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SECTION II: ANALYSIS OF PROGRAM ACTIVITIES BY STRATEGIC OUTCOME

Strategic Outcome One

To regulate and supervise to contribute to public confidence in Canada’s financial system and safeguard from undue loss.

A properly functioning financial system, in which consumers and others (inside and outside Canada) have a high degree of confidence, makes a material contribution to Canada’s economic performance. OSFI is the primary regulator and supervisor of all federally registered financial institutions, numbering about 450. The achievement of OSFI’s first strategic outcome, which is shared by partners within government and the private sector, provides an essential foundation for a productive and competitive economy.

OSFI safeguards depositors, policyholders and private pension plan members by enhancing the safety and soundness of federally regulated financial institutions and private pension plans. Three program activities support this strategic outcome: 

1. Regulation and Supervision of Federally Regulated Financial Institutions (FRFIs)
2. Regulation and Supervision of Federally Regulated Private Pension Plans
3. International Assistance

The performance indicator for Strategic Outcome 1 indicates a strong majority of CEOs (of FRFIs) believe OSFI performs well in contributing to public confidence in Canada’s financial services industry. In 2008-2009, OSFI enhanced its ability to identify emerging risks; continued its participation in international discussions about key issues arising from global market turmoil, and worked with Financial Institutions Supervisory Committee (FISC) partners on similar issues in Canada;  continued to prepare for the move to IFRS; made progress towards developing and agreeing on a more risk-sensitive capital framework for life insurance companies; responded to suggestions or recommendation in the Financial Sector Assessment Program (FSAP) report and the Financial Action Task Force (FATF) report; monitored Basel II systems and reviewed banks’ capital adequacy assessment processes; and, continued to invest in the human resources and infrastructure needed to successfully deliver on its mandate.

1.1 Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

This program is central to OSFI achieving its mandate. It is the largest program activity within OSFI, utilizing the bulk of its financial and human resources. Costs for this program are recovered through assessments, service charges and user fees paid by federally regulated financial institutions. Costs are also recovered via Memoranda of Understanding, as "cost-recovered services” between OSFI and some provinces for which OSFI provides supervision of their institutions on contract, and other federal government organizations, such as the Bank of Canada and the Canadian Deposit Insurance Corporate for shared information systems.

Sub-Activity	2008-2009 Financial Resources ($ millions)			2008-2009 Human Resources (FTEs)
	Planned Spending	Total Authorities	Actual Spending	Planned	Actual	Difference
Risk Assessment and Intervention	$54.7	$54.7	$53.0	255	263	8
Rule Making	$16.4	$16.4	$17.3	95	91	(4)
Approvals	$8.5	$8.5	$6.8	39	40	1
Total	$79.6	$79.6	$77.1	389	394	5

The related expected results, performance indicators, targets, status and summary of performance for the three interrelated activities in this program activity are identified in the summary below.

Program Activity 1.1: Regulation and Supervision of Federally Regulated Financial Institutions

Expected Results	Performance Indicators	Targets	Performance Status	Performance Summary
Protect depositors and policyholders while recognizing that all failures cannot be prevented.	Percentage of estimated recoveries on failed institutions 5 (amount recovered per dollar of claim) Source: Canada Deposit Insurance Corporation, Agents, Liquidators	90%	Exceeded	Total weighted average recoveries were 99% at 2008-2009 year end.
Sub-Activity 1.1.1: Risk Assessment and Intervention
Accurate risk assessments.	Percentage of knowledgeable observers who agree that their institution's Composite Risk Rating is appropriate. Source: Report on Financial Institutions Survey 2008	70%	Exceeded	87% of financial institution CEOs believe that their institution’s Composite Risk Rating is appropriate.
Timely and effective intervention and feedback.	Time to issue Supervisory Letter (within prescribed target days) Source: Internal	80% (of letters are issued within 45 days)	Mostly Met	73% of supervisory letters being issued within the 45-day standard at 2008-2009 year end.
Sub-Activity 1.1.2: Rule Making
Regulations, guidelines and other rules that balance prudential considerations and the need for institutions to compete.	Percentage of knowledgeable observers who rate OSFI as good or very good at developing regulations, guidelines and other rules that strike an appropriate balance between prudential considerations and the need for institutions to compete. Source: Report on Financial Institutions Survey 2008	50%	Exceeded	63% of financial institution CEOs rate OSFI as good or very good at developing regulations and guidance that strike an appropriate balance between prudential considerations and the need for institutions to compete.
Regulations, guidelines and other rules which are clear and scrutinized by industry.	Percentage of knowledgeable observers who rate OSFI as good or very good at developing regulations, guidelines and other rules for industry that are clear and easy to understand. AND/OR	75%	Mostly Met	61% of financial institution CEOs rate OSFI as good or very good at developing regulations and guidelines that are clear and easy to understand.
	Percentage of knowledgeable observers who rate OSFI as good or very good at consulting with industry on the development of regulations, guidelines and other rules. Source for both: Report on Financial Institutions Survey 2008	60%	Exceeded	77% of financial institution CEOs rate OSFI as good or very good at consulting with the financial services industry when developing regulations and guidelines.
Sub-Activity 1.1.3: Approvals
Regulatory approvals result in prudentially sound decisions that are transparent.	Percentage of knowledgeable observers who understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process. Source: Report on Financial Institutions Survey 2008	85%	Mostly Met	82% of financial institution CEOs understand somewhat or very well the basis upon which OSFI makes decisions.
Regulatory approvals that are timely.	Percentage of completed applications for regulatory approvals that are processed within established performance standards. Source: Internal	90%	Exceeded	100% of approvals subject to the deeming provision were processed prior to the date on which they would have been deemed approved. All other performance standards established under the User Fee Act and the Policy on Service Standards for External Fees were met or exceeded in the year under review.

⁵ This measure is a proxy for whether OSFI intervened early enough to prevent undue loss to depositors and/or policyholders. Estimated recovery is the amount on the dollar per claim each policyholder or depositor would receive upon the completion of the liquidation. Expectation > $0.90.

Benefits for Canadians

Our risk assessment and intervention activity helps safeguard the investments of depositors and policyholders. Throughout 2008-2009, which was marked by significant market volatility and economic pressures, OSFI enhanced its level of monitoring and scrutiny of financial institutions in order to provide more in-depth information on possible future areas of concern. This work included: comparative and cross-sector reviews concerning commercial real estate and other credit portfolios, liquidity, securitization and Basel II compliance.

Our rule-making activities contribute to the development of sound risk management practices, which is key in protecting Canadian depositors and policyholders. Due to the complex and global nature of the financial sector, rules are increasingly being developed in the international arena, where OSFI has a strong voice in rule-making bodies like the Basel Committee on Banking Supervision and the Financial Stability Board. OSFI’s participation increases international confidence in Canada’s financial system. OSFI provides a regulatory framework of guidance and rules that meets or exceeds international minimums for financial institutions. This includes the issuance of guidance and input into federal legislation and regulations affecting financial institutions, contributions to accounting, auditing and actuarial standards, and involvement in a number of international rule-making activities.

Our approvals activities provide FRFIs with required approvals in a timely manner, which allows them to conduct their business competitively. Canadians need to feel confident that transactions which could affect the safety and soundness of financial institutions are carefully considered by the federal regulator. During 2008-2009, we strengthened our communication internally and externally, particularly in regard to our due diligence requirements.

Performance Analysis

Risk Assessment and Intervention

• In response to the global financial crisis, over the past year OSFI has become increasingly vigilant in its oversight of rapid growth and complex products. This has included the intensified review of Canada’s financial institutions’ credit, capital markets, and real estate inherent risk exposures, as well as assessing the appropriateness of capital levels to operate in volatile financial markets. While certain institutions experienced losses related to credit and market risk, they successfully rebuilt their capital levels without capital injections from the Canadian government. OSFI also initiated a review, in consultation with the industry, to benchmark liquidity risk management practices. This included piloting new liquidity data and reporting requirements.
• Consistent with its early intervention mandate, OSFI proactively staged a substantial number of institutions, in accordance with its Guide to Intervention for Federal Financial Institutions. The stage rating determines the degree of supervisory attention institutions receive. The majority of staged institutions are in the early warning category as at March 31, 2009.
• OSFI introduced annual Risk Management sessions with various industry segments to reinforce the need for strong risk management and to share lessons learned.
• OSFI initiated a review of its risk-based supervisory framework to ensure that it continues to meet its needs.
• OSFI worked with various domestic partners in the Financial Institutions Supervisory Committee (including the Department of Finance, the Canada Deposit Insurance Corporation and the  Bank of Canada) to review lessons learned, and to share information.
• OSFI continued its active participation in international fora, including the Senior Supervisors Group, the Basel Committee on Banking Supervision (BCBS), the Financial Stability Board (formerly Financial Stability Forum) and the International Association of Insurance Supervisors, to develop and implement better practices concerning liquidity management, governance and compensation.
• OSFI increased the number of supervisory staff and staff with special knowledge of credit, market and operational risks.

Rule Making

During 2008-2009, OSFI continued to promote sound risk management practices through its rule-making activities. We also continued to work with international bodies to develop international rules that may be applied to Canadian financial institutions. As part of its assessments of member countries required under Article IV of the Articles of Agreement, in March 2009 the International Monetary Fund (IMF) recognized the benefits these activities have had for Canada during the global financial market turmoil. The IMF stated that our “strong regulatory and supervisory framework” was one of the three factors responsible for the resilience of the Canadian banking system compared to its global competitors.

Through the current period of financial turmoil, Canada’s federally regulated financial institutions, while negatively affected, have generally outperformed their international peers. 

• During a period of rapid change and crisis in financial markets, OSFI consulted with financial institutions and moved quickly to issue advisories and to use its flexible rule-making powers to address risks and opportunities, while maintaining incentives for resilient risk and capital management. 
• OSFI continued to participate in the development of sound rules at the international level and to build relationships with foreign supervisors through participation in international rule-making discussions.
• OSFI took an active role in the development of the International Financial Reporting Standards (IFRS) for financial institutions through its participation in the Basel Committee’s Accounting Task Force and in the International Association of Insurance Supervisors (IAIS).  OSFI’s participation in the Accounting Task Force helps to ensure the Canadian perspective is considered in the development of the IFRS.
• OSFI continued to actively participate in the work of the International Association of Insurance Supervisors (IAIS). The IAIS objectives are to contribute to the improved supervision of the insurance industry for the protection of policyholders worldwide, to promote the development of well-regulated insurance markets and to contribute to global financial stability. In 2008-2009, OSFI contributed to the development of numerous IAIS guidance papers. 
• OSFI continued its active membership in the Joint Forum. The Joint Forum works to achieve consistency of supervisory approaches on issues of common interest across financial sectors and national borders. OSFI participated in a number of workstreams including: the Conglomerate Principles Working Group; a stocktaking of the uses of external credit ratings by regulators in the banking, securities and insurance sectors; and a study of Off-Balance Sheet (OBS) vehicles. Additional information about these workstreams can be found in OSFI’s 2008-2009 Annual Report.
• OSFI continued its active membership in the Basel Committee on Banking Supervision (BCBS).  The BCBS provides a forum for rule making and cooperation on banking supervisory matters. During 2008-2009, the BCBS devoted efforts to assessing the causes of the crisis in financial markets in 2008 and 2009 and to executing an action plan to address lessons learned and mitigate the impact of the crisis. OSFI worked actively with other BCBS members to develop and issue new rules for sound risk management and capital regulation. Significant pronouncements from the BCBS during 2008-2009 were developed with OSFI’s involvement and can be found in OSFI’s 2008-2009 Annual Report.
• During this period, OSFI held two insurance industry forums and one banking industry forum to identify and discuss challenges for Canadian financial institutions with respect to the move to IFRS.
• A conference was also held for the financial industry to discuss the impact of new anti money laundering rules on federally regulated financial institutions.

Approvals

During the past year, global financial market instability has had an impact on the OSFI approval process. OSFI enhanced the extent of regulatory due diligence applicable to certain transactions requiring approval. In addition, the overall complexity of many applications has increased and, in some cases, new regulatory or policy issues have to be addressed. OSFI spent a considerable amount of time on applications relating to corporate restructurings and reorganizations, changes of ownership, and the establishment of new federal financial institutions.

• OSFI provided continued transparency by publishing on its Web site four rulings and one advisory.
• OSFI spent considerable time dealing with technical issues related to the insuring in Canada of risks by foreign insurance companies under the “Foreign Companies” part of the Insurance Companies Act.
• OSFI hosted a Legislation and Approvals Seminar for industry, focused on issues related to its approvals process; feedback was very positive.

Additional information on OSFI’s approvals activities in 2008-2009 can be found in OSFI’s 2008-2009 Annual Report.

Lessons Learned

Risk Assessment and Intervention

The unprecedented events in the financial markets, and the impact on financial sector supervision, have been instructive in several ways. They have confirmed the importance of contingency planning, which has allowed OSFI to adjust supervisory plans based on risk, and allocate staff as necessary to different parts of the organization. They have confirmed the importance of OSFI’s strategy over the past few years of continuing to build a flexible culture, without which the adjustments would have been more difficult.

There were also important lessons learned concerning key risk management practices in the areas of liquidity management, corporate governance processes, executive compensation practices and complex financial products. Deficiencies have been identified in some institutions, as well as in OSFI’s capacity to assess these critical areas. Steps are being taken in all these areas to improve practices.

Rule Making

Recent experience has provided evidence that regulators need to be flexible with respect to rules and regulation during periods of financial turmoil.  While the relative success of the Canadian financial services industry was, in part, related to existing rules that limited the potential for unduly risky behaviour, OSFI also found that where appropriate, its rules could be prudently adjusted to assist financial institutions through difficult economic conditions.  Given the global nature of financial services, OSFI also found that it is increasingly important to be actively involved in international rule making and regulation, as international standards are becoming more prevalent.

Approvals

The Legislative Approvals framework was subjected to an internal audit in 2007-2008.  The audit report of the Regulation Sector’s Approvals & Precedents Group, concluded that the approvals function is well-developed, applied in a consistent manner, and thorough in its analysis.  In response to the report’s recommendations, OSFI has implemented various process improvements to ensure that we continue to process applications efficiently and meet our established performance standards.

In addition, OSFI continues to enhance the transparency of the statutory approvals process and promote a better understanding of its interpretation of the federal financial institution statutes by:

a) publishing new rulings, advisories and transaction instructions that set out interpretations of the financial institution legislation, primarily in respect of issues linked to applications for regulatory approval, and

b) reviewing and amending transaction instructions and advisories and the incorporation guide.

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

This program activity incorporates risk assessment and intervention, rule-making and approvals related to federally regulated private pension plans under the Pension Benefits Standards Act. The costs for this program are recovered from pension plan fees based on the number of members in each federally regulated pension plan.

2008-2009 Financial Resources ($ millions)			2008-2009 Human Resources (FTEs)
Planned Spending	Total Authorities	Actual Spending	Planned	Actual	Difference
$6.5	$6.5	$6.2	38	41	3

The related expected results, performance indicators, targets, status and summary of performance for this program activity are identified in the summary below.

Program Activity 1.2: Regulation and supervision of federally regulated private pension plans

Expected Results	Performance Indicators	Targets	Performance Status	Performance Summary
Protect the financial interests of federally regulated private pension plan members and beneficiaries.	Percentage of estimated recoveries on pension plans that have terminated under-funded. Source: Internal Data	85%	Met All	Four pension plans terminated under-funded in 2008-2009. The current estimated recovery rate for these plans is 85%.
Regulations, guidelines and other rules which are clear and balanced.	Percentage of knowledgeable observers who rate OSFI as being good or very good at developing regulations, guidelines and other rules that are clear and easy to understand. AND/OR	75%	Mostly Met	60% of plan administrators rate OSFI as being good or better.
	Percentage of knowledgeable observers who rate OSFI as being good or very good at developing regulations, guidelines and other rules that strike an appropriate balance between interests of plan sponsors and plan members. Source for both: Pension Plans Survey 2009 6	50%	Exceeded	61% of plan administrators rate OSFI as good or better.
Regulatory approvals which are timely and transparent.	Percentage of knowledgeable observers who rate the transparency, that is, the rationale for OSFI’s recommendations and decisions of the Pensions Approvals process, as good or very good. Source: Pension Plans Survey 2009 AND/OR	60%	Exceeded	61% of plan administrators rate OSFI as being good or better.
	Percentage of completed applications for regulatory approvals that are processed within established benchmarks. Source: Internal	90%	Data not available as benchmarks are being established.	Not applicable

⁶ OSFI provided TNS Canadian Facts/The Antima Group, an independent research firm, with a list of administrators and professionals of the federally regulated private pension plans it regulates. The research firm invited the administrators and professionals to participate in either an online or a telephone survey - 247 pension plan administrators and 30 professionals participated resulting in a response rate of 34.7%. OSFI does not know which administrators or professionals participated. The report is available on OSFI’s Consultations and Surveys Web page.

Benefits for Canadians

In this program activity, OSFI conducts risk assessments of pension plans covering employees in federally regulated areas of employment; provides timely and effective intervention and feedback; employs a balanced relevant regulatory framework; and manages a prudentially effective and responsive approvals process. Canadians need to feel confident their pension plan benefits are secure and able to fund their retirement. OSFI plays a key role in safeguarding the private pension plans that fall under federal jurisdiction. Developments affecting actuarial and accounting standards – including the increased use of market rates and prices – have implications for pensions. Innovative new investment products and strategies to optimize returns and match pension liabilities require that regulators like OSFI take into account the risk implications for pension plans.

As at March 31, 2009 OSFI supervised some 1,379 federally regulated private pension plans in Canada, which cover 612,000 active members. In the past year, OSFI worked to promote responsible pension plan governance and actuarial practices. OSFI’s actions and decisions affect plan members as well as the sponsors and administrators of the plans.

Performance Analysis

Risk Assessment, Supervision and Intervention

• OSFI continued to monitor carefully the condition of private pension plans and to the extent possible, that of their sponsors, and intervened where necessary to protect promised benefits.
• OSFI worked to address potentially risky situations in a timely manner, to promote actions that mitigate risks and to intervene where appropriate, such as taking measures to enforce minimum funding requirements and ensure timely remittance of contributions.
• OSFI completed the review of its pension risk assessment framework that was begun in 2006-2007.
• OSFI reviewed its risk indicators during 2008-2009, in order to ensure their continued relevance. 
• In 2008-2009, approximately 25% of the plans that submitted regulatory filings were subjected to a more detailed analysis.
• OSFI performed 11 on-site examinations during the year, and also completed one detailed desk review.
• OSFI remains committed to providing timely information to plan administrators.  The turnaround time to issue the findings of on-site examinations has been significantly shortened, to an average of 23 days in 2008-2009 and as a result, the target for report issuance has been reduced to within 35 working days of the examination wrap-up meeting, an improvement from the previous target of 85 working days.

Rules and Guidance

• The newsletter PBSA Update was published twice during the fiscal year.  This newsletter provides announcements and reminders on issues relevant to federally regulated private pension plans as well as descriptions of how OSFI applies selected provisions of the pension legislation and OSFI guidance. 
• OSFI is also in the process of reviewing and updating previous published policy advisories and posting them to a new area of the pensions page of the OSFI Web site under Regulated Entities / Pensions Plans / Pension Policy Advisories.
• In 2008-2009, OSFI continued to promote responsible pension plan governance and actuarial practices by working closely with the Canadian Institute of Actuaries and the Canadian Association of Pension Supervisory Authorities (CAPSA). OSFI is a member of CAPSA, a forum for discussing common issues faced by federal and provincial pension plan supervisory authorities.
• OSFI worked with the Department of Finance to develop legislation and regulations for phased retirement, an initiative that was announced in the 2007 Federal Budget.
• In March 2009, OSFI published guidance regarding the smoothing of pension asset values, which was pursuant to the announcement in the Federal Budget on January 27, 2009.

Approvals

• OSFI continued to streamline processes to improve timeliness while ensuring complex transactions are carefully considered.
• OSFI pursued enhancements to its automated systems to support the pension approvals function, to be completed in early 2009-2010.
• As a result of its focused effort to reduce the backlog in requests for approvals, OSFI has cut the number of outstanding requests for approval at year end by 22 to 68.
• OSFI has published a number of new and revised instruction guides, some with standardized checklists or reports on topics such as asset transfers between defined contribution pension plans and terminations of defined contribution pension plans.
• OSFI monitored and determined the implications of court decisions affecting private pension plans.
  • In March 2009, the Supreme Court denied an application for leave to appeal the June 2008 Federal Court of Appeal ruling in the Marine Atlantic case.  This confirms OSFI's positions that an actuarial surplus does not have to be distributed on the partial termination of a federally regulated pension plan and that the standard of review applicable to the Superintendent's decision is reasonableness.

Lessons Learned

The environment over the last year has confirmed OSFI’s long-held view that transparency, stress testing and planning for various financial outcomes are crucial to the sound operation of a pension plan. OSFI will continue to strongly encourage plan administrators to disclose issues to plan members, to use regular scenario testing as a risk management tool and to develop possible responses that are consistent with their risk tolerance.

In the Pension Plans Survey 2009, some areas for improvement were identified and an action plan has been developed to address these, including in the area of regulations and guidance, and approvals. As well, respondents offered suggestions to enhance communications. OSFI will continue to issue clear instructions and guidance within its mandate to the pension industry, and will increase consultations with industry in developing its guidance and instructions.

1.3 International Assistance

This program activity incorporates activities related to providing help to other countries that are building their supervisory and regulatory capacity. This technical assistance is provided by the International Advisory Group (IAG). The costs for this program are recovered via Memoranda of Understanding between OSFI and organizations such as the Canadian International Development Agency (CIDA) and the International Monetary Fund.

2008-2009 Financial Resources ($ millions)			2008-2009 Human Resources (FTEs)
Planned Spending	Total Authorities	Actual Spending	Planned	Actual	Difference
$1.9	$1.9	$2.2	6	8	2

The increase in 2008-2009 spending is related to incremental travel requirements as directed, and funded, by CIDA.

The related expected results, performance indicators, targets, status and summary of performance for this program activity are identified in the summary below.

Program Activity: 1.3 International Assistance

Expected Results	Performance Indicators	Targets	Performance Status	Performance Summary
Emerging market economies are more informed about current approaches to regulatory and supervisory systems, and deploy them to the extent possible.	Percentage of respondents that rate the assistance / presentations provided as relevant to their work. Source: Survey of International Advisory Group (IAG) program participants 7	80%	Exceeded	86.8% of respondents rated the assistance / presentations as relevant to their work.
Technical assistance (e.g., workshops, advice, on-site needs assessments)	Percentage of respondents who rate OSFI trainers as competent or highly competent.	90%	Exceeded	99% of respondents rated OSFI trainers as competent or highly competent.

⁷ Surveys are provided to workshop participants when IAG staff are the primary presenters. IAG delivered 25 such workshops in 2008-2009, with 853 participants. A total of 694 surveys were completed, for a response rate of 81.4%.

Benefits for Canadians

This program activity supports the government of Canada’s priority for a safe and secure world through international cooperation. Canada and other G-7 governments recognize that upgrading the supervisory capacity of emerging market supervisory authorities can enhance the stability of the global financial system. Canada plays an important role in this regard, in part through OSFI’s technical assistance program, which helps selected emerging market economies to improve the supervisory systems for their financial institutions in line with international banking and insurance supervisory standards. This assistance also benefits Canadian financial institutions, as it strengthens supervisory regimes and increases confidence in jurisdictions in which some of Canada’s financial institutions operate.

Performance Analysis

Since its inception in 2001, IAG has administered and operated its technical assistance program by conducting needs assessments and providing hands-on technical advice, training, workshops and seminars, primarily to supervisors in the Caribbean, Latin America, Asia and Africa. Informal evaluations by CIDA indicate there have been significant and generally sustainable impacts on capacity building in countries where IAG has established continuing relationships.

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

• During 2008-2009, IAG delivered 45 bilateral or multilateral programs, sometimes in partnership with other technical assistance providers, in 28 jurisdictions.
• IAG has agreed to a multi-year plan to develop supervisory practices with supervisory authorities in Ghana, Barbados and the Dominican Republic (Tier 1).
• IAG also continued to work closely with the supervisory authorities in Malaysia, Thailand, Nigeria, South Africa and Antigua. We are assisting these jurisdictions in enhancing their supervisory and regulatory practices for financial institutions.
• CIDA’s Performance Review Policy necessitates periodic independent evaluations of its technical assistance projects. In early 2009, an independent group within OSFI surveyed 20 ⁸ organizations overseas that had received assistance from IAG over the previous 12 months. The purpose of the survey was to get a sense of the relevance of the support provided by IAG; of the impact on the organization; of the ease of collaboration with IAG; and to collect any suggestions for improvement. The results of this survey (based on 60% response) were very positive and substantiate the results from the IAG program evaluations. The survey indicates that the IAG programs were relevant, there have generally been sustainable impacts on capacity building, collaboration with IAG was easy and IAG instructors were highly competent.

Steps planned for the future to improve performance include:

• Going forward, IAG will continue to focus on a limited number of priority countries (Tier 1) chosen primarily for their capacity to effect change.

⁸ The survey was administered in confidence by OSFI’s Consultations and Reporting Manager.

Lessons Learned

• Need to balance synergies of multilateral programs and Tier 1 bi-lateral programs. Each Tier 1 agreement is expected to require 3 programs on average each year.
• Following the financial turmoil, there have been significant changes and new guidance from international organizations and governments. As a consequence, some programs need to be updated and new programs need to be developed to meet changing needs. This will be a priority during 2009-2010.

Strategic Outcome Two

To contribute to public confidence in Canada's public retirement income system.

This Strategic Outcome is supported by the Office of the Chief Actuary (OCA). The OCA is continuously involved in preparing various experience studies and research covering a wide range of social security, demographic and economic issues that may affect the financial status of pension or benefits plans. Some of these studies also serve to support policy makers in developing and analysing various policy options in the context of plan reforms. The information presented in these studies could benefit private sector organizations that evaluate social security or private pension plan schemes.

In 2008-2009, the OCA maintained the tradition of continual improvements to actuarial methods by applying more extensive and sophisticated stochastic analysis, as recommended by the CPP Peer Review Panel.

The external peer review panel’s findings received in March 2008 reports that work on the 23^rd Actuarial Report (CPP) fairly communicated the results of the work performed by the Chief Actuary and his staff. The achievement of OSFI’s second strategic outcome provides an essential contribution to income security for Canadians.

2.1 Office of the Chief Actuary

2008-2009 Financial Resources ($ millions)			2008-2009 Human Resources (FTEs)
Planned Spending	Total Authorities	Actual Spending	Planned	Actual	Difference
$5.7	$5.7	$5.3	38	37	(1)

Program Activity 2.1 is supported by three distinct Sub-Activities: Canada Pension Plan and Old Age Security, Public Pension Plans, and Canada Student Loans. The related expected results, performance indicators, targets, status and summary of performance are identified in the summary table below.

Program Activity 2.1: Office of the Chief Actuary

Expected Results	Performance Indicators	Targets	Performance Status	Performance Summary
Stewards of Canada’s public retirement income system are provided with professional actuarial services and advice in regard to the Canada Pension Plan (CPP) 9 and federally legislated public pension and benefit plans.	Adequacy of professional experience of the Chief Actuary and his staff. AND/OR	Unanimous agreement	2008-2009 – N/A 2007-2008 – Met All	The external peer review panel’s findings received in March 2008 reports that work on the 23rd Actuarial Report (CPP) complies with all relevant professional standards and that the Chief Actuary and his staff have adequate professional experience.
	Compliance with Canadian and international professional standards.	Unanimous agreement	2008-2009 – N/A 2007-2008 – Met All
Sub-Activity 2.1.1: Canada Pension Plan and Old Age Security
High quality actuarial valuations inform CPP and OAS stakeholders and Canadians of the current and projected financial status of the CPP and OAS.	Reviews are comprehensive (methods, assumptions, analysis) AND/OR	Unanimous agreement	2008-2009 – N/A 2007-2008 – Met All	The external peer review received in March 2008 found the reviews are comprehensive3.
	Percentage of the recommendations within the scope and influence of the OCA that are implemented before the next peer review.	80%	2008-2009 – N/A 2007-2008 – Met All	The OCA plans to implement 80% of the recommendations by the next independent peer review scheduled for 2010-2011.
CPP and OAS Triennial Actuarial Reports	Timeliness of tabling in Parliament of Reports on Canada Pension Plans & Old Age Security.	100% by the deadline	CPP: 2008-2009 – N/A 2007-2008 – Met All	The last CPP triennial review was tabled October 29, 2007 prior to the deadline of December 31, 2007.
			OAS: 2008-2009 – Met All 2007-2008 – N/A	The OAS report as at 31 December 2006 was tabled in Parliament on June 17, 2008 prior to the deadline of June 30, 2008.
Sub-Activity 2.1.2: Public Pension Plans
Accurate and high quality actuarial valuations of Public Pension and Insurance Plans provided to departments to inform design, funding and administration of plans.	Reviews are comprehensive (methods, assumptions, analysis). AND/OR	Unanimous agreement	2008-2009 – N/A 2007-2008 – Met All	The Office of the Auditor General (OAG) report received November 2007 found that the reviews are comprehensive.
	Actuarial opinion is appropriate.	Unanimous agreement	2008-2009 – N/A 2007-2008 – Met All
Public Sector Triennial Actuarial Reports	Timeliness of tabling in Parliament of Reports on Public Pension Plans.	100% by the deadline	2008-2009 – Met All 2007-2008 – Met All	The triennial report on the Pension Plan for the Members of Parliament as at March 31, 2007 was tabled in Parliament on April 28, 2008 prior to the deadline of September 30, 2008.
Sub-Activity 2.1.3: Canada Student Loans
Independent valuation of the Canada Student Loans Program informs the Departments of Finance and HRSDC of the future costs and provision rates of the program.	The OCA is the service provider of choice to HRSDC.	Annual renewal of the MOU with HRSDC	2008-2009 – Met All 2007-2008 – Met All	The MOU with HRSDC was renewed in 2008-09. The Bill C 10 (Budget Implementation Act, 2009) assented to March 12, 2009 makes the CSLP annual report statutory thus OCA becomes the mandatory service provider for actuarial valuations of the program.
Actuarial Report on the Canada Student Loans Program	Timeliness of the Report on the Canada Student Loans Program provided to HRSDC.	100% by the deadline set by HRSDC	2008-2009 – Met All 2007-2008 – Met All	The 7th Actuarial Report on the CSLP was sent to Ministers June 18, 2008.

⁹ The OCA is required by law to produce an actuarial report on the CPP every three years, and the CPP Peer Review is also conducted triennially. The most recent review was completed March 2008, and the next CPP actuarial report will be published in 2010, with the independent peer review scheduled for 2010-11.

Benefits for Canadians

Canada has set in place a public pensions system that is expected to be sustainable and affordable well into the future in the face of changing demographic conditions. While OSFI does not supervise public pensions, the Office of the Chief Actuary (OCA) does do statutory actuarial reports on various public pension programs, to come to conclusions about sustainability under certain assumptions. In this way, the OCA provides appropriate checks and balances on the future costs of the different pension plans and social programs that fall under its responsibilities. The OCA contributes to financially sound federal government public pension and other programs through the provision of expert actuarial valuation and advice to the Government of Canada and to provincial governments that are Canada Pension Plan (CPP) stakeholders.

Performance Analysis

• In order to ensure the high quality of its triennial actuarial reports, the OCA has a multi-layered review system that includes both internal and external reviews of its reports. Since the OAS report uses the same assumptions and methodologies as the CPP report, the reviews of the CPP reports are assumed to be a statement to the quality of the OAS report as well. In the setting of assumptions and methodologies with regards to all OCA reports, Senior Actuaries regularly peer review the work performed by other actuaries.
• To further increase the transparency and independence of the peer review process, the United Kingdom Government Actuary’s Department (GAD) selected an external peer review panel and released the resulting opinion of this review in April 2008. Lastly, OSFI’s Audit and Consulting Services Section performs internal audits, the most recent of which took place in early 2009 with results expected in mid 2009. The OCA then takes all these reviews into consideration in the production of subsequent reports to ensure the highest quality.
• To date, no actuarial report produced by the OCA has ever been submitted late. Furthermore, the OCA takes pride in submitting reports well in advance of the required deadline. For example, for the period of 2008-2009, three reports were submitted to the appropriate Ministers between 10 days to 6 months prior to deadline.
• Whenever a Bill that has a significant impact on the financial status of the CPP is introduced in the House of Commons, the Chief Actuary must submit an actuarial report valuing this impact on the results of the most recent triennial actuarial report. During 2008-2009, the OCA continued working with the federal, provincial, and territorial Ministers of Finance’s representatives on CPP costing for the current review period. This will be beneficial for next year, as proposed changes to the CPP legislation will require an interim report.
• The 7^th actuarial report on the Canada Student Loans Program (CSLP) was successfully completed and sent to both the Minister of Human Resources and Skills Development Canada (HRSDC) and the Minister of Finance in June 2008. In March 2009, new legislation was introduced in Parliament requiring that the Chief Actuary of OSFI prepare and submit a report to the Minister of HRSDC to be laid in Parliament. Consequently, the OCA became, through legislation, the service provider for the actuarial valuation of the CSLP.

Lessons Learned

Released in March 2008, the results of the external peer review not only found that most aspects of the 23^rd Actuarial review of the CPP were adequate, but also listed various recommendations for improvements for the next triennial review. The recommendations covered, among others, factors such as data, methodology, communication of results, and other actuarial issues. Agreeing that implementing the majority of the recommendations would be beneficial for the next triennial reviews, the OCA developed an action plan to address 10 of the 12 recommendations by the next external peer review. Since the CPP actuarial report is central to the OCA, the additional research and innovations introduced from one report to the next often directly affect all future reports the OCA produces, thus improving the OCA’s actuarial services and advice. This increases the quality of reports presented to decision makers, Parliamentarians, and the public and helps them understand the future costs and inherent risks of the programs under the OCA’s scope.

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