ARCHIVED - Office of the Superintendent of Financial Institutions Canada

Strategic Outcome: Regulate and Supervise to Contribute to Public Confidence in
Canada’s Financial System and Safeguard from Undue Loss

Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Program Sub-Activity: Risk Assessment and Intervention

Priority 1: Accurate risk assessments of financial institutions and timely, effective intervention and feedback.

Description

• Operate an effective prudential supervisory system by allocating resources to higher risk/impact institutions/activities.
• Conduct timely risk assessments and interventions and provide clear reports and recommendations to Federally Regulated Financial Institutions (FRFIs).
• Recommend appropriate changes in FRFI practices and processes.

Key Expected Results

• OSFI uses a modern supervisory process that is effective and leads to an accurate overall assessment of the risk profile and control functions of the financial institutions it regulates and supervises.
• In exercising its early intervention mandate, OSFI is proactive in intervening in problem cases in an effective and appropriate manner.

Performance Discussion

Steps taken during the year in support of this objective include:

• Intervened with a number of institutions to improve risk management and governance practices and to enhance safety and soundness.
• Reduced the number of “staged” (problem) institutions, mainly as a result of the continued improved health of the Property and Casualty (P&C) insurance industry, as well as effective intervention by OSFI. The number of staged institutions declined to 25 at the end of 2006-2007 from 36 a year earlier.
• Assigned a low or moderate Composite Risk Rating (CRR) to 95% of all rated institutions as at March 31, 2007. No institution was assessed as high risk. The percentage of institutions with a low or moderate risk rating has been improving steadily since 2002-2003, when OSFI started sharing risk ratings with institutions.
• Enhanced risk assessment and intervention activities on emerging areas of risk. For example, OSFI increased the focus on risks arising from Canadian institutions’ offshore operations and their ability to manage those risks. Continued to develop and maintain effective working relationships with foreign regulators to optimize supervisory efforts.
• Monitored institutions’ ability to manage the adoption of international accounting standards and the implementation of Basel II.
• Reviewed institutions’ crisis response and preparedness.
• Continued to assess institutions’ ability to detect and deter terrorist financing and money laundering.
• Increased focus on a potential deterioration in asset quality at smaller deposit-taking institutions.
• Monitored P&C institutions closely for signs of imprudent pricing behaviour, as well as catastrophic exposures.

Steps planned for the future to improve performance include:

• Formal review of our supervisory framework to ensure it reflects best practice.
• Enhance understanding of the measurement and management of operational risk and its relation to capital.
• Monitor the compliance with anti-money laundering laws and anti-terrorism financing controls by FRFIs, including the life insurance sector, as well as the foreign operations of large banks.
• Continue monitoring for potential deterioration in asset quality at smaller deposit-taking institutions.

Financial Resources ($ millions)

Human Resources (average Full-Time Equivalents, including Program Support)

² Knowledgeable observers are defined to meet the parameters of each specific consultation undertaken. In general, these are senior executives and professionals representing the stakeholder group.

³ Findings reported here are from the 2004 industry consultation process. An independent consultant, the Strategic Council, conducted a series of confidential one-on-one interviews with senior executives and professionals representing a cross-section of the institutions regulated by OSFI. OSFI provided a list of key contacts within regulated institutions, external actuaries and external auditors, and the consultant selected the final sample. OSFI does not know who was interviewed. A total of 63 interviews were conducted in November and December 2004. The findings reported here emerged consistently across stakeholder groups. The final report is available on OSFI’s Web site under About OSFI/ Reports/ Consultations and Surveys.

⁴ OSFI provided The Strategic Counsel, an independent research firm, with a list of executives and professionals representing a cross-section of the life and property and casualty insurance companies regulated by OSFI. The research firm conducted 64 one-on-one confidential interviews. The research firm independently selected the samples from the list, and OSFI does not know who was interviewed. Unless otherwise noted, the findings reported emerged consistently across stakeholder groups.

Strategic Outcome: Regulate and Supervise to Contribute to Public Confidence in
Canada’s Financial System and Safeguard from Undue Loss

Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Program Sub-Activity: Risk Assessment and Intervention

Priority 8: Ensure that OSFI is in a position to review and approve applications that are submitted for approval under the Basel II capital framework.

Description

• Implement a process and an organizational structure to manage Basel II projects.
• Respond in a timely manner to bank requests for interpretation or for flexibility in implementation.
• Monitor major banks, and periodically update their boards of directors and senior executives on OSFI’s assessment of their ability to comply with Basel II.
• Complete a gap analysis between OSFI’s supervisory framework and Basel II requirements.

Key Expected Results

• OSFI can, with a reasonably high degree of confidence, approve (or otherwise) banks’ applications for using advanced approaches outlined in Basel II in their calculation of capital.
• OSFI effectively deals with banks in their achievement of Basel II requirements

Performance Discussion

Steps taken during the year in support of this objective include:

• Designed and rolled out a supervisory approval process to review and approve bank applications.
• Finalized the regulatory reporting framework for Basel II.
• Continued to provide support to banks in their preparations for successful filing of their first “parallel run” of the Basel capital adequacy reporting (BCAR) as at October 31, 2006.
• Hosted three ‘college of supervisors’ events designed to exchange information and discuss cross-border implementation approaches with supervisors of major foreign subsidiaries of Canadian banks.
• Conducted reviews to assess bank’s progress in meeting Basel II requirements.
• Met with major banks periodically and updated their boards of directors and senior executives on OSFI's assessment of their ability to comply with Basel II.

Steps planned for the future to improve performance include:

• Complete assessments of banks’ progress in meeting Basel II requirements.
• Review for approval banks’ applications to use IRB capital models prior to the November 1, 2007 implementation of Basel II.
• Focus on the measurement and management of operational risk and its relation to capital, especially under the Basel II framework.
• Complete a gap analysis between OSFI’s supervisory framework and Basel II requirements.
  • Supervisory methodology is being revisited
• Support ongoing supervisory monitoring under Basel II using Business Intelligence (data) tools.

Resources: Included in Priority 1

Strategic Outcome: Regulate and Supervise to Contribute to Public Confidence in
Canada’s Financial System and Safeguard from Undue Loss

Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Program Sub-Activity: Rule Making

Description

• Communicate and consult effectively with financial institutions and the industry during the rule development process.
• Contribute effectively to international regulation and standard setting.

Key Expected Results

• In developing and maintaining a regulatory framework that meets or exceeds international minimums, OSFI strikes an appropriate balance between safety and soundness and the need for institutions to compete.

Performance Discussion

Steps taken during the year in support of this objective include:

• Worked closely with the Department of Finance in the review and update of the financial institutions legislation (Bill C-37), and played a key role in streamlining a number of regulatory approvals in order to increase regulatory efficiency and reduce the burden on financial institutions.
• To meet international minimums, developed Guideline E-17 Assessments of Responsible Persons by FREs, as a draft for comment. The guideline sets out principles to assist federally regulated entities in the establishment of policies and procedures to conduct assessments of the suitability and integrity of their directors and senior officers.
• Released the final version of the Capital Adequacy Requirements (CAR) Guidelines on the implementation of the New Basel Framework for banks and federally regulated trust and loan companies.
• Revised the capital guidelines for banks, life insurance companies, and property and casualty insurance companies to reflect the financial instruments standards that took effect after the 2006 fiscal year.
• Worked with the life insurance industry through the Minimum Continuing and Capital and Surplus Requirements (MCCSR) Advisory Committee to develop and incorporate more advanced risk measurement techniques for the MCCSR.
• Issued the final version of an accounting guideline on the treatment of various financial instruments under the new "Fair Value Option". The guideline provides further direction with respect to guidance issued by the International Accounting Standards Board and the BCBS.
• Issued the final revised version of Guideline E-15 Appointed Actuary: Legal Requirements, Qualifications, and External Review. The revised guideline avoids duplication with requirements now contained in the CICA’s Auditing Guideline 43 on Assurance and Related Services.
• Developed information-sharing agreements with a number of host-country supervisory authorities that regulate significant foreign incorporated subsidiaries of Canadian banks.
• Continued involvement with a number of international groups, including the Joint Forum, the Financial Stability Forum, the Integrated Financial Supervisors, the Association of Supervisors of Banks of the Americas, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the International Actuarial Association, and Le Groupe des superviseurs bancaires francophones.
• Continued to work with a number of Canadian Institute of Actuaries practice committees and collaborated on a number of projects such as the development of qualification standard certificates for the Appointed Actuary (AA) in Canada and the definition of the role of the auditor and the valuation actuary in light of the new Canadian Institute of Charted Accountants’ (CICA) Audit Guideline AuG43 on Assurance and Related Services.
• Collaborated with domestic and international standard setters in areas such as the new international accounting standards framework, liquidity risk and business continuity planning.
• Participated in the International Association of Insurance Supervisors through committee work and contribution to several guidance papers addressing areas such as a standard on disclosures for life insurers, a standard on asset liability management, and a common structure for the assessment of insurer solvency.

Steps planned for the future to improve performance include:

• OSFI continues to review and improve its rule making process (e.g., more targeted and effective industry consultation and better defined internal controls over the development process),
• Continuing membership in international associations and regulatory bodies will help to ensure OSFI contributes to the development of international rules, while remaining current with respect to international regulatory issues. These factors will assist OSFI in maintaining guidance that meets or exceeds international standards.
• Continue working with the life insurance industry through the Minimum Continuing and Capital and Surplus Requirements (MCCSR) Advisory Committee to develop and incorporate more advanced risk measurement techniques for the MCCSR.

Financial Resources ($ millions)

Human Resources (average Full-Time Equivalents, including Program Support)

⁵ Source: see footnote 4.
⁶ Source: see footnote 3.

Strategic Outcome: Regulate and Supervise to Contribute to Public Confidence in
Canada’s Financial System and Safeguard from Undue Loss

Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Program Sub-Activity: Rule Making

Priority 7: Participate in and monitor international work on conceptual changes to accounting standards.

Description

• Develop a prudential response to the change to fair value accounting and revise related regulatory reporting as needed.
• Respond to revision of the International Accounting Standards Board’s conceptual framework and insurance accounting overhaul.
• Take regulatory and supervisory action to respond to these changes, including updating staff knowledge of evolving standards.

Key Expected Results

• Competitive prudent capital rules and regulatory reporting for Canadian financial institutions.
• Promotion of consistent treatment between banks and insurance companies for the same economic risks.
• Alignment with practices in other regulatory jurisdictions to ensure consistency and remove the ability for capital arbitrage.
• If possible, maintain OSFI’s strategy of using audited financial statement amounts for regulatory measurement purposes.

Performance Discussion

Steps taken during the year in support of this objective include:

• Participated in the Accounting task force (ATF) of the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors’ (IAIS) Insurance Contracts Subcommittee, which monitor the International Accounting Standards Board and US Financial Accounting Standards Board joint project to develop a common conceptual framework.
• Participated in providing several comment letters to the International Accounting Standards Board (IASB) on their requests for comments in 2006 and 2007, as a result of our participation in the ATF and IAIS.
• Provided input and participated with international colleagues at the ATF and IAIS in several forums that meet with the IASB, to gather views from constituents on accounting projects with significance to bank and insurance regulators.
• Participated in creating the IAIS’s Second Liabilities Paper that went to the IASB in May 2006 and covered important accounting concepts for the insurance industry and regulators.

Steps planned for the future to improve performance include:

• Identify significant accounting differences impacting FRFIs as GAAP moves to International Financial Reporting Standards (IFRS).
• Identify possible impacts of identified changes in GAAP accounting on OSFI’s accounting and regulatory reporting framework.
• Assess the impact on regulatory capital of accounting changes and consider implications on the principles of solvency regulation including change to OSFI Guidelines and reporting instructions.
• Continue to represent OSFI on BCBS and IAIS groups to put forward Canadian views and coordinate actions with other countries.

Resources: Included in Priority 2 totals

Strategic Outcome: Regulate and Supervise to Contribute to Public Confidence in
Canada’s Financial System and Safeguard from Undue Loss

Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Program Sub-Activity: Approvals

Priority 3: A prudentially effective, balanced and responsive approvals process.

Description

Operate a timely, clear and transparent approvals process for legislative and non-legislative approvals.  

Key Expected Results

OSFI’s regulatory approvals result in prudentially sound decisions that are timely, clear and transparent.

Performance Discussion

Steps taken during the year in support of these objectives include:

• Processed 589 applications for approval, including approvals relating to the establishment of 14 new federal financial institutions either as new incorporations, continuances from other jurisdictions or Canadian branches of foreign institutions.
• Monitored established service standards governing timeliness of granting approvals. All service standards were met or exceeded in the 2006-2007 year.
• While no new Instruction Guides for regulatory approvals or Advisories or Rulings were published during the year under review, considerable work was completed on advisories relating to carrying on business in Canada, insurance of risks in Canada and control issues.
• Held a seminar for financial institutions and their advisors to educate these stakeholders about approval processes and procedures; feedback was very positive.
• Provided input to OSFI groups responsible for legislative amendments and rule-making as well as post-implementation assessments of prior rule changes.
• Continued to adapt and update a framework for assessing foreign regulators and country-risk related to applications from foreign jurisdictions.
• Developed an internal framework to assist in the consistent application of the Administrative Monetary Penalty Regulations to approval requests that are considered post-approvals.
• Staff developed and/or participated in a number of training sessions related to legislative changes to come into force in 2007 fiscal year, Shari’a financial instruments, fair value accounting and the application of an office-wide risk tolerance framework.

Steps planned for the future to improve performance include:

• While performance standards related to the timeliness for approvals reviews were met, stakeholders continue to emphasize the need for improvements in approvals timelines, more transparency in the review and decision process and ensuring the knowledge level of staff keeps pace with the complex and rapidly changing financial services industry. OSFI recognizes the need to focus on these areas, as key drivers of the level of satisfaction with the approvals process, and is addressing these issues on an ongoing basis and will continue to monitor the results of these efforts in the next approvals survey of stakeholders. Another survey relating to the approvals process will be held in 2007-2008.
• Certain guidance documents, including incorporation guides, are being reviewed and amended to include guidance for applicants related to the Basel II capital framework.

Financial Resources ($ millions)

Human Resources (average Full-Time Equivalents, including Program Support)

⁷ Source: Findings reported here are from the 2004 approvals consultation process. An independent consultant the Strategic Council, conducted a series of confidential one-on-one interviews with senior executives and professionals representing a cross-section of the institutions regulated by OSFI. OSFI provided a list of key contacts within regulated institutions, and law firms, and the consultant selected the final sample. OSFI does not know who was interviewed. A total of 63 interviews were conducted in July 2004. The findings reported here emerged across participants. The final report is available on OSFI’s Web site under About OSFI/ Reports/ Consultations and Surveys.

Strategic Outcome: Regulate and Supervise to Contribute to Public Confidence in
Canada’s Financial System and Safeguard from Undue Loss

Program Activity: Regulation and Supervision of Federally Regulated Private Pension Plans

Program Sub-Activity: Activities related to the Regulation and Supervision of Federally Regulated Private Pension Plans

Priority 4: Accurate risk assessments of pension plans, timely and effective intervention and feedback, a balanced relevant regulatory framework, and a prudentially effective and responsive approvals process.

Description

• Conduct timely risk assessments and interventions and provide clear reports and recommendations to supervised plans.
• Communicate and consult constructively and effectively with the pension plan industry during the development of regulations, rules and other guidance.
• Operate a timely, clear and transparent approvals process for private pension plans.
• Work closely with the Department of Finance in the development of proposals for and the analysis of any changes to federal legislation that could impact federally regulated pensions.

Key Expected Results

• OSFI uses a modern supervisory process that leads to an accurate overall assessment of the risk profile of the private pension plans that it regulates.
• In exercising its early intervention mandate, OSFI is proactive in intervening in problem cases.

Performance Discussion

Steps taken during the year in support of this objective include:

• Used the Estimated Solvency Ratio exercise to identify defined benefit plans with an estimated solvency funding deficit (about 51% of supervised defined benefit plans as at December 2006, compared to 78% in December 2005). In part due to OSFI’s efforts, market conditions and the government’s solvency funding relief, almost all of these plans are dealing actively with their deficits through plan funding.
• Worked with the Department of Finance on solvency funding relief regulations for federally regulated defined benefit pension plans.
• Published guidance on funding relief and on plan registrations to clarify OSFI’s expectations and improve transparency, and updated the Pension Guide for Members.
• Increased resources and refined internal processes to improve efficiency and timeliness on approvals.
• Dealt actively with late remittance issues in selected defined contribution plans.
• Completed a number of detailed desk reviews of defined benefit plans and undertook a number of on-site examinations during the year, with a continued focus on governance.
• Continued to promote responsible pension plan governance and actuarial practices by working closely with the Canadian Association of Pension Supervisory Authorities (CAPSA) and the Canadian Institute of Actuaries.
• Improved communications with industry, by providing more feedback to individual pension plans and through regular publication of the PBSA Update newsletter.

Steps planned for the future to improve performance include:

• To align and respond to the changing external environment for pensions, OSFI commenced a review of the pension supervisory framework in 2006-2007. In addition, OSFI’s Enterprise Risk Management assessment has identified a need to upgrade the systems that support OSFI’s supervisory efforts. These two initiatives will span the next few years.
• In 2007-2008, OSFI will pursue enhancements to its automated systems to support the pension approvals function.
• In the human resources area, the Private Pension Plans Division will focus on fully integrating additional staff hired during 2006-2007. Also, the division will continue with training initiatives to build both general and specialized pension knowledge in the increasingly complex actuarial, accounting, investment and legal environment.
• OSFI expects courts to look increasingly to regulators to make decisions under relevant legislation, and OSFI will continue to review court decisions that chart the course for pensions and that affect OSFI’s pension policy direction.
• Given the current pension environment and the impact of potential future adverse changes in economic conditions or financial markets, OSFI will continue to carefully monitor both the condition of private pension plans and, to the extent possible, that of their sponsors, and will intervene when necessary.

Financial Resources ($ millions)

Human Resources (average Full-Time Equivalents, including Program Support)

⁸ OSFI provided The Strategic Counsel, an independent research firm, with a list of pension plan sponsors, external actuaries, lawyers, and insurance representatives. The research firm invited 399 of these stakeholders to participate in a web survey, and 158 (40%) responded. The research firm also conducted 69 one-on-one confidential interviews among sponsors or administrators of large defined benefit plans and their professional advisors. The research firm selected the samples independently from the list and OSFI does not know who was interviewed. The findings reported here emerged consistently across stakeholder groups. The complete report is available on OSFI’s Web site under About OSFI/ Reports/ Consultations and Surveys.

Description

• Provide technical assistance with on-site examination processes, legislative drafting, development/ organization of supervisor agencies, risk-based capital regimes and improving supervision systems.
• Work to improve supervisory cooperation and coordination amongst supervisors.
• Assist selected jurisdictions to prepare their Financial Sector Assessment Program self-assessment.
• Continue to play a role in the governance, program development and delivery of the Toronto International Leadership Centre for Financial Sector Supervision.

Key Expected Results

• OSFI to contribute to the awareness and improvement of supervisory and regulatory practices for foreign regulators and jurisdictions.

Performance Discussion

Steps taken during the year in support of these objectives include:

• Hosted numerous supervisors from around the world, including those who participated in OSFI's in-house programs, and provided training to 24 jurisdictions both bi-laterally and multi-laterally.
• Worked alongside foreign supervisors "in the field" helping, for example, to implement on-site examination programs in two countries and risk-based supervision in two others, as well as providing consultative, legislative and regulatory drafting expertise.
• Continued to establish and nurture partnerships with other international technical assistance providers in order to achieve economies.
• For the first time, made significant inroads into Africa, a region of particular importance to CIDA.
• Continued to work with several jurisdictions that are attempting to correct deficiencies identified during their Financial Sector Assessment Program ( FSAP) assessment, and assisting with the preparation of FSAP self-assessments.

Steps planned for the future to improve performance include:

• In order to improve the performance measurement of IAG, OSFI has engaged the services of a consulting firm to assist in developing improved surveys, evaluations, etc. for our stakeholders. The consultants will also handle the mail out and collection of the surveys and the tabulation of the results to enhance their independence factor.

Human Resources (average Full-Time Equivalents, including Program Support)

Strategic Outcome: Contribute to Public Confidence in Canada’s Public Retirement Income System

Program Activity: Office of the Chief Actuary

Program Sub-Activities: Canada Pension Plan & Old Age Security; Public Pension Plans; Canada Student Loans

Priority 6: Contribute to ensuring there are financially sound federal government public pension and other programs through provision of expert actuarial valuation and advice.

Description

• Provide high-quality and timely reports such as: triennial Actuarial Reports in respect of the Canada Pension Plan (CPP); the Old Age Security program; public service pension plans established under various acts.
• Prepare actuarial reports that are tabled in Parliament in respect of the CPP, for example, when certain bills are introduced and when amendments are made to certain public sector pension plans.

Key Expected Results

• Provide expert and timely advice in the form of high quality reports tabled in Parliament, in respect of the CPP when certain bills are introduced and when amendments are made to certain other public sector pension plans.
• Provide expert and timely advice in the form of high quality reports, in respect of Public Sector Pension and Insurance Plans.
• Provide expert and timely advice in the form of high quality and timely actuarial reports, in respect of the Canada Student Loans Program.

Performance Discussion

Steps taken during 2006-2007 in support of these objectives include:  

• Throughout 2006-2007, we gave consideration to how the OCA can deliver improved services to its clients, including implementing recommendations from independent peer reviews, improving valuation techniques, organizing seminars to broaden sources of advice, and participating in various committees.

Reports, studies, services and advice

• The Office of the Chief Actuary contributes substantially to parliamentary committee proceedings by means of its actuarial reports. It submits an actuarial report to the appropriate Minister if and when a Bill introduced before Parliament has a significant impact on the financial status of a pension plan falling under the statutory responsibilities of the Chief Actuary. As well, OCA contributes substantially to client departments by providing actuarial advice to assist in the design of the funding and administration of social programs and public sector pension plans. For every actuarial report tabled or prepared, the OCA provides a detailed presentation to the client department.
• The OCA participated in the federal/provincial committee’s CPP triennial financial review completed in June 2006.
• In December 2006, the Chief Actuary published the 22^nd Actuarial Report on the CPP, as a supplement to the 21^st Actuarial Report on the CPP, to show the effect of Bill C-36 on the long-term financial status of the CPP. This bill was introduced before the House of Commons following the completion of the CPP triennial financial review by the federal and provincial ministers of Finance in June 2006.
• The OCA conducted triennial actuarial reviews of the Public Service, the RCMP and the Canadian Forces, as well as the Public Service Death Benefit Account and the Regular Force Death Benefit Account pension plans established under their respective acts in accordance with the Public Pensions Reporting Act; presentation of the reports to their respective ministers for timely tabling in the House of Commons.
• In early 2007, the OCA completed and published its sixth actuarial study, entitled Optimal Funding of the Canada Pension Plan, which can be found on OSFI’s Web site under Office of the Chief Actuary.
• The OCA provided ongoing actuarial advice and support to the Public Sector Pension Investment Board and the Pension Advisory Committees of the Public Service, the Canadian Forces and the RCMP, each of which provided advice to their Ministers on the design, administration and funding of their respective plans.

Seminars

• To ensure the quality of future actuarial reports and acting in part on the recommendations of the review panel from 1999 and 2005, the Chief Actuary continues to consult with experts in the fields of long-term demographic and economic projections in the preparation of actuarial reports. In preparation of the 23^rd Actuarial Report on the CPP, on March 24, 2006, the OCA hosted its fourth seminar entitled "Demographic, Economic and Investment Perspectives for Canada – Years 2006 to 2050" where experts presented their views on long-term perspectives on demographic, economic and investment issues.

Appearances before Parliament

• The Chief Actuary is being asked to provide information, opinions and professional expertise to parliamentarians and he periodically appears before various House of Commons and Senate Committee hearings. Most of these are on OSFI’s Web site under Office of the Chief Actuary.
• In December 2006, the Chief Actuary published the 22^nd CPP Actuarial Report, as a supplement to the 21^st CPP Actuarial Report, to show the effect of Bill C-36 on the long-term financial status of the CPP. This bill was introduced before the House of Commons following the completion of the CPP triennial financial review by the Federal and provincial Ministers of Finance in June 2006.
• The Chief Actuary participated in the Debates in the Senate in April 2007 regarding Bill C-36. Among expert witnesses, he noted that “t he proposed legislation will bring important improvements to the daily lives of Canadian seniors and those with long-term disabilities. The proposed administrative improvements to the CPP and to the OAS program result from submissions given over the past few years to the Department of Human Resources and Social Development Canada and to various federal and provincial politicians. A key intent of the bill is to resolve issues raised by seniors and by those with disabilities.” He also noted that “the proposed changes are actuarially sound. They reflect the recommendations made by federal, provincial and territorial ministers of finance. They reflect the observations of the Auditor General, and they reflect the opinions and representations of many Canadian seniors and disabled people.”

Steps planned for the future to improve performance include:

• In 2007-2008, the OCA will maintain the tradition of continual improvements to the actuarial methods by applying more extensive and sophisticated stochastic analysis as it was recommended by the CPP peer review panel. The OCA will continue to study and implement most recommendations made by the peer reviewers. As well, the OCA will continue to improve its data validation, assumptions and methodological processes by studying and implementing the recommendations included in the review of actuarial reports on the Public Sector Pension and Insurance Plans undertaken by an external auditor hired by the Office of the Auditor General.

Third performance measure on the annual actuarial review of the Canada Student Loans Program

Once the actuarial reporting is enshrined in legislation, the Auditor General's Office will likely request an external auditor to provide its view that the Chief Actuary provides expert and timely advice in the form of high quality reports.

Financial Resources ($ millions)

Human Resources (average Full-Time Equivalents, including Program Support)

⁹ A panel of three well-respected independent actuaries reviewed the 21^st Actuarial Report on the Canada Pension Plan and their conclusions were made public in May 2005. The report is available on OSFI’s Web site. The United Kingdom Government Actuary’s Department (GAD) selected the independent Canadian actuaries who performed the peer review, and provide an opinion on the work done by the reviewers. The opinion of GAD, released in May 2005, considers the terms of reference of the independent peer review to be appropriate. The report is available on OSFI’s Web site under Office of the Chief Actuary/CPP Independent Peer Review.

¹⁰ The review was requested and received at the Auditor General Office as part of the verification on the Government expenditure for the Fiscal Year Ending March 31, 2006.

¹¹ The OCA is not required by law to produce an actuarial report on the CSLP. It is the intention of the CLSP department of HRSDC to seek to enshrine a triennial cycle for the Actuarial Report in legislation. Once this is done, the Auditor General’s Office will likely request an external auditor to provide its view on the quality of the reporting.