Opening Statement to the Standing Committee on Public Accounts

2000-01 Estimates - Report on Plans and Priorities
Office of the Auditor General of Canada

Thank you, Mr. Chairman. We appreciate being given the opportunity to discuss our Report on Plans and Priorities and our 2000-2001 Estimates. We believe that it is important to obtain the Committee’s views on the selection of future audit topics and the administration of the Office.

This report outlines our performance expectations and the general direction the Office wants to take in the next three years. It also provides additional details on our funding requirements and challenges for the coming year.

This year we plan to publish approximately 35 chapters in four Reports, including the Report of the Commissioner of the Environment and Sustainable Development. In addition, to coincide with the end of my 10-year mandate, I plan to present in February 2001 a "capstone" report to Parliament. This report will provide my perspective on some key management problems facing the federal government, the role and evolution of legislative auditing during the last 10 years and the efforts made by the Office to identify problems and seek reform in central agencies and in program delivery.

We have provided you with a handout that shows, in summary, the list of the chapters we plan to include in our reports for this year and our planned audits for 2001 and beyond. The work for 2000 is well under way, but there is room for adjustment to our plans for 2001 and obviously beyond 2001. We would like to engage this Committee in a discussion of issues that we could consider in our audits planned for 2001. New issues also may be considered as they emerge.

I would like to take a few minutes to provide you with highlights of certain chapters that will be contained in our upcoming reports this year.

As you know, this Office has frequently identified problems in the management of grants and contributions. This year, we intend to report the results of our audit of specific grant and contribution programs at Human Resources Development Canada. Afterwards, in the fall of 2001, we will present the results of a government-wide audit of grants and contributions.

Reporting on performance and managing for results are essential parts of an effective accountability regime and are goals of the government. In December 2000, we will report the results of a government-wide audit designed to assess the status of performance reporting and managing for results in the federal government. The audit team is contacting various committee chairs and vice-chairs to obtain their views on this subject.

Public service renewal will be an ongoing issue in the years ahead, as the government emerges from downsizing and faces new challenges in program delivery and human resources management. In April, we published a study to draw Parliament’s attention to the urgent need to deal with long-standing issues and emerging challenges for human resource management in the public service. Your Committee will be reviewing this study in the fall. This year, we will examine the progress made in the past decade toward reforming Canada’s public service. We will report from a central perspective on the reform efforts, and on the management of human resources in departments and agencies.

In May 1995 we published a study, Ethics and Fraud Awareness in Government. We also looked at this subject at Revenue Canada in 1998 and National Defence in 1999. Canadians are concerned about integrity in government and they have the right to expect the highest ethical standards in their governments. A new study will be presented this year on promoting integrity in the federal public sector; it will include a framework for discussion and action.

I have presented only the work we will be doing under the value-for-money component of our business line. The other components of our work relate to statutory audit requirements. This work includes the audit of the summary financial statements of the federal government. In the next year, we will perform additional audit work as a result of the federal government’s implementation of the Financial Information Strategy (FIS). The FIS initiative presents our Office with new audit challenges. Extra resources have been allocated to meet these challenges.

In addition, we audit the annual financial statements of about 90 government organizations, including Crown corporations, other entities and territorial governments, agencies and corporations. We are also the auditors of two international organizations, UNESCO and the International Civil Aviation Organization.

Special examinations of Crown corporations are also required to be carried out at least once every five years. The third round of examinations will end in 2000-01. A chapter on accountability and control issues in Crown corporations will include a summary of these special examinations.

I would like to take a few minutes to briefly review our financial requirements and some of our challenges in the year ahead.

In 2000-01, we plan to spend approximately $56 million. This is made up of our Main Estimates of $54 million and $2 million in Supplementary Estimates. Although we have presented our best estimate for the coming year, the timing of the Estimates preparation and the direction from Parliament to undertake new work mean that we will need to request Supplementary Estimates. We will need additional funds for the audit of UNESCO, the special work on the Canadian Wheat Board and other allocations to cover salary increases under collective agreements.

During the past year, and for the upcoming year, we have had to make some tough choices on what to audit based on our available funds. We have also looked at our audit techniques and technology to ensure that they are up-to-date. We are becoming concerned that our current level of funding may not be sufficient to provide the level of service expected by Parliament in the medium and longer terms. We are currently reviewing our funding base and discussing its appropriateness with the Treasury Board Secretariat. We may ask for an increase to our reference level this fall that would appear in next year’s Main Estimates.

I want to assure the Committee that we continuously strive to improve our own management procedures and systems.

Last year at this meeting, I indicated that the accounting firm of PriceWaterhouseCoopers had been selected to conduct an external audit of the Quality Management System we use for our annual financial audits. I wrote to you in March this year with the results, and I was very pleased to inform you that we had received assurance that we are carrying out high-quality audits. The practice of auditing quality assurance systems is new to Canada and, to the best of our knowledge, we are the first major auditing organization in Canada to undergo such an independent quality assurance audit. We have started a similar process that will lead to an external audit of our Quality Management System for value-for-money audits. We will report back to you as this work progresses.

At the Committee’s November 1999 meeting concerning our Office’s 1999 Performance Report, members requested, among other things, more information on the status of our observations and recommendations. We are developing a new database that will help us provide better qualitative information on the progress of recommendations we have made in our VFM audits.

Further, we are investing in knowledge management for the Office, using modern technologies to capture and share knowledge that is strategic to the audit practice. We also put a priority on staff training and have designed a new curriculum and courses to respond to challenges facing the office as our environment changes.

Before I ask Michael McLaughlin to review the financial aspects of our Estimates, I would like to update you on issues I raised last year with this Committee. First, the subject of our independence in managing staff as it relates to our ability to negotiate our own collective agreements. We have had further discussions with Treasury Board Secretariat and we agree there is a need for a different formula that recognizes the authority delegated to the Auditor General by Parliament. We need a clear operating framework to enable us to negotiate effectively with our employees, and based on discussions to date, we expect to have this framework in place this year.

Second, an issue that arises from our status as a separate employer is our ability to apply the terms of the recent pay equity settlements to our affected employees. Our employees, like those of other separate employers, are not eligible for compensation because they were not included in the original complaint by the Public Service Alliance of Canada. However, our employees have always worked under the same terms and conditions and they feel very strongly that they should continue to receive the same benefits, even if they are retroactive. This is a fairness issue that concerns me very deeply.

We have raised the matter of pay equity with Treasury Board Secretariat and have had discussions that we hope will lead to a favourable resolution. Officials assure us that our concern is being taken seriously and with urgency. We really need to have this matter resolved to ensure the smooth continuing functioning of our office.

Finally, last year, in response to Committee members’ questions and my own concern, I raised the issue of how audit appointments are made for various government entities, including alternative delivery arrangements. Since that time, we have worked hard on the development of criteria or principles that could assist in making appropriate audit appointment decisions for the future. The principles relate to an entity’s level of financial assistance, its financial exposure and its public policy significance. We are discussing these principles with government officials and getting feedback on their applicability. When we complete these consultations, we intend to make these principles available for discussion with parliamentarians.

OVERVIEW BY MIKE MCLAUGHLIN

We remain committed to serving Parliament in the best way we can. We constantly encourage communication with parliamentarians, to be aware of their needs, concerns and interests and, where feasible, we try to address these in our audit plans. We also work to promote awareness and understanding of matters reported by our Office.

I would like to take this opportunity to thank the Committee for its interest and the thoughtful suggestions made in its recent report to improve our Performance Report. We hope that we can implement most of your recommendations in the report this fall.

In closing, I would like to add that employees of the Office, through their skills and professionalism, remain committed to providing Canadians and Parliament with work that I believe is of remarkable quality. It is a privilege for me to lead such a team of dedicated individuals. Thank you, Mr. Chairman. We would now be pleased to respond to your questions.

VFM Audit Subjects - 2000

Service Quality
Human Resources Development Canada — Service Quality at the Local Level
Citizenship and Immigration Canada — The Economic Component of Canada’s Immigration Program
Indian and Northern Affairs Canada — Elementary and Secondary Education
Canada Customs and Revenue Agency — Travellers to Canada: Managing the Risks at Ports of Entry
Canada Customs and Revenue Agency and Department of Finances — Handling Tax Credit Claims for Scientific Research and Experimental Development
RCMP — Services for Canada’s Law Enforcement Community
Department of Finance — Managing Canada’s Debt: Facing New Challenges
Streamlining the Human Resource Management Regime: A Study of Changing Roles and Responsibilities

Implementing Sustainable Development Strategies: Year Two — Work in Progress
Greening Government Operations: When Will the Government Measure Up?
Government Support for Energy Investments
Smog: Our Health at Risk
Working Together — Partnerships for Sustainable Development
Follow-up of Previous Audits: More Action Needed

Canadian International Development Agency — Contracting
Crown Corporations — Accountability and Control Issues
Financial Management and Control: Capability Model in Government Departments
First Nations Health
Fisheries and Oceans — Fleet Management
Fisheries and Oceans — The Role of the Department in the Salmon Farming Industry in BC
Food Inspection
Health and Safety Regulatory Programs
Human Resources Development Canada – Grants and Contributions
Information Technology — Acquisition of Goods and Services
National Defence — Productivity and Renewal
Promoting Integrity in the Government of Canada
Public Service Reform — Progress & Challenges
Public Works and Government Services Canada — Reporting of Contracting Activity Information
Results Measurement — Performance Reporting
Staffing: Specific Recruiting Program
Transport Canada — Airport Transfers

Tentative VFM Audit Subjects – 2001

Capstone Report

Audit of Sustainable Development Strategies
Governance in the Great Lakes — St-Lawrence Basin
Great Lakes — Fisheries
Great Lakes Overview
Implementation of Departmental Sustainable Development Strategies
Species and Spaces at Risk
Sustainable Development — Social Dimension
Sustainable Development Policy Integration
Water Management

Agriculture — Research Branch
Atlantic Canada Opportunities Agency — Grants & Contributions
Canada Customs and Revenue Agency — Customs Border Control
Canadian Food Inspection Agency — Financial Management & Control
Financial Information Strategy: Infrastructure Readiness
Financial Management and Control — Adequacy of Cost Information
Health — Health Promotion
Heritage Canada — Attributes of Successful Museums
Human Resources Management –- Health of the Merit Principle
Indian Affairs and Northern Development –- First Nations Governance
Information Technology –- Security
Management of Grant and Contribution Programs
National Defence — In-Service Equipment
Revenue Canada — Non-Residents Subject to Canadian Income Tax
Solicitor General — RCMP Drug Enforcement
Statistics Canada — Environmental Statistics
Transport Canada — Aviation Safety