Opening Statement to the Standing Committee on Public Accounts

2001-02 Report on Plans and Priorities and 1999-2000 Performance Report of the Office of the Auditor General of Canada

Thank you, Mr. Chairman. I am pleased to be here as the interim Auditor General and want to thank you for the opportunity to discuss with you our Report on Plans and Priorities for 2001-2002 and our Performance Report for the year ended March 2000. We welcome your views and suggestions on the orientation of the Office and ways we can improve our performance.

Our plans and priorities for 2001-02

The Office of the Auditor General is committed to making a difference for Canadians by encouraging positive changes in our federal institutions. Over the last five years, we have focussed on the following priorities: improvement of the government's financial position, accountability, financial management, public service renewal, and the environment. In February 2001, the Auditor General, Denis Desautels tabled his final report, which assesses the progress made in relation to these priorities. The Office will continue to focus on these priorities this year; however, they will be reviewed when the new Auditor General is appointed.

This year, we plan to publish the Annual Report of the Commissioner of the Environment and Sustainable Development in October and the Annual Report of the Auditor General in December. These two reports will contain some 20 chapters.

We have provided you with a handout that shows the list of chapters in our 2001 and April 2002 Reports. The work for these reports is well under way, but there is room for adjustment to our plans for the latter part of 2002. We would appreciate the Committee's suggestions on issues that we could consider in subsequent audits.

I would like to take a few minutes to outline certain chapters in our December 2001 Report. The management of grants and contributions was an area of concern in 2000 and is the focus of much of our work in 2001. In response to a request from your Committee, we will report on a government-wide audit in this area in December.

We will continue our work in tax revenue administration. One chapter will discuss how the Canada Customs and Revenue Agency administers the tax legislation related to income earned in Canada by non-Canadian residents. Another chapter will review Customs operations related to commercial traffic. We will also report on National Defence's management of in-service equipment and on the adoption of new governance arrangements.

The Report of the Commissioner of the Environment and Sustainable Development will focus on environmental issues affecting the Great Lakes and the St. Lawrence River basin and will provide an assessment of the sustainable development strategies tabled in February 2001.

In addition to these reports, we will complete two special reports. One, in response to a request from the government on the Export Development Corporation's sustainable development strategy and a second one on the Canadian Wheat Board, at the request of its Board.

We also conduct statutory audits, including the audit of the summary-level financial statements of the federal government. The implementation of the government's Financial Information Strategy will have an impact on our audit of these financial statements. We will have to perform a substantial amount of additional audit work on new financial systems and amounts not previously recorded in the government's financial systems and financial statements - amounts such as tangible capital assets, inventories, and environmental liabilities.

We are also responsible for auditing the annual financial statements of over 100 government organizations, including Crown corporations, other entities and territorial governments. We just recently provided our first audit opinion on the financial statements of the Nunavut government. We carry out special examinations of Crown corporations once every five years and we plan to start the fourth round of examinations in 2001-02. We are also the auditors of two international organizations, UNESCO and the International Civil Aviation Organization. The cost of the latter two audits are recovered from these organizations.

Last year, we told your Committee that our current level of funding was not sufficient to provide the level of service we believe is expected by Parliament in the medium and longer term. Over the last decade, the Office voluntarily participated in government restraint programs and, at the same time, accepted expanded audit responsibilities with the creation of the Office of the Commissioner of the Environment, the new agencies and Nunavut. The result is that the Office now has significantly fewer resources available for Value-For-Money auditing than we did a decade ago. Government changes such as the introduction of the government's Financial Information Strategy and the modernization of the comptrollership function have further increased pressures on our resources and resulted in strains throughout the Office. We have been striving to maintain adequate audit coverage of government entities and programs.

To address this concern, the Office has requested from the Treasury Board Secretariat a significant increase to our base budget for 2001-02. This proposed increase would also support our plans to invest in the training and development of our people and renew our audit techniques and technology. These changes are necessary to ensure our auditors are well equipped to audit in today's changing government environment.

Our recent performance

In March 2000, your Committee asked us to clarify our performance expectations, refine our performance measures and improve our performance reporting. You also asked us to keep members of Parliament involved in our strategic planning process. We have told you that we intend to implement all these recommendations. Our second handout for the Committee shows our progress in this regard.

We have revised the Office's performance measurement and reporting framework (which appears on pages 12 and 13 of our Report on Plans and Priorities). The revised framework describes a cascade of results that flow from our work and lead progressively to the adoption of best management practices, better accountability and sustainable development. We have described four of these results in our 2001 Report on Plans and Priorities and set expectations for three of them.

These three results tell only a part of our Office's performance story. Work on implementing other measures and setting expectations is ongoing. We expect our next Performance Report to respond more fully to the Committee's recommendations. And, we intend to continue meeting with members of Parliament to discuss issues of interest to them. We are also working through the Canadian Council of Legislative Auditors to develop comparable performance measures for legislative audit institutions.

Now, Mr. Chairman, with your permission, I will ask Mr. McLaughlin to briefly take us through some of the charts in our report on Plans and Priorities.

Thank you, Mr Chairman. We would be pleased to answer any questions.

Special Reports 2001

Export Development Corporation - Sustainable Development Strategy

Canadian Wheat Board

October 2001 - Commissioner of the Environment and Sustainable Development

The Commissioner's Observations - 2001

Sustainable Development Management Systems - It's Time for All Departments to Turn Talk into Action

Reporting to Parliament on Sustainable Development - Is the System Working?

Assessing the First Sustainable Development Strategies

The Social Dimension - A Critical Milestone on the Journey Toward Sustainable Development

Great Lakes and St-Lawrence River Basin

Overview
Water Management
Species and Spaces at Risk
Agriculture
Fisheries
Governance

Climate Change and Energy Efficiency - Follow-up

Management of Grants and Contributions

Atlantic Canada Opportunities Agency - Economic Development
Health Canada - Health Promotion
Citizenship and Immigration Canada - Settlement Programs

National Defence - In-Service Equipment

Canada Customs and Revenue Agency - Non-Residents Subject to Canadian Income Tax

Canada Customs and Revenue Agency - Customs Border Control: Commercial Traffic

Royal Canadian Mounted Police - Drug Enforcement

Financial Information Strategy: Infrastructure Readiness

New Governance Arrangements

Human Resources Management: Staff Renewal in the Public Service

Follow-up of Recommendations in Previous Reports

Audit Observations

April 2002

Public Works and Government Services Canada - Leasing of Real Property

Canadian Radio -Television and Telecommunications Commission

Information Technology: Security

Department of Justice - Criminal Justice System

Indian Affairs and Northern Development - Fiscal Relations

Financial Management and Control: Comptrollership

National Defence - Human Resource Management

Department of Finance - Environmental Considerations in Policy Analysis

The Office has revised its Performance Measurement and Reporting Framework (pages 12 and 13 of our 2001-02 Report on Plans and Priorities). The revised framework describes a cascade of results that flow from our work and lead progressively to the adoption of best management practices and sustainable development. We have described four of these results in our 2001 Report on Plans and Priorities and we have set expectations for three of them.

The revised framework will form the basis of the next Performance Report and will guide the development of revised performance measures. It will enable us to identify and report on areas where performance and achievements have fallen short of expectations. Future Performance Reports will indicate how the Office plans to address problem areas.

The Office has included a summary discussion of unintended results in its 2000 Performance Report (paragraph 2.7, page 6). Identifying unintended effects is not an easy task. Though we have not yet attempted to systematically measure them, we will examine how to do so in the next months.

Various techniques, such as surveying senior management of departments, could provide valuable information for identifying and measuring unintended effects. The Office is currently examining the possibility of extending to departments and agencies its current practice of surveying Crown corporations subject to VFM audits. In this regard, the Office will review the experience of other audit offices in surveying senior management of departments and agencies.

We regret that we were unable in the 1999-2000 Performance Report to provide additional detail on the implementation of recommendations. Our initiatives in this area had not progressed enough to enable us to provide this type of information. We realized that our current follow-up approach and the number of non-comparable recommendations affected the quality of the information that we could provide in our Performance Report. Future performance reports will provide better information on departments and agencies that have demonstrated low rates of implementation and areas where significant problems have arisen.

In the interim, we have taken steps to improve our ability to track the progress departments and agencies have made in implementing our recommendations. We have developed a central database of recommendations that will help us to monitor that progress. We also plan to review our follow-up approach so that we can provide more complete information on the status of our recommendations.

We will seek the views of the Public Accounts Committee as we refine our Performance Measurement Framework. We hope to do this during discussions of the 1999-2000 Performance Report. In setting our goals, we closely monitor parliamentary issues to ensure that we are aware of matters of interest to Parliament, and we seek to meet with members of parliamentary committees and their staff to identify issues of interest to them. Further, we have initiated a series of informal meetings with Members of Parliament to discuss areas of mutual interest. Future discussions could cover matters related to goals and performance indicators. This information will complement the information gathered through our survey of stakeholders (mentioned in our response to recommendation 2) and will help us refine our goals and expectations.

The Office has made it a priority to improve its performance reporting. Consultations with other audit offices in the United States, United Kingdom, Australia and New Zealand have taken place last year. This year, we will investigate further the experience of these audit offices in surveying stakeholders. We plan to develop our own survey in order to measure our stakeholders' satisfaction with our audit findings and audit process.

Through the Canadian Council of Legislative Auditors (CCOLA), we are working with other legislative audit offices in Canada to develop a common performance framework. With CCOLA, we hope to develop key common performance indicators that can be used for comparative purposes. Given the differing mandates of legislative auditors, this is not an easy task and progress is not as fast as we would like.

The CCOLA initiative and our own project to review our performance reporting framework should enable us to report on our progress in developing benchmark indicators. Future Performance Reports will provide updates on that progress.

The Office expects to significantly change its Performance Report this year in order to respond to the Committee's recommendations. It will include for the benefit of readers a brief explanation of the changes. The key change will be the adoption of the new Performance Measurement Framework. We should also be able to provide better information on the status of departmental implementation of our recommendations.

During the year, the Office will seek the views of the Committee and will include appropriate references to previous Performance Reports and Reports on Plans and Priorities.

The 2001-02 Report on Plans and Priorities provides a crosswalk (page 25) between the 2000-01 and the 2001-02 Reports on Plans and Priorities. We will also include such a crosswalk in the next Performance Report.

The Office has included an index of key issues and topics in its 2000 Performance Report and its 2001-02 Report on Plans and Priorities. It will continue this practice in the future.