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Canadian Association of Management Consultants, Eastern Ontario Chapter

Notes for an address by Sheila Fraser, FCA, Auditor General of Canada, 26 February 2004, Ottawa, Ontario

Introduction

Good afternoon everyone. I would like to thank the Canadian Association of Management Consultants for inviting me to speak here today.

Now, I’m an accountant and auditor by training, but I’ve had the opportunity to work with many management consultants throughout my career, and I know that our disciplines share a lot in common.

When it comes to the heart of the matter, we all seek better management, whether we work in the private or the public sector.

And that means we place a high value on concepts such as accountability, transparency and good governance.

I believe these same concepts are important to the average Canadian — although he or she might express them in a different way. In fact, if asked, Canadians say that what’s important to them is to be able to trust their institutions to deal with them openly and honestly, to handle their money responsibly, and to fix mistakes when they happen, whether they are shareholders or taxpayers.

Most of you have probably heard a bit about our latest report in recent days…

As you know, one chapter of the report has received an unprecedented amount of media attention and is now the subject of a wide range of actions being taken by Parliament and a number of other bodies.

While I will discuss our audit of the sponsorship program, which has received a great deal of attention, I would also to talk about what we found in some of the other audits that make up our most recent report.

But before I get into the specifics, I would like to tell you a bit about work of the Office of the Auditor General.

And, finally, I’d like to answer a really big question — after our audits, does anything ever change?

But let me begin by saying how honoured and privileged I am to serve as Canada’s 10th Auditor General.

To me, this is not so much a job as it is a public trust.

One thing that has surprised me is the public attention I have received. As Auditor General, I fully expected that I would be in the public eye from time to time. That goes with the territory. What I didn’t expect is how recognizable I would become on an everyday basis.

For instance, people have struck up conversations with me as I’ve shopped for fish at the grocery store, and they’ve shouted encouraging messages to me on the street.

I’ve been called a hero and a wonder woman. I’ve also been accused of being over the top in the way I talk about my reports.

The truth is much more mundane. I’m no hero. I’m an accountant and an auditor doing a necessary job in our democratic system.

So why all this fuss?

I think it partly has to do with my preference for communicating in a forthright manner. I prefer to call a spade a spade, rather than a digging implement.

Many Canadians have told me they welcome that.

Now, I’m sure everyone in this room understands the implications of saying that contracts were awarded on a sole-source basis… or that projects were funded without a needs assessment, for example.

But the specialized terminology surrounding contracting management practices is far from familiar to most Canadians. So, the meaning and significance of what we say in our reports may not always be obvious.

I know from the comments and letters I receive that many people appreciate it when I connect the dots and state clearly that certain practices are unacceptable, inappropriate or — in some rare cases — “shocking” or “appalling.”

And such cases are indeed rare. Out of the 100-odd value-for-money audit chapters that have been tabled since I became Auditor General, I can count on the fingers of one hand how many times I have felt compelled to signal grave concern about the findings of an audit.

The audit of the Groupaction contracts, the firearms registry, the Office of the Privacy Commissioner and, most recently, the government-wide audit of the sponsorship program are the only ones that fall into this small group.

The vast majority of the time, our reports point out much less shocking failings—what would be correctly called management deficiencies—such as the lack of strategic plans and clear objectives, or the failure to manage risk well.

In the last few years, I have been taken aback by the reactions of ordinary Canadians who go to some lengths to express their appreciation for the work of my Office. Shortly after the recent tabling I even received a dozen roses from two wonderful gentlemen in Cape Breton Island!

I am overwhelmed and humbled by the response.

Role of OAG

But let me take a moment, now, to describe how the role of the Auditor General has evolved.

The Office is almost as old as Canada itself. Parliament passed an act back in 1878 to provide for Canada’s first independent Auditor General. And 125 years later, Parliament and Canadians are still benefiting from that enlightened legislation.

My Office is occasionally described as the government’s watchdog. But that’s not the case at all. It’s really Parliament’s job to watch over the government and hold it accountable.

My job is to audit government operations and give Parliament information, advice and assurance so that it can do its work effectively.

In other words, my Office conducts audits and then makes recommendations for change. But, it is up to Parliament to decide what to do based on this information and then up to government to take the needed action.

In 1977, a new Auditor General Act expanded our responsibilities to include a new kind of auditing—what we call value-for-money or performance auditing. Essentially, what we do is examine whether or not taxpayers are getting value for their tax dollars.

That means asking key questions. Questions such as: Are government expenditures being made with due regard for economy and efficiency? And is the government measuring the effectiveness of its programs?

It’s not our role to comment on the government’s policy choices. We focus on examining how those policies are implemented.

In 1995, our mandate changed again when Parliament created the position of the Commissioner of the Environment and Sustainable Development within the Office of the Auditor General.

Today, Johanne Gélinas holds that post. Along with her team, she audits the government’s environmental performance and monitors how well the federal government is keeping its promises. And, like me, she reports to Parliament on her findings.

Let me give you another measure of our activities.

With a staff of almost 600 people and an annual operating budget of some $70 million, we audit most areas of the Canadian government.

This includes about 70 federal government departments and agencies, about 40 Crown corporations (such as CBC, VIA Rail and Farm Credit Canada ), and about 10 departmental corporations and about 60 other entities and special audits.

We also audit two United Nations agencies. In addition, we audit the governments of Nunavut , the Yukon and the Northwest Territories as well as some 15 territorial agencies.

To be effective and credible in our work, we must be independent of government, both organizationally and intellectually. That independence has several safeguards.

First, I am an Officer of Parliament, appointed to a 10-year term—and I have the right to recruit my own staff.

Second, I have the right to ask the government for any information I need to do my job.

And, third, I submit my reports directly to the House of Commons through the Speaker.

How we choose our audits

Now, how do we decide what to audit?

As you can appreciate, we don’t have the resources to audit everything all the time. Even if we did, that would not be the best way to obtain value for money spent. So, we focus our attention on areas of greatest significance and risk.

For all of our audits, we use a risk-based approach. To select our value-for-money audits, we use an approach called one-pass planning. This method assesses the high level risks of the entities under study. And those entities can be anything from a particular sector or program to a department or functional area like human resources management.

To be credible, audits have to be objective and fair. Risk-based audit planning is objective because it assesses how well an entity is managing major risks, rather than simply looking at areas of suspected weakness.

The impetus to audit the sponsorship program was slightly different. Back in March 2002, the then Minister of the Department of Public Works and Government Services Canada asked us to do an audit of three large government contracts awarded to a communications firm called Groupaction under the sponsorship program.

In that audit, we found that many rules had been broken in the awarding of the contracts, and that in a few cases, there was no evidence of work done. This discovery led us to undertake a much broader audit of the sponsorship program — and the rest is history, so they say.

My focus areas

Now, I’d like to spend a few minutes looking at some of the findings in our recent report through the prism of the priorities I set for myself at the beginning of my mandate, almost three years ago.

The first priority on my list is to improve accountability to Parliament. This has been a priority for all Auditors General—so I’m no exception.

In my view, Canadians deserve the highest standards of accountability and ethics in the government’s conduct of public business.

In a large organization like the federal government, which spends about $180 billion a year, there are bound to be problems and failures, despite people’s best efforts.

The problems are not all the same, however. They can be the result of honest mistakes, taking risks that didn’t work out, poor management, or worse.

What disturbs Canadians in many cases is not the problem itself, nearly as much as it is the fact that no one is willing to take responsibility for the problem or take action to fix it.

Public trust in government erodes when significant problems in major programs, both actual and perceived, are allowed to persist even though they could have been prevented or corrected.

Over time, the impact of such events can snowball, leading Canadians to call into question the integrity of government as a whole.

The government recognizes this fact, and, over the past two years, has issued a number of documents containing guidelines and principles aimed at improving accountability and ethics.

For example, we now have a Guide for Ministers, Guidance for Deputy Ministers, and a management accountability framework for deputy ministers.

Together, these guidelines raise an important question that is central to maintaining trust in government: How, and to what extent, are ministers, deputy ministers and officials to be held responsible and accountable for government actions in the 21^st century? The guidelines attempt to clarify the meaning of responsibility, accountability and answerability, but they fall short on how these principles will be implemented.

Here’s a case in point. The Guide for Ministers and Guidance for Deputy Ministers go to some length to distinguish between accountability and answerability. According to the Privy Council Office, the distinction between these terms is that accountability includes personal consequences for a wrongdoing while answerability only involves explaining why something went wrong.

While some might think this is hair splitting, the Privy Council Office promotes this as useful distinction. By way of note, the British do not make this distinction when they speak about accountability.

Using these distinctions, the Guide for Ministers states that ministers are accountable to Parliament for actions taken in their current portfolio. They are also accountable for taking steps to correct errors, and to make sure they don’t happen again. It also states that current ministers are answerable for actions taken by previous incumbents.

But this begs an important question about the distinction between “answerability” and “accountability.” Let’s say an audit reveals problems that arose under the leadership of a former minister. Under these guidelines, the current minister is only “answerable” for the actions of a predecessor. It’s not clear who—if anyone—is accountable.

The government has also put out a values and ethics code for the public service, which lays out what is expected of public servants.

We applaud the work that has been undertaken so far to strengthen ethics and accountability in the government. It’s on the right track, but it needs to go further. We think the government needs to further explain how it intends to turn the principles in its documents into action.

Moving to my second focus area—the promotion of an effective public service. Once again, this is a long established area of interest for Auditors General, because an effective public service is critical to delivering services to Canadians at the best value.

With that aim in mind, our audits try to answer questions such as:

• Are the key resources of government—people, technology and financial resources—working together well to achieve results for Canadians?
• And do they make the best use of public funds?

In our audit of the sponsorship program, the answers added up to a resounding NO.

Between 1997 and 2001, we found that the government had run the sponsorship program—a program that consumed $250 million in public funds—in a way that showed little regard for Parliament, the Financial Administration Act, contracting rules and regulations, transparency, and value for money. Since documentation was very poor, there was little evidence of analysis to support expenditures.

In a few cases we noted in our report, some sponsorship funds were transferred to Crown corporations using unusual methods that appear to have been designed to provide significant commissions to communications agencies, while hiding the source of funds and the true nature of the transactions.

Parliament was never informed of the program’s objectives or the results it achieved. When you read the Departmental Performance Report, which says that the funds were being managed with prudence and probity, you see that Parliament was, in fact, misinformed as to how the program was being managed.

Even though the Sponsorship Program has since been cancelled, it was disturbing to discover that such practices were allowed to happen. Furthermore, these practices led us to conclude that the controls and oversight mechanisms that should have been in place, had, in fact, collapsed.

Our audit raised more questions than it could answer. Why did these controls and oversight mechanism collapse? We don’t know the answer. Our job is to bring the evidence to light. It is up to others to decide exactly what happened and who was at fault.

Our mandate also limits us to reviewing the actions of public servants. We do not have the right to look at what happened to the sponsorship funds once they left the government.

But, as you know, others will be pursuing the matter further. The Prime Minister has taken the matter very seriously and has called for a judicial inquiry and appointed a special counsel to recover funds. And an RCMP investigation is already under way.

My third focus area is the well-being of Canadians. When I took this job, I felt strongly that I wanted the Office to make a positive and lasting difference in the lives of my fellow citizens.

Well-being encompasses issues such as health, safety, security and the environment. I care deeply about these issues because they touch the day-to-day lives of my family and all Canadians.

Our past audits have covered everything from border security and immigration to the government’s management of toxic substances and pesticide safety.

The fourth area where I’m placing my focus is on Aboriginal issues.

My Office seeks to contribute to the well-being of Aboriginal people by concentrating our work on the social, economic and environmental conditions they face.

Chapter 9 of my report looked at the role the federal government plays in supporting the economic development of First Nations communities. We found that while current federal programs are designed to help First Nations businesses and related economic structures, these same programs sometimes create barriers that actually increase the cost of doing business and impede economic development.

We concluded that the federal government and First Nations have to work together to build and improve institutional arrangements. And we recommended steps such as consolidating the administrative requirements of various programs and developing a more co-ordinated approach.

My fifth focus area addresses my concern about preserving our legacy and heritage as Canadians.

We have a wealth of cultural, historical and physical assets that help define who we are as Canadians. Will future generations applaud us for preserving them? Or, will they express regret for what we squandered? These are questions we keep firmly in mind as we do our work.

The federal government plays an important role in protecting Canada’s cultural heritage, but our recent audit concluded that unless action is taken soon, much of our cultural heritage will disappear, especially in the areas of built, published and archival heritage.

That’s because current heritage protection regimes have reached their limits. For example, more than two-thirds of national historic sites managed by Parks Canada as well as federal heritage buildings are in poor to fair condition. More than 90 percent of the collections of the National Library of Canada are housed in buildings that do not meet current standards for temperature and humidity.

Once a piece of our history is lost, it’s lost forever.

Clearly, the federal government and its public and private sector partners must do more to protect our heritage. Together, they must rethink their approach, and really reflect on what they want to achieve in the area of heritage protection, on what means are available to protect it, and on how much in the way of resources they wish to allocate.

I am concerned that Parliament does not receive complete information on the state of cultural heritage protection. The government needs to provide better information on the extent of conservation problems, their long-term implications, and what all of this means for Canadians.

Our recommendations – do they make a difference?

OK, I’ve talked about my priorities and how they are reflected in the recommendations contained in my most recent report. But, what happens after I table that report?

As I said earlier, when we find something wrong, we hold the evidence up to public scrutiny. And we recommend steps that can be taken to set things right.

What happens next is up to Parliament and government.

In the months following the release of a report, various committees of the House and the Senate conduct a thorough examination of the issues we raise. In particular, the Standing Committee on Public Accounts, consider our reports in detail.

I testify before these committees. In fact, I appeared before the Public Accounts Committee to answer questions two days after my latest report was made public.

Following these discussions, the Public Accounts Committee makes its own report to the House with recommendations to the government. Other standing committees of the House of Commons or the Senate also review our reports and issue their own. Last year, we participated in a record 52 hearings and briefings before house committees.

The big question is what happens after Parliament endorses our recommendations? Does anything really change?

We have always kept track of what happened to our recommendations. But in the fall of 2001, we introduced a new Status Report in an effort to focus greater attention on the government’s response to our audits.

To prepare this report, we go back and re-audit important and potentially high-risk areas to see what government has done to address the problems we have identified. And let me assure you, the re-audit is every bit as rigorous as the original audit.

If and when we find progress has been made, we are happy to tell the story and applaud the achievement.

Our May 2003 Status Report included many examples of efforts by departments and agencies to make changes that have lasting benefits. As we recorded then, four of six departments involved in key audits made satisfactory progress in responding to our recommendations.

So, government departments DO take action on the recommendations of our value-for-money audits. And public servants DO want to deliver high quality services, safeguard the public purse and protect the public interest.

In fact, despite the actions of those involved in the sponsorship program, I hold the men and women who make up Canada’s public service in very high esteem. The vast majority of public servants are hardworking, dedicated and honest.

Conclusion

In closing, let me say again how gratified I am when Canadians tell me that they appreciate the work of my Office.

While it is the role of my Office to be critical, ultimately I believe we play a constructive part in maintaining the confidence of Canadians in government. We do it, in large measure, by embodying and promoting the values of accountability, transparency and protection of the public interest.

My staff and I are extremely proud to be part of a long history of dedicated service to Parliament and to Canadians, and to play a unique and important role in making Canada a better country for all of us.

Thank you. And now I’d be happy to hear some of your views and to answer any questions you may have.