.

37. As Parliament's auditor, I deeply respect the right of parliamentarians to reach their own conclusions about the issues we report. Still, I stand by what we said in the audit report, and I am proud of the quality of the audit work my staff performed. I remain convinced that these were matters on which I have a duty to report to Parliament and that the information we disclosed about the transactions was necessary to inform Parliament properly about the magnitude of the issues involved.

38. I also believe that more recent events confirm my conclusion on the basic taxation issue. On 2 October 1996, the Minister of Finance responded to the Committee's recommendations by announcing changes to the income tax rules designed to close the loophole we had identified. In announcing the changes, the Minister noted that "the Auditor General has done his work as a watchdog." In his comments to the House of Commons on the proposed changes, the Chairman of the Finance Committee stated, "We came down fully and squarely against the type of thing that happened, in terms of trusts being able to take large sums out of this country. We have recommended that in the future that type of provision not be allowed." And in responding to questions in the House of Commons, the Minister of Finance said, "It is quite important that we understand what has happened here. There was a law in place in 1991, of which certain taxpayers took advantage. The government decided there was a loophole in the law which should be closed."

39. I do not believe that Parliament intends to have loopholes in the Income Tax Act . I do believe that the fact that one existed in 1991 and was used by certain taxpayers to their advantage supports my conclusion that the transactions ruled on circumvented the intent of Parliament. ( Chapter 1 - 1996)

The potential for cost savings
40. This year, as in past years, we have reported on several areas where departments could achieve significant cost savings. The potential savings are quite substantial :

  • Since 1980 we have identified significant problems in the government's materiel management practices and this report confirms that many of these deficiencies still exist ( Chapter 23 ). The elimination of excess inventory held by departments could save up to $1.25 billion in annual holding costs, according to a 1995 government estimate. Departmental initiatives since 1995 have attempted to reduce excess inventory and address other long-standing deficiencies. If departments do not succeed, hundreds of millions of dollars will be at risk.
  • The Treasury Board Secretariat has accepted many of the recommendations we made in last year's Chapter 12 and in Chapter 24 this year for improving the management of information technology projects. The Secretariat recently published its estimate that changing the way large system development projects are managed could help save over $1 billion in costs on projects worth $2.7 billion.
  • In Chapter 34 we note that National Defence has identified potential opportunities to save nearly $200 million annually through productivity improvements. The chapter makes recommendations on how the Department can improve productivity to achieve even greater savings.
  • As a result of our audit of Canada Pension Plan Disability operations, reported in September's Chapter 17 , we estimated that the exchange between the CPP and other insurers of information on termination of benefits could reduce CPP Disability benefit payments by $42 million per year.
41. The government has also acted, in some cases, on opportunities identified in past audits:

  • Following our 1995 audit, Treasury Board acted quickly to introduce new regulations for charging interest on amounts that are overdue to the Crown. This should encourage better management of non-tax receivables and, we estimate, could save up to $17 million annually. (Chapter 27 - 1995)
  • In May's Chapter 6 (Peacekeeping: Foreign Affairs and International Trade Canada) we reported that senior management needed to pay more attention to collecting amounts due from the United Nations. We believe that our audit contributed to raising the priority given to the collection function and that subsequent efforts resulted in an increased cash flow. Eighty-eight per cent of the $75 million collected from the United Nations in 1995-96 was collected in the second half of the fiscal year, after we began reporting these concerns to management.
42. Besides identifying direct cost savings, audits identify opportunities to use existing resources more wisely. For example, in May we noted in Chapter 9 that, with better risk assessment, Agriculture and Agri-Food Canada could increase the effectiveness of animal and plant health inspections without additional cost. Although these improvements are obviously beneficial, it may be very difficult to put a dollar value on them. So too, it is often difficult to determine the extent to which our audits contribute to savings compared with steps departmental managers might have taken without our reports. We describe the type of impacts that can result from our work in our Part III Estimates .

43. I believe that highlighting opportunities for cost savings is one of the most important contributions our audits can make. In this time of resource restraint, these opportunities are too important to ignore.

The pace of action must keep up with the pace of events
44. The fact that our audits usually find some deficiencies should not be surprising. In any organization as complex as the federal government, there will always be weaknesses requiring attention. The job of management is a never-ending process of identifying and reacting to current problems and new developments.

45. But the pace of these "new developments" is increasing dramatically. And that means that government organizations must be able to react more quickly, though no less coherently and thoughtfully .

46. The public is pressing for more openness, more consultation and better service and results. Technology is changing rapidly, especially information technology. Capital, labour, markets and knowledge itself increasingly transcend national borders. Fiscal restraint has brought expenditure cuts affecting almost all organizations, some dramatically. Numerous programs are being fundamentally redesigned and new alternatives for service delivery are being adopted. New issues evolve rapidly, and often cut across a number of government organizations.

47. Dealing with these pressures simultaneously is, as one public servant has put it, "like changing the wiring with the lights on."

48. In the past the approach to resolving these challenges has often been cautious but rather slow. With the pace of events, this old approach is no longer acceptable.

The Risks of Undermanagement in the CPP Disability Program, and Elsewhere

49. In every government program, there are certain management controls that are essential - without which the risks of failing to achieve value for money are high. If many essential controls are absent or clearly insufficient, I would describe the program as undermanaged, a concern I discussed in this chapter last year (Matters of Special Importance - 1995). That is our assessment of the state of the Canada Pension Plan Disability program, as reported in September's Chapter 17 (Canada Pension Plan: Disability).

50. In disability insurance programs, long-term recipients must be reassessed regularly to ensure that they remain eligible. But CPP Disability staff reassess few cases. Adjudicator's decisions need to be reviewed to ensure that applicants are handled equitably and consistently - but CPP Disability has no such formal and systematic quality control review. And information on cost and case trends is critical - but CPP information systems were of little use in providing early warnings and explanations of why benefit payments tripled in the last decade, now reaching close to $3 billion annually.

51. With these weaknesses in essential controls, as well as others described in the chapter, the CPP Disability program runs an undue risk of paying benefits to recipients who are no longer eligible, or who never were . In my opinion on the 1995 financial statements of the CPP, I noted that the amount of overpayments in disability pensions could be significantly higher than management's estimate of $14 million. ( Chapter 17 - 1996)

Child tax benefits and GST credits
52. The administration of child tax benefits and GST credits (Chapter 19, Revenue Canada: Child Tax Benefit and Goods and Services Tax Credit Programs, September) exhibits similar signs of undermanagement. Until August 1995, Revenue Canada shared responsibility for child tax benefits with Human Resources Development Canada.

53. While the launches of both programs were well managed, we found that the risk of error, fraud and abuse going undetected is high because the current system lacks a number of fundamental checks and balances. Control over enrolment of children for either child tax benefits or GST credits is weak, for example. Unlike other jurisdictions that require a birth certificate or other proof of eligibility, both programs rely almost exclusively on the honour system. In the case of child tax benefits, we noted that thousands of unentitled newborns may have been improperly included on the benefit rolls, meaning that tens of millions of dollars may have been paid out improperly. We were unable to conduct a similar analysis for GST credits but found that overall financial risks may be greater than for child tax benefits.

54. With over $30 billion spent to date in child tax benefits and GST credits, or some $8 billion per year, the situation is worrisome. I am encouraged, however, that Revenue Canada has prepared an action plan that covers many of the observations raised in my Report. ( Chapter 19 -1996)

There are many possible reasons for undermanagement
55. The reasons why programs become undermanaged are numerous. Program administration may be under-resourced. This is a greater risk in these times of fiscal restraint. It is one of the reasons why the work of a modern legislative auditor must go beyond looking for ``fat" in government administration. Sometimes the issue is underinvestment - not overspending - in program administration.

56. In other cases, administrative resources may be adequate but they may be allocated to less important functions. Or it may simply be that "getting the cheque out" is seen as much more important than getting the cheque out right .

57. Whatever the reasons, these examples illustrate why government services require alert and attentive management, especially when they involve massive expenditures that can quickly escalate. Good management will help ensure that money is available in the future for the programs Canadians value. Undermanagement is not an option - government programs cannot be allowed to run on "auto pilot".

The Importance of Service Quality

58. Canadians' impressions of government are formed to a great extent by their first-hand encounters with government services. The treatment we receive from government employees - the Customs officer at the airport, the agent on the telephone from Revenue Canada and the employment officer at an employment centre - leaves a lasting impression. Quality of service matters.

59. To examine how service quality is being managed, as reported in September (Chapter 14), we chose the example of telephone service. A significant, and growing, proportion of contacts between Canadians and government is by telephone - 30 million calls completed each year in the six major government telephone services examined in Chapter 14. We examined other specific telephone services in Chapter 19 on the Child Tax Benefit and Goods and Services Tax Credit programs and Chapter 20 on the administrative consolidation of Revenue Canada.

60. To the public, the quality of telephone service comes down to several key things: being able to get through to the service, receiving accurate information and being treated properly.

61. The quality of government telephone service clearly is not providing Canadians with an acceptable level of service. For example, over 90 percent of the tens of millions of calls made last year about child tax benefits and GST credits received a busy signal. Few departments check the accuracy of information that agents give to callers - one department that did found that accuracy of responses is 80 percent at best.

62. Increased automation can help, but it is not the only answer. Government organizations need to understand why so many calls are necessary in the first place and re-engineer operations to reduce the need for Canadians to call government services or, if nothing else, to smooth out peaks in call patterns. ( Chapter 19 -1996, Chapter 20 - 1996)

Are departments properly managing service quality?
63. We examined government telephone systems as part of a broader look at whether departments have appropriate practices to manage service quality (Chapter 14). It is widely accepted in the private and public sectors that organizations must have a clear idea of user expectations, understand the cost implications of different levels of service, set delivery targets, measure actual performance, and use client feedback to determine the best way to improve service.

64. During the 1990s, the government has made repeated commitments to establish service standards and to report performance against these standards. For example, the 1994 Budget committed each government department to set and publish standards by 1995. So far, progress has been slow and uneven, and deadlines have been missed repeatedly .

65. The reason to move forward with service standards is not simply a matter of fulfilling commitments. Service quality in many areas other than telephone services needs to improve.

66. This was the conclusion of recent research conducted for a deputy ministerial task force examining service delivery models. The results were sobering. It found that users of government services put most value on promptness, convenience, receiving an open and candid response, and being able to cut through bureaucracy. In each of these areas, between only one quarter and one half of survey respondents were satisfied - a sizeable expectation gap.

67. Significant improvements will require action on several fronts. Wise investment in information technology would help. Managers need a better understanding of user expectations and levels of satisfaction. Publishing service standards can help ensure that users' expectations are realistic, by giving Canadians a clearer idea of the kind of service they can expect. As Chapter 14 describes, there is evidence that taking these steps can improve the satisfaction of service users.

68. As we try to understand Canadians' views about government, we should not underestimate how poor service can damage public attitudes toward government, or how good service quality can improve them. ( Chapter 14 - 1996)

Previous Challenges Remain

69. A number of issues from past years continue to be very relevant. I have described them in detail in previous reports and I comment briefly here on why they remain matters of special importance. There is some progress to report, but in most cases I remain concerned that considerable work still needs to be done .

Strengthening the tax system
70. The significance of Canada's tax system is self-evident - it is the source of revenue on which government relies to fund programs and to service our accumulated debt. For this reason, the performance and fairness of the tax system and the integrity of the tax base have been a prime focus of our audit work in recent years. Parliamentarians from all parties have encouraged us to maintain this emphasis on tax issues . Tax issues are sometimes difficult and controversial, but I remain committed to this aspect of our audit work.

71. This year we issued six audit chapters and an audit observation dealing with the tax system. Taken together, the audits highlight the need to strengthen and streamline anti-avoidance activities, carry out more and better-targeted audits, and strengthen administrative checks and balances.

72. Given the considerable attention we have paid to the tax system, it is not surprising that we have identified a large number of tax issues. An equally extensive scrutiny of other areas of government might well yield an equally long list of issues . Still, the critical importance of Canada's tax base - the very reason why we continue to devote considerable audit resources to the tax system - makes action on these matters especially important. As we saw in the case of family trusts, our audits can result in significant improvements in the fairness of the tax system. Next year, we will report a comprehensive follow-up of government action taken on tax issues raised in our reports of recent years.

Stronger financial management and control
73. Last year, I said that my staff continued to find significant problems in financial management and control across a broad range of government operations (Matters of Special Importance - 1995). Other examples have come to light in the past year. For example, a number of chapters note that important decisions were made without adequate cost information and analysis; these include Chapter 5 (The Reform of Classification and Job Evaluation in the Public Service), Chapter 17 (Canada Pension Plan: Disability) and Chapter 32 (Parks Canada: Management of Historic Canals). As described in paragraphs 50 through 54 of this chapter, we found control weaknesses in the CPP Disability program and the Child Tax Benefit and GST Credit programs.

74. These examples raise a more basic question: Just how strong are financial management and financial control in federal government organizations? We have become convinced that departments and central agencies need to assess their internal financial capabilities more systematically. This includes everything from the basic ability to control assets, revenues, expenditures and liabilities to the ability to generate and use future-oriented financial information to support planning and decision making.

75. We have under way a number of audits of departmental financial management and financial control. In addition, we are working with senior government officials to develop a more effective means of measuring an organization's capability to exercise financial management and financial control. The results of this work will be reported beginning next year.

Managing the risks of information technology
76. For a number of years, we have expressed concern that the significant risks involved in large information technology projects are not being well managed. Our audit last year of four large systems found that only one was managing risk properly. The results of our audit this year of four other large information technology projects were no better - again, only one managed risk effectively and proactively, as we report in Chapter 24.

77. Efforts by the Treasury Board Secretariat in the past year to develop a new framework for managing information technology projects have been moving in the right direction. With, we estimate, over $5 billion in information technology projects under way or planned, it is critical that the investments in these projects be managed to ensure that the government obtains expected results. We intend to continue to review information technology projects until we are satisfied that the principles of sound project management and effective risk management have taken hold. (Chapter 12 - 1995, Chapter 24 - 1996)

Ethical standards in government
78. In May of 1995, we reported the results of our study of ethics and fraud awareness in government, which concluded that the ethical base of the public service, while strong, required attention. I stressed that ethics need to be discussed openly, difficult as this can be.

79. Some attention has been given to the subject since then. A deputy ministerial task force has been examining values and ethics. In recent months, the task force has been presenting, and consulting widely on, its findings. We are pleased that the task force has been advocating an "ethics regime" much like the ethics framework we proposed in our study.

80. I intend to return to the subject of ethics in future reports. (Chapter 1 - 1995)

Administrative decentralization: clarifying the role of central agencies
81. There has been significant decentralization of administrative authority in the past decade, providing managers with much-needed flexibility to deal with rapid change. Last year, I discussed a number of issues that I believe need to be addressed if administrative decentralization is to be successful. (Matters of Special Importance - 1995)

82. Among these issues is the question of how a modern central agency - in particular, the Treasury Board Secretariat - should operate. For example, in our audits we frequently encounter the question: How actively should Treasury Board Secretariat monitor various departmental activities?

83. I am encouraged to see the Secretariat commit, as part of its annual Outlook Document to Parliament, to re-examine its activities and to develop "an accountability framework which clearly articulates the relationships and accountabilities between the Secretariat and other government organizations." If successful, among other things this should help parliamentarians and our Office determine who should be held accountable in specific situations.

Better co-ordination among organizations
84. Canadians expect taxpayer-funded organizations to co-ordinate activities and to work co-operatively.

85. In the past year, we have seen some encouraging signs. I sense a change in attitude in the public service. Senior officials have devoted significant time and energy to the work of task forces dealing with cross-government issues. Senior officials, too, have talked a great deal about the need for better co-ordination, with much of the discussion focussed on the need for better co-ordination of policy development in the federal government.

86. I think they must also work on the need for better co-ordination of operations, and not simply among federal government organizations. The example of Correctional Service Canada - Reintegration of Offenders ( Chapter 30 ) in this Report demonstrates what happens when co-ordination is inadequate: poor information exchange among federal, provincial and municipal governments on the background of offenders and other relevant information has created delays, excess costs and unnecessary security risks .

Renewing the management of human resources
87. I continue to be concerned about the need to streamline the structures and rules that govern how public servants are managed.

88. I am encouraged by initial efforts to remove the constraints faced by those who manage scientific personnel ( Chapter 15 ). But, as described in May's Chapter 5 , reform of the classification and job evaluation system - which many see as a cornerstone of human resource management - has taken about six years, and still is incomplete. Moreover, we concluded that further opportunities remain to simplify the system.

Part II: Information and Accountability

Creating a Better Appreciation of Government's Financial Condition

89. One of my continuing priorities as Auditor General has been the quality of financial information that the federal government provides to parliamentarians and Canadians. I have seen encouraging progress - but we should not regard these efforts as complete.

90. I am pleased that our message last year - that it is every bit as important to focus on debt as it is on deficits - has been embraced by others (Matters of Special Importance - 1995). The Governor of the Bank of Canada and the House of Commons Finance Committee have supported our suggestions, as have a number of other experts in the field. The government itself has indicated that its ratio of debt-to-gross domestic product needs to be reduced.

91. I believe government can continue its progress toward better financial information and, more specifically, further improve the information it provides on its financial condition.

92. A study group assembled by the Canadian Institute of Chartered Accountants (CICA) has been tasked with developing a framework of indicators to provide insight into the overall financial condition of federal and provincial governments. I chair this group and we anticipate reporting our findings late this year or early in 1997.

93. We have identified three general criteria for assessing the financial condition of governments: the sustainability of the debt burden, a government's flexibility to raise revenues through taxation (or through borrowing, should it need to), and its vulnerability to forces beyond its control. The study group is developing a core set of indicators for each of these three areas.

94. The group has recognized that no set of indicators or benchmarks can provide an unambiguous presentation of financial condition. Judgment will always be involved in forming opinions in this area. But with the information provided by this core set of indicators, views on financial condition should become less subjective .

95. In 1994, the government produced its first succinct annual financial report, incorporating the five indicators we had recommended the previous year. I believe that an important next step is for government to revisit the annual financial report and include the CICA's proposed indicators.

Government Needs to Do More to Account to Parliamentarians and Canadians

96. Information on the debt and deficits has improved in recent years, but the same is not consistently true of other information provided by the federal government. The need to provide better information to parliamentarians and Canadians is one of the most common - and long-standing - problems we find in our audits. It is also a problem the government has recognized and, as described later, one on which it has begun to act.

97. Before turning to why this problem persists and what needs to be done about it, it is worth explaining why I consider these to be matters of considerable importance.

Restoring confidence in government: why information on results matters
98. The reasons why parliamentarians need good information on results stem from the very essence of our system of democracy: Parliament's role is to hold the government to account. Whether it be for voting on annual spending, reviewing future years' priorities and plans or scrutinizing past performance, parliamentarians need good information on the activities, plans and results of government.

99. Many ordinary Canadians, too, are interested in this information. As voters, they hold the government to account. And, as taxpayers, they want to know what they are getting for their tax dollars. A recent study by Ekos Research Associates found that the item most often cited by Canadians for improving governance was "accountability for measured results and effectiveness".

100. The results that matter to Canadians are those outcomes of government programs that affect their lives and conditions, such as economic growth and jobs created, the state of the environment, the fairness and equity they receive through regulation and administrative procedures, the level of service they get when dealing with government and the government's financial condition.

101. Canadians interested in public affairs want information with which to form considered opinions on current issues. Where government has provided good information to Canadians, I think public debate has been enhanced. Two examples come to mind. As noted earlier, improved debt and deficit information in recent years has helped give Canadians a better appreciation of the government's financial condition. Much the same is true about the debate following the release of the government's discussion paper, "Improving Social Security in Canada", for which the government distributed a great deal of background analysis by independent researchers.

102. Knowledge about government is low. Many Canadians know little about government. Another study by Ekos Research Associates found that interest in and knowledge about government and politics among Canadians was low, and that negative views about government were strongest among the least informed. This, too, is cause for government to do more to explain its activities.

103. These reasons for improved reporting are not new. What is relatively new - and what to me is perhaps the most compelling reason to improve reporting - is the level of public skepticism about the effectiveness of government services. In the absence of credible information on program results, many Canadians no doubt imagine the worst.

104. In Chapter 29 we report on one government organization that has been attempting to improve the information it provides on results - the Canadian International Development Agency (CIDA).

Dealing with public perceptions of government: the case of CIDA
105. As noted in Canada in the World, the government's foreign policy statement, "Canadians want to be sure that their aid dollars are being used effectively, that their help is making a difference in the lives of people benefiting from Canadian assistance..." But studies show Canadians becoming more and more skeptical about whether aid is indeed achieving results.

106. At the same time, CIDA - the organization responsible for delivering Canada's Official Development Assistance program - has been attempting to reorient its management culture toward the achievement and reporting of results.

107. In this Report (Chapter 29), we comment that the Agency has given this considerable attention, and that a results orientation has emerged within the Agency. But progress has been slower than either CIDA or we had expected. The Agency readily acknowledges that a great deal remains to be done. We are continuing to work with the Agency to deal with the challenges it faces.

108. It is risky to be unable to demonstrate results. The reason for CIDA to move ahead with courage and determination is not simply to satisfy the demands of Parliament or our Office. In this time of resource restraint and skepticism about government, it is risky indeed to be unable to demonstrate results clearly and convincingly . The public does not see CIDA's accomplishments, and will not, until sound reporting of results is in place. Instead, the public hears mainly about problem cases.

109. Whether the subject is development assistance or any other government service, credible information on results is a critical tool. Even when results are negative - and the complex nature of public policy almost ensures that all will not be positive - an astute institution acknowledges its weaknesses and the risks it faces and explains how it is addressing them. Openness and candor about difficulties often leave little ammunition for critics, and reassure the public that the institution is seeking to improve the situation.

110. By doing this, institutions build public trust. That, ultimately, is why information on results matters ( Chapter 29 - 1996).

What needs to be done: thoughtful, not indiscriminate, information on results
111. Some argue that measurement of performance in government is impossible. I disagree. But the disagreement might be more over what is meant by measurement than over something more fundamental.

112. For many, "measurement" means trying to determine the precise magnitude of things. Our Office sees "measurement" more broadly, as the gathering of relevant information to enhance understanding about what a program is accomplishing.

113. Almost always, some sort of measurement is possible. In some cases, we can measure actual performance in quantitative terms, but sometimes "softer" measurement tools such as users' views on performance have to suffice. Not everything can or should be described by a number. We need to be astute in deciding what to measure and when. A high degree of precision is costly and not always warranted; cost and precision must be balanced. If measurement is done sensibly, the benefits will outweigh the costs.

114. For these reasons, measurement will often suggest rather than prove the level of performance . This is acceptable as long as users are informed of the limitations, which existing government reports commonly fail to do.

115. Measurement does not replace judgments on the value of programs; it allows officials, ministers, parliamentarians and other Canadians in general to make value judgments based on better evidence than would otherwise be available. This is especially important at a time when major decisions are being made throughout all levels of government to restructure services.

116. And since each of us may value different aspects of performance differently, we may very well arrive at different assessments of the performance achieved. Measurement does its job by enlightening - not ending - debate on the issues of the day .

Recent efforts show promise
117. Although inadequacies in the reporting of results have persisted for many years, there have been encouraging developments in the last year. In the past I have been frustrated by the lack of action; now I am cautiously optimistic about the chances for progress.

118. Following concerns expressed by our Office, and by the 1979 Royal Commission on Financial Management and Accountability (the Lambert Commission), reporting to Parliament on departmental spending was significantly improved in the early 1980s with the introduction of Part III of the Estimates. In 1992, our Office completed a review of this departmental reporting. Our Report echoed the frustration of many parliamentarians and public servants with existing departmental reports. We made a series of recommendations to make the reporting more useful.

119. Action on our 1992 Report was slow, but important steps have been taken in the past year. Reporting in the Estimates is being revamped as part of a broader effort to revise the government's Expenditure Management System.

120. On a number of occasions, I have expressed my support for this initiative and the direction it is taking. The key question is whether good ideas can be translated into good practice. Although early pilots show some improvements over previous departmental reporting, they still have a long way to go to equal the reports of public sector organizations in some other jurisdictions, such as the Province of Alberta.

Progress has been hindered by insufficient will
121. Current efforts to improve the reporting of results are likely to succeed only if we understand why deficiencies have persisted for so long. Work under way in our Office is looking at this question. At this time, let me suggest some initial explanations.

122. Rarely a high priority. First, progress has been slow because improving information on results has rarely been a high priority. Had it been among the top priorities of governments, we would have seen marked progress long ago.

123. Better public information does not become a priority on its own. Few in government disagree that parliamentarians and Canadians deserve to be better informed about government. But there is no lack of other priorities that compete for attention.

124. If parliamentarians and interested groups want to be better informed about government, then they must clearly and consistently demonstrate that they consider this a priority. Several years ago, the senior government official charged with improving departmental reporting said he found it like pushing on a rope: what he needed was a stronger demand by parliamentarians and the public. In jurisdictions with good accountability reporting, political leaders often have been the driving force .

125. The other, and perhaps more important, reason why progress has been slow is rooted in the attitudes of government officials. The reporting of results is often seen as nothing more than giving ammunition to critics . This view needs to be challenged and changed.

126. Leadership is needed to make results measurement an integral part of organizations. Providing information on results should not be left only to program evaluators and other measurement specialists; each manager should regularly report results up through the management hierarchy to the minister and finally to those outside the organization. Reporting results must be seen as a way of demonstrating what has been accomplished and what has been learned.

127. Is it time for a legislative solution? Some jurisdictions - the United States, New Zealand, Western Australia, Alberta and others - have enacted, or are considering, legislation requiring that government provide a full accounting of performance. A broadly similar requirement has been in place for federal Crown corporations since 1984.

128. The idea of enacting such legislation deserves consideration. Not only would it limit the ability of government to avoid accountability reporting, it would also allow Parliament to demonstrate the importance it attaches to this reporting. It would be a requirement that would continue notwithstanding political or administrative change. The idea is one that parliamentarians may wish to explore.

129. Still, it should be possible to make strides in accountability reporting without resorting to legislation. And, even with legislation, success will require the genuine commitment of government officials to provide meaningful and solid accountability information. There is a risk of arming critics, but in the face of skepticism about government institutions, the bigger risk is to fail to demonstrate the results being achieved with taxpayer dollars.

Government Change Means that Accountability, Too, Must Change

130. Informing parliamentarians and Canadians about what is being achieved with taxpayers' dollars - the subject of the preceding section - is only part of the broader issue of accountability in government.

131. Accountability is not a new issue to me. Within a short time of becoming Auditor General in 1991, I became convinced that the need for better accountability was one of the most pressing issues facing the federal government. That fall, in my first Report, I observed that accountability was often talked about in Ottawa but that its practice was much less evident (Matters of Special Importance - 1991).

132. The changes that government is undergoing bring many of these challenges to the forefront. I am convinced, more than ever, that real advances in accountability are needed . I am heartened by recent discussions with senior public servants that indicate they share this view . However, better accountability has not been prominent among the government's stated priorities for the public service.

Why accountability matters
133. I see accountability as a corrective mechanism, much like a course correction system on an aircraft. When accountability in public institutions is working well, problems that arise from time to time are identified - either by the institution itself or by parliamentary or public scrutiny - honestly acknowledged and quickly corrected. Too often, Canadians perceive this accountability to be lacking.

134. If we are to make real progress toward better accountability, effort is needed in two areas. We need a clear, updated vision of what good accountability involves. Then we need to apply it in practice. Our Office has been working actively in both areas.

What modern accountability involves
135. From what we have learned in audits of accountability arrangements, we have identified a set of five key elements without which accountability is significantly weakened:

  • clear roles and responsibilities;
  • clear objectives and performance expectations;
  • performance expectations that are balanced with the capacities (authorities, skills and resources) of each party;
  • the reporting of credible and timely information on what was achieved and what was learned; and
  • informed review and feedback on the performance achieved, in which achievements are recognized and necessary corrections made.
136. Expanding beyond accountability for compliance and toward accountability for results requires different expectations for the accountability relationship. The results sought in the public sector are frequently difficult to achieve. In many cases, it may be unfair to hold officials responsible for achieving results that are significantly beyond their control . But it is fair in all cases to hold officials accountable for doing everything possible to maximize the chances that desired results will be achieved, while still adhering to due process.

137. The above-noted elements are essential to, but not enough for, effective accountability. Significant cultural change is also required. There needs to be a supporting set of values in play that encourages honesty and integrity. People need to stand up and take responsibility for their actions and decisions - for what they have and haven't accomplished.

138. Key to bringing about this cultural change are the ministers to whom the public service reports. They need to show leadership and support for a results-focussed public service, and be willing to learn when things do not go as well as expected. Further, as a result of moves toward greater autonomy in the public service (for example, with alternative delivery arrangements), there is pressure to define more precisely the accountabilities of the public servants who head government organizations. In some instances, traditional aspects of ministerial accountability are being challenged.

The challenge of accountability in joint programs: lessons from the Infrastructure Works program and from First Nations
139. A modern concept of accountability must also reflect the increasing involvement of other parties in the delivery of federal government services. In some cases, these joint arrangements are similar to partnerships, as with many federal-provincial arrangements. In other cases, they involve third parties in service delivery, such as CIDA's use of independent agents to deliver development services.

140. These joint arrangements can bring many benefits, with each party contributing its own expertise and perspective. But with a number of parties involved, accountability can become diffused - a concern I have expressed before (Matters of Special Importance - 1995).

141. The case of the Canada Infrastructure Works program. The Infrastructure Works program, reported in Chapter 26, is perhaps the most visible new federal-provincial program in recent years. Expenditures by various levels of government will exceed $6 billion, with $2 billion funded by the federal government and the remainder by provincial and municipal governments and other project proponents. These are sizeable amounts. The program is important, too, because it has been seen as a model for future federal-provincial programs, and may itself be extended or renewed.

142. The program exemplifies the central accountability challenge of partnership programs: when the federal government relies on others for the day-to-day running of a program it helps to fund, for what exactly is it accountable? And how can it ensure that it meets these accountability obligations?

143. The answer seems clear to me: the federal government is responsible for ensuring that an administrative framework is established incorporating the five key elements (paragraph 135), that these arrangements are properly implemented, and that credible information on results is reported to Parliament.

144. As the chapter describes, we found that the administrative framework worked well in a number of important respects. We also identified areas where improvements are required. For example, in most cases there were weaknesses in procedures to ensure that the program would "make a difference" by triggering infrastructure investments over and above those that would have been made in its absence. We estimate that as much as one third of the program's spending in 1994 did not lead to additional infrastructure investment. However, in some regions of the country, arrangements were in place that had the potential to produce better results.

145. The federal-provincial agreements that provided the primary administrative framework for the program were not clear about requirements for ongoing performance information or compliance audits. We found little or no monitoring of operational performance in practice. Similarly, timely audits to verify compliance with program terms and conditions were not being carried out in all provinces. Such feedback is essential where the federal government is relying on others to undertake program implementation.

146. Job creation results reported to Parliament did not always address limitations arising from the estimating methods used, or point to possible shortfalls in the program's additional investment effects. An evaluation of the program, addressing a number of key issues of program design and impact, was completed in time to provide input to decisions on future directions. However, it did not address adequately the program's success in stimulating additional investment.

147. If the Canada Infrastructure Works program is to be renewed or extended - or if other similar programs are to be established - it will be important to heed the lessons learned from the present program so as to establish a more effective accountability regime ( Chapter 26 -1996).

148. How First Nations view accountability. Another important lesson about the accountability challenges in partnerships is suggested in September's Chapter 13 . Traditionally , in hierarchical arrangements, accountability has been designed to serve merely the party delegating responsibility. The First Nations that participated in our study believe that accountability mechanisms should serve both parties; that, for example, systems to provide information from First Nations to government and Parliament should be designed also to meet the information needs of the leaders and people of First Nations.

149. This sounds like a sensible approach to partnerships in general. If all sides are well served by accountability mechanisms, the relationship is more likely to be effective.

150. In the case of First Nations, funding arrangements - the mechanism by which Indian and Northern Affairs Canada formalizes its financial relationship with First Nations - are short of this ideal. Chapter 33 in this Report notes that the Department is moving to introduce new funding arrangements that it maintains will address the accountability deficiencies and others evident in existing arrangements. We found that the new funding arrangements have many similarities to previous ones, and we remain concerned that the new arrangements may not significantly improve the situation. We are encouraged, however, that the Department is identifying needed improvements to the new funding arrangements as it proceeds with their implementation. In doing so, the Department needs to collaborate further with First Nations.

Improving accountability in practice
151. Good ideas about accountability are valuable only if they are put into practice.

152. The structural changes under way in government create not only the need for better accountability but also ample opportunity to apply new mechanisms and determine which ones work best. The government is indeed looking at different ways to ensure accountability in new service delivery arrangements.

153. Our Office, too, has been involved in a number of initiatives to help improve accountability in practice. We have examined accountability in specific audits and recommended ways to improve accountability arrangements. A notable example in this Report is our audit of the accountability and control of Canada's security intelligence and foreign intelligence activities ( Chapter 27 ), which identifies opportunities to strengthen further the accountability arrangements already in place.

154. We have also been working directly with government organizations to improve accountability. In a project launched this past year, we have been providing suggestions to a number of Crown corporations on how to develop and use performance indicators. And, throughout the development of the government's new Expenditure Management System, we have provided suggestions and critiques to central agencies and parliamentary committees.

155. Our role in assessing performance information. In our work with CIDA, and elsewhere, we have encouraged federal organizations to assess their own performance and to report on the progress, results and value achieved for money spent. Nothing would improve accountability more than if organizations themselves reported on value for money .

156. If federal organizations are willing to develop good performance reporting, then I am willing to consider providing some form of assurance on the information they present. Under draft legislation now before the House of Commons, I would be providing such an assessment for the new Canadian Food Inspection Agency being established.

157. I will continue to press the need for better accountability, and contribute wherever possible to its achievement.

Part III: Matters Affecting Our Office

The Commissioner of the Environment and Sustainable Development: A Status Report

158. Over the past decade, our Office has become more and more active in environmental issues and has done pioneering work in the application of audit principles to the environment. An example of this work is our review of federal contaminated sites in Chapter 22 of this Report.

159. Now, with amendments to the Auditor General Act in December 1995, come important changes in the way the environment is treated by departments and by our Office.

160. Each department is required to prepare a sustainable development strategy and action plan that will explicitly describe how it has made trade-offs among policy objectives. Each department will also specify how it will carry out its activities in a way that minimizes their impact on the environment.

161. The amendments charge me with determining whether funds voted to departments by Parliament are spent with due regard to the impact on the environment and on sustainable development. This codifies much of the type of work we have been doing in the past decade. The amendments also create the position of Commissioner of the Environment and Sustainable Development, who will monitor departmental sustainable development strategies and action plans; will track the response by ministers to petitions from Canadians on environmental issues; and will prepare a "green" report to Parliament each year on the government's performance with respect to the environment and sustainable development.

162. The first Commissioner of the Environment and Sustainable Development, Mr. Brian Emmett, took up his duties on July 22, and further staffing is under way to make sure the right resources are in place to do the job. We intend to present the first green report to Parliament in the first quarter of 1997.

Part IV: Conclusion

163. In this chapter, I have discussed a number of issues I consider to be of particular importance, all of which are affected to some degree by the changes government is undergoing. Notable among them is the need to control the risks of undermanagement, improve the quality of service, act on opportunities for cost savings and generally keep up with the accelerating pace of change. I have noted, too, how events and audit findings this year have reinforced a number of my continuing concerns about the tax system, financial management and control, information technology management, ethics, the role of central agencies, co-ordination among organizations and human resource management.

164. Perhaps the most important of these matters is the need for real advances in accountability and reporting to Parliament and the Canadian taxpayer.

165. Many other significant matters are contained in the May and September volumes of my Report, and elsewhere in this volume. Together they make a fairly daunting list of issues , problems and challenges facing the federal government. And yet they are only a partial reflection of the actions needed, since our audit work touches only a fraction of government activities in any one year.

166. These issues often defy simple solutions. In the past, I have described many of them as seemingly intractable - they are not impossible to deal with, but neither are they solved easily.

Ample Reason for Optimism

167. This would seem to be ample reason for pessimism, but I remain optimistic about the ability of government to deal with these challenges.

168. The first reason for optimism is that most of the issues and challenges have been acknowledged by government officials. As a notable example, there is a great deal of congruence between the challenges discussed in the annual reports on the Public Service of Canada by the Clerk of the Privy Council and those raised by our Office.

169. I sense a new openness to change, more than I saw in my early years as Auditor General. Morale in the public service has clearly suffered from uncertainty and expenditure cuts. But when I meet with senior officials of government organizations, I find mostly people who are excited by the opportunities that change brings and who are acting on them. The task for senior officials is to infuse their staff with this sense of excitement.

170. I see a broader recognition that we cannot run government by rules, structures and processes alone . The less tangible elements of management - the need to provide inspired leadership, build motivation and reinforce sound values - are getting more of the attention they deserve.

We All Must Deal with These Challenges

171. Without action by others, public servants on their own are unlikely to be able to deal with the many challenges facing government.

172. Parliamentarians and ministers have a role to play in putting government management issues on the political agenda. Examples elsewhere are telling: the most impressive improvements in government management and accountability in other jurisdictions have been driven by political leaders.

173. For all Canadians, the challenge is to be fair in our criticisms of government. Criticism can be healthy and constructive, but if blown out of proportion it can become dangerously self-fulfilling. As Henry Mintzberg, one of Canada's most respected management thinkers, recently remarked, "Societies get the public services they expect. If people believe that government is bumbling and bureaucratic, then that is what it will be. If, in contrast, they recognize public service for the noble calling it is, then they will end up with strong government. And no nation today can afford anything but strong government."

174. I couldn't agree more. By any standards, we are among the most fortunate and blessed of nations. Attempts to measure this with indices and scales merely confirm what we already know in our hearts.

175. And I think, too, in our hearts we know that a great deal of our collective success is the result of fundamentally strong national institutions and good government. In the final analysis, the many challenges we face come down to this: reacting promptly and wisely to change so that our national institutions remain strong and good government prevails. It is indeed a solemn responsibility. The test of our success will be whether, years from now, our grandchildren too will see their nation as fortunate and blessed.