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Message from the Auditor General of Canada

Sheila Fraser, Auditor General of CanadaI am pleased to present the Office's 2007–08 Performance Report.

One of Parliament's important roles is to hold the government to account for the results it achieves with taxpayer dollars. To do this effectively, parliamentarians need objective information they can rely on to scrutinize government activities and spending.

The Office of the Auditor General is an independent source of such information, which we gather in the course of carrying out about 150 financial and performance audits and special examinations every year. The reports we give to Parliament describe areas of government that need attention and point out good practices. Our audits also point to the causes of problems, and we make recommendations for improvement. In this way, we contribute to maintaining healthy public institutions.

Parliament provides government oversight through its committees, which may review our reports, conduct hearings, and make recommendations to the government for action. It is up to the government to implement changes recommended in our reports. By carrying out our distinct roles and working together effectively, Parliament, the government, and my Office all contribute to well-managed and accountable government for Canadians.

Our priorities for 2007–08 were to integrate changes to professional standards; invest in recruitment and retention; and contribute to good practices in accountability, governance, and effective public service while implementing our mandate, which was expanded in 2005 to increase the number of financial audits and special examinations we conduct. We had requested and received an increase of approximately $4 million in ongoing funding and an additional $2 million in one-time funding to address these priorities and other Office needs.

Canada's adoption of international standards for auditing in 2010 and accounting in 2011 are the most significant changes our profession has yet experienced. This year we began developing our strategy to implement these coming changes—a strategy that we will be completing in 2008 and implementing for years to come.

As we face increasing competition for experienced auditors from other federal organizations and the private sector, it is a constant challenge to recruit and retain a strong base of employees. (Our retention rate of audit professionals for the year was steady compared with the previous year, at 86 percent, continuing below our target of 90 percent.) We have begun investing the additional funds provided by Parliament in our recruiting efforts and in increasing the staff levels in our methodology teams this year. We were pleased to be selected as one of Canada's top 100 employers and one of Canada's top 10 family-friendly employers for 2008—valuable recognitions that will enhance our recruitment efforts. We were also very pleased with the results of our 2008 employee survey. Ninety-three percent of our employees participated in the survey and 88 percent of them told us they believe the Office is above average or one of the best places to work.

Like many other organizations, we are also experiencing a significant rate of retirement among our senior people. We have appointed five new assistant auditors general who will work alongside our retiring executives over the coming months to facilitate a smooth and effective transfer of knowledge. A new Commissioner of the Environment and Sustainable Development has also been appointed. Mr. Scott Vaughan joined the Office on 5 May 2008.

We assess the impact our work is having on improving management within government. One of the ways we monitor this is by asking departments to report on their progress in implementing our recommendations. This year we also asked them to assess the recommendations' level of implementation. We received assessments for 96 percent of the recommendations we issued. The statistics that result—departments reported that they had fully implemented 55 percent of the performance audit recommendations we made four years ago and had substantially implemented another 29 percent—represent a new baseline for this indicator. We believe this new approach is better aligned with departmental responsibilities to monitor and report on their responses to our recommendations.

We monitor Parliament's engagement with our performance audit reports by looking at how frequently parliamentary committees ask us to appear before them to further elaborate on our findings. In the past year, committees reviewed 56 percent of our performance audit reports and we participated in 33 hearings and briefings, both about average for the last few years.

We survey the key users of our audit reports: parliamentarians on the value and impact of our performance audits, board chairs on the value of our special examinations, and audit committee chairs on the value of our financial audits. We are particularly pleased that parliamentarians continue to provide us with a very positive assessment of our work.

We have had difficulties completing individual audits within budgets and completing some special examinations and financial audits on time. This year our efforts have led to significant improvements in our on-time performance. Our on-budget performance results are still falling below our target of 70 percent for all of our products. We initiated a number of actions this past year in response and have made improving our resource allocation and project management a strategic priority for the coming year.

Behind all our achievements is an exceptionally competent, professional, and dedicated workforce. I wish to take this opportunity to thank my staff for their continued dedication to the Office and the Parliament we serve.

I trust you will find this performance report presents an open and balanced picture of our activities and impacts in 2007–08.

 

Sheila Fraser, FCA
Auditor General of Canada

2 September 2008

Management representation statement

I submit for tabling in Parliament the 2007–08 Performance Report for the Office of the Auditor General of Canada.

This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2007–2008 Estimates: Reports on Plans and Priorities and Departmental Performance Reports. It

  • is based on the Office's strategic outcome and Program Activity Architecture;
  • presents consistent, comprehensive, balanced, and reliable information;
  • provides a basis of accountability for the results achieved with the resources and authorities entrusted to the Office; and
  • reports finances based on approved numbers from the Estimates and the Public Accounts of Canada.

In meeting its reporting responsibility, the Office's management has established and followed procedures and controls designed to provide reasonable assurance of the fairness and reliability of the performance information. While the Office continually strives to improve its performance information, the information in this report is the best currently available and management considers it reasonable for the purpose of preparing this report. Some of the information is based on management's best estimates and judgments, and any limitations to the quality of the data provided are disclosed in the report.

The Office's Executive Committee oversees the preparation of the report, and approves it following advice from the Office's Audit Committee.

 

Sheila Fraser, FCA
Auditor General of Canada

Ottawa, Canada
2 September 2008

Performance summary

Highlights

We completed 152 financial and performance audits, special examinations, and other reports during the 2007–08 fiscal year.

We delivered 86 percent of the audits due this year on time.

Virtually all parliamentarians surveyed believed that our performance audit work "often" or "almost always" adds value for them in the key areas that we ask them about.

Parliamentary committees reviewed 56 percent of our performance audit reports, compared with a near-record 66 percent in 2006–07 and 52 percent in 2005–06. We participated in 33 hearings and briefings with parliamentary committees over the course of the 113 parliamentary sitting days. Hearings held on two of our special examination reports (which are performance audits of Crown corporations) and on our report on military health care are but two examples of our work contributing to the legislative and oversight work of Parliament.

In 2007–08, departments reported that they had fully implemented 55 percent of the performance audit recommendations we tabled four years ago and had substantially implemented 29 percent.

We have substantially fulfilled all of the commitments in our own Sustainable Development Strategy and met all but one of the targets we established.

Our 2008 employee survey had a 93 percent response rate. The results show that 88 percent of employees believe the Office is above average or one of the best places to work.

We were selected as one of Canada's top 100 employers and one of Canada's top 10 family-friendly employers for 2008.

To assemble a workforce that represents the Canadian population, the Office has increased its relative levels of representation for all of the four designated groups, with three now exceeding the levels of representation in the community.

We completed two internal practice reviews of our performance audits; these reviews concluded that our audits were conducted in accordance with professional standards and our quality management framework.

Areas for improvement

Over the past five years, departmental senior managers have rated the value of our performance audits to them at levels lower than we would like to see. In the coming year, we will be taking steps to understand the reasons for these assessments and developing any necessary responses.

We have had difficulties completing individual audits within budgets and completing some special examinations and financial audits on time. The Office has sufficient funds to fulfil its mandate. Nevertheless, our ability to complete individual audits on budget is still falling below our target of 70 percent for all of our products. This year we initiated a number of actions regarding on-time performance, and our efforts have led to significant improvements. For the coming year, we have made improving our project management—including planning, budgeting, and resource allocation—a strategic priority.

In monitoring government responses to our work, we note the following.

  • We issued two financial audit reports with a reservation of opinion where the reservation continued from the previous audit. Both were for financial statements of territorial organizations.
  • We issued a special examination with a significant deficiency that was not addressed from the previous examination.
  • Ministers delivered 84 percent of responses to public petitions on environmental matters during the year within the 120-day time limit specified in the Auditor General Act, a decrease from 96 percent last year.

Section I—Overview

Who we are

The Auditor General is an Officer of Parliament. She is independent from the government and reports directly to Parliament (Exhibit 1). She leads a dedicated team of some 600 professionals and support staff located in five offices across the country.


Exhibit 1—The Auditor General's role as an Officer of Parliament

Exhibit 1—The Auditor General's role as an Officer of Parliament


The Auditor General Act, the Financial Administration Act, and other acts and orders-in-council set out the duties of the Auditor General. These duties relate to legislative auditing and monitoring of federal departments and agencies, Crown corporations, territorial governments, and other entities that include international organizations.

Maintaining our objectivity and independence from the organizations we audit is critical. Our independence is assured by a broad legislative mandate; compliance with professional auditing standards; additional authority granted by Parliament for staffing and contracting; a strong internal Code of Values, Ethics and Professional Conduct; and a 10-year mandate for the Auditor General.

What we do: Legislative auditing

The Office of the Auditor General of Canada conducts independent audits and studies that provide objective information, advice, and assurance to Parliament, territorial legislatures, government, and Canadians. With our reports and testimony at parliamentary committee hearings, we assist Parliament in its work related to the authorization and oversight of government spending and operations.

Our major subactivities. Legislative auditing, our main activity, consists of eight subactivities; two of these—professional practices and audit services—are supporting activities (see Exhibit 2 for further details of the six other subactivities).


Exhibit 2—The Auditor General answers many important questions

Legislative audit subactivities1

Questions

Performance audits and studies of departments and agencies

Are federal government programs well managed? Were they run with due regard to economy, efficiency, and their environmental effects? Does the government have the means to measure and report their effectiveness where it is reasonable and appropriate to do so?

Audit of the annual summary financial statements of the Government of Canada

Is the government presenting fairly its overall financial situation?

Financial audits

Is the annual financial information of the Crown corporations, territorial governments, and other organizations presented fairly and are they complying with their legislative authorities?

Special examinations

Do the systems and practices used by Crown corporations provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively?

Sustainable development monitoring activities and environmental petitions

Are departments and agencies meeting the objectives and implementing the plans set out in their sustainable development strategies? Are ministers responding as required to environmental petitions?

Assessments of three annual performance reports

Are the Canadian Food Inspection Agency, Parks Canada Agency, and the Canada Revenue Agency presenting their performance information (published annually in their statutory reports) fairly and in a reliable way?

1These audits and studies are detailed in the Auditor General Act (sections 5, 6, 7, and 23) and the Financial Administration Act (Part X), and in the enabling legislation of the three agencies noted above.


The focus of our audits. We are responsible for carrying out audits and studies of organizations to answer many important questions on behalf of Parliament and, in turn, Canadians at large.

Performance audits. Performance audits examine, against established criteria, whether government programs are being managed with due regard for economy, efficiency, and environmental impact, and whether measures are in place to measure and report their effectiveness. Our reports contain recommendations to address the most serious deficiencies identified.

Our performance audits are tabled in Parliament and published up to four times a year in the reports of the Auditor General of Canada and the Commissioner of the Environment and Sustainable Development.

The Auditor General Act gives the Office discretion to determine what areas of government to examine when doing performance audits. We may decide to audit a single government program or activity, such as pesticide regulation; an area of responsibility that involves several departments or agencies, such as the protection of cultural heritage; or an issue that affects many departments, such as the security of information technology. We consider requests for audits received from parliamentary committees; however, the ultimate decision about what to audit rests with the Auditor General.

The Office does not audit government policy or any areas under the exclusive jurisdiction of provincial or municipal governments.

Financial audits. Our financial audits provide assurance that financial statements are presented fairly in accordance with Canadian generally accepted accounting principles or other relevant standards. Where required, we provide assurance that the organizations we audit comply with the key legislative authorities that govern their activities. We conduct financial audits of federal and territorial Crown corporations, other organizations, and the summary financial statements of the Government of Canada and of each of the three territories.

If issues or opportunities for improvement in areas such as financial reporting and internal controls come to our attention during our financial audit work, we make recommendations to management and the boards of directors.

We report our opinion and observations on the summary financial statements of the Government of Canada in the "Public Accounts of Canada, Volume 1" and publish reports on the use of financial information and other significant issues in the Auditor General's reports to Parliament. Our audit reports on the financial statements of Crown corporations are addressed to the appropriate minister and published in the annual reports of these organizations. Our audit reports on the financial statements of other federal organizations are generally addressed to the minister or the head of the corporation or other interested parties.

Our performance audit reports of territorial governments and our audit reports on their financial statements are published and presented to the territorial legislatures.

Special examinations. A special examination assesses the financial and management control and information systems and management practices of a Crown corporation and provides an opinion on whether there is reasonable assurance that there are no significant deficiencies in these systems and practices. The Financial Administration Act requires all Crown corporations to have a special examination of their organization conducted by the Office at least once every five years, except for the Bank of Canada, which is not required to have a special examination, and the Canada Pension Plan Investment Board, which, under its Act, is subject to a special examination by a private sector accounting firm.

Our special examination reports are addressed to the boards of directors of the corporations we examine. We bring the information in the report to the attention of the appropriate minister and of Parliament when we find certain types of significant deficiencies—for example, issues relating to a corporation's mandate, issues that only the government can address, issues of a governance nature, and problems we reported previously that continue to occur.

How we are held accountable

Who audits the Auditor General? Each year, an external auditor appointed by the Treasury Board audits the Office's financial statements. Our financial statements are prepared on a full accrual basis of accounting, in accordance with Canadian generally accepted accounting principles.

These financial statements are included in Section III of this performance report, which is submitted to the President of the Treasury Board for tabling in the House of Commons.

The Office is also subject to scrutiny by the Commissioner of Official Languages on language issues, by the Public Service Commission of Canada on staffing and classification practices, by the Privacy Commissioner of Canada on adherence to the Privacy Act, by the Information Commissioner of Canada on compliance with the Access to Information Act, and by the Canadian Human Rights Commission on the Office's compliance with the Employment Equity Act.

We conduct internal audits of our management and administration practices to assure the Auditor General that the Office is complying with government and Office policies. The audits also provide managers with assessments and recommendations. We normally conduct one internal audit per year and publish the results on our website.

Who assesses our audit methodologies? Our audit work is guided by rigorous methodology and quality management frameworks. The frameworks provide reasonable assurance that our audits are conducted in accordance with established standards of professional practice.

To ensure that our quality management frameworks are suitably designed and operating effectively, we subject them to periodic external reviews by peers. We also conduct internal practice reviews of our audits. We publish our peer reviews and our practice reviews on our website under About Us.

The provincial institutes of chartered accountants review our compliance with professional standards for financial audits about every four years, in order to determine whether our training of chartered accountant students meets their requirements.

Who reviews our funding? The Auditor General prepares annual Estimates documents and the President of the Treasury Board submits them to Parliament. The Standing Committee on Public Accounts calls on the Auditor General to explain the Estimates for the Office and to discuss our report on plans and priorities, our performance report, and our management practices.

The Office is funded by Parliament, in the same manner as government departments. Historically, like government departments, we negotiated the level of funding with the Treasury Board of Canada Secretariat, one of the organizations we audit. However, this process was not considered to be sufficiently independent to ensure that our budget is appropriate for meeting Parliament's expectations.

In 2005, the government committed to implementing a pilot project for a new funding and oversight mechanism for the 2006–07 and 2007–08 Estimates processes for all officers of Parliament. The new mechanism, involving a parliamentary oversight panel, seeks to respect the role of Parliament and the independence and distinct mandates of its officers, and also to reflect the government's responsibility for sound stewardship of public resources.

When an Officer of Parliament develops a submission for the Treasury Board, the panel reviews both the submission and the Treasury Board of Canada Secretariat's assessment of the submission. The panel then provides advisory recommendations for consideration by the Treasury Board.

The Auditor General appeared before the panel in November 2007, requesting approximately a $1.2-million addition to our ongoing funding starting in 2008–09. The panel unanimously agreed to recommend the requested funding increase to the Treasury Board.

Our strategic framework and results chain

The long-term strategic outcome of the Office of the Auditor General is to contribute to better-managed government programs and better accountability to Parliament through our legislative auditing. We use a results chain to describe our strategic outcome and to show how we expect to make a difference. The results chain links what we do (conduct audits and other assessments) and what we deliver (audits, studies, opinions, information, and advice) to the results we expect to achieve in the short, medium, and long terms. It also describes the various stakeholders and their contributions to improving government operations. A copy of the results chain is included in Section IV—Supplementary Information.

The strategic framework of the Office of the Auditor General presents our vision and our values that guide our work (Exhibit 3).


Exhibit 3—The strategic framework of the Office of the Auditor General of Canada

Our Vision

An independent audit office serving Parliament, widely respected for the quality and impact of our work.

We promote

  • accountable government,
  • an ethical and effective public service,
  • good governance,
  • sustainable development, and
  • the protection of Canada's legacy and heritage.

We do this by

  • conducting independent audits and studies that provide objective information, advice, and assurance to Parliament, government, and Canadians;
  • working collaboratively with legislative auditors, federal and territorial governments, and professional organizations; and
  • providing a respectful workplace in which our diverse workforce can strive for excellence and realize their full career potential.

Our values are

  • serving the public interest,
  • independence and objectivity,
  • commitment to excellence,
  • respectful workplace,
  • trust and integrity, and
  • leading by example.