Report and Observations of the Auditor General on the 2020–21 Consolidated Financial Statements of the Government of Canada

Opening Statement before the Standing Committee on Public Accounts

Report and Observations of the Auditor General on the 2020–21 Consolidated Financial Statements of the Government of Canada

3 May 2022

Karen Hogan, Fellow Chartered Professional AccountantFCPA, Fellow Chartered AccountantFCA
Auditor General of Canada

Thank you, Mr. Chair. I want to start by acknowledging that I am in Ottawa, on the traditional unceded territory of the Algonquin Anishinaabeg People. As this is a virtual hearing and participants may be spread across different locations, I want to pay respect to Indigenous people from all nations across Canada.

With me today are Chantale Perreault and Etienne Matte, financial audit principals. We’re pleased to have this opportunity to discuss our audit of the Government of Canada’s consolidated financial statements for the 2020–21 fiscal year.

The government’s financial statements are one of its key accountability documents. Our audit of these statements provides information that helps Parliament exercise its oversight of the government, promotes transparency, and encourages good financial management.

This year, our audit of the government’s financial statements involved most of our 200 financial auditors. It is the largest of the audits conducted by my office.

You will find our audit opinion on the Government of Canada’s consolidated financial statements starting on page 57 of Volume 1 of the Public Accounts of Canada 2021.

We found that you can rely on the information contained in the financial statements. In all material respects, the information is presented fairly and conforms with generally accepted accounting principles for the public sector. In other words, we issued a clean opinion.

This year, exceptionally, our opinion includes 2 dates. This is because the government amended its 2020–21 consolidated financial statements after it had approved them. The amendments were the result of a significant event that occurred later but before the statements were tabled in Parliament.

When the government amends its financial statements, auditing standards require my office to perform additional work to assess whether the amendments were recorded appropriately. The second date in our audit opinion represents the completion of our work on the amendments, which we determined were appropriately recorded.

Our opinion this year also includes an Emphasis of Matter paragraph. It highlights the significant impacts of the COVID‑19 pandemic on certain amounts presented in the Government of Canada’s consolidated financial statements and related notes.

Every year, we provide Parliament with a commentary report that highlights important information about the results of our federal financial audits.

This year, the commentary provides an overview of the government’s spending in response to the COVID‑19 pandemic and discusses possible effects on the government’s finances over the coming years. The commentary also describes the additional work we performed to respond to a motion from Parliament.

As in previous years, the commentary raises observations about pay administration and National Defence’s inventory. These are recurring issues that we continue to monitor.

For pay administration, we once again carried out detailed audit tests of salary transactions processed through the Phoenix pay system. We found that almost half of the employees in our sample were paid incorrectly at least once during the 2020–21 fiscal year. Despite the significant number of individual pay errors, overpayments and underpayments partially offset each other. At an individual level, it’s important to understand that these underlying problems and pay errors continue to affect thousands of people who are being paid incorrectly.

We have been reporting for 18 years on National Defence’s difficulties in recording its inventory. National Defence continues to implement the 10‑year action plan it submitted to this committee in 2016. We did not see an overall improvement in the rate of errors in our sampling. In our view, errors in reported quantities and values are likely to continue until internal controls are strengthened and the department’s plan is fully implemented.

The commentary also provides insights into challenging areas. This year, these insights are about cybersecurity and advances in the use of data in federal organizations.

Mr. Chair, I would like to thank the senior officials and staff of the many departments, agencies, and Crown corporations involved in preparing the government’s financial statements. We appreciate their collaboration during these challenging times.

This concludes my opening remarks. We would be pleased to answer the committee’s questions.