2016 Spring Reports of the Auditor General of Canada

Opening Statement to the Standing Committee on Public Accounts

2016 Spring Reports of the Auditor General of Canada

5 May 2016

Michael Ferguson, CPA, CA
FCA (New Brunswick)
Auditor General of Canada

Mr. Chair, I am pleased to present my Spring 2016 reports, which were tabled in the House of Commons this past Tuesday. I am accompanied by Jerome Berthelette, Assistant Auditor General and by Richard Domingue and Nicholas Swales, both Principals. The reports provide the findings of five audits and two special examinations.

One of the themes that ties a number of our audits together is that the data collected by many government organizations is either not usable, not used, or not acted upon.

Report 1—Venture Capital Action Plan

In the first of our audits, we examined how Finance Canada, the Business Development Bank of Canada, and Innovation, Science and Economic Development Canada designed and implemented the government’s Venture Capital Action Plan. This plan’s origin dates back to 2012, when the government announced that it would spend $400 million to strengthen venture capital investment in Canada.

Having completed this audit, it is unclear what impact the government’s Action Plan will have on venture capital and innovation.

Overall, we found that investors were initially reluctant to participate in the Venture Capital Action Plan for a number of reasons, including high management fees and regulatory constraints. We also noted that the selection process for fund managers lacked fairness, openness, and transparency.

In the areas of monitoring and reporting, activities under the Venture Capital Action Plan were properly monitored and reported within government, but little information was publicly shared. We also found that performance indicators were lacking, making it difficult to assess what benefit the Action Plan will ultimately bring for Canadians.

Report 2—Detecting and Preventing Fraud in the Citizenship Program

Let’s move on to the Citizenship Program. In this audit, we concluded that Immigration, Refugees and Citizenship Canada’s efforts to detect and prevent citizenship fraud were not adequate.

Some important controls designed to help citizenship officers identify fraud risks were inconsistently applied. Because of weaknesses in the Department’s database system, officers did not always have accurate or up-to-date information about addresses that were known or suspected to be associated with fraud.

For example, one address was not identified as a problem even though it had been used by 50 different applicants, 7 of whom were granted Canadian citizenship. In addition, even when information was available in the system, officers did not always act on it. The Department’s task is further complicated by poor information sharing with the RCMP and the Canada Border Services Agency.

We also found that Immigration, Refugees and Citizenship Canada did not have in place all the elements it needed to successfully manage fraud risks in the Citizenship Program. For example, the Department did not have in place a rigorous process to identify, understand and document the nature and scope of citizenship fraud risks. It also did not have a way to verify that existing measures to detect and prevent fraud were working as intended.

These gaps make it difficult for Immigration, Refugees and Citizenship Canada to assess the impact of its efforts to combat citizenship fraud and to ensure that it is focusing its efforts on the right areas.

Report 3—The Governor in Council Appointment Process in Administrative Tribunals

In the third audit we are presenting, we examined the process that is used to appoint the heads and members of administrative tribunals. This process is known as governor-in-council appointments.

Administrative tribunals regulate specific areas of the law or provide individuals with a way to appeal the government’s decisions, such as decisions about immigration status or First Nations’ claims.

Our Office last audited this area in 2009. At that time, we had found lengthy delays in some appointments.

In our most recent audit, we found that this problem persisted in some cases, and that these delays have impacted tribunals’ ability to make timely decisions.

For example, at the Immigration and Refugee Board of Canada, the average time to process immigration appeals has grown from 10 to 18 months since 2009. Given the importance of the work that these tribunals perform, these delays and the resulting backlogs are concerning.

We also found that while the selection processes for chairpersons and full-time appointees were open and transparent, there was no documentation to support several part-time appointments. In our view, without this type of documentation, it is not possible to demonstrate whether the process results in the appointment of individuals with the necessary expertise and skills.

Report 4—Drug Benefits—Veterans Affairs Canada

Our Spring reports also provide the results of our most recent audit of Veterans Affairs Canada. This audit focused on how the Department is managing drug benefits for veterans.

To recap our findings, Veterans Affairs Canada has not managed its drug benefits program in a way that considers the impact on veterans.

Veterans Affairs Canada’s decisions about which drugs to cover were poorly documented and not clearly based on evidence such as veterans’ needs, clinical research or cost-effectiveness. Where decisions were made, there were no timelines to implement them. In one case, a decision to limit access to a narcotic was still not implemented two years after it was made.

We found that while Veterans Affairs Canada used some cost-savings strategies to manage the cost of the drug benefits program—including substituting generics for name-brand drugs and negotiating reduced dispensing fees with pharmacies—it has not assessed whether these strategies are working as intended. That means that the Department does not know whether it is using the right strategies to prudently manage the taxpayer dollars that are used to fund veterans’ drug benefits.

We also found that while the Department monitored some high risk drugs, it has not adequately monitored drug use trends important to veterans’ health and the management of its program.

For example, the Department covers marijuana for medical purposes when authorized by a physician, but it does not monitor whether veterans using marijuana for medical purposes are also using drugs prescribed to treat conditions such as depression. Effective drug utilization monitoring can help improve health outcomes for veterans by flagging cases of higher risk prescription drug use.

Report 5—Canadian Army Reserve—National Defence

In another audit also linked to the military, we concluded that the number of soldiers in the Canadian Army Reserve has been shrinking, and that gaps in training mean that Reserve soldiers were not fully prepared to deploy on missions.

Reserve soldiers make up almost half of the Canadian Army’s complement, and they are expected to provide up to 20 percent of the soldiers deployed on major international missions.

We found that the Army Reserve lacked clear guidance on how to train for international missions. The Reserve did not have the number of soldiers it needed, and the Canadian Army lacked key information on whether the soldiers it did have were prepared to deploy when required.

There has been a steady decline in the number of Army Reserve soldiers because National Defence has been unable to recruit and retain the number of soldiers it needs.

For example, in 2014–15, the Canadian Army allocated funds for about 21,000 Army Reserve soldiers, but only some 14,000 were active and trained. Furthermore, in 2015 only about 3,600 attended their annual large-scale training events.

National Defence has recognized the need to improve its training for Army Reserve soldiers and to better integrate its part-time soldiers with their counterparts in the Regular Army.

Special Examination Reports

This brings me now to the final piece of our Spring reports to Parliament—the reports of our special examinations of PPP Canada Inc. and VIA Rail Canada Inc. These reports were issued to the corporations respectively in September 2015 and March 2016.

In the case of PPP Canada, we are satisfied that during the period under audit, the Corporation maintained the systems and practices we examined in a manner that provided it with reasonable assurance that its resources and activities were managed economically, efficiently and effectively.

In the case of VIA Rail, while we found strengths in the way the Corporation managed its operations, we did find a significant deficiency in the Corporation’s governance. We observed that for a number of years, VIA has received only short-term approval of its funding and corporate plan, and often late in the fiscal year. This makes it difficult for the Corporation to carry out its operations economically, efficiently and effectively.

Conclusion

Before taking your questions, I want to go back to my earlier remarks about data in government. Weaknesses in the way data is collected, used and shared within departments and organizations are having a direct and significant impact on the public service’s ability to serve and protect Canadians.

There is no shortage of examples, not just in these most recent audits but also in past ones, to warrant my concern about the way data is collected and used—or not—by government organizations.

In these audits, we have seen that serious consequences can arise when government data is either not useful, or not acted upon. In the Citizenship Program, such failings are limiting the effectiveness of efforts to combat citizenship fraud risks.

In National Defence, a lack of current data on human resources is keeping the Canadian Army from knowing whether Reserve soldiers are trained and ready to deploy, yet the Army relies on these soldiers to carry out its international missions.

In the case of Veterans Affairs Canada, the Department is not using the data it collects to better understand how its clients use drug benefits. This missed opportunity is not in the best interest of veterans, because data about drug utilization can be used to inform decisions about which drugs to cover for a particular individual.

I believe that government departments and organizations urgently need to turn their attention to this issue. They need to focus on collecting the right data to support their activities, on ensuring that data is well-managed and up-to-date, and on fully using this data not only to inform their core business, but also to support reporting and continuous improvement.

Mr. Chair, that concludes my opening statement. We will be happy to answer any questions you may have.