This Web page has been archived on the Web.

2008 May Report of the Auditor General of Canada

This Report addresses a variety of issues that affect the daily lives of many Canadians, from infectious diseases to the cost of entering a federal park to the safety of air travel. Here is a brief overview.

Special Examinations of Crown Corporations—An Overview

Are Crown corporations properly managing their resources?

This Report contains a chapter on a part of our audit practice not frequently reported to Parliament, our special examinations of Crown corporations. The chapter also summarizes key findings of the 11 special examinations reported to Crown corporations since January 2006. This is the first time we have included such summaries in a Report to Parliament.

Unlike our performance audits of federal departments and agencies, special examinations are reported to Crown corporation boards of directors, rather than to Parliament. Very few special examination reports were released to the public until recently, and they have rarely been the subject of parliamentary hearings.

In its March 2004 Budget, however, the Government of Canada announced its intention to require that Crown corporations post special examination reports by the Auditor General on their websites. All 29 of the Crown corporations examined since then have done so. Now that these reports are public, we are bringing them to Parliament's attention in an overview of our special examination practice.

Crown corporations form a significant part of the federal public sector. They deliver important public programs in many sectors of the Canadian economy, including transportation, financial services, and culture. They employ about 90,000 people, manage more than $185 billion in assets, and have long-term liabilities of about $145 billion.

A special examination provides independent assurance to the board of directors of a Crown corporation that systems and practices are in place to ensure that

• the corporation's assets are safeguarded and controlled,
• its resources are managed economically and efficiently, and
• its operations are carried out effectively.

Any major weakness in the corporation's key systems and practices that could prevent it from achieving these objectives is reported as a significant deficiency. I am pleased that since our last report on Crown corporations in 2000, we have seen a marked decline in the number of corporations with significant deficiencies.

The publication of special examination reports provides an opportunity for parliamentary committees to examine the operations of Crown corporations and to hold them accountable. We intend to provide Parliament with annual summaries of the key findings of special examinations conducted during the previous year.

Management of Fees in Selected Departments and Agencies

Are fees being managed appropriately?

The federal government charges the public and industry diverse fees for goods such as certain government publications, services such as inspections, or the use of facilities such as a park campsite. It also charges for the right or privilege to use publicly owned or managed resources—the fee for a commercial fishing licence, for example. In the 2006–07 fiscal year, federal departments and agencies reported collecting about $1.9 billion in fees for everything from passports to licences for manufacturing pharmaceuticals.

The government must consider the value of a right or privilege in determining the fee to charge for it. However, in determining what fee to charge for a good (or service, or use of a facility), the government must consider the cost of providing it—and while the government may choose to charge less than that cost, it cannot charge more. In addition, it should document any other factors considered in determining fees.

We found that the methods used to establish the fees we examined varied significantly, notably the methods either to determine the cost of providing a good, service, or use of a facility, or to determine the value of a right or privilege. Some organizations had captured the full cost or the current value, while others had not. This means that some departments and agencies may not have the necessary information available when determining how much to charge.

We also found that Foreign Affairs and International Trade Canada allocated to the consular services fee (included in the cost of an adult passport) costs for activities beyond those outlined in the original approval of the fee. Using a method consistent with the original fee approval, we identified a trend of fee revenues in excess of costs.

Support for Overseas Deployments

How well does the National Defence supply chain respond to the needs of the troops in Afghanistan?

National Defence support to the mission in Afghanistan is essential to ensuring that troops have the supplies and services needed to conduct operations. We examined whether the Department has been able to meet the needs of the mission as it has evolved.

We found shortcomings in the supply chain that have contributed to delays in moving supplies to Afghanistan. In addition, the system does not provide enough information to track the arrival and whereabouts of all supplies. This has resulted in losing track of some items needed for operations and an increased risk of loss. We also found that some key equipment has been difficult to maintain because of spare parts shortages and reduced stocks as equipment begins to wear out.

Despite the problems we identified, National Defence has been able to deliver its equipment and supplies to troops in Afghanistan who need them. But this was often due more to the concerted efforts of personnel than to the system's design. A growing number of contract support personnel have also been needed for maintenance and other services that help keep operations going. Unless the problems we found can be resolved, National Defence could find it increasingly difficult to support the mission.

Oversight of Air Transportation Safety

How well is Transport Canada managing the shift to a new system of safety oversight?

Transport Canada is the first national regulatory authority in the world to introduce regulations requiring aviation companies to implement safety management systems (SMS). The new approach to air transportation safety is a requirement of the International Civil Aviation Organization (ICAO) for all member countries by 2009. According to ICAO, the rapidly expanding aviation industry and the limited resources of oversight authorities make it increasingly difficult to sustain the existing approach to managing safety. Under the new approach, Transport Canada's focus will shift from traditional oversight, such as conducting inspections and audits, to assessing the safety systems that companies have in place.

We examined Transport Canada's management of the transition to the new approach for the first sectors to make the shift. We did not examine the level of air transportation safety in Canada. Nor did we look at security—that is, protection against deliberate acts of terrorism.

Transport Canada conducted pilot projects with airlines and small operators and developed appropriate procedures for implementing SMS. The first two phases of the four-phase approach to SMS—implementation by airline operators and associated aircraft maintenance companies—are now complete.

We found that in planning the transition, the Department did not document risks, such as the impact of the transition on oversight of air transportation safety, or identify actions to mitigate the risks. Nor did it forecast the overall costs of managing the change. In addition, it has not measured the impact of shifting resources from traditional oversight to the new approach.

We found that Transport Canada has not yet identified how many inspectors and engineers it needs, with what competencies, during and after the transition. It could find itself unable to recruit the right mix of skills when it needs them.

The next phase of the transition will involve many more companies than the first phase did. In order to manage it successfully, Transport Canada will need to address these weaknesses.

First Nations Child and Family Services Program

How well does Indian and Northern Affairs Canada serve First Nations children under its Child and Family Services Program?

Children are among the most vulnerable people in society. We looked at child welfare services funded by Indian and Northern Affairs Canada (INAC) for First Nations children and families living on reserves.

At this time last year, over 8,000 First Nations children ordinarily resident on reserves were in the care of child welfare services funded by INAC. This number represents a little over five percent of children living on reserves and is almost eight times the proportion of children in care living off reserves. We found that the funding the Department provides to First Nations child welfare agencies for operating and administering child welfare services is not based on the actual cost of delivering those services.

We also found that INAC lacks assurance that the services funded by its Child and Family Services Program are culturally appropriate and reasonably comparable with those provided for children off reserves in similar circumstances. It also has limited assurance that the services are meeting provincial legislation and standards.

The Department needs to better support, manage, and oversee the program. It also needs to obtain better information on the outcomes for children receiving the services.

The Auditor General of British Columbia (BC) is presenting a separate report to the BC Legislative Assembly on BC's child welfare services to First Nations and Aboriginal children. Our audits were conducted concurrently to obtain a broader view and understanding of the problems and minimize duplication of effort.

Surveillance of Infectious Diseases

How well does the Public Health Agency of Canada track threats posed by infectious diseases?

The Public Health Agency of Canada is the federal organization responsible for the surveillance of infectious diseases. It was created in 2004, following the outbreak of SARS (severe acute respiratory syndrome) in Canada.

Effective surveillance of infectious diseases can lead to concrete actions, such as responding to outbreaks of food-borne illness, controlling insects that carry disease, and developing new vaccines. Well-informed and rapid public health actions can prevent and contain outbreaks, reduce the economic burden of infectious diseases, and ultimately save lives.

To obtain routine surveillance information, the Agency relies on the goodwill of the provinces and territories. However, due to gaps in its information-sharing agreements with them, it is not assured of receiving timely, accurate, and complete information. While a recent agreement with the province of Ontario re-established the routine flow of information about individual cases, there are no similar data-sharing agreements with other provinces and the territories.

With its partners, the Agency has laid the groundwork for sharing essential information in the event of a public health emergency. However, until critical arrangements are sorted out, it may be difficult for the Agency to obtain the information needed to prevent and respond to a disease outbreak. Faced with a public health threat that could affect other countries, the Agency may be unable to notify the World Health Organization within the times specified in the revised International Health Regulations and to keep it informed of subsequent events.

Conservation of Federal Official Residences

How well does the government conserve official residences?

The federal government provides official residences to the Governor General, the Prime Minister, the Leader of the Opposition, the Speaker of the House of Commons, and foreign dignitaries visiting Canada. The National Capital Commission (NCC) owns and manages the six official residences located in Ottawa-Gatineau, and Public Works and Government Services Canada manages the Governor General's secondary residence, La Citadelle, in Québec City.

Official residences are more than just housing for Canada's top political leaders; they are part of Canada's heritage, and, as such, they belong to all Canadians.

We found that the NCC has sound management practices to ensure that the official residences are conserved. However, the Governor General's residence (Rideau Hall) and the Prime Minister's residence (24 Sussex Drive) are showing signs of fatigue and wear. With federal funding it received in 2005, the NCC was able to undertake major repairs at Rideau Hall and to improve the condition of most other residences.

However, the Prime Minister's residence has not undergone any major renovations for more than 50 years. A number of elements, such as the windows, heating and air conditioning, and electrical and plumbing system, are nearing the end of their life cycle and are in poor condition. The NCC believes that rehabilitating the residence has become an urgent matter. This will be possible only if the NCC has prolonged access to the residence to complete the work, which it estimates would take 12 to 15 months, if there are no unexpected complications.

Detention and Removal of Individuals

How well does the Canada Border Services Agency manage the detention and removal of individuals who enter Canada illegally or who pose a threat to Canadians?

Each year, thousands of people who meet Canada's immigration policy objectives enter the country legally. Thousands of others who gain access to Canada do not meet these objectives, and some may pose a threat to public safety and security. When the Canada Border Services Agency (CBSA) was created in December 2003, it was assigned responsibility for detaining foreign nationals and permanent residents believed to be a public risk and removing individuals found to be inadmissible to Canada. This was previously the responsibility of Citizenship and Immigration Canada (CIC).

Our audit followed a request by the Public Accounts Committee to report on whether the management of detentions and removals has improved under the CBSA since 2003, when we audited those activities as part of CIC's control and enforcement program.

Since our last audit, the Agency has made a number of improvements in its management of detentions and removals. It better estimates the number of outstanding cases and focuses on removing the higher-risk individuals. The Agency has improved its identification of risks and tracking of individuals ready for removal. However, there is a growing number of individuals whose whereabouts are unknown and who might remain in Canada illegally.

We also found that the Agency does not collect suitable information to determine whether its policies are consistently applied so that individuals, regardless of their location, receive consistent and fair decisions about their detention or release. While the Agency sometimes requires individuals to report their whereabouts as an alternative to detention, it does not monitor the level of compliance. This may result in undue risk to the public.

I hope that parliamentarians find the information in this report useful in their scrutiny of these important areas of government activity.