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Section II—Reporting on Results

Our priorities for 2008–09

The Office identified three strategic objectives when setting out the planning priorities for 2008–09: integrating changes to professional standards, sustaining our capacity, and building constructive entity relations.

Integrating changes to professional standards

Decisions made by the standard-setting boards of The Canadian Institute of Chartered Accountants, to adopt International Standards on Auditing in 2010 and International Financial Reporting Standards in 2011, will lead to significant changes in auditing and accounting in Canada.

In 2008–09, we formed a strategic alliance with a major accounting firm to assist us in implementing the new standards. This alliance will help us achieve efficiencies in methodology, training, and the development and implementation of professional standards. We also continued with the expanded training of our staff and our efforts to raise awareness in the organizations we audit.

In addition, we created a National Professional Practices Group within our Office. Under the terms of a memorandum of understanding with provincial auditors general, we provide technical accounting and auditing advisory services, practice advisories, and financial audit methodology and training support to their offices. Parliament has provided us with re-spending authority for the amounts to be recovered from our provincial counterparts as part of the Supplementary “A” Estimates in 2009. By creating this group, we and our provincial colleagues will be able to more effectively implement professional standards.

Sustaining our capacity

Throughout the Public Service of Canada, shifting demographics and an aging workforce are making recruiting and retaining employees ever more difficult. The loss of corporate memory due to retirements places significant pressure on organizations to ensure that effective programs for knowledge transfer are in place. These challenges are exacerbated for the Office of the Auditor General because professional auditing skills are in high demand and short supply.

In September 2006, the Office developed a recruitment and retention strategy covering the period 2006–07 to 2008–09. The Office dedicated resources to ensure that effective recruitment and retention plans were in place as a means of attracting and retaining qualified employees. We worked to address compensation issues, and increased access to a variety of challenging opportunities for staff. We made the orientation and integration of new staff a priority for our Office. We also began to focus on knowledge transfer by further integrating support from senior staff into the regular development of audit professionals, and on the renewal, rebuilding, and reinforcement of specialist capacity.

In 2008–09, we continued our entry level recruitment efforts and expanded our student program, to better meet our current needs and to build for the future. We expanded our methodology teams and continued work on the enhancement of our training programs. We began work to improve coordination between our methodology activities and training initiatives to ensure that our methodology is clearly reflected in the way we conduct our audits.

For the second year in a row, the Office was recognized as one of Canada’s Top 100 Employers and one of Canada’s Top 20 Family-Friendly Employers. Our 2008 staff survey showed that 88 percent of our staff believe that the Office is an above-average place to work or one of the best places to work. Our employee retention rate increased slightly to 88 percent.

Building constructive entity relations

We understand the critical importance of building and maintaining an effective relationship between our Office and the organizations that we audit. Questions often arise about what the entities that we audit can expect from us and what we expect from them. In order to provide answers to these questions, in mid-2008 we produced a document What to Expect: An Auditee’s Guide to the Performance Audit Process. This document outlines

• our objectives,
• the principles governing interactions between auditors and auditees, and
• administrative information.

We believe that this information provides a valuable reference that will encourage productive and respectful relations between audited organizations and Office audit staff.

In addition, we began a concerted effort to ensure that consistent practices are used throughout the audit process across all areas of our Office. Also, the Office regularly carries out surveys involving the organizations we audit. The results are one of a number of sources of information that help the Office analyze its performance and plan for any necessary correction or improvements.

Meeting other challenges in 2008–09

In addition to the three strategic objectives identified, there were further challenges that we worked to address in 2008–09.

Preserving the independence of Officers of Parliament. When government central agencies issue management and other policies, they currently apply to Officers of Parliament in the same way that they apply to government departments and agencies. Certain provisions of these policies do not recognize the independence of Officers of Parliament and the management autonomy needed to protect their independence. In 2008–09, we continued to work with the government to resolve this matter. There were fruitful discussions with Treasury Board of Canada Secretariat officials over the past year on this subject. The application of several sections of 10 Treasury Board policies to the Officers of Parliament has been amended to reflect their independence. However our concerns about application of the government’s Communication Policy and the Federal Identity Program Policy have not yet been addressed.

Serving Parliament. One of the most important factors determining whether or not the Office is successfully fulfilling its mission is the degree to which our reports, and specifically our recommendations, are seen by Parliament and the government as offering objective assurance, information, and guidance for corrective action.

Parliamentary committee hearings encourage the departments and agencies to implement our recommendations. Following a hearing, a committee may report and make recommendations to the government. Departments and agencies are expected to report back to the committee on what they have done in response to these recommendations.

Beginning in 2009–10, the Office will decrease the number of performance audits we conduct—from 30 to about 25 per year—for the 2009–10 and 2010–11 fiscal years. In addition, we will table our reports twice a year—once in the spring and once in the fall—rather than three times a year. We believe this will give Parliament more time between reports to hold hearings, while still providing members of Parliament with the information they require for holding government to account for its use of public funds.

As part of our continuing effort to serve Parliament, our primary client, in the most effective manner, we continually seek Parliament’s feedback on the products and services we provide. In June 2008, we conducted the second survey of selected parliamentarians, and the results were reported in the 2007–08 Performance Report. We also monitor the number of parliamentary hearings and briefings that we participate in and the percentage of performance audits reviewed by parliamentary committees.

In 2007–08, the Office set up an independent panel, called the Green Ribbon Panel, to undertake a review of our environment and sustainable development practice. This practice’s mandate was defined by Parliament when it amended the Auditor General Act to create the position of Commissioner of the Environment and Sustainable Development in 1995. The Green Ribbon Panel looked for, and recommended, opportunities to strengthen implementation of this mandate in such a way as to best serve Parliament. In 2008–09, the Office appointed a new Commissioner of the Environment and Sustainable Development and began to address the recommendations of the Green Ribbon Panel.

Improving resource allocation and project management. In 2008–09, we continued reporting externally on our on-budget performance, and we recognized it as an area where progress had been made but there was still room for improvement. Our 2008 employee survey identified a matter we believe is related—improving our allocation of staff to audit projects.

In 2008–09, we undertook a number of initiatives to improve our overall project management, including better planning, budgeting, and resource allocation. During the year, we undertook a study of how budgets for individual projects are established and monitored across all product lines in order to identify best practices and challenges. Using this information, we are currently developing a comprehensive action plan to improve on-budget performance. The Audit Resource Planning and Career Management team continues to facilitate allocation of staff to projects.

Our international contribution

Our international strategy guides our international activities as well as positioning the Office to meet future opportunities and challenges.

International accounting and auditing. The Office contributes to development of standards, particularly as they relate to the public sector. To that end, the Auditor General became a member of the International Public Sector Accounting Standards Board of the International Federation of Accountants in January 2008.

In addition, employees of the Office participate in various committees of the International Organization of Supreme Audit Institutions (INTOSAI), including the Subcommittee on Financial Audit Guidelines, the Subcommittee on Performance Audit, the Ad hoc Group on Transparency and Accountability, the Working Group on Information Technology Audit, the Working Group on Environmental Auditing, the Working Group on Value and Benefits of Supreme Audit Institutions, and the Task Force on the Global Financial Crisis.

Employees of the Office also participate in various task forces of the International Auditing and Assurance Standards Board to revise and develop International Standards on Auditing. This expert participation helps to build public sector considerations into these international standards.

The International Legislative Audit Office Assistance Program for Improved Governance and Accountability of the CCAF-FCVI Inc. was established in 1980 to strengthen performance auditing in national audit offices. Funded by the Canadian International Development Agency, the program brings auditors from other national audit offices to Canada for 10 months of training in performance auditing, accountability, and governance. Training is provided by our Office and that of the Vérificateur général du Québec and the Office of the Auditor General of Alberta. Since 1980, the program has trained more than 198 fellows from 53 developing countries.

In partnership with the Canadian International Development Agency and two executing agencies—the Université du Québec en Outaouais and the Canada School of Public Service—we are actively involved in helping to build capacity in audit institutions located in French sub-Saharan Africa.

The Office has recently completed its audit mandate of the United Nations Educational, Scientific and Cultural Organization (UNESCO), and the International Civil Aviation Organization. In 2007, the Office was selected as the external auditor of the International Labour Organization, effective in 2008.

We actively participate in peer reviews of other supreme audit institutions. In 2008–09, we led the peer reviews of the United States General Accountability Office (GAO) and the European Court of Auditors.

Our performance indicators and measures

The Office has established a set of core indicators of impact and measures of organizational performance to help inform management decision making.

Our indicators of impact (Exhibit 3) help us to assess the extent to which

• key users of our reports are engaged in the audit process,
• our work adds value for the key users of our reports,
• our work adds value for the organizations we audit, and
• key users of our reports and the organizations we audit respond to our findings.

Exhibit 3—Summary of our indicators of impact

Objectives and indicators	2007–08 Actual	2008–09 Actual	2008–09 Target
Our work adds value for the key users of our reports
Percentage of parliamentary committee members who find our performance audits add value	97	n/a1	90
Percentage of audit committee chairs who find our financial audits add value	87	85	75
Percentage of board chairs who find our special examinations add value	75	97	90
Our work adds value for the organizations we audit
Percentage of departmental senior managers who find our performance audits add value	55	75	65
Percentage of Crown corporation and large-department senior managers who find our financial audits add value	83	83	75
Percentage of Crown corporation chief executive officers who find our special examinations add value	96	84	75
Key users of our reports are engaged in the audit process
Number of parliamentary hearings and briefings we participate in	33	35	maintain or increase2
Percentage of performance audits reviewed by parliamentary committees	56	57	maintain or increase2
Key users of our reports and the organizations we audit respond to our findings
Percentage of performance audit recommendations substantially implemented four years after their publication3	293	273	253
Percentage of performance audit recommendations fully implemented four years after their publication3	553	633	503
Percentage of performance audit recommendations substantially or fully implemented four years after their publication3	843	903	753
Percentage of reservations that are addressed from one financial audit to the next	574	115	100
Percentage of significant deficiencies that are addressed from one special examination to the next	50	n/a6	100
1 The survey of parliamentarians was not carried out in 2008–09. 2 There is no numeric target for these indicators as they depend on the number of sitting days and other factors beyond our control. Instead the target is to maintain the percentage of parliamentary hearings and briefings we participate in, relative to the number of sitting days, and to maintain the percentage of audits reviewed by parliamentary committees. 3 Beginning in 2009–10 the indicator will be reported as a combined total only (substantually and fully implemented). 4 The result for 2007–08 is restated because compliance-with-authorities reservations and "other matters", as well as accounting and financial auditing reservations, are now included in the calculation of the indicator. 5We issued 108 financial audit opinions, which contained eight reservations. There had been nine reservations in 2007–08, of which only one was addressed. 6For all eight special examinations completed in 2008–09, there were either no significant deficiencies in the previous special examination, or there was no previous special examination because the Crown corporation was new.

Our measures of organizational performance (Exhibit 4) help us monitor the extent to which

• our work is delivered on time and on budget,
• our audit reports are reliable, and
• we provide a respectful workplace.

Exhibit 4—Summary of our organizational performance

Objectives and indicators	2007–08 Actual	2008–09 Actual	2008–09 Target
Our work is completed on time and on budget
On time
Percentage of performance audit reports completed by the planned tabling date as published in the Report on Plans and Priorities	90	97	90
Percentage of financial audits completed on time1
federal Crown corporations with statutory deadlines	100	91	100
other federal organizations with statutory deadlines	94	95	100
federal organizations with no statutory deadlines	81	84	70
territorial organizations	59	48	55
Percentage of special examination reports delivered on or before the statutory deadline	75	75 (6 of 8)	100
On budget
Percentage of audits completed on budget2
Performance audits	48	90	70
Financial audits—federal Crown corporations	54	53	70
Financial audits—other federal organizations with statutory deadlines	50	47	70
Financial audits—federal organizations without a statutory deadline	47	76	70
Financial audits—territorial organizations	28	65	55
Special examinations	25	75 (6 of 8)	70
Our audit reports are reliable
Percentage of internal practice reviews that find the opinions and conclusions expressed in our audit reports are appropriate and supported by the evidence3	n/a	95 (21 of 22)	100
We provide a respectful workplace
Percentage of employees who believe the Office is either an above-average place to work or one of the best places to work	884	n/a4	80
Percentage of management who meet our language requirements
assistant auditors general and principals	83	85	100
directors in bilingual regions	75	76	75
Percentage representation relative to workforce availability for
women	131	118	100
people with disabilities	114	119	100
Aboriginal peoples	140	97	100
members of visible minorities	83	74	100
Percentage retention of audit professionals	86	88	90
1 "On time" for financial audits means the statutory deadline where one exists (usually 90 days after year end), or 150 days after the year end where no statutory deadline exists. 2 "On budget" means that the actual hours to complete an audit did not exceed the budgeted hours by more than 15 percent. 3 This indicator replaces "the percentage of internal practice reviews that find our audit in compliance with our quality management system." 4 The employee survey results shown were received in June 2008 and were reported in the 2007–08 Performance Report. We conduct employee surveys every two years.

This year we reviewed our targets and how we set them and are making changes to some of the targets presented in our 2009–10 Report on Plans and Priorities.

Revised performance targets for 2009–10
Objectives and indicators	2009–10 Original Target	2009–10 Revised Target
Percentage of audit committee chairs who find our financial audits add value	75	90
Percentage of Crown corporation and large-department senior managers who find our financial audits and special examinations add value	75	80
Percentage of department senior managers who find our performance audits add value	65	70
Percentage of financial audits of federal organizations with no statutory deadlines completed on time	70	80
Percentage of financial audits of territorial organizations completed on time	55	60
Percentage of financial audits of territorial organizations completed on budget	55	60

We begin our performance target-setting process by identifying any established standards, such as legislative authorities. For example, many of our financial audits have statutory reporting deadlines and, for these audits, our on-time target is 100 percent. Where no such standards exist, we look to identify reasonable expectations and then consider the trend of past performance. For example, while we might expect that all audits would be completed within 150 days of the year end to be timely and useful, our experience has been that about 80 percent are completed within this time period. We believe our revised 2009–10 target of 80 percent represents a reasonable performance target and that any significant movement away from this target would alert us to a potential problem.

Finally, where there is no objective standard, we set targets that we believe are realistic and attainable while holding ourselves to a high level of performance. For example, while we believe it is not realistic for all users of our reports to find that we always add value on all dimensions that we monitor, we believe that a realistic and high standard is that 9 out of 10 users of our reports would feel this way, and we have therefore set a target of 90 percent for 2009–10 for all users of our reports. In the case of the indicator of adding value for the organizations we audit, which are not our primary clients, our targets are slightly lower. We have also adjusted this target, based on past results, to 80 percent for senior managers subject to our financial audits and special examinations and to 70 percent for senior managers subject to our performance audits. We believe that these targets reflect a very positive level of performance and any significantly different result would warrant our attention.

Performance highlights by product line

We measure our impact and performance for our three major activities:

• Performance audits and studies of departments and agencies
• Financial audits of Crown corporations, territorial governments, and other organizations
• Special examinations of Crown corporations

The following sections present the results for 2008–09 for each of these activities.

Performance audits and studies of departments and agencies

Performance audits and studies answer the following questions:

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

In 2008–09, we completed 32 performance audits. A list of these audits is in Section III—Supplementary Information.

We also completed five multi-year audit plans in 2008–09. This is a risk-based approach to audit planning that involves the development of a multi-year audit plan for each significant federal government organization subject to audit. It involves discussions with key senior managers and a review of key documents of those organizations.

Exhibit 5 summarizes our results for performance audits and studies for 2008–09.

Exhibit 5—Results for performance audits and studies

Expected results Parliament and federal and territorial organizations are engaged in the audit process Parliament holds government to account Our work is relevant to federal and territorial organizations, departments, agencies, and Crown corporations		Actual results We provided Parliament with 32 performance audits, a number consistent with recent years. The Standing Committee on Public Accounts reported that "it finds great value in the Office's work."
Objectives	Indicators and targets	Performance summary	Performance status
Key users of our reports are engaged in the audit process	Maintain percentage of performance audits that are reviewed by parliamentary committees Maintain number of parliamentary hearings and briefings we participate in	Parliamentary committees reviewed 57 percent of our performance audit reports—a slight increase from the previous year. We participated in 35 committee hearings and briefings over the 99 parliamentary sitting days. This is higher than last year and is consistent with the average in previous years.	Exceeded
Our work adds value for the key users of our reports	90 percent of selected parliamentary committee members find our performance audits add value	Our reports are considered to be valuable and no need to make significant improvements has been identified in past surveys. No survey was done in 2008–09.	n/a
Our work adds value for the organizations we audit	65 percent of departmental senior managers find our performance audits add value	75 percent of departmental senior managers found our performance audits add value.	Exceeded
Key users of our reports and the organizations we audit respond to our findings	50 percent of performance audit recommendations are fully implemented and 25 percent are substantially implemented four years after their publication	Departments reported that they had fully implemented 63 percent of the performance audit recommendations made in the reports we tabled four years ago, and substantially implemented a further 27 percent.	Exceeded

Key users of our reports are engaged in the audit process. While many parliamentary committees draw on our work, the Office’s main relationship is with the Standing Committee on Public Accounts. Our appearances before committees assist parliamentarians in fulfilling their oversight role and give us the opportunity to increase awareness and understanding of the issues in our reports.

It is important that the key users of our reports be engaged in the audit process, understand the nature and objectives of our work, and understand our reports and follow up on issues presented in them. For performance audits, we monitor the level of involvement of parliamentary committees by tracking the number of audits reviewed by committees. We also assess the committees’ level of interest in our reported findings by looking at how frequently they ask us to appear before them to further elaborate on our findings.

In 2008–09, we participated in 35 hearings and briefings with parliamentary committees over the 99 parliamentary sitting days: 22 with the Public Accounts Committee and 13 with other committees (Exhibit 6). This number is higher than the previous year but is consistent with the average from previous years. Parliamentary committees reviewed 57 percent of our 2008–09 performance audit reports, slightly more than last year. Our target is to maintain the percentage of parliamentary hearings and briefings we participate in, relative to the number of sitting days, and to maintain the percentage of audits reviewed by parliamentary committees.

Exhibit 6—We participate in parliamentary hearings and briefings

Committee hearings covered a wide range of topics and audit reports, including the following to name a few: Canadian Agricultural Income Stabilization Program of Agriculture and Agri-Food Canada, managing the delivery of legal services to government by the Department of Justice Canada, First Nations Child and Family Services Program of Indian and Northern Affairs Canada, safeguarding government information and assets in contracting, federal transfers to provinces and territories, and detentions and removals of individuals by the Canada Border Services Agency.

The Commissioner of the Environment and Sustainable Development usually appears before both the House of Commons Standing Committee on Environment and Sustainable Development and the Senate Standing Committee on Energy, the Environment and Natural Resources. Other committees will also call upon the Commissioner if they are studying matters audited by the Commissioner. This year, he also participated in a hearing on Bill C-474, an Act to require the development and implementation of a federal sustainable development strategy. Although it is not our common practice to comment on proposed legislation, we agreed to testify since the Bill touched upon our Office's mandate.

The Federal Sustainable Development Act received royal assent in June 2008 and included a number of requirements that were recommended in previous audit reports of the Commissioner of the Environment and Sustainable Development on the sustainable development strategies of departments and agencies.

Parliament considers the issues raised in our reports. We monitor how our performance audits help Parliament hold the government to account by identifying examples of how Parliament considers issues of accountability, performance, compliance with authorities, and the environment and sustainable development in its legislative and oversight work.

The following three examples illustrate how our 2008–09 work has contributed to the legislative and oversight work of Parliament.

A Study of Federal Transfers to Provinces and Territories (December 2008, Chapter 1) Introduction At times, the Office of the Auditor General undertakes a study of a topic of interest to parliamentarians. These studies serve to inform parliamentarians of significant issues. Background The federal government transfers of funds to provinces and territories make up a significant portion of the federal government’s annual spending. In 2006–07, the federal government transfers to provinces and territories amounted to about $50 billion or just less than 23 percent of federal spending. They are a major source of funds for services to Canadians, such as health and post-secondary education. In the past, parliamentarians had asked a number of questions regarding these transfers and their accountability arrangements. The study found that the extent of federal accountability for how the provinces and territories spend transferred funds depends on the nature and extent of conditions attached to the transfers. For example, a significant addition to the transfer mechanisms used by the federal government was its introduction of trusts in 1999. Once the eligibility conditions for these trusts have been met, no additional legal conditions obligate the provinces and territories to spend the funds for the purposes announced. Once the provinces and territories have established their eligibility to draw funds down from the trust, they become accountable to their own citizens, not to the federal government, for how they use these funds. Result/Outcome This chapter was reviewed by two House of Commons standing committees—the Standing Committee on Health in February 2009 and the Standing Committee on Public Accounts in March 2009. These hearings provided a good forum of discussion on the issue of federal transfer fund mechanisms and federal, provincial, and territorial accountabilities. In May 2009, the Standing Committee on Public Accounts issued its own report and made two recommendations for government action.

Safeguarding Government Information and Assets in Contracting (October 2007, Chapter 1) Introduction When the Auditor General presents the findings of an audit to parliamentary committees and the department(s) and agencies are also present as witnesses, these hearings provide a valuable forum for accountability. A case in point is the hearings on the October 2007 Chapter 1, Safeguarding Government Information and Assets in Contracting. Background Keeping sensitive government information and assets secure, whether held within government or entrusted to industry, is critical to supporting the Government of Canada's objectives and the health, safety, security, and economic well-being of Canadians at home and abroad. Our audit examined how the federal government assures the security of sensitive information and assets that it makes available to industry in the course of contracting. We found serious weaknesses in the processes that are supposed to ensure the safeguarding of sensitive government information and assets. Some of these weaknesses included a lack of clarity in roles and responsibilities among those responsible for policy implementation, a lack of monitoring mechanisms to ensure that the policies and procedures were actually being implemented as intended, and officials circumventing key security procedures in order to reduce costs and avoid project delays. As a result, many federal contracts that provide access to sensitive government information and assets were awarded to contractors whose personnel and facilities had not been cleared to the appropriate level of security. Result/Outcome Public Works and Government Services Canada, National Defence, the Royal Canadian Mounted Police, Defence Construction Canada, and the Treasury Board of Canada Secretariat agreed with the Auditor General’s recommendations to review and enhance current roles, responsibilities, policies, and procedures in order to better safeguard the security of sensitive information and assets that it makes available during the contracting process. Furthermore, the Standing Committee on Public Accounts reviewed this chapter during two committee hearings—one in February and the other in June 2008. These hearings provided an opportunity to discuss our findings and the departments’ positions, as well as their planned activities for remediation, in order to address the observations and recommendations in the chapter.

Annual Report on Sustainable Development Strategies (Chapter 4, December 2008 Commissioner of the Environment and Sustainable Development Report) Introduction Some of our audit findings can lead to new legislation. The Commissioner’s work on the sustainable development strategies of government departments and agencies over the past decade is a case in point. Background In 1995, Parliament amended the Auditor General Act, requiring the ministers of designated departments and agencies to prepare sustainable development strategies, to table them in Parliament, and to update them at least once every three years. The Commissioner of the Environment and Sustainable Development was directed to monitor implementation of the strategies and to report annually on progress. The objective of the legislative amendment was to make sustainable development an integral part of the mandate and operations of each department and agency. Over the past decade, the Commissioner has frequently reported significant weaknesses in the quality and relevance of the commitments presented in the departmental sustainable development strategies and has called for a comprehensive federal approach to sustainable development. In the 10th annual report on the sustainable development strategies, October 2007 Report, Chapter 1, Sustainable Development Strategies, the Commissioner concluded that the government's current approach to producing and using sustainable development strategies was not working to deliver progress toward sustainable development. The Commissioner recommended that the federal government undertake a number of corrective measures, including establishing federal goals for sustainable development. The goals should include specific performance expectations, indicators, and targets that would serve as objectively verifiable benchmarks against which progress can be measured. Result/Outcome In June 2008, Parliament passed the Federal Sustainable Development Act. In the formulation of the Act, the Commissioner of the Environment and Sustainable Development was consulted on key management practices that should be specified in relation to a federal sustainable development strategy. As a result, the Act incorporated key aspects of the Commissioner’s 2007 recommendation. Under the Act, the government is to develop a federal sustainable development strategy that specifies measurable goals and targets. Departments and agencies are to prepare their own strategies that comply with and contribute to the government-wide strategy, and Environment Canada is responsible for monitoring implementation and reporting on progress. In addition, the Act provides new duties for the Commissioner, including assessing the fairness of the information contained in the government’s report on progress.

Our work adds value for the key users of our reports. We carry out surveys of parliamentarians, requesting feedback on performance audits tabled before the members of four key parliamentary committees that review our reports: the House of Commons Standing Committee on Public Accounts and the Standing Committee on Environment and Sustainable Development, as well as the Senate Standing Committee on National Finance and the Standing Committee on Energy, Environment and Natural Resources. In the past year, there was considerable turnover in committee membership, and consequently many of the committee members were not in a position to comment on the reports completed in 2008–09. Therefore, we chose not to conduct a survey of parliamentarians for performance audits completed in 2008–09.

Our target is to have 90 percent of respondents provide us with an average rating of “agree” or “strongly agree” in response to five statements that are used as an indication that our audits add value. Virtually all parliamentarians who responded to the 2006–07 survey and the 2007–08 survey provided ratings that exceeded the target.

Our work adds value for the organizations we audit. Since 2003–04, we have surveyed senior management of organizations subject to our performance audits after tabling the applicable report in Parliament. This year we received 28 completed surveys on 15 audits.

The target for performance audits, established in our 2008–09 Report on Plans and Priorities, was to have 65 percent of ratings of our audits as “agree” or “strongly agree” that the audits add value for senior management. This indicator is based on responses to the four statements shown in Exhibit 7. The percentage of responses of “agree” or “strongly agree” to all statements exceeded 65 percent for audits in 2008–09, with the average for the four statements being 75 percent.

Exhibit 7—Performance audits add value for senior management
(Number of surveys received in 2008–09=28)

Exhibit 8 shows the trend for senior management responses over time (no target was established before 2005–06). Their assessment in 2008–09 was the best in the past five years.

Exhibit 8—Performance audits add value for senior management

Key users of our reports and the organizations we audit respond to our findings. Departments and agencies are responsible for taking corrective action and improving their management practices. Annually, we request an update from these organizations on their progress in implementing our recommendations. Beginning in 2007–08, we also asked them to assess their level of implementation. The information we receive is self-reported by the departments and agencies. While we do not subject it to any detailed review or audit, we do consider it for consistency with our current knowledge of the organization.

We have established that four years is a reasonable period of time to fully implement our recommendations. We expect that 25 percent will be substantially implemented and a further 50 percent will be fully implemented by that time. In 2008–09, departments reported that they had fully implemented 63 percent of recommendations and had substantially implemented a further 27 percent of the recommendations made in the performance audit reports we tabled in 2004–05. Beginning in 2009–10, our target will be 75 percent based on a combined total of recommendations that were substantially or fully implemented. In 2008–09, the combined total was 90 percent.

Periodically, we prepare a status report, which follows up on the government’s progress in responding to recommendations contained in previous performance audits. We audit selected recommendations and findings from prior reports to determine if progress in addressing them has been satisfactory. When we make that determination, we consider the time elapsed since our original report and the complexity and degree of difficulty of remedial action by the government. These status reports are another way for us to determine —and for parliamentarians to understand—whether government organizations are meeting commitments they made in response to our previous recommendations.

We tabled a status report in March 2009 and concluded that for the seven topics we examined, there was satisfactory progress in five.

Financial audits of Crown corporations, territorial governments, and other organizations

Financial audits answer the following questions:

• Are the annual financial statements of Crown corporations, territorial governments, and other organizations presented fairly?
• Is the federal government presenting its overall financial situation fairly?
• Are these entities complying with their legislative authorities?

In 2008–09, the Office issued 108 reports expressing an audit opinion on financial statements or financial information.

Exhibit 9 summarizes our results for financial audits for 2008–09.

Exhibit 9—Results for financial audits

Expected results Parliament and federal and territorial organizations are engaged in the audit process Parliament holds government to account Our work is relevant to federal and territorial organizations, departments, agencies, and Crown corporations		Actual results We completed 108 financial audit reports that provided the recipients, and ultimately Parliament, with an independent and objective opinion that they could rely on the financial information we examined. We began working with federal organizations that will be affected to raise their awareness about the upcoming conversion to international financial reporting standards, and with their audit committees to become engaged in monitoring preparedness for these conversions.
Objectives	Indicators and targets	Performance summary	Performance status
Our work adds value for the key users of our reports	75 percent of audit committee chairs find our financial audits add value	85 percent of audit committee chairs found our financial audits add value	Exceeded
Our work adds value for the organizations we audit	75 percent of Crown corporation and large-department senior managers find our financial audits add value	83 percent of Crown corporation and large-department senior managers found our financial audits add value	Exceeded
Key users of our reports and the organizations we audit respond to our findings	100 percent of the reservations in our audit opinions are addressed from one financial audit to the next	11 percent of the reservations in our audit opinions were addressed from one financial audit to the next. We issued 108 financial audit opinions, containing eight reservations. There had been nine reservations in 2007–08.	Not met

Our work adds value for key users of our reports. To measure the value of our financial audits, we conduct surveys of the chairs of audit committees and other bodies with responsibility for oversight of financial reporting. Since 2002–03, we have conducted two biennial surveys. In 2008–09, we began to survey following every audit.

In our 2008–09 Report on Plans and Priorities, we established a target of 75 percent for the audit committee chairs who find that our audits add value. The result was an 85 percent average, with at least three quarters of the respondents indicating they “agree” or “strongly agree” in response to all five statements used to measure value added (Exhibit 10).

Exhibit 10—Financial audits add value for audit committee chairs
(Number of surveys received in 2008–09=43)

Exhibit 11 shows the trend for audit committee chair responses (there was no target before 2004–05). Their assessment in 2008–09 was better than in the previous surveys.

Exhibit 11—Financial audits add value for audit committee chairs

Our work adds value for the organizations we audit. In 2008–09, we established a target of 75 percent for the senior managers of Crown corporations and large departments who “agree” or “strongly agree” that our audits add value. The result in 2008–09 was an 83 percent average, with the responses to only one statement being below 75 percent (Exhibit 12).

Exhibit 12—Financial audits add value for senior managers
(Number of surveys received in 2008–09=70)

Exhibit 13 shows the trend for senior manager responses (there was no target before 2004–05).

Exhibit 13—Financial audits add value for senior managers

Key users of our reports and the organizations we audit respond to our findings. For our financial audits, we monitor the corrective action taken in response to opinion reservations contained in our reports. Our indicator is the percentage of reservations that are addressed from one report to the next. Our target is 100 percent.

There are two types of reservations that are presented in our financial audit reports: reservations related to financial accounting and auditing issues, and reservations related to compliance with authorities issues. Our reports can also contain other matters—for example, these might include comments concerning an organization’s financial sustainability or ability to fulfill its mandate. In the past, we included only financial accounting and auditing reservations in the calculation of this performance indicator.  This year, we have included compliance-with-authorities reservations and “other matters”, and we have restated the 2007–08 result accordingly.

In 2008–09, we issued 108 financial audit opinions, containing eight reservations that continued from the 2007–08 reports. Only one of the nine reservations issued in 2007–08 was addressed, giving a performance result of 11 percent.

Of the eight continuing reservations, three were financial accounting and auditing issues and five were compliance-with-authorities issues. All three of the financial accounting and auditing reservations were contained in reports on territorial organizations. Four of the five compliance-with-authorities reservations were contained in reports to territorial organizations and were for failure to table annual reports on time. Many territorial organizations continue to face a challenge in having the financial management capacity they require.

Special examinations of Crown corporations

A special examination of a Crown corporation answers the following question:

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

In 2008–09, we reported on the special examinations of the eight corporations listed in Section III—Supplementary Information. In 2008, there were three new Crown corporations added to the list of corporations that require special examinations: The Canadian Museum for Human Rights, the Canada Employment Insurance Financing Board, and PPP Canada Inc.

We began publishing a chapter presenting the main points of special examinations in 2008 and will continue to present this information annually in our Report to Parliament. Chapter 7 of our Spring 2009 Report—Special Examinations of Crown Corporations presents the main points of eight special examination reports of Crown corporations that were issued to their boards of directors between 1 March 2008 and 31 December 2008 and that have subsequently been made public. Of those eight reports, six identified no significant deficiencies and two—Federal Bridges Corporation Ltd. and VIA Rail Canada—identified one or more significant deficiencies. These deficiencies were reported to the responsible Minister.

Exhibit 14 summarizes our performance results for special examinations of Crown corporations for 2008–09.

Exhibit 14—Results for special examinations

Expected results Parliament and federal organizations are engaged in the audit process Parliament holds government to account Our work is relevant to federal organizations, departments, agencies, and Crown corporations		Actual results We delivered eight special examination reports on federal Crown corporations in 2008–09. In two of these reports—Via Rail Canada and Federal Bridges Corporation Ltd.—we identified significant deficiencies.
Objectives	Indicators and targets	Performance summary	Performance status
Our work adds value for the key users of our reports	90 percent of board chairs find our special examinations add value	97 percent of board chairs found our special examinations add value	Exceeded
Our work adds value for the organizations we audit	75 percent of Crown corporation chief executive officers find our special examinations add value	84 percent of Crown corporation chief executive officers found our special examinations add value	Exceeded
Key users of our reports and the organizations we audit respond to our findings	100 percent of significant deficiencies are addressed from one special examination to the next	n/a*	n/a
*For the eight special examinations completed in 2008–09, there were either no significant deficiencies in the previous special examination, or there was no previous special examination because the Crown corporation was new.

Our work adds value for the key users of our reports. To determine the value of our special examinations to the users of these reports, we survey board chairs (Exhibit 15). While the number of survey respondents is small (corresponding with the number of special examinations we complete annually), the response rate has been good. We received responses from eight of the ten board chairs surveyed in 2008–09.

Exhibit 15—Special examinations add value for board chairs
(Number of surveys received in 2008–09=8)

In our 2008–09 Report on Plans and Priorities, we established a target of 90 percent for the respondents who indicate that they “agree” or “strongly agree” that our reports add value. This year the overall result was 97 percent. All respondents indicated they “agree” or “strongly agree” that we prepare reports that are clear and concise, that we report the findings in a fair and objective manner, and that the findings reflect key issues that will contribute to future improvement within the organization.

Exhibit 16 shows the trend for board chair responses (there was no target before 2007–08).

Exhibit 16—Special examinations add value for board chairs

Our work adds value for the organizations we audit. In our 2008–09 Report on Plans and Priorities, we established a target of 75 percent for the chief executive officers of Crown corporations who “agree” or “strongly agree” that our special examinations add value. The result in 2008–09 was 84 percent (Exhibit 17).

Exhibit 17—Special examinations add value for chief executive officers
(Number of surveys received in 2008–09=11)

Exhibit 18 shows the trend for chief executive officer responses (there was no target before 2006–07).

Exhibit 18—Special examinations add value for chief executive officers

Key users of our reports and the organizations we audit respond to our findings. We monitor the corrective action taken in response to significant deficiencies reported in our reports. Our indicator for special examinations is the percentage of significant deficiencies that are addressed from one report to the next. Our target is 100 percent.

For the eight special examinations completed in 2008–09, there were either no significant deficiencies in the previous special examination, or there was no previous special examination as the Crown corporation was new. Therefore, this indicator was not applicable.

Sustainable development monitoring activities and environmental petitions

Sustainable development monitoring activities. Over the years, we have monitored a number of departmental sustainable development strategies annually and continue to do so. In 2008, we examined the implementation of one commitment each from the 2007–2009 strategies of 11 federal organizations.

Individual organizations have taken some action in specific areas, but there are still no clear federal goals or indicators to clarify the government's expectations for sustainable development strategies or to measure the individual or collective progress of departments and agencies. Consequently, there is still no basis for a meaningful assessment of results relative to the sustainable development strategies.

The 2008 Federal Sustainable Development Act requires Environment Canada to establish federal sustainable development goals and targets by June 2010 and to provide a progress report at least once every three years after the day on which the Act came into force. Under this legislation, the Commissioner of the Environment and Sustainable Development has new responsibilities, including assessing the fairness of the information contained in the government’s report on progress in implementing a federal sustainable development strategy. We look forward to examining progress in our future annual reports.

Environmental petitions. The 1995 amendments to the Auditor General Act require that we monitor and report annually to Parliament on environmental petitions received from Canadians. The Commissioner reports on the quantity, nature, and status of petitions received and on the timeliness of ministers’ responses. The annual report on environmental petitions was included in the Commissioner’s December 2008 Report, tabled in Parliament in February 2009.

In 2008–09, the Office received 37 environmental petitions. Ministers delivered 83 percent of responses to petitions on environmental matters within the 120-day time limit, compared with 84 percent last year.

In addition, we continued our practice of auditing selected issues and commitments made by ministers in their responses to petitions. In 2008–09, we audited departmental progress related to the development of the Air Quality Health Index. The results of this work were reported to Parliament in our Status Report in March 2009.

Organizational performance

We measure and manage our performance as an organization in a number of ways. The following section describes our key performance objectives, indicators, and targets and how we performed in 2008–09.

Delivering work on time and on budget

On time. For performance audits, the Office determines when individual audit reports will be tabled in the House of Commons; thus, there are no statutory deadlines for these reports. However, we do communicate to the Public Accounts Committee our planned tabling schedule for performance audits for the coming fiscal year. In our 2008–09 Report on Plans and Priorities, 29 performance audits were listed as planned for tabling during the current fiscal year and all but one were completed as planned. That one was rescheduled and reported in May 2009. The target for 2008–09 was 90 percent on time. For federal performance audits, 13 were tabled as planned and 13 were tabled later than the planned completion date listed in the 2008–09 Report on Plans and Priorities due to the prorogation of Parliament. One of the 13 audits tabled later than planned was tabled separately as it was reported concurrently with a related audit conducted by the Office of the Privacy Commissioner. Both planned territorial performance audits were completed on time. Details of the audits tabled are in Section III—Supplementary Information.

The majority of financial audits of federal Crown corporations (91 percent) and other federal organizations with a statutory deadline (95 percent) were completed on time, but we did not meet our target of 100 percent. For federal Crown corporations, reporting deadlines were not met for the Royal Canadian Mint (year ended 31 December 2008) and for the National Capital Commission, Federal Bridges Corporation Ltd., and the Canadian Race Relations Foundation (all 31 March 2008 year ends). The one “other federal organization with a statutory deadline” that was late was the National Battlefield Commission. Completing audits of federal organizations without a statutory deadline on time can be more challenging as these entities are not always ready to be audited within our self-determined deadline of 150 days after the end of the reporting period. Nonetheless, in 2008–09, 84 percent of these audits were completed on time, exceeding our 2008–09 target of 70 percent (Exhibit 19).

Exhibit 19—Our work is completed on time

Territorial financial audits present some unique challenges, including client readiness. In 2008–09, 48 percent of these audits were completed on time, a decrease from 2007–08 and below our target of 55 percent for 2008–09.

In our 2008–09 Report on Plans and Priorities, we listed 15 special examinations that we planned to complete in 2008–09. Eight were completed in 2008–09, and six of these were delivered on or before the statutory deadline (see List of completed special examinations). Completion of the remaining seven has been delayed until 2009–10; however, we still expect these to be completed before the statutory deadlines. The performance result of 75 percent for 2008–09 is the same as for 2007–08. While it is a significant improvement from 25 percent in 2006–07, it is still below our target of 100 percent. We are refining our approach to planning special examinations to improve on-time performance.

On budget. For all of our audits, being on budget is defined as completing the audit in no more than 115 percent of the budgeted hours for the audit. This figure recognizes that factors outside the control of the audit team, such as client readiness and the number and complexity of audit issues identified, can affect time spent on an audit.

For federal audits, three of our on-budget results improved in 2008–09 and are above our target of 70 percent, while the audits of Crown corporations and other federal entities with a statutory deadline are below the target. Our on-budget result for audits of territorial organizations is well above the target of 55 percent (Exhibit 20).

Exhibit 20—Our work is delivered on budget

Although our on-budget results for financial audits of Crown corporations and other federal entities with statutory deadlines continue to be significantly below target in 2008–09, the results of our recent audits are promising, in part as a result of our efforts to develop a more rigorous budget-setting and management process. Work on preparing for the transition to international financial reporting standards is introducing new budgeting and resourcing challenges for audits of Crown corporations and territorial organizations, and we will be reviewing all audits to identify possible audit efficiencies to offset these additional challenges. While there are many reasons and possible explanations for why individual audits did not meet their budgets, overall we need to do a better job in planning, monitoring, and developing budgets for our audits. Our employee survey results also tell us that our staff believe we can do a better job in managing our allocation of staff to products.

Ensuring our audit reports are reliable

Our audit work is guided by a rigorous methodology and quality management system. Annual internal reviews and periodic external peer reviews provide the Auditor General with opinions on whether our audits are conducted in accordance with professional standards, and whether our Quality Management System (QMS) is appropriately designed and effectively implemented. We report publicly on the results of these reviews in order to provide assurance to members of Parliament and the public that they can rely on the opinions and conclusions contained in our audit reports. Our Quality Management System is based on professional standards and Office policies. It guides auditors through a set of steps they must follow during their audits and ensures that these audits are conducted according to professional standards and Office policies. Annual internal reviews also conclude on whether the opinions and conclusions contained in our audit reports are appropriate. External reviews conducted by the provincial institutes of chartered accountants conclude on whether we are following professional standards and meeting their requirements for training chartered accounting students.

Internal practice reviews. Each year we conduct practice reviews of our financial audits, special examinations, performance audits, and assessments of agency performance reports by assessing their compliance with our Quality Management System. In 2008–09, we completed 22 practice reviews—12 annual audits, 7 performance audits, and 3 special examinations. This number of reviews was higher than usual and addressed a backlog from the previous year.

In all cases but one, the practice reviews found that the opinions and conclusions expressed in our reports were appropriate. In the one exception, the audit team was directed to carry out additional work and make the necessary corrections to the audit file.

The practice reviews identified a number of instances where improvements should be made to our Quality Management System and where the QMS was not applied consistently and rigorously. The reviews found that only four of the audits were in full compliance with our QMS.

The Office is not satisfied with these results and we are taking steps to address them, including increasing accountability for compliance with the QMS. We have developed detailed action plans that have been reviewed by our independent audit committee and approved by the Office’s Executive Committee. These two committees will carefully monitor implementation of the action plans. As a result of the actions we are taking, we expect to see some improvements next year, and, since many of next years’ audits are already well advanced, further improvements the following year.

As a result of these practice reviews, we are changing our performance indicator from “the percentage of internal practice reviews that find our audits in compliance with our quality management system” to “the percentage of practice reviews that find the opinions and conclusions expressed in our reports are appropriate.” This change reflects the fact that while compliance with our QMS is intended to ensure that audit opinions and conclusions are appropriate, ultimately it is the reliability of the opinions and conclusions expressed in our reports that is important to Parliament and the public.

External reviews. Through peer reviews of the Office, conducted by other national legislative audit offices, we periodically seek independent assurance that our Quality Management System is suitably designed and is operating effectively to produce independent, objective, and supportable information that Parliament can rely on to examine the government's performance and hold it to account. The next peer review will take place in 2009–10. It will encompass all three of our main audit practices, as well as key services that directly support audit operations. The two previous peer reviews found that our QMS for financial audits was effectively designed and operating effectively (1999) and reached the same conclusion for our performance audit practice (2003).

A second type of external review is conducted by the provincial institutes of chartered accountants, who review our compliance with professional standards and our training of chartered accounting students. The most recent reviews by the institutes of five provinces (conducted within the past 18 months) concluded that we were following professional standards and met their training requirements.

Results of our practice reviews, including action plans and progress reports, are published on our website under About Us.

Internal audits. We also audit our management and administrative practices. These audits assure the Auditor General that the Office is complying with government and Office policies. They also provide managers with assessments and recommendations. A link to the list of internal audits and reviews is in Section III—Supplementary Information.

In 2008–09, following the implementation of a new financial system in April 2008, we began an internal audit on the controls for financial transactions. The findings of this audit will be reported in our 2009–10 Performance Report.

As our internal audits are completed, the results are published on our website under About Us.

Providing a respectful workplace

Our values for creating a respectful workplace are trust, integrity, and leading by example. These values define how we conduct ourselves and carry out our work. In addition, the Office strongly supports the values of competency, representativeness, non-partisanship, fairness, employment equity, transparency, flexibility, affordability, and efficiency. The Office includes these values in all of its human resource activities. In addition, since 2005, 50 percent of managers’ performance pay has been tied to their people management skills.

The Office has set four objectives for providing a respectful workplace, each with its own indicators and targets:

Provide a workplace environment where employees are satisfied and engaged.

Promote a bilingual workplace.

Assemble a workforce that represents the Canadian population.

Ensure that qualified, capable employees are available to carry out our mandate.

Satisfied and engaged employees. Our target for this objective is to maintain a minimum level of 80 percent employee satisfaction. Our 2008 employee survey had a 93 percent response rate, which is above the 90 percent rate in 2006 and the 65 percent norm for most organizations. The results show a significant increase in overall employee satisfaction from 70 percent in 2004 to 82 percent in 2006, and to 88 percent in 2008. Most employees—93 percent—said they feel proud to work for the Office, and consider the Office to be well run and characterized by good clarity of direction and strong support for vision and values.

Our challenge during the next year will be to maintain this positive momentum and continue to look for ways to improve. In response to the 2008 Employee Survey, the Executive Committee committed to taking action in the following three areas: managerial and supervisory effectiveness, resources (workload and staffing), and the promotion process. Implementation of these actions began in late 2008. Our goal is to ensure that all the initiatives identified are well under way or completed before our next employee survey in the spring of 2010.

A bilingual workforce. The Office has continued to improve its bilingual capacity in the management group. On 31 March 2009, 85 percent of our senior management group (assistant auditors general and principals) met the language requirements of their positions. As for the directors, 79 percent met the language requirements of their positions. Emphasis will continue to be placed on second language training in 2009–10.

A representative workforce. In increasing its workforce from the previous year, the Office has been able to exceed or achieve close to 100 percent representation of workforce availability for three out of four designated groups. Efforts are still needed to increase representation of visible minorities.

Retention rate. The retention rate of 88 percent has increased slightly in the past year and remains below our target of 90 percent. A Retention and Recruitment Strategy was developed and greater attention was focused on specific target groups, especially in the accounting field, in order to increase retention.

Financial performance

Our net allowable spending for 2008–09 was $100.4 million, consisting of $87.9 million current year appropriations plus services provided by other government organizations without charge of $13.4 million less non-respendable revenue of $0.9 million.

Parliamentary appropriations

In 2008–09, the Office used $84.4 million of the $87.9 million in parliamentary appropriations approved (Exhibit 21). The $87.9 million is comprised of $81.9 million in Main Estimates and a further $6.0 million in Supplementary Estimates and adjustments and transfers. The $6.0 million was routine in nature, including the carry-forward funding ($3.6 million), various salary-related entitlements, such as economic increases and increases related to performance pay ($1.0 million), and parental leave/severance payments ($1.7 million) recovered from the Treasury Board of Canada Secretariat (through the contingency vote).

Exhibit 21—Voted and statutory items

		2008–09 ($ millions)
Vote # or statutory item (S)	Vote or statutory wording	Main Estimates	Planned spending	Total authorities	Total actual expenditures
15	Program expenditures	72.3	72.3	78.6	75.1
(S)	Contributions to employee benefit plans	9.6	9.6	9.3	9.3
	Total	81.9	81.9	87.9	84.4

The Office lapsed $3.5 million in 2008–09 ($4.3 million in 2007–08). Like government departments and agencies, subject to parliamentary approval, the Office may carry forward lapsed amounts and adjustments of up to five percent of its operating budget (based on Main Estimates program expenditures) into the next fiscal year.

Exhibit 22 shows our spending trend from 2004–05 to 2008–09.

Exhibit 22—Spending trend

Cost of operations

In 2008–09, the net cost of operations for the Office was $100.1 million, as reported in our audited financial statements. This increase of $7.4 million (8.0 percent) from 2007–08 is mainly due to increases in salary and employee benefits of about $4.5 million (6.4 percent), Office accommodation of $1.6 million (22.0 percent), and professional services of $1.2 million (14.4 percent). The increased salary costs are mainly due to a larger number of full-time equivalents (FTEs) used, annual economic increases, and an increase in employee benefits and the severance pay expense. The cost for Office accommodation, which is provided without charge to the Office, increased due to a new 4.5 year agreement. The new agreement was negotiated by Public Works and Government Services Canada for our Ottawa location, starting in April 2008. The first year of the agreement incorporates a 22 percent increase to reflect the increased market value of occupancy costs.

Full-time equivalents used

The Office used 628 full-time equivalents in 2008–09, which represented 98.9 percent of our budget of 635 FTEs. This represents an increase of 20 in the number of FTEs used from last year. In 2007–08, we used 608 FTEs, representing 98.5 percent of our budget of 617 FTEs.

Analysis by legislative auditing activity

We reported an original 2008–09 budget of $91.9 million in our 2008–09 Report on Plans and Priorities, and a revised 2008–09 budget of $98.8 million in our 2009–10 Report on Plans and Priorities. The 2008–09 revised budget (forecast spending) and actual spending (net cost of operations) are presented in Exhibit 2—Performance Summary.

We manage costs for the Office as a whole and also for individual audits. Audit budgets are established for planned hours and other costs of work. All direct salary, professional service, travel, and other costs associated with the delivery of individual audits and professional practice projects are charged directly to them. All other Office expenses, including services provided without charge, are treated as overhead and allocated to audits and professional practice projects based on the direct hours charged to them.

Performance audits and studies

($ millions)	2008–09		2007–08
	Actual costs	Budget	Actual costs
Performance audits and studies	43.7	45.2	39.5

The number of audits tabled and in progress in 2008–09 was similar to last year, but the costs were higher because the audits were larger and more complex. This year’s actual costs were slightly below budget as some work was delayed until next year and certain expenditures were less than budgeted.

Financial audits

($ millions)	2008–09		2007–08
	Actual costs	Budget	Actual costs
Financial audits—Crown corporations, territorial governments, other organizations, and the summary financial statements of the Government of Canada	38.3	35.2	34.8

The costs of these audits in 2008–09 were higher than planned as a result of dealing with difficult issues in several Crown corporations and the summary financial statements of the Government of Canada, as well as a need for increased professional services to manage our peak period in May and June 2008. The costs also increased compared with last year. The increase in year-over-year costs is partly attributable to the above factors, but also due to the costs associated with beginning our new mandate as auditor of the International Labour Organization, and to work related to our Quality Management System, the cost of which we allocate to the audits. We continue to work on improving our management of the costs of our financial audits.

Special examinations of Crown corporations

($ millions)	2008–09		2007–08
	Actual costs	Budget	Actual costs
Special examinations of Crown corporations	7.8	8.6	6.8

The total cost of conducting special examinations of Crown corporations varies depending on the number of examinations under way each year; their nature, size, and complexity; and the risk levels of the corporations being examined. In 2008–09, we worked on 24 special examinations of which 8 were completed, compared with the 20 we worked on in 2007–08 of which 8 were completed. Our special examination costs were $800,000 under budget this year as a result of delays in a number of special examinations, including one major examination that has been deferred until a later date. In addition, another recently completed major examination was about $300,000 under budget.

Sustainable development monitoring activities and environmental petitions

($ millions)	2008–09		2007–08
	Actual costs	Budget	Actual costs
Sustainable development monitoring activities and environmental petitions	2.0	1.4	3.2

The costs of this work in 2008–09 were higher than planned due to additional work conducted on special projects related to the petitions process. These costs were lower than in 2007–08 because fewer petitions were received and fewer environmental and sustainable development audits were tabled this year.

Professional practices

($ millions)	2008–09		2007–08
	Actual costs	Budget	Actual costs
Professional practices	8.8	8.5	7.8

We increased the effort in this area compared with last year due to various projects and initiatives, such as updating audit methodology and preparation and training for the implementation of international financial reporting standards.

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