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ARCHIVED - RPP 2007-2008
Office of the Auditor General of Canada
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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 2007–08.
As the Government of Canada's auditor, the role of the Office of the Auditor General is to assist Parliament in its oversight of government spending and operations. In other words, we help elected representatives to hold the government to account. We do this by providing fact-based information obtained through independent audits of federal departments, agencies, and most Crown corporations, which Parliament can use in its scrutiny of government spending and performance. Following professional standards, we examine the government's activities 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 they are. In addition to these performance audits, we conduct special examinations of Crown corporations, which are a type of performance audit. Our special examination reports are provided to the corporation's board of directors, and include an opinion on whether there is reasonable assurance that there are no significant deficiencies in the corporation's systems and practices. We also conduct annual financial audits of the Public Accounts of Canada, each of the three territories, and federal and territorial Crown corporations. We also conduct performance audits in the territories. In 2007–08, we plan to report the findings of 28 performance audits, 11 special examinations, and 130 financial audits.
The coming years provide us with significant challenges. Not only will our workload increase because of recent additions to our Crown corporation and performance audit mandates, but our audit work will also become more complex. We will have to adjust to new accounting and auditing standards, as well as an expected move to international standards. At the same time, 40 percent of our executives and 30 percent of their replacement group will be eligible to retire by 2009; the pressure to recruit and retain a strong employee base will increase as we will be competing with other federal organizations and the private sector.
We have set four priorities for ourselves over the coming year.
First, we will need to implement our expanded mandate. In 2005, federally funded foundations were added to our list for performance audits, three Crown corporations were added to our list for financial audits, and seven Crown corporations were added to our list for special examinations. In 2006 Parliament authorized us to "follow the dollar" to individuals, firms, partnerships, and corporations that have received at least $1 million, in government funds over five years, though we intend to only rarely conduct "follow the dollar" audits.
Second, we will need to continue to ensure the quality of our audits by integrating new accounting and auditing standards in our audit practices.
Third, we plan to contribute to best practices in accountability, good governance, and effective public service by addressing the potential overload of controls in government. As I stated in 2006,
Our audit work . . . generally confirms that programs and activities cannot be error-proofed by building a web of controls, rules, and regulations into their design to ward off risk. In fact, where the risks are weighed and managed, intelligent risk taking is vital to any innovative, successful organization. Programs that are mired in controls and reporting requirements are not programs that focus most of their efforts and resources on improving the lives of Canadians. In several of the areas [audited in the last few years], we see a need for the government to review whether programs have too many rules and whether their administration could be streamlined to improve delivery. In many respects, the government needs fewer rules, but rules that are consistently applied.
Finally, in dealing with recruitment and retention of our staff, we will implement a multi-year recruitment and retention strategy and our new corporate action plan to maintain the positive results from our 2006 employee survey.
In addition to the strategic challenges identified above, our 2007–09 Sustainable Development Strategy reconfirms our efforts to integrate environmental and sustainable development issues in our audits of government activities.
To address all these challenges and implement our priorities, we are seeking an increase of $4 million in our funding for 2007–08 and future years, and about $2 million for one-time investments in technology. Our request has been reviewed by the Parliamentary Panel on the Funding of Officers of Parliament, who has recommended that we be provided with the additional funding. We thank the panel and Parliament for their continued confidence in our work.
We define how we conduct our work and ourselves by our set of values. We serve the public interest with independence and objectivity. We are committed to excellence and to providing a respectful workplace. We aim at sustaining public confidence by conducting ourselves, in everything we do, with honesty and integrity and in a manner that meets the highest standards of professional conduct. We strive to be a model organization for the federal government, by leading by example.
Our most recent employee survey indicated that 82 percent of staff believe that the Office is a good place to work. Our goal is to continue to strengthen our people management skills and processes, while meeting our responsibilities to Parliament.
The challenges ahead are significant, but I am confident that our dedicated and competent staff will pull together and meet them.
Sheila Fraser, FCA
Auditor General of Canada
12 February 2007
Management representation statement
We submit, for tabling in Parliament, the 2007–08 Report on Plans and Priorities for the Office of the Auditor General of Canada. Management of the Office is responsible for preparing this report, which
- is based on the Office's results chain consistent with its approved program activity architecture;
- presents fair and reliable information;
- provides a basis of accountability for the results achieved with the resources and authorities entrusted to it;
- reports finances based on approved, planned spending numbers from the Treasury Board Secretariat; and
- is based on the reporting requirements outlined in the Treasury Board Secretariat guidance.
The Office's Executive Committee oversees the preparation of the report, and approves it based on the advice of the Office's Audit Committee.
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Sheila Fraser, FCA |
Jean Landry, CGA |
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Ottawa, Canada 12 February 2007 |
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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). She leads a dedicated team of some 600 professionals and support staff located in five offices across the country.
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Exhibit 1—The Auditor General's role as an Agent of Parliament |
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The Auditor General Act, the Financial Administration Act, and other acts and orders-in-council set out the duties of the Auditor General. These duties relate to legislative auditing and monitoring of federal departments and agencies, Crown corporations, territorial governments, and other entities that include international organizations.
Objectivity and independence. Maintaining our objectivity and independence from the organizations we audit is critical. Our independence is assured by a broad legislative mandate, freedom from certain government controls, and a 10-year mandate for the Auditor General.
What we do: Legislative auditing
The Office of the Auditor General of Canada conducts independent audits and studies that provide objective information, advice, and assurance to Parliament, territorial legislatures, government, and Canadians. With our reports and testimony at parliamentary hearings, we assist Parliament and territorial legislatures in their work related to the authorization and oversight of government spending and operations.
Our major subactivities. Legislative auditing, our main activity, consists of eight subactivities, two of these—professional practices and audit services—are supporting activities (see Exhibit 2 for further details of the six other subactivities).
The focus of our audits. We are responsible for carrying out audits and studies of the organizations to answer many important questions on behalf of Parliament and, in turn, Canadians at large.
Performance audits. Performance audits examine, against established criteria, whether government programs are being managed with due regard for economy, efficiency, and environmental impact, and whether measures are in place to determine their effectiveness. Our reports contain recommendations to address 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 policy, nor any areas under the exclusive jurisdiction of provincial or municipal governments.
Financial audits. Our financial audits provide assurance that financial statements are presented fairly in accordance with Canadian generally accepted accounting principles or other relevant standards. Where required, we provide assurance that organizations comply with the key legislative authorities that govern their activities. We conduct financial audits of federal and territorial Crown corporations and other organizations, and financial audits of the summary financial statements of the Government of Canada and the financial statements of each of the three territories.
If issues or opportunities for improvement come to our attention during our financial audit work, we make recommendations to management and the boards of directors in areas such as financial reporting and internal controls.
Special examinations. A special examination assesses the financial management control and information systems and management practices of a Crown corporation and provides an opinion on whether there is reasonable assurance that there are no significant deficiencies. The Financial Administration Act requires all Crown corporations to have a special examination of their organization conducted by the Office once every five years, except for the Bank of Canada, which is not required to have a special examination and the Canada Pension Plan Investment Board, which, under its Act, is subject to a special examination by a private sector firm. The Office performs about 40 examinations over each five-year period. We refer to each five-year period as a "cycle."
Who receives our reports
Our primary responsibility is to Parliament, and our relationship with parliamentarians is key to our effectiveness. However, certain of our reports are also provided to other groups as detailed below.
Parliamentary standing committees. The Auditor General's main relationship is with the House of Commons Standing Committee on Public Accounts. In turn, much of the work of the Public Accounts Committee draws on the work of the Office. The Senate Standing Committee on National Finance and other parliamentary committees also rely on our work.
The House of Commons Standing Committee on Environment and Sustainable Development, the Senate Standing Committee on Energy, the Environment and Natural Resources, and other committees draw on the work of the Commissioner of the Environment and Sustainable Development, who leads the environmental audit function within the Office.
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" and publish reports on the use of financial information and other significant issues in the Auditor General's reports to Parliament.
Other Recipients. Financial auditors' reports on Crown corporations are addressed to the appropriate Minister and published annually in the annual reports of these organizations. Financial auditors' reports of other federal organizations are generally addressed to the minister or the head of the Corporation or other interested parties.
Financial auditors' reports on territorial governments and reports on other matters 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 opinion on the financial statements of the territorial governments is 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 bring the information in the report to the attention of the appropriate minister and of Parliament when we deem it appropriate. We do this in situations when, for example, certain types of significant deficiencies are present, such as those related to mandate issues, issues that only the government can address, issues of a governance nature, and when problems, previously reported, continue to occur.
What our governance structure is
The Auditor General. The Auditor General leads the Office, and as an Officer of Parliament, is accountable to Parliament for the Office's performance.
The Executive Committee. The 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. It comprises the Auditor General, the Deputy Auditor General, the Commissioner of the Environment and Sustainable Development, and 11 assistant auditors general.
External advice. The Auditor General receives advice from a number of committees with external members.
- The Audit Committee. It oversees the quality of audit practices and internal controls. The majority of its members are external to the Office, and it is chaired by a retired partner from a private sector chartered accounting firm.
- The Panel of Senior Advisors. It 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, as well as former senior public servants and former members of Parliament.
- The Independent Advisory Committee. It 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. This committee is made up of senior accountants and financial consultants.
- Panels on Aboriginal issues. They advise the Auditor General on matters affecting Canada's Aboriginal peoples, and include Aboriginal and non-Aboriginal leaders.
The Commissioner of the Environment and Sustainable Development receives advice from one external committee:
- The Panel of Environmental Advisors. It advises the Commissioner on his work and on environmental and sustainable development matters. It includes leading representatives from environmental groups, the private sector and the academic community, as well as former senior public servants.
Audit advisory committees. These committees advise 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 with a variety of backgrounds such as former senior public servants, and leading representatives from the private sector, academia, and First Nations.
Further information on the Office's organization is available in the organization chart in Section III 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 our performance report, which is submitted to the President of the Treasury Board for tabling in the House of Commons.
The Auditor General's reports are reviewed and discussed in hearings of the Standing Committee on Public Accounts and 15 other parliamentary committees.
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 House of Commons Standing Committee on Public Accounts calls on the Auditor General to explain the Estimates for the Office and to discuss our report on plans and priorities, our performance report, and our management practices.
The Office is funded by Parliament, in the same manner as government departments. Historically, like government departments, we negotiated the level of funding with the Treasury Board Secretariat, one of the organizations we audit. However, this process was not considered to be sufficiently independent to ensure that our budget is appropriate for meeting Parliament's expectations.
In 2005, the government committed to implementing a pilot project for a new funding and oversight mechanism for the 2006–07 and 2007–08 Estimates processes for all officers of Parliament. The new mechanism, involving a parliamentary oversight panel, seeks to respect the role of Parliament and the independence and distinct mandates of its officers, and also to reflect the 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 Treasury Board Secretariat's assessment of the submission. The panel then provides advisory recommendations for consideration by the Treasury Board.
The Auditor General appeared before the panel in November 2006, requesting approximately $4 million in additional, ongoing funding and about $2 million in one-time funding. The panel unanimously agreed to recommend the requested funding increases to the Treasury Board. This increase in funding is reflected in the financial tables presented later in this Report on Plans and Priorities.
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. We publish summaries of our practice reviews and peer reviews on our website under About Us.
- Practice reviews. We conduct internal practice reviews of our financial audits, performance audits, special examinations, and assessments of agency performance reports to assess their quality and compliance with Office policies and professional standards. The reviews assure the Auditor General of the quality of our audits and identify good practices and areas for improvement. We will conduct about 10 practice reviews in the coming year.
- External peer reviews. The Office requests periodic external reviews of its audit practices. In 2003, an international team of legislative auditors carried out a peer review of the Office's quality management framework for performance auditing. In 1999, we hired an audit firm to assess our quality management system for annual financial audits. Both reviews concluded that our quality management frameworks were suitably designed and operating effectively. They are available on our website under About Us.
The provincial institutes of chartered accountants review our compliance with professional standards for financial audits, in order to determine whether our training of chartered accounting students meets their requirements. These reviews have concluded that we are following professional standards and meeting their training requirements.
We conduct internal audits of our management and administration practices to assure the Auditor General that the Office is complying with government and Office policies. They also provide managers with assessments and recommendations. We normally conduct one internal audit per year. Executive summaries are published on our website.