3.9 Observations and recommendations made in our annual Report are normally followed up and reported in the Report, two years after the original chapter is published. This year, follow-up has been cancelled on three chapters, and deferred on three others.
3.10 The issues raised in the 1990 chapter on the Crown Corporation Audit Regime were followed up and reported in 1991, Chapter 4, The Accountability Regime - Making it Work. Issues relating to reporting performance will be further reviewed during audits to be completed in the next few years.
3.11 The 1990 chapters on Values, Service and Performance and Efficiency in Government: A Special Study were not audits but studies. Studies are done to increase understanding of important and complex issues, and usually there are no recommendations. Among other things, the insights gained during a study may help us in subsequent audits. Therefore, no formal follow-up is carried out.
3.12 Follow-up on the 1990 Information Security Audit has been deferred until 1994. Departmental internal audit groups are required to conduct an internal audit of compliance with the Government Security Policy in their departments, by the end of 1993. Therefore, we decided that it would be appropriate to defer review of these reports, and of the actions taken by the departments and central agencies to address the deficiencies noted in our 1990 chapter.
3.13 Follow-up on the two 1990 audits of the RCMP - Federal Law Enforcement and Support Services to Canadian Law Enforcement Agencies - has been deferred to 1993.
3.16 We recognize that, given the recommendations of the Royal Commission on Electoral Reform and Party Financing, possible amendments to the Canada Elections Act, and the passing of the Referendum Act, Elections Canada is faced with an evolving environment that has placed heavy demands on its resources. Also, it should be noted that the ultimate test for some of the implemented changes will be an election and/or a referendum; until that happens it may be difficult to assess some areas adequately.
3.17 While Elections Canada has taken some steps to address all of our recommendations, further work is needed in the following areas.
3.19 Elections Canada has not yet developed a strategic plan for its operations. However, in 1991 it appointed a Director, Strategic Planning and International Services, with responsibility for developing a strategic plan. In early 1992 a consultant completed a review of the planning process to assist in developing an approach to strategic planning. Elections Canada plans to take action on the consultant's report when resources become available.
3.26 Our follow-up found that, after consultations with charities, the Department of National Revenue - Taxation "concluded that a late-filing penalty was not as effective as revoking registration" and that "the penalty would only serve to further reduce the already scant resources available to a charity's beneficiaries." The Department also believes that "voluntarism should not be discouraged through undue threat of penalties for non-compliance." It is therefore studying proposals to amend the Income Tax Act to exclude registered charities from the late-filing penalty imposed under section 162(7).
3.27 The Department is now revoking the registration of charities that do not comply with the filing requirement. The initiation of revocation proceedings imposes costs on a charity and is not necessarily less costly than a late-filing penalty. The costs could include administrative costs, accounting costs and professional fees. It is also important to remember that revocation of a charity's registration may result in the imposition of a revocation tax due within one year of the effective date of revocation. This penalty tax is equal in amount to the assets that the charity has not disbursed to qualified recipients.
3.30 Our follow-up found that, starting in January 1993, almost all information provided with the Public Information Return will be available to the public on request. The Department of National Revenue - Taxation believes this measure should prove a very potent incentive for charities to comply with the requirements of the Income Tax Act, because the donating public would have access to material previously considered confidential. The Department is also placing more emphasis on educating the charity sector about the requirements of the Income Tax Act.
3.31 The Department's position with respect to sanctions is as follows:
"The Department agrees that some form of sanction is required to ensure that charities honour their obligations under the Income Tax Act; however the nature of these sanctions must necessarily differ because of the particular nature of the charities sector and the peculiarities of their problems. For example, the funds are given to these organizations, largely made up of volunteers, for charitable purposes only.
Bearing in mind the intent of the tax incentive, any such sanctions should ensure that the charitable objectives do not suffer unduly because of any negligence or wrongdoing on the part of those administering the charity.
To enforce current sanctions, the Department will:
3.34 The Department is now addressing our concerns. It has advised us that a mainframe program, in the final stages of design, will assist in the comprehensive monitoring of charities. This program will provide the technology to match taxpayer receipts and to identify non-complying charities for post-assessment.
3.35 In 1990 we reported that it was possible for charities to circumvent the intent of the Income Tax Act pertaining to allowable business activities.
3.36 In our follow-up we found that the Department of National Revenue - Taxation, after consulting with the charity sector, will use an interpretation of "related business" based on the tests set out by the Federal Court of Appeal in the case of Alberta Institute on Mental Retardation v. The Queen. The Department's position will be explained in greater detail in a December 1992 publication devoted exclusively to business activities. Because the law has not been amended we are still concerned that charities will be able to circumvent the intent of the Income Tax Act pertaining to allowable business activities.
3.38 The Department is now addressing our concerns. Among other things, a revised information return has been prepared, standards for financial statements will be developed, and the public will be advised that the Department does not assume responsibility for the accuracy or completeness of the Public Information Return.
3.40 The Department is now revising the annual information return to assist its audit activities. We support this initiative. We believe that it is important not only to identify non-complying charities but also to try to find out why they did not comply. We were informed that the Department has undertaken some projects to monitor the reasons for non-compliance.
3.42 Consultations between the departments of Finance and National Revenue - Taxation have been ongoing since then. A detailed ways and means motion to amend the Income Tax Act was tabled in Parliament on 19 June 1992, requiring non-profit organizations to file annual returns for fiscal years ending in 1993 and thereafter.
3.44 In the course of our follow-up the Department advised us that it considers "that the case confirms that a non-profit organization may conduct a commercial operation where the activity itself is the means of carrying out the non-profit organization's objectives". In its view, "this does not sanction the conducting of a commercial activity that has nothing to do with carrying out the non-profit organization's objectives other than supplying profits to achieve those objectives". National Revenue-Taxation has advised us that the information received on the new annual returns for non-profit organizations will be used to determine the significance, if any, of the incidence of non-profit organizations conducting commercial activities that have nothing to do with carrying out the non-profit organizations' objectives.
3.45 We are still concerned that certain legislative rules need to be clarified. We are unable to provide Parliament with reasonable assurance that the law is sufficiently clear to see that only organizations "organized and operated exclusively for social welfare, civic improvement, pleasure and recreation or for any other purpose except profit" are entitled to exemption from tax as non-profit organizations.
3.47 Two significant events have occurred since our last audit. First, Employment and Immigration Canada (EIC) focussed considerable effort on reviewing several key Program management and control mechanisms, and the Minister of Employment and Immigration recently proposed a series of important amendments to the Immigration Act. Bill C-86 was tabled in the House of Commons in June 1992 and was subsequently referred to a legislative committee for study. According to EIC, the primary aims of the proposed amendments are to improve the management of the immigrant selection system, preserve the integrity of the Program, better protect Canadian society, and make the refugee status determination process simpler, fairer and more efficient. We found that the text of Bill C-86 addresses many of the observations and recommendations made in our 1990 Report.
3.48 The other event, in August 1992, was the transfer of responsibilities for foreign delivery of the Immigration Program from External Affairs and International Trade Canada to Employment and Immigration Canada (EIC). This transfer should clarify the accountability of stakeholders and improve the co-ordination of Program activities as a whole. EIC and the Department of National Health and Welfare (NHW) were also discussing the transfer of NHW's Division of Immigration Overseas Health Services to EIC.
3.50 On the other hand, given the importance of training to the delivery of the Program, we feel that EIC management should pay more attention to this question. We have also noted that the quality of information to Parliament still needs to be improved.
3.52 Following the transfer of responsibilities for immigration operations abroad, EIC and External Affairs signed an agreement that sets out a new division of responsibilities and resources. EIC and the Department of National Health and Welfare (NHW) were also discussing the transfer of NHW's Division of Immigration Overseas Health Services to EIC. However, few changes have been made to the other interdepartmental agreements that existed in 1990.
3.53 Management of immigration levels. In 1990 we reported that planned immigration levels had been significantly exceeded for the previous three years. In October 1990, EIC announced annual immigration levels based on a five-year plan and replaced "range" levels with specific levels for each class of immigrants. Instructions were given to External Affairs to improve management of the number of immigrants selected abroad. In 1991 the total number of immigrants was six percent less than the overall planned level. Since August 1992, EIC has been responsible for processing immigrant applications abroad.
3.54 Bill C-86 provides for a new immigration level management system that would group immigrant classes into three streams, only two of which would be subject to annual fixed limits.
3.55 Immigration cost recovery. EIC reacted positively to our recommendation that it clarify the basis for setting fees and that it periodically review the costs of providing immigration services and the related fees. EIC has adopted a basic policy of recovering as much of the cost as possible, taking into account the fees charged in other countries. A plan was developed to raise fees over a period of three years. EIC is also looking into the possibility of charging fees for a number of other services that currently are being provided free of charge.
3.56 Program evaluation. In 1990 we found that a number of key Program components had not been evaluated. EIC has since prepared a plan for evaluating the entire Program over a period of seven years. For example, a pre-evaluation assessment of the settlement component has been carried out. An evaluation of the primary inspection line at ports of entry has been completed in co-operation with National Revenue-Customs and Excise. EIC was also carrying out a pre-evaluation assessment of activities abroad.
3.58 Although improvements have been made in EIC's internal operational training program, more needs to be done to ensure that all personnel with immigration responsibilities possess the knowledge and skills necessary to discharge their duties. EIC still has no system for needs identification, recording of training received and validation of training. It is therefore unable to monitor its own training activities. No new monitoring mechanism has been established with respect to operational training by other stakeholders.
3.59 Information to Parliament. We noted in our 1990 Report that information to Parliament on the Immigration Program was incomplete and fragmented. Since then, EIC has restructured its Estimates Part III. Budgeted Immigration Program costs are now grouped and disclosed under one heading. The various program activities are listed, as well as the related costs. Reference is also made to the other departments and agencies involved in Program operations. But EIC's Part III still does not set out standards for assessing the performance of specific operations.
3.60 Information on immigration activities and costs of other stakeholders in the Program are either disclosed separately in their Estimates (Part III) or are buried among their other activities. Consequently, the information provided to Parliament is still fragmented.
3.62 Responsibility for the delivery of the Immigration Program abroad was transferred to Employment and Immigration Canada (EIC) in August 1992. A Memorandum of Understanding between EIC and External Affairs specifies in more detail the responsibilities of each department and the resources to be transferred.
3.64 Our 1990 chapter indicated a concern with the imbalance in the allocation of resources in various regions of the world. The Department had taken a decision to start reallocating resources based on changes in workload for each of the missions. However, implementation plans were delayed when the government announced the transfer of the Department's responsibilities for the foreign delivery of the Immigration Program to EIC. EIC informed us that it intends to carry out these plans.
3.66 The Department has put measures in place to achieve these objectives. Mission targets were developed that took into account a number of factors including the relative volume of cases processed the previous year at each mission as well as the relative backlogs at each mission. A database was created to allow mission targets to be established on a component basis. The Department informs us that Heads of Missions are now increasingly involved in setting targets. Throughout 1991, performance was closely monitored and adjustments were made to individual mission targets. The successful implementation of these measures is reflected in the fact that deviations from the 1990 and 1991 global targets were respectively 5 percent and 3 percent compared to a deviation of 33 percent in 1989.
3.67 Automation. The Department responded positively to our recommendation that there be a worldwide acceleration in the automation of immigration activities, particularly at high-volume missions. Between April 1990 and the end of March 1992, the Department installed the Computer Assisted Immigration Processing System (CAIPS) in Paris, Manila and all missions in the United States. Prior to 1990, it had installed the system in Hong Kong and London. In addition to the foregoing the Department has installed automation equipment at 31 missions not scheduled for early CAIPS installation. ( see photograph )
3.68 Locally engaged program officers. We recommended that the Department should convert more Canada-based officer positions to locally engaged program staff positions. The Department responded by increasing the proportion of locally engaged program staff.
3.69 Internal audit. In 1990 we recommended that the Department's Internal Audit Division be requested to provide an audit conclusion to both the departmental Audit and Evaluation Committee and the Canada Employment and Immigration Commission on the degree of compliance with the Immigration Act and Regulations and its related policies and procedures. This has been done. In our report we also recommended that the Committee should direct Internal Audit to provide an audit conclusion on the system for measuring and reporting on the efficiency of immigration operations, on both a mission and a global basis. Although the Department is receptive to this suggestion, no action can be taken until the mission-specific efficiency norms that are now under development have been completed. Internal Audit is committed to implementing this recommendation once the efficiency norms are in place.
3.70 Medical screening procedures. In our 1990 Report we observed that medical screening procedures were inefficient and management controls weak. We recommended that the Department, in consultation with EIC and the Department of National Health and Welfare, introduce risk-based sampling procedures that reduce the amount of checking done by Canadian-based medical officers and develop a better system for monitoring the performance of designated medical practitioners.
3.71 An interdepartmental committee, chaired by EIC, conducted a Medical Inadmissibility Review and concluded that risk-based sampling procedures were not an acceptable option because inadmissible persons could be admitted to Canada. However, EIC indicated that this issue needs once again to be further examined before a final decision can be made. The Department of Health and Welfare has also revised and documented its guidelines for selecting, training and assessing the performance of designated medical practitioners. Their performance was reviewed at some European missions.
3.73 The Department has contracted with Consulting and Audit Canada to develop a resource allocation model, by developing and quantifying the work units for immigration and visitor visa services and by developing and applying workload standards for these units of work. Input data was collected during field visits conducted in April 1992. The usefulness of this exercise will depend on how the norms are used to improve the level of service and utilization of resources.
3.74 Our 1990 chapter indicated a concern with the imbalance in the allocation of resources to various regions of the world. External Affairs had taken a decision to start reallocating resources based on changes in workload for each of the missions. However, implementation plans were delayed by the transfer of External Affairs' responsibilities for the foreign delivery of the Immigration Program to EIC. EIC informed us that it intends to carry out these plans.
3.75 Streamlining procedures. The 1990 audit observed an excessive paper burden and recommended that the Department, in consultation with EIC, examine ways to streamline procedures and to simplify the use of immigration forms and documents at missions abroad. The Department has developed, also in consultation with EIC, plans to streamline procedures supporting the delivery of the Immigration Program abroad. The implementation of this recommendation should be facilitated by the recent reorganization whereby EIC will have responsibility for both immigration policy and foreign delivery of the program. No tangible results in the form of reduced paper burden can be shown yet. However, EIC is confident enough to introduce, in December 1992, a generic visa that will replace numerous documents now in use. Moreover, External Affairs has recently hired a consulting firm to develop a "quality of service" implementation plan, that will, upon completion in late 1992, train managers to identify inefficiencies and correct them. Further, an action plan has been developed by the Department to evaluate procedures, techniques and materials used in program delivery, with a view to identifying inefficiencies and then developing procedural and management models to correct them. Plans are also under way to improve on the issuance of student authorizations, to revise and reformat the Immigration Manual and to review the Pre-application Questionnaire.
3.76 Waiving of interviews. Our 1990 Report recommended that the Department assess the risks of fraud at each mission and issue guidelines to assist mission staff in determining the most appropriate balance between waiver practices and degree of risk at that mission. The Department has replied that the recommendation is being addressed within the context of a project that will examine all aspects of visa office performance. This project is in the very early stages of development, and it is unlikely that guidelines will be developed before the end of 1992.
3.78 As mentioned in paragraph 3.47, the Minister of Employment and Immigration recently tabled a series of amendments to the Immigration Act. Some of these amendments deal with the refugee status determination system. The intent of the proposed amendments is primarily to reserve access to the system to those who are truly in need, to streamline the system to encourage expeditious and cost-efficient decision making, and to ensure that decisions are acted on promptly. The proposed amendments address many of the observations and recommendations that we made in 1990.
3.80 Progress has been slower in other areas. The number of hearing adjournments is still high, for example. More needs to be done in personnel training. In general, refugee claimants still do not undergo medical examinations and security checks until they request permanent residence. Regarding the backlog of claims, EIC does not expect to complete this process before March 1993.
3.82 Employment and Immigration Canada recognizes that international co-operation is needed to manage and resolve the refugee issue. Bill C-86 therefore replaces the concept of a "safe third country" with a series of measures for sharing responsibilities in determining refugee status, including bilateral agreements with certain countries signatory to the Geneva Convention on Refugees. These agreements would make it possible to process claims for refugee status in the first country where the claimant found asylum. EIC, in co-operation with External Affairs, is currently discussing such agreements with other countries.
3.83 Streamlining the initial hearing process. In 1990 official hearings were held even in cases where the representative of the Minister of Employment and Immigration felt that claimants had a credible basis for making a refugee claim. Following a pilot study, EIC adopted a simplified inquiry process, which eliminates official hearings for claims that are not challenged by the Minister's representative. Bill C-86 would simplify the refugee status determination system even further by eliminating the initial hearing completely.
3.84 Scheduling of hearings. As of 31 March 1990, the refugee status determination system had encountered significant delays and 23,500 claims were pending at various stages of the process. Since then, the process has incurred no further delays and has kept pace with new claims. This is due not only to the improvements in the scheduling of hearings but also to the increase in resources allocated to the system, and to other steps taken by EIC and the Immigration and Refugee Board. However, as mentioned in paragraph 3.88, little progress has been made with regard to adjournments. The number of cases pending as of 31 March 1992 represented about three months of work for EIC and the Immigration and Refugee Board.
3.85 Interpreters. In our initial audit, we recommended that EIC and the Immigration and Refugee Board ensure that interpreters are qualified, have proper security clearance, and are not in a conflict-of-interest situation. EIC and the Immigration and Refugee Board have since developed an accreditation program that includes testing to determine the competence of interpreters by ensuring that they meet a prerequisite language standard. The test was first administered to a group of interpreters in 1991.
3.86 Security checks are now required for all interpreters. All interpreters are also required to sign a declaration of any possible conflicts of interest. At present, security checks have been completed for about half of the interpreters who have passed the accreditation test.
3.87 Because the pool of interpreters is limited, EIC and the Immigration and Refugee Board continue to use existing interpreters whose test results and security clearance remain pending.
3.89 Training. In 1990 we noted that the training given to Case Presenting Officers (CPOs) was inadequate. Since our audit, all but a few of the new CPOs in main offices across the country have taken the national basic training course. To meet important training needs of experienced CPOs, EIC developed an advanced course which was offered on a pilot basis in March 1992. In light of the anticipated changes to the Immigration Act, further offerings of this course have been postponed.
3.90 Medical examinations and security checks of claimants. In 1990 we recommended that medical examinations and security and criminality checks be conducted promptly following the receipt of claims for refugee status. No progress has been made in this area since our audit. In general, claimants still do not undergo medical examinations and security checks until they apply for permanent residence, several months after their arrival in Canada.
3.91 An interdepartmental committee on the medical inadmissibility of immigrants has recommended that claimants, when making their claims, each be given medical instructions and that a system be set up to ensure that claimants undergo medical examinations within 60 days of receiving these instructions. These recommendations are included in the proposed amendments to the Act tabled in the House of Commons in June 1992.
3.92 Investigations. Our 1990 audit revealed that EIC had not taken any steps to trace backlog claimants who had failed to respond to a notification to appear. Since then, EIC has made efforts to increase the number of investigations, but further improvement is needed. Between the start of the backlog clearance program and 31 March 1992, 32,900 people have failed to respond to a notification to appear. During this same period, 20,500 investigations were conducted and people were located in half of these cases.
3.93 Backlog clearance. In 1990 we expressed doubts about the capacity of the system to eliminate the backlog within the budgetary limits and by the deadline of 30 September 1991 set by EIC. By 31 March 1992 the backlog of cases had not been eliminated; EIC announced that the remaining claims would be processed in full by 31 March 1993.
3.94 Since our audit, 10,000 new cases have been added to the backlog. This has increased the workload and altered the initial schedule, which was based on a total of 85,000 cases. All the Backlog Canada Immigration Centres have been closed, with the exception of those in Toronto and Mississauga, and cases not finalized have been transferred to regular Canada Immigration Centres.
3.95 As of 31 March 1992, there were 41,600 cases that remained to be finalized, the majority of them in Ontario. About 19,000 of these cases were awaiting a decision; another 9,000 were awaiting landing, which is the last stage in the process. Thus, a great deal of work remains to be done to finalize all backlog cases.
3.96 As to costs, EIC and the Immigration and Refugee Board had spent, as of 31 March 1992, a total of $114 million to process backlog cases. Another $5 million had been used for language training and settlement assistance. EIC and the IRB expect to process the entire backlog of cases within the approved budget of $181 million.
3.98 As mentioned in paragraph 3.47, the Minister of Employment and Immigration recently proposed, through Bill C-86, a series of amendments to the Immigration Act. Some of these proposals impact on control and enforcement activities at all three intervention points. The intent of the proposed amendments is to better protect Canadian society from those who break our laws and to curtail abuse of our immigration system. They address many of the observations and recommendations that we made in 1990.
3.100 In other areas, progress has been slow. Decisions about whether to admit immigrant applicants who have been the subject of security concerns by the Canadian Security Intelligence Service after 1990, are still pending in most cases. Although measures taken by EIC have resulted in an overall increase in the number of removals, we found that, as in 1990, either the carrying out of removal orders affecting refugee claimants is delayed or their effect is cancelled in a majority of cases.
3.102 We noted little progress, however, in the management of lookout information at land border points. EIC has attempted, without real success, to set up provisional mechanisms for improving the management of lookout notices. Customs is presently testing an electronic licence plate reading device that could eventually help to remedy the situation.
3.103 PIL performance measurement and feedback. In 1990 there was no performance measurement system for immigration-related work, and feedback information on referrals was limited. Since then, EIC, in consultation with Customs, conducted the first-ever comprehensive evaluation of PIL effectiveness from the standpoint of immigration. A final report had not been issued at the time of our follow-up. The two departments have yet to define what constitutes regular and meaningful feedback on cases referred to EIC by Customs.
3.104 Training of customs officers. In 1990 we noted that training of customs officers on immigration matters was limited and inconsistent. Since then, Customs has taken steps at the local level to update the knowledge of experienced customs officers and to provide basic training to many students recruited as customs officers. However, minimum standards regarding content, documentation, presentation and duration have not yet been applied to all of this training developed at ports of entry. The sessions are still not evaluated or validated.
3.106 As indicated in their responses to our Report in 1990, EIC and the Department of National Health and Welfare (NHW) tasked a special Medical Inadmissibility Review Committee with reviewing all medical conditions and related issues to ensure that the current medical guidelines for inadmissibility are appropriate, just, and compatible with current medical opinion. The issue of danger to public health was examined and the Committee recommended that current mandatory testing for VDRL (syphilis) be removed to ensure consistency in the application of medical inadmissibility criteria. The Committee also examined the criterion of excessive demand and reported that there was a need to define what constitutes excessive demand with reference to the availability, accessibility and cost of health and social services required.
3.107 EIC, in conjunction with National Health and Welfare, recently approved those recommendations of the Committee. The government has also proposed an amendment to the Immigration Act that would, by regulations, better define excessive demand. However, the departments acknowledge that it will take time to compile information on available services, the demand on those services and their costs across Canada, before the regulations can be implemented.
3.110 Bill C-86 would authorize the use of fingerprints and photographs to secure positive identification of refugee claimants. EIC is also evaluating new technology designed to reduce the use of fraudulent documents to gain entry into Canada.
3.111 The workload of investigations in one region that we noted was high in 1990 remains substantial. However, a detailed analysis done by EIC has shown that the actual number of cases involving serious criminality, which could result in removals, is relatively low and these cases are given high priority by EIC.
3.113 In 1990 we recommended that EIC take steps to monitor and analyze the use of Minister's permits. The Minister's 1991 report to Parliament on this matter reflects a change toward the recommended direction.
3.115 Since our audit, EIC has reached decisions on most of the cases pending in 1990. In the vast majority of cases, the applicant was accepted as a landed immigrant. We noted, however, that decisions for most of the briefs issued after 1990 were still pending, especially where they involved persons already living in Canada. On the other hand, CSIS states that often the information available is not sufficient to support a denial of admission to Canada, although there are national security concerns. In most cases, foreign agencies do not provide criminal intelligence (as opposed to criminal record information) and therefore criminal checks continue to be incomplete. The situation consequently remains similar to what we reported in 1990.
3.116 Effectiveness of screening activities. We recommended in 1990 that EIC evaluate, in collaboration with CSIS and External Affairs, the effectiveness of their security screening activities. EIC has yet to do so following the approval and implementation of amendments to the Immigration Act regarding inadmissibility criteria relating to security and criminality.
3.117 A pilot project on security screening activities abroad, which was just starting at four posts at the time of our 1990 audit, has since been expanded to include all posts. An evaluation of this pilot project is planned for 1992-93, which should be an important element of a future effectiveness evaluation.
3.124 Since our audit, the Patent Co-operation Treaty, which started to come into effect in 1990, and the implementation of the new Patent Act (1987) have significantly changed the patent application and examination process. The Department has also continued the development of the Canadian Automated Patent System (CAPS), which is expected to be fully operational by 1996.
3.125 In order to respond more effectively to demands in the area of patents as well as to its other responsibilities, the IPD sought and recently received the authority to become a Special Operating Agency (SOA). In the case of the Patent Office, the Department believes that the procedural changes, the development of CAPS, and the flexibility provided by SOA status will allow it to reduce backlogs, assess and meet client needs, develop performance measures and establish a quality control function. The Department also believes that SOA status will provide the means to fully address our concerns about service standards and overtime use in another part of the IPD, the Trade-marks Office.
3.126 While the Department's actions to date seem reasonable and appropriate, the concerns underlying our observations and recommendations remain unresolved at the time of our follow-up.
3.130 The Branch has taken some action on our recommendation, although progress has been slower than expected. Management is developing a strategy in the form of a new business plan that, among other matters, is intended to deal with the issues raised by the audit. Implementation is expected to begin in April 1993. The Branch is also implementing a compliance-oriented strategy to resolve lesser priority cases through alternative (non-criminal) means. Finally, during 1993-94 the Department expects to further consider whether it should recommend amendments to the Competition Act that might, among other things, allow for more effective and efficient administration of the marketing practices provisions.
3.132 Between 1980 and 1990, the Department spent about $33 million dollars on establishing a National Topographic Data Base (NTDB). The NTDB attempts to deal with the question of how to produce or revise paper maps efficiently, while meeting the emerging need for digital map information.
3.133 At the time of our audit, we could not find adequate plans and analysis guiding the development of the NTDB and substantiating its contribution to the Sector's overall objectives. We also questioned the efficiency gains and cost justification for digital stereocompilation of topographic data.
3.134 Our follow-up focussed on the action taken by the Department of Energy, Mines and Resources in response to our recommendations and observations. We reviewed studies and supporting documents supplied by the Department and conducted interviews to substantiate its progress since 1990.
3.137 The Sector conducted a user needs study that identified user requirements and four alternatives for meeting them, as well as a cost-benefit analysis for each. The study also suggested that the Department's "program with respect to topographic information must change to be more in line with user needs and emerging technologies."
3.138 The Department has considered the conclusions and recommendations of the user needs study and is acting upon them. Specifically, the Sector has indicated that it will be curtailing its stereocompilation activities.
3.139 Our second recommendation in 1990 involved the identification and monitoring of strategic milestones and measurable benefits for the digital mapping program over the next 10 years. The Sector has now established targets and performance indicators which will be used in developing its multi-year operational plan and in monitoring results against the plan.
3.141 Our 1991 audit report went more deeply into the Department's compliance and enforcement activities and its implementation of the Canadian Environmental Protection Act and of sections 36 to 42 of the Fisheries Act. We reiterated the need for the federal government and the provinces to clarify their respective roles and responsibilities for compliance and enforcement activities. We pointed out that priorities for these activities had not been clearly defined; that they were not adequately monitored and evaluated; and that there was insufficient information for their management and control.
3.142 In 1991 we also reported on weaknesses in the strategic and operational planning of the Great Lakes Action Plan for the clean-up of the Great Lakes. At the operational level, for example, there was no Remedial Action Plan strategic framework, containing realistic goals and deadlines, to guide the implementation of the 17 Remedial Action Plans for areas of concern. In our opinion, such deficiencies have slowed progress in dealing with the serious toxic pollution of these water bodies.
3.143 Finally, we reviewed the quality of information presented in three important accountability documents, with an emphasis on reporting on compliance and enforcement activities and the Great Lakes Water Quality Agreement. We found several deficiencies in reporting, particularly with respect to planned and actual results.
3.148 Program co-ordination. The Inter-departmental Committee on Water (ICW) has formed a RAP Steering Committee that will advise it on both policy and operational matters and improve interdepartmental co-ordination. This is a positive step. However, only one ICW meeting (November 1991) and one Steering Committee meeting (February 1992) have taken place since our 1991 audit was completed. The benefits gained from this process change could be lost if the Department does not show leadership by setting the pace of meetings, impressing on members the importance of personal participation and setting agendas to ensure timely decisions are taken on important policy and operational issues.
3.150 Regulation of toxic substances. In 1991 we noted that the priority substances assessment program had completed reports for only three of the forty-four substances on the priority list and that the Department would not complete the remaining reports by 1994 as originally scheduled. Since then the Department has significantly advanced the number of reports nearing completion. The Department has indicated that the release of reports for sixteen substances will be completed by March 1993 and the assessment of the remaining substances will be completed on schedule before February 1994.
3.151 Since the 1991 audit, a comprehensive management system has been implemented to support the program by tracking progress and providing the information needed to anticipate, identify and resolve problems on an ongoing basis.
3.154 Part III of the Estimates for 1990-91 and 1991-92. In its 1992-93 Estimates the Department responded to several of our concerns about completeness of information and providing information on significant constraints to program success. There is still room for improvement in the reporting of planned and actual performance in terms of results and related resources. The Department's Part III Estimates provide some broad information on proposed government-wide Green Plan spending targets and expected results and refers the reader to the progress report entitled "Canada's Green Plan - The First Year" for more detailed information on the government-wide Green Plan. We have not audited this latter report, but we have noted that it does not provide a comprehensive picture of planned and actual Green Plan spending.
3.156 This year, we enquired into the Department's progress in implementing our 1990 recommendations. In March 1992, it reported to us on several initiatives it had undertaken.
3.158 With respect to land management, we are unable to determine whether or not DIAND's current approach to land use planning is reasonable in the circumstances.
3.159 We noted in our 1990 audit that the ways in which land is used can involve many complex decisions. These relate to issues such as development opportunities, environmental protection and threats to aboriginal cultures. In our view, although approved land use plans may not provide complete solutions, their absence could mean that these issues are not being appropriately addressed.
3.160 During our follow-up review, DIAND informed us that due to resource constraints, the Land Use Planning Program for the North was wound down in early 1991. This resulted in delays in the planning approval process. DIAND further indicated that land use planning functions would continue through the comprehensive land claims process and other departmental activities.
3.161 We therefore asked DIAND to provide information on the extent of land use planning coverage from all significant sources. DIAND responded that approximately 33 percent of the Northwest Territories and 10 percent of the Yukon are covered by approved land use plans and/or by a land use planning component in a land claim settlement. The extent of land use planning through other departmental activities was not reported to us.
3.162 We further noted that DIAND has not conducted a recent evaluation of how well land use decisions are being made and implemented. This is partly because comprehensive land claim settlements were finalized only recently. Consequently, the appropriateness of the current approach through the claims process and other activities is largely unknown.
3.166 The Department of National Defence (DND) has since acquired a human resource management modelling and simulation capability. This has the potential to resolve most of the issues we raised concerning the overall management of the process.
3.167 In 1984 and again in 1990, we recommended that DND review its Military Occupational Classifications (MOCs) structure in the context of longer-term force development. The Department has initiated a military occupation structure review. This review will rely on a definition of "military essentiality" and is intended to produce a comprehensive management tool that can be used for force structure design; it is intended to redress imbalances between officers and non-commissioned members, operations and non-operations within MOCs, and support and operations classifications. DND is now in a position to utilize its recently acquired modelling and simulation capability to assess the long-term personnel policy and force structure impacts from this initiative.
3.169 National Defence has initiated studies on some aspects of changes in the officer merit process and plans to begin an in-depth review of the merit system. We intend to follow-up on the Department's progress at a later date.
3.171 Since 1990, National Defence, with the support of the Treasury Board Secretariat has acted positively on our recommendations. The roles and responsibilities of the National Defence/Treasury Board Secretariat Advisory Committee on Military Pay and Other Conditions of Service have been revised. A broadly based review of key elements of conditions of service is now under way. Given the current context of widespread changes to the Public Service, this issue may be the subject of an in-depth audit as early as 1995.
3.173 Our follow-up audit found that, although a committee had been established to co-ordinate the administration of the plans, no single office was responsible. An evaluation of the plans has been initiated, though not completed.
3.175 Since our 1990 chapter, the Department has taken, or has made plans to take, a number of actions to address deficiencies.
3.178 We reported that this program had cost the Department about $500 million since 1980 and was expected to cost $1.4 billion over the next 15 years. There were 7,600 individuals on language training in 1990-91.
3.179 The Department's Official Languages Program is operated separately from that of the Public Service Commission of Canada because of unique National Defence operational requirements. DND must also respect the provisions of the Official Languages Act.
3.180 Additionally, National Defence has developed an internal policy known as the "bilingual officer corps". This does not require that all officers be bilingual, but that the officer corps must be structured in such a way that all bilingual positions can be manned continuously by bilingual people. Under this policy, starting in 1997, promotion to the rank of lieutenant-colonel will normally be restricted to bilingual officers.
3.181 Development of management goals. In response to several of our findings, the Department told us that it would work with Treasury Board officials to develop a Letter of Understanding to set clear and measurable objectives for the official languages training program, including the refinement of attainable goals. A Letter of Understanding was signed by the Department and the Treasury Board in June 1991 and contains commitments to improve management and reporting in many areas, including needs definition, utilisation of bilingual personnel, posting, and planning and control. At the time of our follow-up, the Department had not yet reported to Treasury Board officials on their progress. Our follow-up reflects the situation as of summer 1992.
3.182 Policy on definition of needs. Since 1990 the Department has responded to our recommendations by reviewing its policy on the identification of bilingual positions and is in the process of redefining its bilingual requirements to comply with the Official Languages Act. The bilingual officer corps policy has not been re-examined yet.
3.183 Program management still inefficient. Our follow-up found that the efficiency and effectiveness of language training programs have not improved. In order to meet the bilingual officer corps policy, DND has given all officers the opportunity to become bilingual. This approach appears very expensive and at the current level of resources does not seem to be an advantageous way of meeting DND's linguistic obligations. We found that in 1990-91 language programs produced only about 30 percent of what was required and projected under the 1990 plan. The Department recognizes that it is spending a great deal of resources just to maintain the status quo and that a fundamental review of language targets and implementation options is needed.
3.184 Our follow-up also observed that language training programs continue to have many deficiencies.
3.186 Bilingual posting priorities not implemented. DND has not implemented our recommendation to incorporate bilingual posting priorities into its language training. There is still no departmental posting policy to assign bilingually trained individuals from all courses to positions designated as bilingual, while respecting operational tasking priorities. The current departmental bilingual manning policy affects only the 250 or so graduates each year of the continuous French course. Although this course lasts a full year and costs over $80,000 per person, in 1990-91 only 66 percent of its graduates were actually assigned to a bilingual position.
3.187 Our audit indicated a 1.4 percent increase in the number of bilingual positions filled with bilingual personnel in 1989 and a 0.2 percent increase in 1990, even though the Department's objective is 5 percent per year.
3.188 The language factor in the merit system. In 1990 we reported that the Treasury Board had not provided direction on how to integrate language skill requirements into the merit assessment process for an institution such as the Canadian Forces. National Defence has adopted a policy of awarding merit points to individuals for having been motivated to learn the second language as well as for actually acquiring second language skills. Our follow-up indicates that consultations between Treasury Board and departmental officials would be necessary to develop policies suited to institutions that appoint individuals to rank rather than position.
3.189 Our 1990 audit stated that there was a need for clearer guidelines for merit boards on how to apply a language factor in merit assessment. In order to gauge the progress made, our follow-up audit examined the current guidelines used to assess the language factor. We also reviewed merit board files of majors promoted to lieutenant-colonel in 1991, to assess the boards' application of the language factor.
3.190 Our follow-up could find no rationale for the merit assessment language factor of 5 percent, nor how it contributes to the Department's goal of a bilingual officer corps by the year 1997. The merit system did not establish a minimum requirement in terms of language capability, and awarded the same value or greater to a candidate's perceived motivation to learn the second language as to a candidate's actual bilingual capability.
3.191 The current system, including the low percentage of merit points, the lack of minimum requirements and the disproportionate importance attributed to motivation, appears inadequate to motivate enough individuals to become proficient in their second language by 1997. In fact, our follow-up review of promotion files indicated no significant increase since 1989 in the percentage of bilingual Anglophone majors promoted to lieutenant-colonel.
3.192 Our follow-up also found that the application of the criteria was seriously inconsistent within and between merit boards. We found that over 50 percent of the time, the bilingual score given to individuals did not follow the guidelines or did not compare with scores awarded to their peers. Our examination also indicated that merit assessment included standards that were no longer valid. One quarter of lieutenant-colonel promotions were based on language test results that had expired or on no data at all.
3.193 Minister's study group established. At the time of our follow-up, the Minister of National Defence set up a study group to report on the use of French and Francophone participation in the Canadian Forces. We held discussions with the study group and are keeping abreast of its activities.
3.194 Conclusion. Our follow-up audit indicates that the Department still needs to re-evaluate its Official Languages Program implementation in order to better respond to identified needs under the Official Languages Act and ensure effectiveness and efficiency in its posting and merit systems, while respecting "sharp-end" operational priorities. Our findings are supported by officials of the Office of the Commissioner of Official Languages.
3.196 In June 1992 the Department began a Financial Accountability in Individual Training initiative intended to link training more directly to operational requirements, delegate authority to those actually responsible for training, provide adequate cost and budget information to training managers, and carry out verification of training. Departmental officials told us that positive results from this project are not expected before three or four years.
3.197 At present, while reviews of course content through validations are being done by all Commands, the number of completed validations remains low. In 1990-91, 40 courses were validated out of approximately 1,700 for the whole Canadian Forces. The Department plans to complete 51 validations in 1991-92 and another 54 in 1992-93. Officials told us that they expected the number to increase when new validation tools, now under development, become available. However, the Department does not know the extent to which it has been able to eliminate unnecessary training.
3.198 We recommended in 1990 that the Department compare costs between its own school system, civilian colleges and institutes of technology. We reported that National Defence should identify where Canadian Forces schools cost more and should use this information to reduce its costs. By way of example, in 1990 we reported that it cost $265,352 for a CF Fleet School to train a marine engineering technician, whereas it cost $71,923 in the community college system.
3.199 The Department has contracted out training in a number of significant, but isolated, initiatives. It has also amended its training policy to make option analysis a requirement, despite not yet having applied it on a case-by-case basis. In addition, the Financial Accountability in Individual Training initiative is designed to encourage decision makers to select the most economical training method by holding them financially accountable.
3.200 In 1990 we recommended that National Defence ensure that equipment contracts require that the type and quality of training provided will meet departmental needs, before acceptance of the product. For example, in 1990 we reported concerns that the Canadian Patrol Frigate Project did not require the contractor to provide adequate training capacity for the first six ships.
3.201 Since 1990 the Department has changed its standard contract to require contractors to specifically state what course evaluation and validation will take place. However, it still does not require that courses be validated before payment is made, as we recommended.
3.202 Our 1990 report recommended that National Defence increase efforts to synchronize training with delivery of equipment and ensure that opportunity costs of non-productive equipment are considered during contract negotiation. The Department has issued instructions that increase emphasis on this issue.
3.204 The Department is attempting to identify all Regular Force medical support personnel requirements for quick-response forces used to support contingency operations. National Defence continues to have difficulty determining the minimum peacetime dedicated medical support system that could be mobilized to meet multiple contingency needs. The Department has yet to define medical support requirements for circumstances more demanding than contingency operations and to determine how they would be mobilized. Consequently, minimum peacetime medical staff levels to support wartime operations cannot be defined.
3.205 Since our 1990 audit, officials indicated that National Defence reduced expenditures in 1991-92 for medical support by $1.5 million over the previous year. The Department is undertaking a study to identify the optimal means of providing peacetime hospital services in the Prairie and Pacific regions. The Department has taken positive steps to rationalize its hospital system by downgrading two of its Canadian Forces Hospitals (CFHs) to smaller base hospitals. This resulted in a surplus of 59 positions, the majority of which will be used to meet existing and new program requirements within DND. However, the Department's redistribution of 24 positions to other CFHs could increase the peacetime cost per patient. DND has indicated a reluctance to further reduce the size of the medical system until the medical support requirements for contingency operations have been fully identified. The need for an approved force structure for peace and war was identified in our 1984 report and has been the object of follow-up since then. Chapter 18, which deals with the CF Reserves, comments further on this issue.
3.207 The Department considered various alternatives in accountability reporting at National Defence Headquarters, and in February 1990 opted for group business plans. However, our follow-up audit found that Headquarters has still not developed any policy for producing these plans.
3.208 In 1984 and again in 1987 we recommended that the Defence Activity Performance Management System (DAPMS) assign the full range of costs against tasks and provide performance data on support and logistic services. Since that time, National Defence has dropped the DAPMS and developed the Operational Readiness and Effectiveness System (ORES) to report on the operational capability of the Canadian Forces. ORES is based on tasks developed from the 1988 Canadian Forces Development Plan (Provisional). While ORES is a significant step forward, it is not designed to assign costs to tasks, and its data is not yet complete or usable.
3.209 In 1988 we recommended that DND develop a series of indicators for defence capabilities and peacetime defence performance measures suitable for publication in Part III of the Estimates. During our follow-up audit, officials informed us that alternatives are still being actively considered, but no decision has yet been taken to implement our recommendation.
3.217 Improvement in the rate of filings for T4s on magnetic media has been slower. Filing has increased to 27 percent in 1992 from 20 percent in 1990 but the vast majority of T4s are still filed manually. The Department has stated that it expects voluntary rates of filing to increase to 40 percent in 1993 and 43 percent in 1994. It has also committed to reviewing the need for mandatory magnetic filing at the end of 1993.
3.222 We were advised by OSFI that the new legislation governing financial institutions, which was proclaimed this year, has also affected the timing and method of implementation of many of our recommendations.
3.223 As we stated in our 1990 chapter, the importance of effective and timely monitoring cannot be overemphasized and OSFI should continue to make every effort to further strengthen its role.
3.226 Specifically, we recommended that OSFI have access to a comprehensive database on deposit-taking institutions. OSFI has recently prepared a plan to develop such a database and expects its implementation to begin shortly. In the meantime, OSFI is using alternative sources of information for monitoring institutions.
3.227 In response to our recommendation that OSFI conduct regular financial analysis of individual deposit-taking institutions to identify emerging risks, we noted that more financial analysis is being done now than before. However, analytical procedures have not been formalized to ensure regularity and consistency. In some cases, the breadth of analysis carried out and provided to the examiners is not sufficient to permit full utilization of this information by them. Also, in several cases, data obtained and used for financial analysis were not current.
3.228 We recommended that OSFI strengthen its procedures for conducting studies of system-wide and sectoral issues. In our follow-up, we noted that there continues to be a need for more extensive and pro-active coverage of such issues. OSFI has recently established a program for conducting studies in the 1992/93 fiscal year; if implemented, these would provide a more comprehensive coverage of relevant issues.
3.229 We were unable to fully assess the implementation of our recommendation that OSFI's examiners periodically contact the management of institutions. We found that, except in the case of troubled institutions, few such contacts were documented in OSFI's files. However, OSFI advised us that its examiners were indeed making periodic contacts, even though limited records were being maintained on file.
3.230 With respect to our recommendation for the consolidation of procedures for troubled institutions, OSFI has recently prepared a crisis management plan and has improved the co-ordination between its investigations unit and its examiners in order to achieve a more concerted monitoring effort.
3.232 In our follow-up, we observed that OSFI had made some improvements in the coverage of treasury and EDP risk in terms of the number of institutions examined and the quality of examination. OSFI, however, needs to further improve its coverage of these high-risk areas by rigorously examining a greater number of institutions. In respect of security subsidiaries of deposit-taking institutions, OSFI has developed and implemented improved procedures for assessing risk from their operations. As to the overall approach to measuring the risk profile of an institution, OSFI has only recently developed the detailed criteria needed for this purpose. The approach is being field-tested.
3.237 OSFI and CDIC have been working on a memorandum of understanding since 1989. A number of drafts have been prepared, but an agreement has not yet been signed, as some issues are still to be resolved.
3.238 In 1991 OSFI, under the lead of the Department of Finance, joined its provincial counterparts in an effort to harmonize supervision of regulated financial institutions. There is a need for continued effort by all parties.
3.241 OSFI prepared a threat and risk assessment of information systems in 1991 and an implementation plan in May 1992. However, procedures to ensure information security are not yet fully in place. We noted that procedures relating to conflict of interest have been improved.
3.243 Organizational change. Citizenship Registration and Promotion activities were transferred from the Department of the Secretary of State to the Department of Multiculturalism and Citizenship, following its establishment 21 April 1991. The organization of the new Department was approved by Treasury Board in December 1991. The Citizenship Development activity (now called Social Development) remained at Secretary of State.
3.244 Scope. Our follow-up reviewed the measures taken by both departments in response to our observations and recommendations. In addition to reviewing formal representations made by management and relevant documentation, we interviewed departmental representatives in national headquarters and in three citizenship courts. We did not visit the Registration Centre in Sydney, Nova Scotia.
3.246 In addition to initiating the new Citizenship Registration System, the Department has taken some measures to improve its activities. For example, citizenship cards are now more difficult to falsify; the Royal Canadian Mounted Police (RCMP) are notified when, as a result of a request for fingerprints, a citizenship application is abandoned; some citizenship courts are better equipped; new application forms for citizenship and proof of citizenship have been developed; and a pilot project to improve productivity by five percent in the current year has been initiated at the Sydney Registration Centre.
3.247 The Department should pursue its efforts to establish productivity standards for citizenship courts and implement the new Citizenship Registration System as quickly as possible.
3.249 Corporate planning process - improvements are necessary. In 1990 we recommended that the Department of the Secretary of State quantify its operational objectives and link operational planning to strategic planning. Given that the organization of the new Department was approved only in December 1991, no operational plan framework was prepared for 1992-93. We have been informed that the planning exercise for 1993-94 has started.
3.250 No standards established for turnaround time. We had noted the absence of standards for turnaround time to apply for a grant or a proof of citizenship. Standards have since been approved by the Deputy Minister and will become effective when the new Citizenship Registration System becomes operational in 1994-95.
3.251 In the meantime, efforts have been made, in Toronto, to meet a proof of citizenship processing time of one month, through a pilot proof-application centre. The Sydney Registration Centre gives priority to these proof applications.
3.252 Risk of irregularities in the use of citizenship cards. In 1990 we recommended that the identification numbers of cards reported lost or stolen be communicated to the Passport Office and Customs and Excise. Although preliminary discussions were held with these departments in 1991, no further action has been taken. The Department intends to resume discussions soon.
3.253 Problems identifying persons with a criminal record. In connection with the problem raised by the RCMP, that existing procedures did not positively identify persons with criminal records, we recommended that the routine fingerprinting of all applicants for Canadian citizenship be considered. We note that the Minister for Multiculturalism and Citizenship has decided not to adopt this policy, which would provide positive identification of applicants.
3.254 Information for Parliament. We had recommended that Part III of the Estimates reflect the cost of individual elements of Citizenship registration in a way that allows the total cost to be determined, and that it provide performance information. The Department plans to comply with these recommendations for 1993-94.
3.257 The Department appeared before the Standing Committee on Public Accounts twice in June 1992. The Committee studied an audit note on the CSLP that was published in our 1991 Report. The Committee also deliberated on a number of elements discussed in Chapter 29 of the 1990 Report.
3.258 Scope. Our follow-up included a review of the action taken by the Department in response to our recommendations. We examined management's official response to the Standing Committee on Public Accounts, as well as relevant documents and other reports. We limited our meetings to members of the Department's staff.
3.261 Federal co-ordination. The Department has made increased efforts to fulfil its mandate as the federal co-ordinator for post-secondary education, using existing mechanisms and developing new ones as the need arises. In our view, these mechanisms still are not sufficiently comprehensive to meet the mandate.
3.263 Designation of post-secondary education institutions. We had recommended that the Department clearly define what constitutes a post-secondary education institution for the purposes of the CSLP, as well as the eligibility criteria to be used in designating these establishments. The Department and the provinces have jointly developed a policy and criteria for identifying these institutions, which are to be implemented beginning 1993-94 loan year.
3.264 Student loans granted in excess of need. In 1990 we found that loans in excess of need were being granted to students who had made erroneous declarations of their resources or had dropped out of their course of studies. Seven provinces currently apply identification and recovery measures with respect to federal loans in excess of need. Departmental and all provincial officials have agreed, starting in August 1992, to establish mechanisms to be used by provinces in the recovery of federal loans granted in excess of need. In addition, Bill C-76, presently in first reading, will have an effect on reducing interest subsidies, but does not constitute a revision of the Canada Student Loans Act with respect to the recovery of loans in excess of need.
3.265 Monitoring and auditing of loan applications. In 1990 we recommended that what constitutes a satisfactory scholastic standard be clearly defined and that an audit plan focussing on provincially administered activities be developed. The Department and provincial officials have agreed on comprehensive requirements for a satisfactory scholastic standard to be applied for loan year 1993-94. Furthermore, the Department has proposed an accountability framework that includes operational and compliance audits, to be implemented by August 1993.
3.266 Need to improve the management of accounts receivable. In 1990 we pointed out the need to improve the management of accounts receivable. Since February 1992 the Department, in conjunction with National Revenue-Taxation, has established a program to recover defaulted loan money from tax refunds. A total of $18 million was recovered between April and August 1992. The Department is also negotiating with financial institutions for the adoption of other measures to improve the recovery rate. Other initiatives established by the Department, such as a performance grid, the monitoring of collection agencies and a more active follow-up action process, have increased the 1991-92 recoveries. Such mechanisms, as well as other alternatives that should be developed, are necessary for sound management.
3.267 High default rate. In 1990 we found that lenders had made little effort to recover loans that had been granted to students. At the time of our follow-up, discussions were under way with lending institutions with a view to sharing the risks of default. As at 31 March 1992, some $964 million in federal loans were in default and were in collection.
3.268 Management tools. All of our audits since 1986 have revealed significant deficiencies in the management information system. We note improvements to the system and we urge the Department to continue this work. The Department and the provinces are currently examining the question of developing a common management system. Talks have been held with the banks concerning electronic data interchange. A program evaluation is planned, and a final report is expected by March 1994.
3.271 Runway expansion. In 1990 we noted that after years of planning, runway expansions at Pearson and Vancouver Airports remained unresolved. In June 1992 the runway expansion at Vancouver was approved and announced publicly. An Environmental Assessment and Review Panel has reviewed the plans for runway expansion at Pearson and the Department is awaiting the Panel's recommendation. Construction of runways could take three years to complete.
3.272 Federal role in airports. In 1990 we reported that the Department needed to re-examine its role in providing airport services in Canada; it needed to develop criteria setting out the conditions under which federal funding would be provided to airports, and a plan to rationalize federal asset holdings and financial involvement in airports. Terms of reference for a study to address these issues were developed, but the Department is now modifying them to account for local airport authorities as well as other government initiatives.
3.273 The Department also has not yet clearly defined its future strategic role in airports. It has developed a decision model for the use of private sector financing, but not an overall policy framework.
3.274 Planning. In response to the need to address the $1.4 billion shortfall over five years between capital needs and funding from traditional sources, the Department has developed a business plan outlining operational and capital requirements and a capital investment plan that outlines the needs of airports over the next five years. The plan now shows a shortfall of $1.8 billion, which includes $1.5 billion for the planned runway expansion and terminal revitalization at Pearson Airport.
3.275 Commuter facilities. The Department has completed construction of a satellite holdroom and walkway for commuter traffic at Halifax Airport, overcoming difficulties that we noted in 1990. The commuter facility project at Vancouver Airport is now the responsibility of the Vancouver International Airport Authority.
3.276 Cost recovery. Many issues that we identified in 1990, such as an outdated landing fee structure, inconsistent application of general terminal fees, shortcomings in the terminal building rental policy and loss of fuel concession fees, were to be addressed by a replacement of the 1978 Cost Recovery Policy. The Department indicates that a decision on a proposed cost recovery policy has been delayed by economic conditions.
3.277 Regulations. Despite efforts by the Department, regulations have not been revised to allow airports to operate in a more businesslike manner and to provide line managers with a rate and fee setting process that is responsive to market conditions.
3.278 Financial information. We recommended in 1990 that the Department provide line managers with key financial tools, such as a commercial cost accounting system, a billing system and a fixed asset accounting system. The development of an Integrated Departmental Financial System is under way, with core requirements scheduled for implementation in late 1993-94. Completion is expected by 1995-96.
3.279 Parking. We estimated in 1990 that annual revenue losses of $4.5 million could be prevented through improved equipment to control parking revenue. We also observed that the Department was slow in replacing parking meters with newer equipment and estimated that at six airports we reviewed, replacement could save $1 million to $2 million per year. The Department states that upgrading of parking equipment has been delayed at larger airports because of fiscal restraints and impending airport transfers. The Department has replaced meters at some airports, but not at the airports we reviewed.
3.280 In addition, we found in 1990 that airports were losing up to $5 million annually because of tenant parking in public parking structures. The Department states that if public parking continues to grow, some of the tenant parking will have to be moved.
3.281 Post-project review of Terminal 3. In 1990 we suggested the development of an improved methodology for future private sector developments based on a post-project analysis of Terminal 3. The Department states that such a review is nearing completion.
3.282 Long-term financial implications. We estimated that there would be an initial revenue shift of $11 million annually to Terminal 3 above the original $25 million that the Department had forecast because of changes to the project, such as the satellite terminal and the transfer of more airlines to Terminal 3. The Department has since agreed to pay the developer to reacquire control of taxis and limousines at the terminal, resulting in a net cost to the Department. The Department's terminal-related revenues from Pearson Airport for 1991-92 declined by $38 million from the previous year. Of this, $4.7 million was because of reduced passenger traffic. The remaining $33.3 million can be attributed to the operation of Terminal 3.
3.283 Although the Department knows the short-term financial impact of these changes, it still has not analyzed the long-term financial implications. Furthermore, it has not updated its original analysis to determine if benefits from the private sector option exceed the cost of the changes. The impact on revenues of a possible merger of Canada's two largest airlines would also need to be considered.
3.284 Terminals 1 and 2 at Pearson Airport. The Department has requested proposals from private concerns for the renovation and operation of both terminals. It is unclear how Air Canada's prior funding of renovations will be taken into account if a third party operates Terminal 2.
3.285 Airport transfers. We noted in 1990 that the Department will have to manage new risks, such as evaluating the potential financial viability of local airport authorities involved in the transfer of airports. The transfers of airports to authorities in Vancouver, Calgary, Montreal and Edmonton have recently been completed. Discussions with local groups on potential future airport transfers are under way in several other cities.