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Message from the Auditor General of Canada
I am pleased to present my Office's Report on Plans and Priorities for 2008–09.
Our role
The role of the Office of the Auditor General, as external auditor of the Government of Canada, is to assist Parliament in its oversight of government spending and operations. We do this by providing fact-based information obtained through independent audits of federal departments, agencies, and most Crown corporations—information that Parliament can use in its scrutiny of government spending and performance. Following professional standards, we examine activities of the government to determine whether it is carrying them out with due regard to economy, efficiency, and environmental impact, and whether it has measures in place to determine how effective its activities are.
Our performance audit reports to Parliament describe areas of government that need attention, offer recommendations for improvement, and point out good practices. Our special examinations of Crown corporations are also a type of performance audit. These reports to the corporation’s board of directors provide an opinion on whether there is reasonable assurance that there are no significant deficiencies in the corporation’s systems and practices. We conduct annual financial audits of the Public Accounts of Canada, each of the three territories, federal and territorial Crown corporations, and other entities. In addition, we conduct performance audits in the territories. In 2008–09, we plan to report the findings of 29 performance audits: 5 of them from the Commissioner of the Environment and Sustainable Development; 14 special examinations; and more than 130 financial audits.
Our priorities for the 2008–09 fiscal year
The years ahead provide us with challenges related to the core of our auditing practice. The recent decisions by 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—represent changes on a scale unprecedented in our profession in Canada. At the same time, the ongoing retirement of a significant percentage of our staff means that, like other organizations throughout the public sector, we face the loss of corporate memory essential to the pursuit of our mandate.
We have set three priorities for ourselves over the coming year.
First, we will need to incorporate the changes to professional standards. We will need to determine how the changes in auditing standards will affect the way we conduct audits, and what impact the changes in financial reporting standards will have on the financial statements of the entities we audit. We will need to adjust our methodology to take these changes into account, train our staff, and ensure that our audit tools continue to support us in doing our work efficiently. To respond to these challenges, the Office is developing a multi-year plan that will prepare us well to carry out our work in this new environment.
Second, we will work toward sustaining our most precious asset, our staff capacity. Our Office has been selected as one of Canada’s top 100 employers and one of Canada’s Top 10 Family-Friendly Employers for 2008. We hope to build on this success to retain and attract qualified employees. We will dedicate resources to ensure that effective recruitment and retention plans are in place. We will focus on compensation issues and greater access to a variety of challenging opportunities for existing staff. We will devote continued attention to the orientation and integration of new staff and focus on knowledge transfer by further integrating support from senior staff. We will also develop capacity through renewing, rebuilding, and reinforcing our pool of internal specialists.
Finally, because we understand the critical importance of an effective relationship with the entities we audit, we are investing efforts in building constructive relations with them. We will ensure, for example, that in our audits of departments and agencies we use consistent practices across all areas of the Office. We also intend to clarify certain issues such as access to information, security, and working with audit committees.
Our environment and sustainable development mandate
The position of Commissioner of the Environment and Sustainable Development and the related part of our mandate have been in place now for 12 years. In 2007, I asked an independent Green Ribbon Panel to undertake a review of our environment and sustainable development audit practice. Now that we have received the Panel’s report, we will work to implement its recommendations. This will allow us to move forward with confidence as we prepare for the appointment of a new Commissioner, who I expect will be in place by mid-2008.As always, I am confident that our exceptionally competent, professional, and dedicated staff will pull together and work diligently to meet the formidable challenges ahead of us, in order to continue serving Parliament and all Canadians in a meaningful way.
Sheila Fraser, FCA
Auditor General of Canada
25 January 2008
Management Representation Statement
We submit, for tabling in Parliament, the 2008–09 Report on Plans and Priorities for the Office of the Auditor General of Canada. Management of the Office of the Auditor General is responsible for preparing this report, which
- presents fair and reliable information;
- provides a basis of accountability for the results achieved with the resources and authorities entrusted to the Office;
- reports finances based on approved, planned spending numbers from the Treasury Board Secretariat; and
- is based on the Office’s program activity architecture and on the reporting principles in the Treasury Board Secretariat’s Guide to the Preparation of Part III of the 2008–09 Estimates: Reports on Plans and Priorities and Departmental Performance Reports.
The Office’s Executive Committee oversees the preparation of this report, and approves it following advice of the Office’s Audit Committee.
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Sheila Fraser, FCA |
Jean Landry, CGA |
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Ottawa, Canada 25 January 2008 |
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Section I—Overview
Who we are
The Auditor General is an Officer of Parliament. She is independent from the government and reports directly to Parliament (Exhibit 1). Maintaining our objectivity and independence from the organizations that are audited is critical. The Auditor General’s independence is assured by a broad legislative mandate, freedom from certain government controls, a strong internal Code of Values, Ethics and Professional Conduct, and a ten-year mandate.
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Exhibit 1—The Auditor General's role as an Agent of Parliament |
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The Auditor General leads a dedicated team of some 600 professionals and support staff located in five offices across the country.
What we do
The Office of the Auditor General of Canada conducts independent audits and studies that provide objective information, advice, and assurance to Parliament, territorial legislatures, government, and Canadians. With our reports and testimony at parliamentary hearings, we assist Parliament’s work on the authorization and oversight of government spending and operations.
The duties of the Auditor General of Canada are set out in the Auditor General Act, the Financial Administration Act, and other acts and orders-in-council. These duties relate to legislative auditing and, in certain cases, to monitoring of federal departments and agencies, Crown corporations, territorial governments, and other entities. Beginning in 2008, the audit of the International Labour Organization (ILO), a United Nations agency, will be included among other entities.
Our major subactivities. Our main activity is legislative auditing, which consists of eight subactivities. Two of these—professional practices and audit services—are supporting activities. See Exhibit 2 for further details of the six other subactivities.
The focus of our audits. We are responsible for carrying out audits and studies of organizations to answer many important questions. These questions are asked on behalf of Parliament and all Canadians.
Performance audits. Performance audits examine, against established criteria, whether government programs are being managed with due regard for economy, efficiency, and environmental impact, and whether measures are in place to determine their effectiveness. Our reports contain recommendations for addressing the most serious deficiencies identified.
The Auditor General Act gives the Office discretion to determine what areas of government to examine when doing performance audits. We may decide to audit a single government program or activity, such as pesticide regulation; an area of responsibility that involves several departments or agencies, such as the protection of cultural heritage; or an issue that affects many departments, such as the security of information technology. We consider requests for audits received from parliamentary committees. However, the ultimate decision about what to audit rests with the Auditor General.
The Office does not audit government policy, or any areas under the exclusive jurisdiction of provincial or municipal governments.
Financial audits. Our financial audits provide assurance that financial statements are presented fairly in accordance with Canadian generally accepted accounting principles or, in a few cases, with other relevant standards. Where required, we provide assurance that the organizations we audit comply with the key legislative authorities that govern their activities. We conduct financial audits of federal and territorial Crown corporations, and of other organizations. We also audit the summary financial statements of the Government of Canada and each of the three territories.
If issues or opportunities for improvement in areas such as financial reporting and internal controls come to our attention during our financial audit work, we make recommendations to management. We also provide information and advice to support audit committees in meeting their responsibilities for oversight of financial reporting and internal control.
Special examinations. A special examination assesses a Crown corporation’s financial and management controls, and its information systems and management practices. A special examination provides an opinion on whether there is reasonable assurance that there are no significant deficiencies in these systems and practices. The Financial Administration Act requires all Crown corporations, except one entity, the Bank of Canada, which is exempted from this requirement under Section 85(1) of Part X, to have a special examination of their organization conducted by the Office once every five years. A second entity, the Canada Pension Plan Investment Board, is subject to special examination and audit of its financial statements by a private sector accounting firm under the Canada Pension Plan Investment Board Act.
Who receives our reports
Our primary responsibility is to Parliament, and our relationship with parliamentarians is key to our effectiveness.
Parliament. In accordance with Section 7 of the Auditor General Act, our performance audits are tabled in Parliament and published up to four times a year in the reports of the Auditor General of Canada and the Commissioner of the Environment and Sustainable Development. We report our opinion and observations on the summary financial statements of the Government of Canada in the “Public Accounts of Canada, Volume 1,” as required by Section 6 of the Auditor General Act. We publish reports on the use of financial information and other significant issues in the Auditor General’s reports to Parliament.
Parliamentary standing committees. The Auditor General’s main relationship is with the House of Commons Standing Committee on Public Accounts, pursuant to Standing Order 108. Much of the work of the Public Accounts Committee draws on the work of the Office. The Senate Standing Committee on National Finance uses our work, as do other parliamentary committees.
The Commissioner of the Environment and Sustainable Development (CESD) leads the environmental audit function within the Office. The House of Commons Standing Committee on Environment and Sustainable Development draws on the work of the CESD, as does the Senate Standing Committee on Energy, the Environment and Natural Resources, and other committees.
Other recipients. We provide some of our reports to other parties. Our audit reports on the financial statements of Crown corporations are addressed to the appropriate ministers and are published in the annual reports of these organizations. Our audit reports on the financial statements of other federal organizations are generally addressed to the minister or the head of the organization, or to other appropriate parties.
Our performance audit reports of territorial governments and our audit reports on their financial statements are published and presented to the territorial legislatures. These reports are discussed in hearings of the Yukon Standing Committee on Public Accounts, Nunavut Standing Committee on Government Operations and Accountability, and the Northwest Territories Standing Committee on Accountability and Oversight. Our opinions on the financial statements of the territorial governments are published annually in the public accounts of the territorial governments of Nunavut, the Yukon, and the Northwest Territories.
Our special examination reports are addressed to the boards of directors of the corporations involved. The legislation also states that we should call the information in our reports to the attention of the appropriate ministers and Parliament, when we deem it appropriate. We do this, for example, when certain types of significant deficiencies are present, such as those related to mandate or governance that only the government can address or to problems that have previously been reported but that continue to occur. We have also reported issues to the minister involving specific risks that, in our opinion, the minister needed to be aware of.
How our governance is structured
The Auditor General. As an Officer of Parliament, the Auditor General is accountable to Parliament for the Office of the Auditor General’s performance.
Executive Committee. Our Executive Committee provides overall professional and administrative direction for the Office. It sets policy and oversees all aspects of management and operations in the Office. The Auditor General, the Deputy Auditor General, the Commissioner of the Environment and Sustainable Development, and 12 assistant auditors general sit on the Executive Committee.
External advice. The Auditor General receives advice from a number of committees that have external members:
- The Audit Committee. The Audit Committee oversees the quality of audit practices and internal controls. The Committee is chaired by a retired partner from a private sector accounting firm, and most of its members are external to the Office.
- The Panel of Senior Advisors. The Panel provides strategic advice on the work of the Office, and is composed of leading representatives from the private sector, the accounting profession, the academic community, and other areas of Canadian society.
- The Independent Advisory Committee. The Committee advises the Auditor General on the audits of the financial statements of the Government of Canada, Crown corporations, territorial governments, and other organizations. The Committee helps the Auditor General monitor developments in the accounting and auditing profession and considers their impact on the Office. Senior accountants and financial consultants sit on the Committee.
- Panels on Aboriginal issues. The panels advise the Auditor General on matters affecting Canada’s Aboriginal peoples. The panels include Aboriginal and non-Aboriginal leaders.
- Audit advisory committees. These committees provide advice on the objectives and approach of performance audits or special examinations, and on significant matters and findings to be reported. Members are experts with relevant experience from inside and outside the Office. They come from a variety of backgrounds. Former senior public servants, and leading representatives from the private sector, academia, and First Nations, are among the members of these committees.
The Commissioner of the Environment and Sustainable Development makes use of audit advisory committees, and also receives advice from an external committee:
- The Panel of Environmental Advisors. The Panel provides strategic advice on audits and studies of the government’s management of environment and sustainable development issues. It includes leading representatives from environmental groups, the private sector, and the academic community, as well as former senior public servants.
Further information on the Office’s organization is available in the organization chart in Section III—Supplementary Information, and on our website, under About Us.
How we are held accountable
Who audits the Auditor General? Each year, an external auditor appointed by the Treasury Board audits the Office’s financial statements. Our financial statements are prepared on a full accrual basis of accounting, in accordance with Canadian generally accepted accounting principles.
These financial statements are included in Section III of our annual performance report. This report is submitted to the President of the Treasury Board, who tables it in the House of Commons.
The Office is also subject to scrutiny by the Official Languages Commissioner on language issues, by the Public Service Commission on staffing and classification practices, by the Privacy Commissioner on adherence to the Privacy Act, and by the Canadian Human Rights Commission on the Office’s compliance with the Employment Equity Act.
Who reviews our funding? The Auditor General prepares annual Estimates documents, and the President of the Treasury Board submits them to Parliament. The Public Accounts Committee calls on the Auditor General to explain the Estimates for the Office and to discuss our report on plans and priorities, our performance report, and our management practices.
Historically, the Office has been funded by Parliament in the same way that government departments are funded. Like government departments, we have negotiated the level of funding with the Treasury Board of Canada Secretariat, one of the organizations we audit.
In 2005, the government committed to implementing a pilot project for a new funding and oversight mechanism for the 2006–07 and 2007–08 Estimates processes for all officers of Parliament. The new mechanism, involving a parliamentary oversight panel, seeks to respect the role of Parliament and the independence and distinct mandates of its officers. It also seeks to reflect the responsibility of the government for sound stewardship of public resources.
When an Officer of Parliament develops a submission for the Treasury Board, the panel reviews both the submission and the Treasury Board of Canada Secretariat’s assessment of the submission. The panel then provides advisory recommendations for consideration by the Treasury Board. This new funding and oversight mechanism is to be assessed in 2008. We look forward to it being made permanent in some form.
Who assesses our audit methodologies? Our audit work is guided by a rigorous methodology and quality management framework. The framework provides reasonable assurance that our audits are conducted in accordance with established standards of professional practice.
To ensure that our quality management framework is suitably designed and operating effectively, we subject it to external reviews by peers. We also conduct internal practice reviews of our audits. Our peer reviews and our practice reviews are published on the Office of the Auditor General’s website, under About Us.
The provincial institutes of chartered accountants review our compliance with professional standards for financial audits about every four years, in order to determine whether our training of chartered accounting students meets their requirements.
We conduct internal audits of our management and administration practices, in order to assure the Auditor General that the Office is complying with government and Office policies. The audits also provide managers with assessments and recommendations. We normally conduct one internal audit per year. This internal audit is published on our website.