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1999-2000 Estimates—A Report on Plans and Priorities
Section I—Messages
Message from the Auditor General
Management Representation
Section II—Overview of the Office
Mandate, Roles and Responsibilities
Enabling Legislation
Business Line—Legislative Auditing
The Commissioner of the Environment and Sustainable Development
The Office's Vision, Mission and Objectives
Organization of the Office
Reporting Our Work
Financial Spending Plan
Section III—Plans, Priorities, Strategies and Expected Results
Summary of Key Plans, Priorities, Strategies and Expected Results
Chart of Key Results Commitments
Office Priorities for the Medium Term, 1999-2001
Details by Component of Business Line
Financial Audit of the Financial Statements of the Government of Canada
Financial Audits of Crown Corporations and Other Entities
Value-for-Money Audits of Departments and Agencies
Environment and Sustainable Development Monitoring Activities
Special Examinations of Crown Corporations
Update on Internal Matters
Audit Project Hour Ratio
Training Activity for Audit Professional Staff
Consolidated Reporting
Sustainable Development Strategy
Year 2000 Initiatives
Section IV—Supplementary Information
Personnel Information
Capital Projects Information
Additional Financial Information
Other Information
Section I—Messages
Message from the Auditor General
The next fiscal year will take us into a new millennium and will hold many challenges for our Office. This century's last decade has seen radical changes in the way the government conducts business and manages its budget. The new Expenditure Management System has placed emphasis on results-oriented and cost-conscious management. This report establishes our performance expectations and outlines the general directions the Office will take in 1999-2000 and the next two fiscal years.
As the federal government prepares for the 21st century, we will continue the emphasis on further improving the government's financial position, accountability, financial management, public service renewal and the environment. We are planning a special status report on these priorities in February 2001, which coincides with the end of my current term as Auditor General of Canada.
In our work as Canada's legislative auditor, we continuously face new challenges as we respond to changes in the way the government conducts the nation's business. Here are some of the new challenges in the coming years:
- In 1998-99, for the first time, the Office was required by legislation to carry out a financial audit and to provide an assessment of the performance information reported by a new service delivery agency, the Canadian Food Inspection Agency. Beginning in 1999-2000, we will conduct the same type of work for the newly created Canadian Parks Agency. The proposed Canada Customs and Revenue Agency would be subject to similar requirements in the future.
- A major topic in 2000 will be an assessment of the government's progress in implementing performance reporting and managing and accounting for results. This work will affect most large departments. In the years ahead, the assessment of performance information in departments and agencies could become a major component of our work.
- On 1 April 1999, we will become the auditors of the newly created territory of Nunavut. This will be a third territorial audit entity for our Office.
- For the last two years, we have had to qualify our opinion on the financial statements of the Government of Canada. Our objective for the coming year is to resolve with the government all outstanding issues on these statements.
- By law, we carry out special examinations of certain Crown corporations every five years. The third round is under way and will be largely completed by the year 2000-01. The fiscal year 1999-2000 is a peak year, as we plan to report on 13 of the 35 corporations we audit.
In our own Office, we continuously review the way we do our work in order to better serve the public interest and provide parliamentarians and Canadians with useful information. For example, in 1999-2000 I have requested an external audit of our Quality Management System for annual financial audits. The purpose of this audit is to determine whether our procedures are designed suitably and operate effectively to provide reasonable assurance that our annual financial audits are conducted in accordance with applicable legislative requirements, professional standards and Office policies. This report will be completed early in 2000.
These are but a few of the challenges we face in the coming year, and there will undoubtedly be others that will surface as the year progresses. I know we are capable of meeting these challenges through our dedication to the public interest and the competence of our people.
L. Denis Desautels, FCA
Auditor General of Canada
22 February 1999
Management Representation
Report on Plans and Priorities 1999-2000
I submit, for tabling in Parliament, the 1999-2000 Report on Plans and Priorities (RPP) for the Office of the Auditor General of Canada.
To the best of my knowledge the information:
- accurately portrays the Office's mandate, plans, priorities, strategies and expected key results of the organization.
- is consistent with the disclosure principles contained in the Guidelines for Preparing 1999-2000 Estimates (Report on Plans and Priorities).
- is comprehensive and accurate.
- is based on the Office's information and management systems.
I am satisfied as to the quality assurance processes and the procedures used for the RPP's production.
Michael J. McLaughlin, CMA
Deputy Auditor General
and Senior Financial Officer
22 February 1999
Section II—Overview of the Office
Mandate, Roles and Responsibilities
Enabling Legislation
1. The Auditor General Act, the Financial Administration Act and a variety of other acts and orders-in-council set out the duties of the Auditor General and the Commissioner of the Environment and Sustainable Development as they relate to legislative auditing and monitoring of federal departments and agencies, Crown corporations, territorial governments and other national and international organizations.
Business Line—Legislative Auditing
2. The business line of the Office is legislative auditing. The Auditor General is required to provide Parliament and the Canadian people with answers to the following questions:
Questions | Components of Legislative Auditing1 |
---|---|
Is the government presenting fairly its overall financial situation? | Financial audit of the Financial Statements of the Government of Canada |
Are Crown corporations and other entities presenting their financial information fairly and complying with relevant professional standards and legislative authorities? | Financial audits of Crown corporations and other entities |
Were departmental and agency programs run economically and efficiently, and with due regard to their environmental effects? Does the government have the means to measure the effectiveness of programs? Is legislation complied with and the public purse protected? | Value-for-money audits of departments and agencies |
To what extent did departments and agencies meet the objectives and implement the plans set out in their sustainable development strategies laid before the House of Commons? | Environment and sustainable development monitoring activities |
Do systems and practices of Crown corporations provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively? | Special examinations of Crown corporations |
1 In all our work, we also consider compliance with authorities. |
3. We are different from departments and agencies by virtue of our independence from the government and our reporting relationship to Parliament. Our independence is assured by a broad legislative mandate, freedom from certain controls over our budget and staff, and a 10-year mandate for the Auditor General.
The Commissioner of the Environment and Sustainable Development
4. The Commissioner's primary role and responsibility is to monitor, on behalf of the Auditor General, the departmental sustainable development strategies and action plans and the status of, and responses to, public petitions on environmental matters. The Commissioner is also required to report annually to Parliament on the results of his work.
The Office's Vision, Mission and Objectives
5. The Office's Strategic Framework, which was last updated in January 1998, includes Vision and Mission statements that guide the work of the Office.
Vision
The Office of the Auditor General of Canada is committed to making a difference for the Canadian people by promoting, in all our work for Parliament, answerable, honest and productive government that reflects a commitment to sustainable development.
Mission
We conduct independent audits and examinations that provide objective information, advice and assurance to Parliament. We promote accountability and best practices in government operations.
Objectives
We want to make a difference by promoting:
- a fair and frank accounting of the government's stewardship of financial and other resources;
- efficiency, productivity and cost effectiveness in the public service;
- collection of revenues owed to the Crown;
- objective assurance on matters found to be satisfactory and unsatisfactory;
- compliance with authority;
- honesty in government; and
- the environment and sustainable development.
Priorities—1999-2001
- Help improve the government's finances and information on its financial condition.
- Stimulate advances in accountability concepts and improve accountability practices in government.
- Improve the quality of financial management in government.
- Contribute to necessary changes in the public service.
- Help improve the federal government's performance in protecting the environment and promoting sustainable development.
6. We share these objectives with many other parties inside and outside government, which complicates the attribution of results to the audits we perform. Many share a commitment to good government, and it is through their co-operation and participation that we effect change. We assess our own effectiveness in terms of our ability to conduct high-quality audits that address significant topics and contribute to making a difference (for further details, refer to Exhibit 2).
Organization of the Office
7. The Executive Office provides legal support and professional practice review, and oversees our international activities.
8. The Corporate Services Branch provides direct support to our audit activities.
9. The Audit Operations Branch is responsible for carrying out all our audit activities.
10. The Commissioner of the Environment and Sustainable Development is responsible for monitoring and reporting on the progress of federal government departments and agencies toward sustainable development. The Commissioner also assists the Auditor General in performing the duties that relate to the environment and sustainable development.
11. The Office audit staff is multidisciplinary, with qualified accountants representing about 62 percent; another 28 percent have postgraduate degrees or professional qualifications in other disciplines, and include engineers, lawyers, statisticians, sociologists, historians, environmental specialists and economists; and 10 percent have both accounting and other postgraduate qualifications.
Reporting Our Work
12. The work of the Auditor General and the Commissioner of the Environment and Sustainable Development is reported in several forms, pursuant to enabling legislation. They include: opinions on the financial statements of the Government of Canada, territorial governments, Crown corporations and other entities; chapters or other audit observations in the reports of the Auditor General and the Commissioner of the Environment and Sustainable Development to Parliament; and special examination reports to boards of directors of Crown corporations (for further details, refer to Table 13). Our work could also result in special publications, methodology, briefings for parliamentary committees, speeches and management letters. Our reports, as well as information about the Office, are available on this site.
Financial Spending Plan
($ millions)
Forecast1 1998-99 |
Planned 1999-2000 |
Planned 2000-01 |
Planned 2001-02 |
|
---|---|---|---|---|
Gross Program Spending | ||||
Legislative Auditing | 54.92 | 53.5 | 53.2 | 53.1 |
Less: Revenue credited to the Consolidated Revenue Fund | (0.9) | (0.8) | (0.3) | (0.3) |
Plus: Cost of services provided by other departments | 6.2 | 5.9 | 6.0 | 6.0 |
Net Cost of the Program | 60.2 | 58.6 | 58.9 | 58.8 |
1 Reflects best forecast of total planned spending to the end of the fiscal year. 2 Includes supplementary estimates of $3.9 million. |
Section III—Plans, Priorities, Strategies and Expected Results
Summary of Key Plans, Priorities, Strategies and Expected Results
Chart of Key Results Commitments
13. Exhibit 1 provides an overview of the key results that the Office expects to achieve in 1999-2000 and subsequent years. It was published in our 1997-98 Performance Report and in Annex B of the 1998 report of the President of the Treasury Board, Managing for Results.
Exhibit 1—Chart of Key Results Commitments
To provide Parliament and Canadians with: | To be demonstrated by: |
---|---|
Independent audits and examinations that provide objective information, advice and assurance, and that promote accountability, best practices in government operations, and sustainable development. | Evidence that we follow professional standards, and that Parliament accepts and endorses our audit conclusions on matters found to be satisfactory or unsatisfactory. Observations and recommendations that are implemented and result in demonstrable improvements in public sector management and service delivery. |
14. Exhibit 2 further develops the key results that the Office expects to achieve and indicates the components of our business line that will help achieve them. The most important links are marked with an X, even though every component could conceivably contribute to every key result.
Exhibit 2—Expanded Chart of Key Results Commitments
To provide Parliament and Canadians with: | To be demonstrated by: | |||||
---|---|---|---|---|---|---|
Independent audits and examinations that make a difference by promoting: | Financial Audit of the Financial Statements of the Government of Canada | Financial Audits of Crown corporations and other entities | Value-for-money audits of departments and agencies | Environment and sustainable development monitoring activities | Special examinations of Crown corporations | Indicators |
A fair and frank accounting of the government's stewardship of financial and other resources | X | X | X | Reliability and usefulness of information provided to Parliament and management for monitoring and decision-making purposes. | ||
Efficiency, productivity and cost effectiveness in the public service | X | X | Extent to which audits identify opportunities to reduce costs or achieve more with resources provided. | |||
Collection of revenues owed to the Crown | X | Increased effectiveness of revenue administration and maintenance of the tax base. | ||||
Objective assurance on matters found to be satisfactory and unsatisfactory | X | X | Demonstrated compliance with professional standards. | |||
X | X | Extent to which parliamentarians and other users of financial statements found our audit opinions useful. | ||||
X | Extent to which Crown corporation boards of directors found our special examination reports useful. | |||||
Compliance with authority | X | X | Extent to which parliamentarians, Crown corporation boards of directors and other users of our audit products were assured that operations were conducted in compliance with relevant legislative authorities and related regulations. | |||
Honesty in government | X | Contributions to reducing the risk of wrong-doing, conflict of interest and fraud, and to maintenance of sound ethics and values. | ||||
The environment and sustainable development | X | Extent to which departments improve their management practices for protecting the environment and promoting sustainable development. |
Office Priorities for the Medium Term, 1999-2001
15. As the federal government prepares for the 21st century, our Office is continuing its emphasis on improving the government's financial position, accountability, financial management, public service renewal and the environment. We formally adopted these subjects as priorities three years ago, although the wording and emphasis have changed somewhat each year. We are planning a status report on them in February 2001, coinciding with the end of the present Auditor General's mandate. Current plans and preliminary performance measures are shown below.
Priority 1: Help improve the government's finances and information on its financial condition.
16. Supplying useful information, and encouraging the government to follow suit. This involves providing good information directly to parliamentarians and the public about the government's financial performance and health, and about the performance of associated systems and processes. It also involves encouraging the government to provide such information on a regular basis by demonstrating its usefulness and the feasibility of its production. Draft performance measures are examples of:
- new financial information that could be used by parliamentarians or decision makers;
- financial improvements implemented and the benefits obtained.
Main outputs that will help to advance this work are value-for-money audits dealing with Department of Finance, Treasury Board, Revenue Canada information technology and sustainable development. We help advance better financial statement disclosure by participating in standard-setting bodies and encouraging the Government of Canada and other audit entities to improve their own financial statements.
17. Improving the effectiveness of revenue programs. We can do this by helping to maintain the integrity of the self-assessment system administered primarily by Revenue Canada and the Department of Finance; and by examining other risk areas such as protection of borders and administration of trade. This priority includes non-tax revenue and cost recovery issues. To measure how well we achieve this priority, results indicators might include changes in tax legislation or tax administration that stem from our recommendations and that are designed to:
- reduce non-compliance or encourage voluntary compliance with the tax system;
- reduce tax avoidance opportunities; or
- improve fairness, consistency and impartiality in tax administration.
Main outputs that will help to advance this work are value-for-money audits of Revenue Canada and work on non-tax revenue issues such as cost recovery and user fees, for example, in Agriculture and Agri-Food Canada. Any contributions to this priority from financial, public accounts or special examination work will be a direct result of regular work and not require extra resources. Audits of Employment Insurance and the Canada Pension Plan also have the potential to contribute.
18. Finding savings in government operations. Savings are defined broadly as:
- actual monetary reductions; or
- potential for future expenditure reductions.
It is the responsibility of every audit team to look for savings opportunities, and each year we expect from value-for-money audits at least two or three good examples of quantified financial savings arising from identified instances of waste, reduced expenditures and improvements in operational efficiency and effectiveness. In 1999, looking for potential savings is one of the objectives of the following value-for-money audits:
- Greening Operations and Policies
- Real Property Services - Alternative Forms of Delivery
- Major Capital Projects
- CIDA
However, we realize that much of the credit for actual savings achieved should go to the organizations that implement our recommendations for improvement.
Priority 2: Stimulate advances in accountability concepts and improve accountability practices in government.
19. This priority emphasizes accountability in light of the changes going on in the public service. It involves modernizing accountability practices (applying principles for effective accountability) in departments, agencies and new delivery arrangements. Some of the improvements expected are:
- better reporting of performance information that provides a meaningful and balanced picture of how well an entity has achieved its expected results;
- central agencies assuming a leadership role, supported by departments, to ensure that government-wide initiatives are carried out as desired;
- more effective accountability in alternative service delivery arrangements through such means as clear roles and responsibilities, credible reporting and a better framework for audit and evaluation. In addition, assessments of service agency performance information conducted by the Office provide assurance to Parliament and other users that the information reported is fair and reliable. A more concrete and balanced account of agency performance is also expected through suggestions made by the Office;
- more effective use of performance information by parliamentarians through committee oversight and reporting, or by decision makers in Cabinet, central agencies and departments.
As part of our work on accountability we are interested in the extent to which new governance and financing arrangements are being adopted. In the next two years we plan to explore the impact of new arrangements on accountability, in our audits of National Defence-Service Contracting, Public Works Real Property Program, the Infrastructure Program, Airport Transfers, Agriculture-The Canadian Adaptation and Rural Development Fund, Employment Insurance and Labour Market Agreements, among others.
Another major topic in 2000 will be an assessment of the government's progress in implementing performance reporting, and managing and accounting for results. This work will affect most major departments.
Priority 3: Improve the quality of financial management in government.
20. For many years, we have reported concerns about financial management in government. For example, decision makers have not always had adequate information on the cost of activities, or information linking financial and operational results. Government accounting systems are not designed to support accrual accounting or to set rates for cost recovery. Some success has been achieved due to the capabilities of particular individuals, but it has seldom been institutionalized. A more effective comptrollership capability both at the centre of government and in individual departments is essential for the success of the planned renewal of the government's accounting systems. The main changes will be accrual accounting throughout the year, strengthened accounting for tax revenues, and adoption of accrual accounting for capital assets.
In the fall of 1997, the government received the report of the Independent Review Panel on Modernization of Comptrollership in the Government of Canada. The government has indicated that it is taking this report and its recommendations to heart and is setting up the leadership necessary to move forward. The Office encourages the government's efforts to improve comptrollership. Financial management lies at the core of comptrollership and one of the tools that the Office is developing to support the government's efforts is the Financial Management Capability Model. The basic structure of this Model is described in Chapter 2 of our 1997 Report. Over the last year, we have completed consultations with government financial managers and revised the Model to reflect these consultations. The first published release of the Model is set for early 1999. We will begin applying the Model in key departments such as CIDA and Health Canada in 1999 and, potentially, National Defence, Human Resources Development Canada and Agriculture and Agri-Food Canada in 2000. The key result will be to strengthen financial management and comptrollership.
Priority 4: Contribute to necessary changes in the public service.
21. The "necessary changes" referred to are those required to reform and renew the public service. In part, these changes flow from the policy decisions taken during and since Program Review that redefined the responsibilities of the federal government and led to downsizing and changes in the types of functions that remain. There is a need to rejuvenate the work force and ensure that gaps in expertise are filled. There is also a need to resolve long-standing human resource management issues pertaining, for example, to job classification and staffing systems.
Work on this priority includes monitoring reform and renewal initiatives in the public service, and auditing the main elements of human resource management (HRM). We intend to publish value-for-money audits and studies of government-wide issues as well as work dealing specifically with Treasury Board Secretariat and other departments. Special examinations of Crown corporations will also address HRM issues. Expected results and performance measures include improvements such as:
- modernized and decentralized key HRM systems (such as classification and staffing) where appropriate;
- evidence that the public service is seeking "continuous improvement" and learning from its successes and mistakes;
- informed dialogue with Parliament on the importance of the public service as an institution and on public service management issues such as risk taking, leading to parliamentary reviews of public service issues;
- line managers held accountable for their people management skills as a critical element in the assessment of their performance;
- streamlining and clarification of the HRM roles and responsibilities of central agencies.
22. There are specific results the Commissioner of the Environment and Sustainable Development would like to achieve in the next few years, in particular:
- narrowing the gap between policy promises and performance, as demonstrated by examples of improvements in program implementation;
- strengthening co-ordination and integration, leading to instances of the elimination of barriers to co-operation;
- improving information for Parliament, as demonstrated by examples of new information used by parliamentarians or decision makers.
Work on environment and sustainable development could likely touch all the entities we audit. Government-wide and entity-specific value-for-money audits will address environmental issues, for example in Environment Canada, Natural Resources Canada, Fisheries and Oceans, Agriculture and Agri-Food Canada, National Defence and Indian and Northern Affairs Canada. Financial audits will continue to examine the accounting for environmental liabilities in the financial statements of all public sector entities. In Crown corporations and other entities, we will, where appropriate, look for opportunities to assist with and encourage the preparation of sustainable development strategies and other environmental reporting practices.
Details by Component of Business Line
23. The business line of the Office is legislative auditing, which is divided into five main components as shown in Exhibit 3. The allocation of resources is driven initially by the demands of financial audits, most of which are required by legislation to take place annually. Special examinations of Crown corporations are required every five years, and must provide the assurance set out in legislation. Our remaining resources are allocated to value-for-money auditing and environmental and sustainable development work.
Exhibit 3—Planned Costs by Component of Legislative Auditing—1999–2000
($ millions)
Component | Planned Cost |
---|---|
Financial audit of the Financial Statements of the Government of Canada | 4.5 |
Financial audits of Crown corporations and other entities | 11.6 |
Value-for-money audits of departments and agencies | 31.7 |
Environment and sustainable development monitoring activities | 1.4 |
Special examinations of Crown corporations | 4.3 |
Total | 53.5 |
Financial Audit of the Financial Statements of the Government of Canada
24. The fundamental purpose of the financial statements of the Government of Canada is to provide information to Parliament, and thus to the public. These statements facilitate an understanding and evaluation of the full nature and extent of the financial affairs and resources for which the government is responsible. The financial statements reflect the financial position of the government at its fiscal year end (March 31), as well as results of its operations, financial requirements and changes in its financial position for the year. The Government of Canada prepares these financial statements in accordance with its stated accounting policies, and includes them in the annual Public Accounts of Canada.
25. The Auditor General examines the annual financial statements in accordance with generally accepted auditing standards to obtain reasonable assurance that they are free of material misstatement, and he expresses an opinion on the fairness and consistency of their presentation. In this way the Office lends credibility to these statements. If the examination discloses that the financial statements are materially misstated, the Auditor General will qualify his opinion on them.
26. For the last two years, the Auditor General has had to qualify his opinion on the financial statements of the Government of Canada. For the year ending 31 March 1999, the Office objective is to resolve with the government all outstanding issues on these statements.
27. As part of the annual Public Accounts audit, audit teams review transactions to see if departments and agencies conformed to selected laws and regulations that govern their operations. This involves checking the spending authority contained in appropriations acts and other relevant legislation. Compliance audit work of this nature is also part of all the other audits done by the Office.
28. The government is planning to improve the usefulness and timeliness of its financial information with the implementation of a new Financial Information Strategy (FIS). The main elements of FIS are the modernization of systems and the implementation of accrual accounting.
29. The vision of FIS is to enhance the government's decision making and accountability, and to improve organizational performance through the strategic use of financial information. Through the modernization of systems, accounting data will be moved from the central accounting systems maintained by the Receiver General for Canada to new departmental systems.
30. Planned spending for this component of our work is approximately $4,500,000 for 1999-2000, somewhat higher than our planned spending of $3,800,000 for 1998-99 (refer to Exhibit 4). The increased spending is due to the new audit work required by the phased implementation of the FIS. In 1999-2000, several departments are moving to their own systems and the central systems are changing. This will require additional effort and conversion of audit tools to provide for the audit of the central systems. In 2000-01, more departments will be modernizing their systems and the implementation of accrual accounting will result in further audit effort. In 2001-02 and beyond, full implementation of accrual accounting is planned, resulting in continued audit effort.
Exhibit 4—Financial Audit of the Financial Statements of the Government of Canada—Annual Costs
Financial Audits of Crown Corporations and Other Entities
31. Annually, we audit about 90 financial statements of parent Crown corporations, federal departmental corporations and entities, Canadian entities, international organizations and territorial governments, agencies and corporations. The Auditor General examines these financial statements and expresses an opinion on the fairness of their presentation.
32. For the first time in 1998-99, the Office was required by legislation to carry out a financial audit and to provide an assessment of the performance information reported by a new service delivery agency, the Canadian Food Inspection Agency. Beginning in 1999-2000, we will now conduct the same type of work for the newly created Canadian Parks Agency. The proposed Canada Customs and Revenue Agency may be subject to similar requirements in the future.
33. If performance assessment work increases in the future, it could become a new business line component for the Office.
34. Also during 1999-2000, we have allowed for the possibility that we may perform an examination of the accounts and financial transactions of the Canadian Wheat Board.
35. The planned costs of financial work for territorial governments, agencies and corporations is expected to increase during 1998-99 and will be increasing more in the future, as the new government of Nunavut is fully implemented and additional audits are required.
36. Taking all of these changes into account, planned spending for this component of our work is approximately $11,600,000 for 1999-2000.
37. Exhibits 5, 6 and 7 represent audit work in the same entities over the six-year period 1994-95 to 1999-2000. This was done to avoid the misleading effects of audits that were added to or taken from the portfolio.
Exhibit 5—Financial Audits of Crown Corporations—Costs
Exhibit 6—Financial Audits of Other Entities—Costs
Exhibit 7—Financial Audits of Territorial Governments, Agencies and Corporations—Costs
Value-for-Money Audits of Departments and Agencies
38. Value-for-money (VFM) or performance auditing examines management practices, controls and reporting systems with a focus on results. It does not question the merits of government policies; rather, it provides information to help legislators judge how well policies and programs have been implemented. The main products are chapters or other audit observations in the periodic reports of the Auditor General to Parliament, but this work could also result in special publications, methodology, briefings for parliamentary committees, speeches and management letters.
39. VFM audits are more discretionary in scope and frequency than either attest audits or special examinations. To identify matters that are of most interest and significance to Parliament, we consider:
- the importance of each program or subject, the level of expenditure, the level of interest among members of Parliament, the degree of risk involved in the program's delivery, and the priorities the Office is addressing;
- the complexity of the program or subject and the level of resources needed to audit it, and whether it falls within the Auditor General's mandate; and
- past audit coverage by the Office and other review work carried out by the government or other knowledgeable observers.
40. Our planning begins with considering broad issues and overall priorities; needs and expectations of Parliament and other key stakeholders; and resources allocated. External input to this process comes from informal consultations with members of Parliament, deputy ministers and external advisors, and from professional interaction.
41. We attempt to schedule VFM audits to cover the most significant issues in a reasonable period of time. Audit teams have developed five-year audit plans for each of the 25 major departments and agencies of the federal government and approximately 12 issue areas that could cross departmental lines, such as accountability and results measurement, financial management, human resource management, major capital projects, compliance with authorities, sustainable development and information technology. Emerging issues are evaluated within this framework and the five-year plans are updated each year.
42. We have received some feedback from members of Parliament that they think the amount and type of work we are doing is useful. Twenty-six percent of members of the House of Commons and the Senate responded to a survey we sent out last November, and although the response rate was not high it included responses from all parties. Most thought the amount and balance of audit effort was appropriately placed on some key areas of public administration like accountability, efficiency and productivity of the public service, environment and sustainable development, and the management of government revenues and expenditures. A few members also suggested specific issues for us to examine, and we are taking these into account in our audit planning. The survey indicated that some of the respondents were not aware of the work we are doing to implement new responsibilities for environment and sustainable development, and we will therefore make more of an effort to inform parliamentarians in this regard.
43. We plan to continue emphasizing the types of issues we asked about in the survey. Our VFM work program for 1999 includes 7 chapters dealing primarily with accountability and results measurement issues, 5 with economy and efficiency of the public service, 14 with environment and sustainable development, and 8 with the management of government revenues and expenditures. In addition, 7 chapters deal with other specific program or entity issues.
44. VFM and government-wide audits and studies do not have generally accepted indicators of performance or quantifiable measures that are easy to compare with those of other legislative auditors. We are now carrying out shorter, more focussed examinations of particular issues and we are paying close attention to planning and managing the cost, timeliness and results of audits. We believe we can now maintain our coverage while keeping the average cost of VFM audits at approximately $750,000 or less, as shown in Exhibit 8. This does not include government-wide audits and studies, each of which is unique in scope and coverage.
Exhibit 8—Value-for-Money Audits of Departments and Agencies—Average Cost
Parliamentary Activities
45. Since our primary client is Parliament, to some extent we can measure the impact or results of the Office's work by the level of parliamentary interest it generates. The hearings process provides some indication of the impact or results of our work.
46. The Public Accounts Committee (PAC) holds meetings with Office staff, and other committees of the House or Senate frequently seek information and advice from us.
47. Exhibit 9 shows the percentage of our reports that were the subject of one or more parliamentary committee meetings and our projected targets for 1998-99 and 1999-2000.
Exhibit 9—Reports Subject to One or More Parliamentary Committee Meeting
Response to our Observations and Recommendations
48. We have noted that the percentage of observations and recommendations in our value-for-money chapters that have been fully implemented or on which satisfactory progress has been made has been declining during the last few years.
49. We are examining whether this is a real decline or whether it reflects inadequate follow-up or other factors. When our study is completed in 1999, we intend to establish new targets and new procedures aimed at increasing the percentage of our observations and recommendations that are fully implemented or where satisfactory progress has been made.
50. Planned spending for VFM audits is approximately $31,700,000 in 1999-2000. This includes VFM audits and studies that have a significant environmental and sustainable development content. The level of VFM effort was reduced in 1998-99 and will remain at about the same level for 1999-2000 because of increased work on the third round of special examinations, which is expected to peak in those two years.
Environment and Sustainable Development Monitoring Activities
51. All value-for-money audits and studies that have a significant environmental and sustainable development content have been integrated into our regular value-for-money audits along with the financial requirements for completion of these audits and studies. Planned spending for this work is approximately $3,392,000 for 1999-2000.52. The major annual outputs of the Commissioner's Office are as follows:
- handling all public petitions received by the Commissioner;
- issuing the Commissioner's annual "green" report to the House of Commons;
- monitoring and reporting the extent to which departments and agencies have implemented their action plans and met the objectives outlined in their sustainable development strategies. An in-depth assessment of the following departments will be completed in 1999-2000: Agriculture and Agri-Food Canada, CIDA, Human Resources Development Canada, Indian and Northern Affairs Canada and Transport Canada; and
- implementing and monitoring the Office's own sustainable development strategy.
53. Planned spending for the Commissioner's Office is approximately $1,400,000 for 1999-2000.
Special Examinations of Crown Corporations
54. Special examinations of Crown corporations are required by the Financial Administration Act once every five years. In addition, we are sometimes requested by the Governor in Council to carry out special examinations of Crown corporations that are exempt from this requirement. Some examinations are done by the private sector, but most are done by this Office with only one or two done jointly with the private sector. Legislation requires the examiner to provide an opinion on whether the corporation's management systems and practices provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively.
55. Because of differences in the size, complexity, mandates and risks associated with these corporations, the amount of effort needed to arrive at an individual opinion is less predictable than in financial statement audits. Practices have been developed that respect legislative requirements, professional standards, and the need to be efficient.
56. A third round of examinations of 35 Crown corporations is under way and will be largely completed by the year 2000-01. In 1999-2000 we plan to report on 13 corporations, namely: Canada Mortgage and Housing Corporation, Marine Atlantic Inc., Enterprise Cape Breton Corporation, Freshwater Fish Marketing Corporation, Old Port of Montreal Corporation Inc., Laurentian Pilotage Authority, Standards Council of Canada, Royal Canadian Mint, National Museum of Science and Technology Corporation, National Gallery of Canada, Export Development Corporation, Canada Deposit Insurance Corporation and Canada Development Investment Corporation.
57. Planned spending on special examinations is approximately $4,300,000 for 1999-2000.
58. A special examination of each Crown corporation is not conducted every year. Rather, special examinations are carried out over a period of years (a cycle). The first cycle was conducted between 1984 and 1989 and the second was conducted between 1990 and 1995. The third cycle is currently under way. Our target average cost for special examinations conducted in the third cycle is $390,000 (refer to Exhibit 10). This expected decrease is due to improved methodology and experience obtained in previous cycles.
Exhibit 10—Special Examinations of Crown Corporations—Average Cost by Cycle
Update on Internal Matters
59. Some important Office activities have taken place during the current fiscal year and others are planned for the coming years. The following provides a description of these activities:
- In 1999-2000, the Office will have a new classification structure that will comprise one category - legislative audit - with separate groups for managers, auditors and non-audit staff. This classification initiative was combined with compensation and performance management initiatives, including the introduction of the Office's Competency Model and Roles and Responsibilities Framework. Further improvements are planned in professional development and succession planning over the next year.
- With the implementation of the new Framework for Managing Office Accommodation, developed by Public Works and Government Services Canada, the Office has embarked on a space renewal and office modernization project. The purpose of this project is to provide more interesting and functional work environments for our employees while using less space. The project should be completed by April 2001.
- The Office has embarked on the development of performance measures and benchmarks for our administrative and support functions. We hope to complete this project in 1999-2000.
- The Office has requested an external audit of its quality management systems for its annual financial audits. This will be conducted in 1999.
Audit Project Hour Ratio
60. The Audit Project Hour Ratio (APHR) calculates the percentage of available staff time that is used directly for audit activities. Available staff time takes into consideration any leave time taken (vacation, maternity, sick, etc.); the balance is available to fulfil the time needs (hours) of the Office. Taking into account various factors such as the need for training, administration and the effects of stress and workload on our staff, we have determined that an acceptable APHR range would be between 70 and 80 percent for our Audit Operations Branch, as shown in Exhibit 11. Up to 1997-98, the actual ratio was within the target range and we expect it to remain within this range in future years.
Exhibit 11—Audit Project Hour Ratio—Audit Operations Branch
Training Activity for Audit Professional Staff
61. The average training in days per year for our audit professional staff is shown in Exhibit 12. Our forecasts for 1998-99 and 1999-2000 exceed the Canadian Institute of Chartered Accountants' recommended average training days of five per year or 15 over three years.
Exhibit 12—Average Training Days Per Year—Audit Professional Staff
Consolidated Reporting
Sustainable Development Strategy
62. In Chapter 37 of the December 1997 Report of the Auditor General of Canada, we voluntarily presented a sustainable development strategy with our Office's goals, objectives and key performance indicators. Exhibit 13 summarizes our strategy and its key performance indicators and targets for 1999-2000 and beyond. Targets have also been developed for most of our other performance indicators and will be presented and reported on in our detailed annual sustainable development progress reports. It is important to note that none of these indicators or targets, taken separately, is perfect. However, used judiciously, together they will enable us to evaluate our influence and our progress toward sustainable development.
Exhibit 13—Sustainable Development Strategy
Goals | Objectives | Key Performance Indicators 1999–2000 |
---|---|---|
Audit Work To promote sustainable development by:
|
|
|
Administrative Activities To optimize the use of natural resources and to minimize the negative environmental impacts of the Office's day-to-day operations. |
|
|
Human Resources To support activities that recognize our employees as our greatest assets in pursuing our sustainable development goals. |
|
|
1 Results from our November 1008 survey of members of Parliament. 2 The appropriateness of this indicator is being reviewed. 3 Percentage conformance for the 28 federal organizations that prepared a sustainable development strategy. |
Year 2000 Initiatives
63. All internal Office mission-critical systems have been identified, analyzed, prioritized, and replaced or repaired if required. We are, of course, dependent on many other entities, including but not restricted to Public Works and Government Services Canada (payroll, invoice payment, accommodation, etc.) hydro, the national and international phone systems, etc. We are monitoring the status of the efforts of these organizations.
64. We have spent $300,000 addressing this challenge. Between now and the year 2000, we will continue to monitor the situation and address issues as they arise, but we do not expect to incur any significant additional expenditures.
65. We are currently evaluating what form of contingency planning would be appropriate for our Office, given the nature of our work and the fact that we have already achieved compliance in our systems. We anticipate completing this evaluation, and developing contingency plans as appropriate, by the end of 1998-99.
Section IV—Supplementary Information
Table 1—Spending Authorities—Office Summary Part II of the Estimates
($ millions)
Vote | 1999-2000 Main Estimates |
1998-99 Main Estimates |
|
---|---|---|---|
Auditor General | |||
25 | Program expenditures | 46.8 | 44.4 |
30 | Salary of the Auditor General | 0.2 | 0.2 |
(S) | Contributions to employee benefit plans | 6.5 | 6.4 |
Total Agency | 53.5 | 51.0 | |
(S) Statutory authority |
Vote—Wording and Amount | ||
---|---|---|
Vote | 1999-2000 Main Estimates | |
Auditor General | ||
25 | Program expenditures and contributions | 46.8 |
30 | Salary of the Auditor General | 0.2 |
Program by Business Line | ||||
---|---|---|---|---|
1999-2000 Main Estimates |
1998-99 Main Estimates |
|||
Budgetary | Total | |||
Operating | Transfer payments |
|||
Legislative Auditing | 53.1 | 0.4 | 53.5 | 51.0 |
Personnel Information
Table 2.1—Organization Structure (As of 1 February 1999)
Table 2.2—Planned Full-time Equivalents for Business Line
Business Line | Forecast 1998-99 |
Planned 1999-2000 |
Planned 2000-01 |
Planned 2001-02 |
---|---|---|---|---|
Legislative auditing | 510 | 515 | 515 | 515 |
Capital Projects Information
Tables 3.1 to 3.3 are not applicable to the Office of the Auditor General.Table 3.1—Capital Spending by Program and Business Line
Table 3.2—Capital Projects by Program and Business Line
Table 3.3—Status of Major Crown Projects
Additional Financial Information
Table 4—Summary of Standard Objects by Expenditure
($ millions)
Spending | ||||
---|---|---|---|---|
Forecast 1998-99 |
Planned 1999-2000 |
Planned 2000-01 |
Planned 2001-02 |
|
Personnel | ||||
Salaries and wages | 34.5 | 32.3 | 32.3 | 32.3 |
Salary of the Auditor General | 0.2 | 0.2 | 0.2 | 0.2 |
Contributions to employee benefit plans | 6.6 | 6.5 | 6.5 | 6.5 |
41.3 | 39.0 | 39.0 | 39.0 | |
Goods and Services | ||||
Transportation and communications | 3.6 | 3.6 | 3.6 | 3.6 |
Information | 0.5 | 0.7 | 0.7 | 0.7 |
Professional and special services | 7.2 | 7.2 | 7.2 | 7.2 |
Rentals | 0.5 | 0.5 | 0.5 | 0.5 |
Purchased repair and maintenance | 0.3 | 0.4 | 0.4 | 0.4 |
Utilities, materials and supplies | 0.6 | 0.7 | 0.7 | 0.7 |
Construction and/or acquisition of machinery and equipment | 0.5 | 1.0 | 0.7 | 0.6 |
13.2 | 14.1 | 13.8 | 13.7 | |
Transfer Payments | 0.4 | 0.4 | 0.4 | 0.4 |
Net Budgetary Expenditures | 54.91 | 53.5 | 53.2 | 53.1 |
1 Includes supplementary estimates of $3.9 million. |
Table 5—Program Resources for Business Line for the Estimates Year 1999-2000
($ millions)
Business Line | FTEs | Operating1 | Grants and Contributions | Gross Voted | Gross Planned Spending | Net Planned Spending |
---|---|---|---|---|---|---|
Legislative auditing | 515 | 53.1 | 0.4 | 53.5 | 53.5 | 53.5 |
Other revenues and expenditures: | ||||||
Revenue credited to the Consolidated Revenue Fund | (0.8) | |||||
Cost of services provided by other departments | 5.9 | |||||
Net cost of the program | 58.6 | |||||
1 Operating includes contributions to employee benefit plans and the salary of the Auditor General. |
Table 6—Details of Transfer Payments for Business Line
($ millions)
Spending | ||||
---|---|---|---|---|
Contribution | Forecast 1998-99 |
Planned 1999-2000 |
Planned 2000-01 |
Planned 2001-02 |
CCAF-FCVI Inc.1 | 0.4 | 0.4 | 0.4 | 0.4 |
1 Formerly the Canadian Comprehensive Auditing Foundation. |
Table 7—Details of Revenue
($ millions)
Revenue | ||||
---|---|---|---|---|
Revenue Credited to the Consolidated Revenue Fund (CRF) | Forecast 1998-99 |
Planned 1999-2000 |
Planned 2000-01 |
Planned 2001-02 |
Legislative Auditing | ||||
Charges for audits | 0.9 | 0.8 | 0.3 | 0.3 |
Total Credited to the CRF | 0.9 | 0.8 | 0.3 | 0.3 |
Total Revenue | 0.9 | 0.8 | 0.3 | 0.3 |
Table 8—Net Cost of Program for 1999-2000
($ millions)
Total 1999-2000 |
|
---|---|
Expenditures | 53.5 |
Cost of services provided without charge by other government departments1 | 5.9 |
Less non-tax revenue2 | (0.8) |
Net Cost of Program3 | 58.6 |
1 In addition to the budgetary expenditures for 1999-2000, there are other costs associated with the operation of the Office. These costs, although not paid for directly by the Office, represent services provided without charge by other government departments. They are: | |
Accommodation (Public Works and Government Services Canada) | 4.1 |
Employee Insurance Premiums (Treasury Board) | 1.8 |
5.9 | |
2 The Office also charges for a small number of audits. The largest billings for such services are to the International Civil Aviation Organization and the United Nations Educational, Scientific and Cultural Organization. These funds are not used by the Office but are returned to the Consolidated Revenue Fund as non-tax revenues. | |
3 The outputs of the Office are the various opinions, management letters, and reports on audits and studies resulting from the audit process. The Office allocates net program costs to its outputs. In addition to direct costs, which are allocated to each output based on hours worked, certain of the Office costs are of an overhead nature: for example, administration, official languages and accommodation. These cannot be directly attributed to our outputs. However, they must ultimately form part of the costs of our outputs. Accordingly, the Office has developed a cost accounting system that also allocates overhead to our outputs. Thus, the cost associated with each output is a "fully loaded" cost; in aggregate these total the net program cost of the Office. |
Tables 9.1 to 11 are not applicable to the Office of the Auditor General.
Table 9.1—Revolving Fund—Statement of Operations
Table 9.2—Revolving Fund—Statement of Changes in Financial Position
Table 9.3—Revolving Fund—Projected Use of Authority
Table 10—Loans, Investments and Advances by Program and Business Line
Table 11—Tax Expenditures
Other Information
Table 12—Listing of Statutes and Regulations is not applicable to the Office of the Auditor General.Table 13—References
Statutory Reports | Description |
---|---|
Report of the Auditor General of Canada to the House of Commons | published periodically and available in a variety of formats. |
Report of the Commissioner of the Environment and Sustainable Development to the House of Commons | published annually and available in a variety of formats. |
Opinion of the Auditor General on the Financial Statements of the Government of Canada | published annually in the Public Accounts of Canada, Volume I. |
Opinion on the Condensed Financial Statements of the Government of Canada | published annually in the Annual Financial Report of the Government of Canada |
Opinions by the Auditor General on some 90 financial statements of parent Crown corporations, federal departmental corporations and other federal entities, territorial governments and organizations, other Canadian entities and international organizations | published in the various statutory reports containing the financial statements of these organizations and Treasury Board's Annual Report to Parliament on Crown Corporations and Other Corporate Interests in Canada |
Special examinations of Crown corporations | published every five years for each Crown corporation and submitted to the respective boards of directors |
Annual Report on Other Matters to the Yukon Legislative Assembly and to the Northwest Territories Legislative Assembly | published annually and submitted to the Council and available from the Clerk of the respective assemblies |
Contacts
Office of the Auditor General240 Sparks Street
Ottawa, Ontario
Canada K1A 0G6
Telephone: (613) 995-3708
Facsimile: (613) 957-4023
Audit Operations Branch
Sheila Fraser, Deputy Auditor General
Corporate Services Branch
Michael J. McLaughlin, Deputy Auditor General and Senior Financial Officer
Environment and Sustainable Development
Brian Emmett, Commissioner of the Environment and Sustainable Development
Communications
Johanne McDuff, Director