Opening Statement to the Standing Committee on Public Accounts

2002-03 Report on Plans and Priorities of the Office of the Auditor General of Canada

Thank you, Mr. Chairman. I am pleased to be here and would like to thank you for the opportunity to discuss our Report on Plans and Priorities for 2002-03. We welcome your views and suggestions on the orientation of the Office. The Deputy Auditor General, Mike McLaughlin, and the Commissioner of the Environment and Sustainable Development, Johanne Gélinas, will each cover some aspects of our Report.

We note in Section III of the Report that during my term as Auditor General, the Office will pay special attention to five areas: accountability to Parliament; an effective public service; Aboriginal issues; the well-being of Canadians (their health, safety, security, and environment); and legacy and heritage. We have begun to develop a new strategic plan for the Office that will establish a framework for directing how these focus areas will influence the audits and studies planned for 2003-04 and beyond.

This year, we plan to publish a status report on follow-up work in September, 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 three reports will contain more than 25 chapters. Tabling of these reports will depend on the parliamentary calendar.

We have provided you with a handout that shows the list of chapters in our 2002 and April 2003 reports. The work for these reports is well under way, but there is room for adjustment to our plans for the latter part of 2003. We would appreciate the Committee's suggestions on issues that we could consider in subsequent audits and would be pleased to discuss any of the matters listed in the appendix to this statement.

Your Committee may be interested in work we are doing with our provincial counterparts to provide third-party verification of the September 2002 health indicator reports as agreed to by first ministers in their 2000 communiqué on Health. Each provincial auditor general will issue a separate opinion.

This year, we will introduce a new kind of report—we are calling it the Auditor General's Status Report. It is devoted entirely to assessing the progress departments have made in implementing our recommendations. The new Status Report will focus on a few key issues of continuing interest to Parliament and offer our opinion as to whether or not departments have made satisfactory progress. The first Status Report will be tabled in September and future reports will be tabled each spring, beginning in 2003. We hope that the Status Report will highlight the very important work that departments undertake to remedy any problems. I believe it provides the final step in the auditing process—our audit work, reporting to Parliament, discussion of action plans in this Committee, departmental implementation, and this assessment of progress.

In addition to this work, we will continue monitoring the implementation of recommendations. An annual summary will appear in the Status Report. This information, along with the chapters on departments' progress, will be a useful performance indicator of my Office.

Over the past couple of years, we have made significants strides in identifying performance measures that are more focused on outcomes. Like other legislative audit offices, we are finding this effort to be an ongoing challenge. This year, we are surveying a number of parliamentarians to gain further insights on their expectations and to get their reactions to the work of the Office. We will use the results of this survey to measure how well we serve Parliament and to improve our operations. The results will appear in our 2002 Performance Report.

We have talked about the work we do at the federal level. But we also have an international program that helps strengthen our legislative audit practice and enhances our reputation and credibility in Canada and abroad. We are the external auditors for UNESCO and ICAO, both UN organizations, and conduct this work on a fee-for-service basis. Over the past two decades, Canada has become known and respected throughout the world for its expertise in legislative auditing. In 2001, we were honoured to receive the prestigious Kandutsch award from the International Organization of Supreme Audit Institutions (INTOSAI). We have recently assumed two new responsibilities within INTOSAI—chair of its working group on environmental auditing and chair of a new sub-committee on the crucial issue of auditor independence.

We are also active in the North, as the legislative auditor for the three territories. We conduct annual financial audits of the territorial governments, and related corporations and entities. We prepare broad-based audit reports for each territory. In addition, we are asked by territorial legislatures to undertake special examinations and audits from time to time. At present, we have one underway in the Yukon and another in the Northwest Territories.

Turning now to the work of the Commissioner of the Environment and Sustainable Development, I would first like to provide further details on the mandate, role, and responsibilities of the Commissioner. In March 1995, the Minister of the Environment asked the House of Commons Standing Committee on the Environment and Sustainable Development to consider how an environmental auditor general could be established to ensure that the government carried out its actions in sustainable ways. The Standing Committee recommended the establishment of a commissioner of the environment and sustainable development and in 1995 amendments to the Auditor General Act created that position. The amendments also established that ministers would be responsible for the preparation of departmental sustainable development strategies.

Now, Mr. Chairman, with your permission, I will ask Johanne Gélinas, to brief you on the activities of her group for the upcoming year.

As part of the Office of the Auditor General, I provide objective, independent analysis and recommendations to members of Parliament for their use in examining the federal government's performance and in holding it to account for that performance. More specifically, the Commissioner has responsibilities in four main areas:

• Audits and studies. We examine how federal organizations manage environmental and sustainable development issues. We have audited issues such as ozone layer protection, climate change, and urban smog.
• Monitoring of sustainable development strategies. We monitor and report on the extent to which departments have implemented the action plans and met the objectives for their strategies.
• Petitions. The Commissioner receives petitions on environmental and sustainable development matters that are the responsibility of federal departments and agencies, and monitors the government's responses to them. I encourage Canadians to use this valuable tool, and I invite members of Parliament to encourage its use by their constituents with environment and sustainable development concerns.
• Reporting. The Commissioner reports annually to the House of Commons on these and other matters related to the environment and sustainable development that she believes should be brought to the attention of the House.

The theme of my annual report this year, to be tabled in October, is the progress the government is making toward sustainable development. My staff is examining five issues:

• invasive species – how does the federal government manage species that invade and disrupt Canadian ecosystems?
• federal contaminated sites – has the government made meaningful progress in managing its contaminated sites since our audits in 1995 and 1996?
• northern abandoned mines – how has the government managed contaminated sites resulting from abandoned mines in northern Canada?
• toxic substances – how has the government progressed in managing toxic substances since our 1999 audit?
• sustainable development strategies – are these leading to real changes in departmental policies, programs, and operations?

My staff also assists in the special examinations of Crown corporations with important environment and sustainable development responsibilities—Crown corporations such as Via Rail Inc. and Atomic Energy of Canada Limited.

As the Auditor General mentioned earlier, our Office has recently become the Chair and Secretariat for INTOSAI's Working Group on Environmental Auditing. This working group composed of Auditor General equivalents from around the world has a mandate and objective to promote the global adoption of environmental auditing. In the coming years, the working group will be providing guidance on how to conduct environmental and sustainable development audits, developing training programs, conducting regional or global audits, and building relationships with other international organizations.

Mr. Chairman, we would be pleased to answer any questions the Committee members may have.

I would now like to spend a few moments talking about our funding situation. As you may recall, last April we indicated to your Committee that we had requested from the Treasury Board Secretariat a permanent increase of 15 percent to our base budget. This increase is required to provide sufficient recources for our value-for-money work, audit methodology, technology, and intellectual capital. We are pleased to report that we have received increased funding for 2001-02 and 2002-03.

As reported by the Treasury Board Secretariat in their response to this Committee's Eighth Report, "At the time that the Auditor General's funding request was approved, Ministers also authorized TBS to undertake consultations with OAG that are to lead to a process for determining future years' funding requirements for the Office. This process will respect the independence of the Auditor General and its mandate to audit government programs and activities."

We are waiting for government officials to develop a study paper on this matter. We are concerned about the progress made to date and hope that the Treasury Board Secretariat will take the necessary steps to ensure this matter is resolved fairly soon.

Mike McLaughlin will now give an overview of the sub-sections Resources, and Outputs and Operational Processes in Section III of our Report on Plans and Priorities. We would be happy to answer the Committee's questions in a few moments.

Thank you, Mr. Chairman. I will refer to our Report on Plans and Priorities itself and page numbers and will refer to the numbers in the French version as well so everyone can follow.

I would like to start by highlighting some of the financial aspects of our Report. On page 14, we see the planned spending for 2001-02 to 2004-05, with 2001-02 being a forecast year that we just completed and 2002-03 the year we are entering that is under consideration.

The first line provides the expenditure plan of the Office. As mentioned by the Auditor General, we received a 15 percent increase ($8 million) to our base budget for 2002-03. This increase is not reflected for 2003-04 and 2004-05 in the exhibit.

With Public Works and Government Services of Canada, we are renovating the current office space for the employees of our Ottawa office. The cost for furniture, fixtures, and equipment is estimated at $3.5 million, and the Treasury Board has provided $3 million of this amount through special funding.

We are also showing a forecasted lapse of $2 million for 2001-02 and a carry-forward of the same amount for 2002-03. This represents spending that was originally planned for work to be done in 2001-02 and has been deferred to 2002-03.

The costs of services received without charge of $8.8 million include the accommodation charges allocated by Public Works and Government Services Canada and the insurance premiums paid by the Treasury Board Secretariat for employee benefits.

The net cost of our program is planned at $78.6 million and the number of full-time equivalents at 570.

Exhibit 3.4 on page 14 (page 15 in French) provides the planned spending by components of our business line for 2001-02 and 2002-03. The figures are presented on a fully loaded cost basis, that is, all the costs incurred directly by the Office are factored into the costing of the Office products. The exhibit is different from last year as this year's figures are based on the net cost of the program, while last year's were based on gross program spending. Essentially we are including the cost of services provided without charge.

These are two significant variations between the two fiscal years in "Special examinations of Crown corporations" and in "Professional practice." First, planned spending for "Special examinations" is expected to double from $2.1 million to $4.2 million. This is explained by the fact that in 2001-02 we were near the end of the third cycle, while in 2002-03 we will complete the last special examination of the third cycle and carry out the first eight special examinations of the fourth cycle.

The other component with a significant variation is "Professional practice." The Office is committed to continuous improvement to strengthen our professional practices. We are planning to increase spending in this area by $2.3 million. This was made possible through the increase in funding for 2002-03. A large portion of this increased spending will go toward the Advancing Audit Practices project, which focusses on adapting and fine-tuning our methodology and electronic tool sets. We are acquiring electronic planning and audit tool sets, training, and methodology and have worked with staff to prepare for the necessary audit practice changes that will result. This project should benefit both our financial audit and value-for-money audit products.

Planned spending on the other product lines—value-for-money audits, financial audits of the Financial Statements of the Government of Canada and of Crown Corporations, territories and other entities, and assessments of agency performance reports—are essentially the same as last year.

Table 5.2 on page 27 shows $0.8 million in non-respendable revenue. This comes from the charging of UNESCO and ICAO for the audit work that we do there. This work is done following our elections by Member States of the respective organizations and supported by an Order-in-Council indicating that this is in Canada's interest.

We pay close attention to planning and managing the cost, timelines, and results of audits. We continue to refine our budgeting and planning process in order to use our resources effectively and efficiently. We set up budgets for all our audits and, similar to last year, we will publish these budgets with actual resources used.

We plan to conduct an employee satisfaction survey in 2002-03. This survey will set a baseline in many areas of interest and concern to our employees, such as strategic leadership, people, products, and communications. We will use the survey results to measure and report our success and to improve Office initiatives.

Our major initiatives in human resources management for the Office for 2002-03 included renewing efforts to achieve a higher level of bilingualism, training in new methodology, and balancing work and personal interests. As with other organizations, we are facing increased competition for people. We will be pursuing aggressive recruitment and retention strategies.

We are excited about our planned initiatives to reinvest in our methodology, people, and tools. We want to ensure that the Office remains a centre of excellence in public sector management.

Thank you, Mr. Chairman.

Introduction

Human Resources Development Canada—Integrity of the Social Insurance Number: A Progress Report

Health Canada—A Report Card on Progress of National Health Surveillance: Diseases and Injuries Management of a Food-Borne Outbreak and Federal Support of Health Care Delivery

National Defence—NATO Flying Training in Canada

Industry Canada—Managing Small Business Loan Guarantees

Public Works and Government Services Canada—Alternative Forms of Delivery: Contracting for Property Services

The Commissioner's Perspective—Foreword and Main Points

Sustainable Development Strategies

Toxic Substances

Invasive Species

Abandoned Mines in the North

Federal Contaminated Sites

Petitions

Matters of Special Importance—Foreword and Main Points

Study of First Nations Federal Reporting Requirements

Fisheries and Oceans Canada—Safe and Efficient Waterways

Canada Customs and Revenue Agency—Special Import Measures Act: Administration of Complaints of Unfair Trade Practices for Imports to Canada

Canada Customs and Revenue Agency—International Tax Administration: Taxation of Foreign Transactions of Canadian Residents

Public Accounts of Canada—Accrual Accounting Implementation

Statistics Canada—Health Statistics

Canadian Space Agency—The Canadian Space Program: A Review of Its Implementation

Public Works and Government Services Canada—Leasing of Real Property

Modernizing Accountability and Its Practice

The Criminal Justice System: A Quantitative Examination

The Canadian Firearms Control Program: Expenditures and Revenues

Other Audit Observations

Citizenship and Immigration Canada—Control and Enforcement

Department of Canadian Heritage—Protecting and Putting a Value on Cultural Heritage

Indian and Northern Affairs Canada—Federal Government Support to On-Reserve Housing

Quality of Management Information

Financial Management and Control—Integrated Risk Management

National Defence—Test and Training Areas

Correctional Service Canada—Male Offender Reintegration

Correctional Service Canada—Female Offender Reintegration

Viewing Federal Programs Through a Northern Lens: An Audit

Public Works and Government Services Canada—Contracting Standing Offers

Canada's Anti-Money Laundering Strategy