ARCHIVED - Office of the Auditor General of Canada

• Previous Page
• Table of Contents
• Next Page

This page has been archived.

Message from the Auditor General of Canada

I am pleased to present my Office's Report on Plans and Priorities for the 2010–11 fiscal year.

Three different challenges are shaping our plans and priorities for the coming year: the current economic situation, the imminent conversion to international financial reporting and auditing standards, and the need to strengthen our Quality Management System (QMS).

In light of the current economic situation, we have chosen to take the same course of action as we did last year and are not requesting any additional funding for 2010–11. Instead, we are continuing efforts to reduce our total expenses. We plan to deliver fewer performance audit reports, 24 in 2010 rather than the 30 or so of previous years. We are redeploying auditors within the Office to decrease our use of contract auditors, and are also taking measures to reduce our corporate costs. We will reassess our situation when we plan our budget for 2011–12.

The adoption of international standards in 2010 and 2011 will lead to significant changes in auditing and accounting in Canada. In 2010–11, we will continue to implement the plan we developed in the last few years to address our needs, especially in the areas of communications, training, and development of audit tools. The strategic alliance we formed in 2008–09 with a major accounting firm and the creation of the National Professional Practices Group within our Office will further help us and provincial legislative audit offices to reach our goals.

Our Quality Management System guides our audit work, ensuring that it is in accordance with professional standards. Our 2008–09 internal practice reviews identified instances where it was not applied consistently and rigorously. As a result, we made updating and strengthening the design and implementation of our QMS a priority starting in 2009–10. We will be undertaking a significant revamp of our audit manuals, associated methodology, and Professional Development curriculum.

An international team is currently reviewing our three audit practices and key services that directly support audit operations. The team is led by the National Audit Office of Australia. We will report the results of this International Peer Review of our Office in mid-2010.

For the third year in a row, the Office has been chosen as one of Canada's Top 100 Employers and one of the National Capital Region's Top 25 Employers. In addition, this is the second year we have been named one of Canada's Top 20 Family-Friendly Employers. We are very pleased by these awards and see them as a recognition of the efforts we make to ensure that our employees are fulfilled in both their professional and personal lives.

I am fortunate to be supported by colleagues who are dedicated to excellence, integrity, and making a difference to Canadians. With them, I look forward to continuing to serve Parliament and trust that parliamentarians find our work useful.

Section I—Office Overview

Who we are

The Office of the Auditor General of Canada is the legislative audit office of the federal government. We are also the legislative auditor of the three territories. We conduct independent audits and studies that provide objective information, advice, and assurance to Parliament, territorial legislatures, governments, and Canadians. With our reports and testimony at parliamentary hearings, we assist Parliament in its work on the authorization and oversight of government spending and operations.

What we do

The Auditor General is an Officer of Parliament, who is independent from the government and reports directly to Parliament. Her duties 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.

The Office of the Auditor General's main legislative auditing duties are

• financial audits,
• performance audits,
• special examinations,
• sustainable development monitoring activities and environmental petitions, and
• assessments of agency annual performance reports.

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, in all significant respects, with legislative authorities that are relevant to a financial audit. We also conduct financial audits of federal and territorial Crown corporations and of other organizations. We audit the summary financial statements of the Government of Canada and each of the three territories (Nunavut, the Yukon, and the Northwest 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.

Performance audits

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

The Auditor General Act gives the Office the discretion to determine what areas of government it will examine in its performance audits. We may decide to audit a single government program or activity, an area of responsibility that involves several departments or agencies, or an issue that affects many departments and agencies. We consider requests for audits that we receive from parliamentary committees. However, the final decision about what to audit is made by the Auditor General.

Special examinations

Our special examinations assess the systems and practices maintained by Crown corporations to safeguard their assets; to manage their human, physical, and financial resources economically and efficiently; and to carry out their operations effectively. A special examination provides an opinion to the board of directors of the corporation on whether there is reasonable assurance that there are no significant deficiencies in the corporation's systems and practices. In addition to reporting on significant deficiencies, our special examinations highlight systems and practices that contribute to success and provide information and recommendations to boards of directors about opportunities for improvement.

The Financial Administration Act (FAA) requires that all parent Crown corporations be subject to a special examination by the Office, except for the Bank of Canada, which is exempted from this requirement, and the Canada Pension Plan Investment Board, which, under its Act, is subject to a special examination by an auditor chosen by the board of directors. Until this year, Crown corporations were required to undergo special examinations at least once every five years. Over the past few years, we had been suggesting an increase in the number of years between special examinations. In early 2009, the Budget Implementation Act changed the frequency of special examinations in the FAA to at least once every 10 years.

Sustainable development monitoring activities and environmental petitions

The Commissioner of the Environment and Sustainable Development assists the Auditor General in performing her duties related to the environment and sustainable development. The Commissioner conducts performance audits to monitor the government's management of environmental and sustainable development issues and, on behalf of the Auditor General, reports to Parliament on issues that should be brought to its attention. Under the Kyoto Protocol Implementation Act , the Commissioner is required to provide Parliament with a biennial report; this report includes an analysis of Canada's progress in implementing its climate change plans; an analysis of Canada's progress in meeting its obligations under Article 3, paragraph 1, of the Kyoto Protocol; and any observations and recommendations on any matter that the Commissioner considers relevant.

With passage of the Federal Sustainable Development Act in June 2008, the Commissioner was given the responsibility of reviewing a draft of the federal government's sustainable development strategy and commenting on whether the targets and implementation strategies can be assessed. The first federal strategy must be tabled in the House of Commons no later than June 2010.

Once every three years, beginning in 2011, 28 federal departments must prepare sustainable development strategies that contribute to and comply with the federal strategy. The Commissioner must report annually to the House of Commons on the extent to which departments subject to the Federal Sustainable Development Act have contributed to meeting the targets set out in the federal strategy and have met the objectives and implemented the plans set out in their own sustainable development strategies. In June 2011, the government must report on progress in implementing its strategy. The Commissioner must assess the fairness of the information contained in the government's progress report.

The Commissioner also administers the environmental petitions process. He monitors responses to environmental petitions, and reports annually to Parliament on petitions activities from the previous year, including instances where ministers' responses to petitions were not provided within the 120-day time limit specified in legislation.

Assessments of agency annual performance reports

The legislation governing the Parks Canada Agency, the Canadian Food Inspection Agency, and the Canada Revenue Agency requires the Auditor General to periodically carry out an assessment of the fairness and reliability of the performance information reported in their annual reports against corporate objectives they provided to Parliament.

Professional practices

In order to ensure the reliability and consistency of our audit work, the Office makes an ongoing investment in professional practices. This investment supports

• the development and maintenance of up-to-date audit methodology, guidance, and audit tools;
• communication and training to promote consistency in the application of audit methodology and our Quality Management System; and
• the provision of advice on the interpretation and application of professional standards, Office policies, audit methodology, and the Office's Quality Management System.

Through the Professional Practices Group, the Office works with other legislative audit offices and professional associations, such as The Canadian Institute of Chartered Accountants, to advance legislative auditing methodology, accounting and auditing standards, and best practices. We regularly participate in external reviews of other national legislative audit offices and are the subject of external reviews.

International activities

Our international strategy guides our international activities and positions the Office to meet future opportunities and challenges. The strategy has four goals: contributing to the development and adoption of appropriate and effective professional standards; sharing knowledge among audit offices; building capabilities and professional capacities of audit offices; and promoting better managed and accountable international institutions (see Section III for more details).

Strategic outcome and expected results

The long-term strategic outcome of the Office of the Auditor General is to contribute to better-managed government programs and better accountability to Parliament through our legislative auditing.

We have identified a number of results that we expect to achieve with our audits in the short, medium, and long term. In the short term, we want to engage Parliament and federal and territorial organizations in the audit process, ensure that Parliament is well-informed about our work, and maintain support for our role and work. In the medium term, we want to assist Parliament in holding the government to account; make our work relevant to federal and territorial organizations, departments, agencies, and Crown corporations; and ensure that the public is well informed about our work. In the long term, we want our work to lead to more effective, efficient, and economical government programs and operations, and programs that foster sustainable development.

The following tables provide the Office's planning summary, including strategic outcome, expected results, performance objectives, indicators and targets, and details of planned spending for the coming year (Exhibits 1 and 2).

Exhibit 1—Planning Summary

Strategic Outcome: We contribute to a well-managed and accountable government for Canadians

Expected results Parliament is well-informed 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 The media and public are well-informed Support for our role and work is maintained
Objectives	Indicators and targets
Key users of our reports are engaged in the audit process	Maintain the percentage of audits that are reviewed by parliamentary committees Maintain the percentage of parliamentary hearings and briefings we participate in, relative to the number of sitting days
Our work adds value for the key users of our reports	Maintain or increase the percentage of users who find our audits add value
Our work adds value for the organizations we audit	Maintain or increase the percentage of senior managers who find our audits add value
Key users of our reports and the organizations we audit respond to our findings	Maintain or increase the percentage of recommendations that are implemented or reservations/deficiencies that are addressed

Legislative auditing activity1	Forecast Spending 2009–10 ($ millions)	Planned Spending 2010–11 ($ millions)
Financial audits of Crown corporations, territorial governments, and other organizations, and of the summary financial statements of the Government of Canada	41.3	41.1
Performance audits and studies	41.5	41.6
Special examinations of Crown corporations	4.5	1.9
Sustainable development monitoring activities and environmental petitions	2.3	1.8
Assessments of agency annual performance reports	.5	.8
Professional practices	11.8	11.6
Total cost of operations	101.9	98.8
Less: costs recovered 2	1.1	.8
Net cost of operations	100.8	98.03
1 We have allocated the cost of audit services to each legislative auditing activity. 2 The costs include respendable revenue from the National Professional Practices Group and non-respendable revenue from the audit of the International Labour Organization, which we conduct on a cost recovery basis. 3 Our planned spending for 2010–11 appears to be decreasing because amounts for our carry-forward funding, salary increases, and parental leave/severance payments are not included in these numbers.

 

Exhibit 2—Voted and statutory items ($ millions)

Vote # or statutory item (S)	Vote or statutory wording	2009–10 Main Estimates	2010–11 Main Estimates
15	Program expenditures	72.6	75.1
(S)	Contributions to employee benefit plans	9.6	10.0
Total		82.21	85.12
1 The difference between 2009–10 net cost of operations ($100.8 million) and Main Estimates ($82.2 million) includes cost of services received without charge from other government departments ($13.9 million), costs recovered ($1.1 million), and other adjustments that are routine in nature, including the carry-forward funding, salary increases, and parental leave/severance payments. 2 In 2009, the Office completed negotiations for the collective bargaining agreement with its staff, which resulted in retroactive pay increases for 2007–08, 2008–09, and 2009–10. These pay increases appear in the Main Estimates for the first time in 2010–11.

 

The following tables provide the Office's planned financial and human resources for the next three years (Exhibit 3).

Exhibit 3—Planned financial and human resources

Financial Resources	Forecast spending 2009–10	Planned spending 2010–11	Planned spending 2011–12	Planned spending 2012–13
Net cost of operations ($ millions)	100.8	98.0	98.0	97.6

 

Human Resources	2009–10	2010–11	2011–12	2012–13
Full-time equivalents (FTEs)	635	635	635	635

 

Our priorities for 2010–11

We have established three strategic priorities for the 2010–11 fiscal year:

• Integrating changes to professional standards
• Updating and strengthening the design and implementation of our Quality Management System
• Improving resource allocation and project management

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 (ISA) in 2010 and International Financial Reporting Standards (IFRS) in 2011, will lead to significant changes in auditing and accounting in Canada. A large number of the entities we audit will be changing the basis of accounting used to prepare their annual financial statements—some to IFRS and others to public sector accounting standards. Thus, the financial statements that we are responsible for auditing will change, as well as the manner in which we conduct and report our audits.

The strategic alliance we formed in 2008–09 with a major accounting firm to assist us in implementing the new standards gives us access to its tools, methodology, and training. We are continuing to work on adapting the firm's methodology and training to our Office.

In addition, through the National Professional Practices Group that we created within our Office, we provide technical accounting and auditing advisory services, practice advisories, financial audit methodology, and training support to the offices of provincial auditors general. Parliament has provided us with re-spending authority for the amounts recovered from our provincial counterparts. By creating this group, we and our provincial colleagues are able to more effectively implement the new professional standards.

Updating and strengthening the design and implementation of our Quality Management System

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. Annual internal reviews also conclude on whether the opinions and conclusions contained in our audit reports are appropriate and supported by the evidence.

In 2008–09, all but one of our internal practice reviews found that the opinions and conclusions expressed in our reports were appropriate and supported by the evidence. In the one exception, the audit team carried out additional work and no change to the audit report was required. However, the 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. As a result, we made updating and strengthening the design and implementation of the QMS a strategic priority starting in 2009–10.

We are addressing this strategic priority and our first priority—integrating changes to professional standards—through the following initiatives:

• a major update of our audit manuals and associated methodology; and
• a review and update of our Professional Development curriculum.

The significance and magnitude of our efforts are reflected in corresponding increases to the forecast and planned spending for professional practices. In 2008–09, the Office spent $8.8 million for professional practices. In 2009–10, we are forecasting spending of $11.8 million. In 2010–11, we are planning to spend $11.6 million.

Improving resource allocation and project management

We have been reporting externally on our on-budget performance since 2006–07, and there is 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. In the following year, we carried out a study of how budgets for individual projects are established and monitored across all product lines, and we identified best practices and challenges. Using this information, we developed a comprehensive action plan to further improve on-budget performance. The plan, which includes communicating Office expectations, providing support for managing budgets, encouraging best practices, and recognizing performance, is now being implemented. Also, our central Audit Resource Planning and Career Management team will continue to facilitate allocation of staff to projects.

We are raising our targets for our on-budget indicator to 80 percent beginning in 2010–11.

Other challenges and initiatives

Funding. We are experiencing a number of funding pressures, including those related to new audit responsibilities we have been given in recent years. In light of the current fiscal climate, we did not seek additional funding in 2009–10, nor are we doing so for 2010–11. We will reassess our situation when we plan our budget for 2011–12.

We are reducing our expenses in a number of ways. Beginning in 2010, we are reducing the number of performance audits conducted from approximately 30 to about 25 a year. We are also reducing our use of auditors on a contract basis by redeploying auditors within the Office. Further, we have reviewed all of our corporate service, travel, and other non-fixed costs to identify possible savings. We anticipate that these actions will provide the resources necessary for us to fulfill new audit responsibilities and to implement the plans to address our three strategic priorities.

Sustaining our capacity. Our people are central to our ability to fulfill our responsibilities and achieve our strategic outcome. We have made the orientation and integration of new staff a key activity of our Office as a way of promoting retention and engagement. Based on the results of detailed research and analysis carried out in 2009–10, we identified best practices that could be applied more consistently and recommended areas for improvement. The Human Resource Committee will monitor implementation of the recommendations.

Official languages. The Office marked the 40th anniversary of the Official Languages Act by renewing its commitment to promoting bilingualism across the Office. Our 2009–2012 Official Languages Strategy focuses on training and building a supportive culture.

• Previous Page
• Table of Contents
• Next Page