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2007 May Report of the Auditor General of Canada

In the reports we present to Parliament, we provide answers to some important questions about the management of government programs and services. Are they managed with due regard to economy, efficiency, and their impact on the environment? And does the government have measures in place to determine if programs and services are effective in achieving the objectives set for them?

Our audit mandate covers the full range of activities of the federal government. Given the size of government and the scope of its activities, deciding what to audit is a challenging exercise. We may decide to audit an activity carried out in a single department or in several; we may select an issue that affects many departments. Choosing audit subjects well is essential to producing reports that are useful to Parliament.

We select areas for audit based partly on the risks they may involve. Examples of high-risk areas include those that cost taxpayers significant amounts of money or that involve public safety or national security. We may decide to audit an area that offers potential for improving government results or is of great interest to Parliament and the Canadian public. We pay particular attention to requests by parliamentary committees for audits of specific areas of concern to them, and we try to incorporate such requests into our audit planning where our resources and mandate permit.

This report includes two chapters on audits performed at the request of standing committees of the House of Commons. We audited the management of the RCMP's Forensic Laboratory Services, following a request by the Standing Committee on Justice, Human Rights, Public Safety and Emergency Preparedness. And we audited the Canadian Agricultural Income Stabilization program after receiving a request from the Standing Committee on Agriculture and Agri-Food.

Management of Forensic Laboratory Services

The RCMP's Forensic Laboratory Services is the main provider of forensic analysis for most police agencies and courts in Canada. A national laboratory service operating at six sites in Halifax, Ottawa, Winnipeg, Regina, Edmonton, and Vancouver, it provides a range of forensic analysis services relating to criminal cases. Among its responsibilities is the operation of the national DNA data bank containing DNA samples from thousands of convicted offenders.

Forensic labs are an important element of the criminal justice system, since investigators and prosecutors rely on forensics to help identify or eliminate suspects and to provide evidence that can hold up in court. Delays in obtaining results of forensic analysis can slow police investigations and leave criminals on the street to reoffend.

The request that we conduct this audit came after the Justice Committee heard conflicting testimony on the performance of the lab services and the status of DNA cases. At hearings of the Committee in 2004 and 2005, the RCMP had testified that its forensic lab services matched the best in the world, that the labs had no backlog of cases, that all cases involving violent crimes were given priority, and that the clients—police forces and prosecutors—were satisfied. Our audit found many of these claims to be incorrect.

We found that while the lab services can process urgent requests in less than 15 days, only 1 percent of all requests are classed as urgent. Among the remaining 99 percent, categorized as routine requests, are cases of violent crimes such as murder, sexual assault, robbery, and abduction. For most routine requests, the lab service is unable to meet its own turnaround target of 30 days, partly due to its backlog of DNA cases. For instance, on average a request for DNA analysis took 114 days to complete during the 2005–06 fiscal year.

We also found problems in the quality control of lab results. In practice, there are significant weaknesses in how quality issues are defined, recorded, monitored, and resolved. We did not audit the quality of the forensic science used and therefore offer no opinion on the validity of the analysis or the results. However, we found that the lab services' own quality management system had failed to identify problems with the new automated process for DNA analysis. After scientific staff questioned the validity and consistency of some DNA results, the automated process was shut down for several months. The difficulties continued, however, and lab officials did not identify the problem as a quality issue for more than a year.

We last audited the Forensic Laboratory Services in 2000. At that time, management committed to address our recommendations within three years. Now, seven years later, we find it necessary to repeat most of those recommendations.

Canadian Agricultural Income Stabilization

We audited the Canadian Agricultural Income Stabilization (CAIS) program following a request by the House of Commons Agriculture and Agri-Food Committee. The CAIS program was the latest in a number of programs developed by Agriculture and Agri-Food Canada to provide income support to agricultural producers when their farm income dropped due to circumstances beyond their control. Producers received a benefit payment based on information included with their applications to CAIS.

We found that the Department was not transparent in explaining how it calculated benefits. When it changed some of the information submitted by producers, it did not explain in the final benefits statement the reasons for changes or their impact on the benefit amount. As a result, producers did not receive in an easily understandable form all the information they needed to decide whether the payment they received was appropriate or whether they should appeal an unfavourable decision. Further, there were long delays before producers learned whether they would receive a benefit and in what amount.

We found that the Department focused on detecting overpayments to producers rather than possible underpayments. Given that the onus was on producers to identify and question incorrect figures in the statement sent to them by the Department, this approach was not consistent with the objective set out for the program in the Farm Income Protection Act—to protect the income of producers. Furthermore, we were surprised to discover that some of the staff involved in assessing applications were also acting as paid consultants to help producers prepare their applications. This practice contravenes the conflict-of-interest provisions in the Values and Ethics Code for the Public Service. We note that the Department has now instructed its employees not to do this.

Since we completed our audit work, the government has announced its intention to change the CAIS program. We believe the Department should look for ways to simplify the delivery of farm income support and make the process more user-friendly.

Human Resources Management—Foreign Affairs and International Trade Canada

Canada relies on the people who work in its missions to be its "face abroad." Foreign Affairs and International Trade Canada operates 170 missions in 111 countries around the world. In light of increasing globalization, its employees abroad and at headquarters in Ottawa must respond to growing demands for services from other government departments, individual Canadians, and Canadian companies. The government also relies on the Department for timely advice to help it develop its foreign policy.

It is important to Canadians that the Department have the right people in the right place at the right time and that it be able to act quickly and decisively in a rapidly changing environment.

We found that the Department has no strategic human resources plan. It does not have a complete picture of the people, competencies, and experience it needs now and in the future. In the next few years, more than half of its employees in the management category will be eligible to retire. The Department has been unable through its recruitment, promotion, and assignment processes to fill its positions in a timely way with enough people who have the required skills and competencies.

We also found that the Department does not pay enough attention to the management of locally engaged staff in Canadian missions abroad. Although these employees account for half of its workforce, the Department does not have accurate and complete information about them. It is not giving its missions the support they need to properly manage the local staff they rely on.

The Department has difficulty finding employees willing to accept postings to its missions in the United States or in dangerous parts of the world. The number of missions considered dangerous or extremely difficult has doubled since 1991. The process in place to compensate employees for living conditions abroad and provide incentives for hardship postings has not allowed the Department to respond in a timely way to changing circumstances. It has been working with the Treasury Board Secretariat to find solutions to these problems, but progress is slow.

Federal Loans and Grants for Post-Secondary Education

The Canada Student Loans Program of Human Resources and Social Development Canada (HRSDC) provides loans and grants to qualified students who need financial assistance for post-secondary education. In 2005–06, the Department loaned $1.9 billion to some 350,000 post-secondary students and awarded 78,500 grants amounting to about $129 million.

The grants provided by the Department and the Millennium Bursary and Access Bursary programs of the Canada Millennium Scholarship Foundation are designed to help limit the amount of debt that recipients accumulate. In 2006, the Foundation awarded almost $340 million in bursaries to over 100,000 students.

Although there are gaps in measuring and reporting program results, we found that the Canada Student Loans Program is well managed. The Foundation also manages its bursary programs well, and it measures and reports the results adequately. Both organizations have appropriate controls for disbursing payments to students.

The Canada Revenue Agency (CRA) contracts with private collection agencies to collect a large proportion of defaulted student loans on behalf of HRSDC. Both the CRA and HRSDC have a responsibility to monitor the private agencies' compliance with specified collection requirements. However, we found that neither one carries out this monitoring adequately.

HRSDC and the Foundation are taking steps to make prospective post-secondary students and their families more aware of the financial assistance available to them. The Department has also improved its communication to students about measures that would help them manage their debt.

This is the second foundation we have examined since Parliament amended the Auditor General Act in 2005, extending our mandate to include them in performance audits of related federal programs.

Modernizing the NORAD System in Canada

Canada shares the defence of North American airspace with the United States through the North American Aerospace Defense (NORAD) agreement. Together they operate an air surveillance and control system over North American airspace. In 1997, the two countries agreed to update and modernize this system.

Originally, the Canadian government approved funding of about $93 million to define requirements and modernize the Canadian portion of the NORAD system. The project included a new system and the construction of an above-ground complex to house it, which would allow National Defence to close its underground complex at North Bay, Ontario.

We found that the modernization project has taken longer and cost much more than planned. We estimate that the cost of replacing the NORAD system in Canada and providing a new above-ground complex will total about $156 million, almost double the original estimate. The cost of the modernization exceeded estimates because of the way the project was structured and managed. There were problems in project management and oversight and in the construction of the complex. The Department did not always inform the government in a timely way of changes in the project's scope.

The Department did not complete a review of building security requirements before construction of the above-ground complex and, at the time of our audit, questions remained about the security of the building and the feasibility of using it for the intended purpose. As a result, the Department has had to keep some operations in the underground complex.

Though it originally expected to save $16 million a year in personnel and operating costs after closing the underground complex and operating out of the facility above ground, National Defence was still operating both facilities at the time of our audit. Anticipated savings have not yet been realized.

Managing the Delivery of Legal Services to Government

Justice Canada can be characterized as Canada's largest law firm, with about 2,500 lawyers and a budget of close to $1 billion in 2006–07. The Department provides legal advice to federal departments, drafts regulations and legislation, and with a few exceptions, represents all departments and agencies in court. Since our last audit in 1993, the complexity and volume of litigation have increased significantly, and the cost of the Department's legal services has more than tripled.

We found that the Department relies on a number of quality management practices and the expertise of the lawyers it employs to help ensure the quality of the legal services it provides to the government. However, it does not know whether it is delivering the right level of quality, because it lacks a departmental quality management system and has not articulated what it means by quality. This impedes its ability to deliver consistent quality of service to the government and to assess whether it is meeting that objective.

The current cost-sharing arrangements with client departments provide little incentive to control costs and manage the demand for legal services—a problem Justice Canada has been aware of for a long time. We also found that it is inefficient to administer the current arrangements—there are more than 100 arrangements with the eight departments in our audit sample. Further, cost information provided to client departments is weak and inconsistent. Justice Canada also does not know whether it is delivering legal services cost-effectively.

The Department has made progress since our 1993 audit, mainly in managing the outside lawyers or law firms ("legal agents") it hires for prosecutions (which are now the responsibility of the Public Prosecution Service of Canada, a new organization separate from Justice Canada). However, we believe the Department would benefit from having a senior executive position with authority for management practices and the administration of legal services.

Use of Acquisition and Travel Cards

Acquisition and travel credit cards can be a convenient and efficient way for the federal government to obtain and pay for goods and services, and many federal departments are encouraging their use. With spending power placed directly in the hands of thousands of government employees with numerous operational needs, it is important that the use of these cards be properly managed and the associated risks taken into account. Acquisition card spending rose from $350 million in 1999 to over $626 million in 2005, and travel card spending rose from $170 million to about $200 million.

We examined the acquisition and travel card programs in National Defence, Fisheries and Oceans Canada, and Health Canada—the three departments that together account for about half of the total acquisition card use and a large portion of the travel card use in the government. We are pleased to report that our audit identified no cases of loss or abuse.

We found that all three departments have adequate controls over the use of travel cards. For acquisition cards, the control framework relies significantly on post-payment verification and certification to ensure that transactions are properly authorized.

We found that these key controls are not applied consistently and rigorously among the three departments or within each department. Lapses in the control and review of transactions leave departments exposed to risk. Moreover, post-payment verification and certification are not merely administrative niceties—they are an important application of law (section 34 of the Financial Administration Act).

We also found that government-wide policies on the use of acquisition cards have not been updated to reflect the considerable evolution and increase in their use over the last decade. For example, the cards are now used for very high-dollar purchases, and some cards have high credit limits—one as high as $1.5 million at one of the departments we examined. Also, both National Defence and Fisheries and Oceans Canada issue acquisition cards in the names of vessels or organizational units and not in the names of specific individuals. While this practice is not consistent with the government's present policy, departments have said it is practical from an operational point of view. Their position might be reasonable, but they have not received the Treasury Board's formal approval to issue the cards in this way. Clearly, a change in practice or a change in policy is in order.

Conclusion

I hope that parliamentarians find the information in this report useful in holding the government to account for its stewardship of public funds and its delivery of services to Canadians.