Opening Statement to the Standing Committee on Public Accounts

Estimates and Performance Report of the Office of the Auditor General of Canada

11 May 2006

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chair, we are pleased to be here and would like to thank you for the opportunity to discuss our Estimates and our latest Performance Report.

Accompanying me are John Wiersema, Deputy Auditor General; and Robert D'Aoust, our Comptroller. We would like to take this opportunity to briefly outline our mandate and operations for the benefit of the new members.

The Auditor General is an Agent of Parliament who is independent from the government and reports directly to Parliament. As legislative auditors, we provide objective information, advice, and assurance that parliamentarians can use to scrutinize government spending and performance. We audit the federal government, which includes some 70 federal departments and agencies, 10 departmental corporations, and 60 other entities. We also audit 40 Crown corporations, the 3 territorial governments, 15 territorial agencies, and 2 United Nations agencies—UNESCO and the International Civil Aviation Organization. For the two UN agencies, we recover the costs of our work.

Our legislative audits include both financial audits and performance audits. A financial audit examines whether the government is presenting its financial information fairly in accordance with accounting policies. Our financial audits are similar to the type of audits you see in the private sector.

Each year we conduct over 100 financial audits, including the financial statements of the Government of Canada, Crown corporations, and the three territorial governments.

Through our performance audits, we examine whether government programs are managed with due regard to economy, efficiency, and environmental impacts; and whether measures are in place to determine program effectiveness. We select the subject of our performance audits by assessing the risks that departments and agencies face in fulfilling their mandates and conducting their operations. We audit matters of significance and report what we find.

We conduct about 30 performance audits a year. They are tabled in Parliament up to four times a year, in reports of the Auditor General and the Commissioner of the Environment and Sustainable Development, who leads my office's environmental audit group. Our reports for 2006 are listed in the attachment to my opening statement.

Special examinations are a form of performance audit that assess the management systems and practices of Crown corporations and provide an opinion on whether there is reasonable assurance that no significant deficiencies exist. All Crowns must have a special examination every five years. Our special examination reports are addressed to the boards of directors of the corporations. Most Crown corporations post our reports on their web sites.

The work of my office is conducted by a diverse staff of about 600 audit professionals and administrative services personnel. The majority work in our Ottawa office. We also have offices in Halifax, Montreal, Edmonton, and Vancouver.

In 2004-05, w e used $72 million of the appropriations available to us and the equivalent of 570 full-time employees (see Attachment 1). Our net cost of operations, taking into account services provided without charge by other departments as well as other smaller adjustments, was $82.5 million.

These figures are measures of our inputs—our use of money and staff. Our last Performance Report for the year ending March 2005 provides details of our outputs—the volume of work that we produced—and a broader perspective on what our work achieved.

Like most federal departments and agencies, we report our planned priorities and performance to Parliament through two central documents—our Report on Plans and Priorities and our Performance Report. The Report on Plans and Priorities for 2006-07, which is part of the government's Estimates process, will be tabled in the fall this year. I look forward to discussing both of these documents with this Committee later this year. Because the Reports on the Plans and Priorities are not available for your review today, we have attached some financial information on past and projected spending to assist you.

Let me comment briefly on our spending plans. Parliament has not yet approved Main Estimates for the current year. To put our current budget in context, Attachment 1 provides a six-year summary. You will see that our Main Estimates are fairly constant over the period. In addition, you will note that each year a budget carry-forward from the prior year is provided through the Supplementary Estimates. For 2006-07, we will be presenting supplementary estimates requesting that a carry-forward of some $3 million be added to our Main Estimates of $73.7 million.

We believe that with the current level of funding we will be able to properly fulfill our current mandate. However, the Office could face financial pressures in the future as a result of our expanded mandate for financial audits and special examinations of additional Crown corporations. Furthermore, the proposed audits of departmental financial statements could also affect our resource requirements. We will continue to monitor our financial requirements as these initiatives unfold and we may need to seek additional funding at some future date.

In previous Estimates documents and in discussion with several parliamentary committees, we have argued that a new funding mechanism is needed for Agents of Parliament. I am pleased that the Advisory Panel on the Funding of Officers of Parliament was established for this purpose on a pilot basis, and I look forward to appearing before the Panel once it is re-established.

I would like to say a few words about the new "follow the money" mandate included in the Accountability Act. First of all, let me say that I appreciate this confidence. Now I would like to explain to the members of the committee how we would intend to carry out this mandate:

• It is management's job, in departments and Crown corporations, to ensure that grants, contributions and loans provided to individuals or institutions outside the federal government achieve their intended purposes. They do this by establishing the systems and procedures needed to ensure that these funds are used appropriately.
• Our role as government's external auditor is to determine whether those systems and procedures are in place and how well they are working. We then report to Parliament on the adequacy of the systems, and we provide recommendations where improvement is needed.
• We do not believe it is our role to routinely audit recipients of grants and contributions. As previously noted, this is the responsibility of the managers of those programs. Therefore, I expect that we would rarely exercise this option.

Since I expect to "follow the dollar" only in very rare and unusual circumstances, we are not seeking additional funding to carry out this expanded mandate.

Finally, Mr. Chair, my staff and I appreciate the continuing support that we have received from the Committee, and we look forward to working with all of you.

My colleagues and I would be pleased to answer your questions.

Office of the Auditor General
Performance Audit Reports Planned for 2006

May 2006
Status Report

• Managing Government—Financial Information
• National Defence—Military Recruiting and Retention
• National Defence—NATO Flying Training in Canada
• Canadian Firearms Program
• Management of Programs for First Nations
• Management of Voted Grants and Contributions
• Acquisition of Leased Office Space
• Canada Revenue Agency—Collection of Tax Debts

May 2006

• Report on another matter related to Parliament's Control of Public Spending

September 2006
Report of the Commissioner of the Environment and Sustainable Development

• Managing the Federal Approach to Climate Change
• Adapting to the Impacts of Climate Change
• Reducing Greenhouse Gases Emitted During Energy Production and Consumption
• Sustainable Development Strategies—Action on Strategy Commitments
• Environmental Petitions: Annual Report on Petitions and Government Purchase of Green Power

November 2006

• Federal Participation in the British Columbia Treaty Process
• Large Information Technology Enabled Projects
• The Federal Government's Expenditure Management Systems—An Overview
• Expenditure Management System in Departments
• Expenditure Management at the Government Centre
• National Defence—Modernizing Canada's NORAD Systems
• Proper Conduct of Public Business—Public Safety and Emergency Preparedness Agencies
• Old Age Security
• Health Canada—Management of Financial Resources
• Royal Canadian Mounted Police—Pension and Insurance Administration
• Integrated Relocation Program

Office of the Auditor General of Canada
Summary of funding and expenses for 2003-04 to 2008-09 (in $000)

Notes:

¹ Departments and agencies can carry forward to future years up to five percent of their operating budgets.

² Other Supplementary Estimates mainly include funding for increases in salaries; for replacement of furniture, and for increased workload resulting from changes to our statutory audit responsibilities.

³ The planned funding for 2007-08 and 2008-09 is derived from the Annual Reference Level Update (ARLU) exercise.