Opening Statement to the Standing Committee on Public Accounts

Status Report 2002

21 November 2002

I am very pleased to be here to give you an overview of my first Status Report. I am accompanied today by three Assistant Auditors General responsible for these follow-up audits, Maria Barrados, Hugh McRoberts and Richard Flageole.

Following up on previous audits has been part of the regular work of my Office for many years. Past annual Reports have included a section on follow-up work along with chapters devoted to new audit work. This year, I decided to introduce a new report devoted exclusively to reviewing how the government has responded to our previous recommendations. I intend to present one every year, with the next one planned for the spring of 2003. The Status Report will become one of the four reports I provide annually to the House.

Why a new Status Report on follow-up work?

Not only does the new Status Report present the results of our follow-up work in a new format, it also reflects a new approach to the way we carry out our work.

Over the years, members of Parliament—particularly members of this Committee—have let us know that they want a more thorough follow-up of how well departments are doing in implementing our recommendations.

What distinguishes the Status Report from our previous work is the way we select the issues to follow up, the scope and depth of our review, and the assurance our findings provide.

We focus on a few complex and significant issues that are timely and relevant—these are high-risk, high-cost issues that are likely to be of most interest to parliamentarians.

Each of these issues is examined in more depth; they are in fact re-audited, and new issues may be reported.

This innovation in reporting our follow-up work is an important new step in the accountability process. I believe that it will go a long way towards more effective evaluation of the progress made by departments.

I look forward to hearing your comments and suggestions regarding this new follow-up approach.

What were our key findings?

Our follow-up audits looked at areas where there were problems in the past—some of which require significant time and resources to resolve. By their very nature, audit recommendations are intended to correct problems. So, we might expect to come up with findings that are less than satisfactory.

Which is indeed what happened.

I see this report as a wake-up call for departments. They agreed with our initial recommendations and recognize what needs to be done. Some improvements have been made; but overall, the pace is too slow and the results often fall short.

Chapter 1—Human Resources Development Canada—The Integrity of the Social Insurance Number

One issue we looked at again is the integrity of the social insurance number (SIN). I am still concerned that the department has not done enough to safeguard and strengthen the integrity of the SIN.

The government has reaffirmed its policy that the SIN was only an account number for authorized federal programs. The SIN continues however to be used for various purposes in the private and public sectors.

Human Resources Development Canada has made little progress since 1998 in the way it issues SINs—regular ones and the 900-series numbers that are only issued to people who are not Canadians or permanent residents. Although most people with 900-series SINs are expected to be in Canada temporarily, these SINs have no expiry date.

In our view, the policies and practices of the Department do not meet the intent of the Employment Insurance Act and Regulations because it is not doing enough to identify SIN applicants properly.

Finally, if the integrity of the social insurance number is jeopardized, how can we be sure that federal benefits go to the right people?

Chapter 2 and 3—Health Canada

We looked at two critical areas of health care in which Health Canada plays a key role. The first chapter deals with national health surveillance and the second one refers to federal support of health care delivery.

Chapter 2 deals with National Health Surveillance. Good national health surveillance is critical to making fact-based decisions on public health issues. In this follow-up, we looked at the gaps and weaknesses in the way Health Canada tracks disease.

Since our audit in 1999 Health Canada has made progress in establishing a national framework that allows for greater collaboration among the partners involved in health surveillance.

However, for the most part, it still has no agreement with other partners on important matters such as data sharing, common standards, and nationally reportable disease. Many of the surveillance systems still lack timely, accurate, and complete disease information.

Health Canada should be taking the lead on efforts to improve national health surveillance. The system will improve only through the joint efforts of the Department, the provinces and the territories.

Chapter 3 deals with Federal Support of Health Care Delivery.

The federal contribution to the provinces and territories for health care is made through the Canada Health and Social Transfer.

Weaknesses in the information that Health Canada collects and reports annually to Parliament on the administration and operation of the Canada Health Act remain a long-standing problem. Health Canada has made only limited progress in addressing these gaps in information, which we identified in our 1999 audit.

The first issue is the federal contribution to health care spending. Because of the nature of the funding mechanism (i.e. a block transfer), Canadians do not know how much federal money is going to health care. The federal government should provide sufficient information to allow for an informed debate on the future of health care funding.

The second issue concerns information Health Canada needs to identify non-compliance with the Canada Health Act. As a result, it is unable to tell Parliament to what extent health care delivery in each province and territory complies with the Act's criteria and conditions.

Chapter 4—National Defence NATO Flying Training in Canada

In chapter 4, we report on the management of the NATO Flying Training Program. The Canadian Forces came up with an innovative plan to train the new pilots they need to help solve a critical shortage. To date, this program has not been able to train enough pilots, and we are paying for services we are not receiving.

National Defence entered into a $2.8 billion contract to train pilots over 20 years as part of the NATO Flying Training in Canada program.

During the first two years of program implementation, National Defence used only about 41 percent of the training capacity that it paid for. We estimated that as of the end of December 2001, the Department had paid about $65 million more than the value of training received.

National Defence will have to manage this program carefully to ensure that at the end of the day, it receives full value for what it has paid for.
In the future, contracts of this nature should ensure that payments are tied to performance and value received.

Chapter 5—Industry Canada—Management of the Canada Small Business Financing Program

Finally, we looked again at the management of Industry Canada's Small Business Financing Program.

In 1997, we had questioned whether the objective of cost recovery for the Canada Small Business Financing Program could be met, given the fee structure and loss-sharing ratio then in effect.

While many improvements have been made in the program, we note that the Program's losses will reach at least $200 million for loans made between 1995 and 1999, and it will be very difficult to recover the costs of loans made after 1999. There has also been a significant decrease in the number of loans made since 1998.

The Department will have to follow the Program's financial performance closely and inform Parliament of the results at the appropriate time.

Conclusion

That completes my overview of the Report. I hope that devoting one report a year to following up on our previous recommendations will help motivate departments to act. We welcome your comments on this new report and we will be pleased to answer any questions.