What we examined (see Focus of the audit)

The Canada Mortgage and Housing Corporation was established in 1946 to help Canadians meet their housing needs. As Canada’s authority on housing, it contributes to the stability of the housing market by insuring residential mortgage loans and helping lenders convert their mortgage loan portfolios into marketable securities. It also supports affordable housing programs for Canadians and offers housing research and advice to Canadian governments, consumers, and the housing industry. Finally, it provides advice to the Department of Finance on developing policies for promoting access, competition, and stability in the housing market.

The Corporation reports to the Minister of Families, Children and Social Development. Its objects and powers are established by the Canada Mortgage and Housing Corporation Act in conjunction with the National Housing Act.

Our objective for this audit was to determine whether the systems and practices we selected for examination at the Canada Mortgage and Housing Corporation were providing it with reasonable assurance that its assets were safeguarded and controlled, its resources were managed economically and efficiently, and its operations were carried out effectively as required by section 138 of the Financial Administration Act.

What we concluded

In our opinion, based on the criteria established, there was a significant deficiency in the Canada Mortgage and Housing Corporation’s corporate governance systems and practices, but there was reasonable assurance that there were no significant deficiencies in the other systems and practices that we examined. We concluded that except for this significant deficiency, the Corporation maintained its systems and practices during the period covered by the audit in a manner that provided the reasonable assurance required under section 138 of the Financial Administration Act.

What we found about…

Corporate management practices

Overall, we found that except for a significant deficiency in corporate governance, the Corporation had good corporate management practices in place. The significant deficiency was related to the combined weaknesses in Board appointments and their related impacts on Board oversight and competencies. During the period covered by our audit, 4 of the 12 Board positions were vacant. These vacancies left gaps in the competencies and diversity of the Board and hindered the effectiveness of its oversight. We found that the Corporation had good corporate management practices in place in other areas, with opportunities for improvement in capital management.

The appointment of directors to the Board was the responsibility of the Governor in Council and was thus outside the Corporation’s control.

This finding matters because effective governance is essential to the Corporation’s ability to carry out its mandate. An insufficient number of members and limited competencies could reduce the effectiveness of the Board’s oversight activities. Also, having strong capital management processes in place is important to the Corporation’s ability to remain financially self-sustaining and to contribute to the stability of Canada’s housing market.

• Except for a significant deficiency in corporate governance, the Corporation had in place good corporate management practices

  Recommendation. The Canada Mortgage and Housing Corporation should continue to engage with its Minister to ensure that directors appointed to the Board have the critical and desirable competencies as provided in the Board’s competency matrix.

  Recommendation. The Canada Mortgage and Housing Corporation should ensure that the Board of Directors seek additional training or external expertise in areas where gaps in competencies and knowledge are identified, particularly in information technologyIT, where a significant transformation is taking place and a significant part of the operations is being outsourced to a service provider.

  Recommendation. The Board of Directors should play a more active role in setting the Canada Mortgage and Housing Corporation’s strategic direction and monitoring performance in the area of assisted housing.

  Recommendation. The Board of Directors should ensure that it receives regular and comprehensive information on all aspects of the Corporation’s mandate as well as on all significant initiatives under way.

  Recommendation. The Canada Mortgage and Housing Corporation should enhance its assessment and documentation with respect to the capital it requires to cover all material risks, including its reputational and strategic risks.

  Recommendation. The Canada Mortgage and Housing Corporation should define additional ad hoc stress tests to further explore its main vulnerabilities, better understand its risk profile in the event of extreme crisis, and ensure that management actions could be deployed to respond proactively to such extreme scenarios.

Management of mortgage loan insurance, securitization, and assisted housing

Overall, we found that the Canada Mortgage and Housing Corporation had in place good operational planning practices for managing its mortgage loan insurance, securitization, and assisted housing business lines.

This finding matters because the Corporation is expected to operate its mortgage loan insurance and securitization activities in a financially self-sustaining manner while improving the access to and stability of the housing market. Further, it must effectively monitor and report on the performance of its assisted housing business so that it can support affordable housing programs for Canadians in need.

• The Corporation was managing its mortgage loan insurance, securitization, and assisted housing business lines well

  Recommendation. We made no recommendations in this area of examination.

Management of organizational transformation initiatives

Overall, we found that the Canada Mortgage and Housing Corporation had good systems and practices to manage its organizational transformation initiatives. However, we found that improvements were needed in integrating the information technology (IT) and non-IT transformation initiatives, and in identifying outcomes for individual projects.

This finding matters because the transformation initiatives taking place, including significant technology changes, were having a pervasive and significant impact on business delivery. If unsuccessful, the initiatives could result in financial losses and threaten the Corporation’s ability to deliver its mandate.

• The Corporation had good systems and practices to manage its organizational transformation initiatives, but some improvements were needed

  Recommendation. The Canada Mortgage and Housing Corporation should manage its transformation initiatives in an integrated way, have a project management team to oversee overall transformation project and change management activities, and report to the Board on the overall state of transformation initiatives.

  Recommendation. The Canada Mortgage and Housing Corporation should clearly define objectives, outcomes, performance measures, and expected benefits for each of its transformation projects and regularly report on its achievements.

Entity Responses to Recommendations

The Corporation agrees with our recommendations and has responded (see List of Recommendations).

Related Information

Report of the	Auditor General of Canada
Type of product	Special Examination
Topics	Crown Corporations
Entities	Canada Mortgage and Housing Corporation
Completion date	14 March 2018
Tabling date	10 May 2018

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