2014–15 Performance Report and 2016–17 Report on Plans and Priorities of the Office of the Auditor General of Canada

Opening Statement to the Standing Committee on Public Accounts

2014–15 Performance Report and 2016–17 Report on Plans and Priorities of the Office of the Auditor General of Canada

10 May 2016

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

Mr. Chair, we are pleased to have this opportunity to discuss our 2014–15 Performance Report and our 2016–17 Report on Plans and Priorities. With me today is Sylvain Ricard, Assistant Auditor General of Corporate Services and Chief Financial Officer; Susan Seally, Principal of Human Resources; and Ron Bergin, Principal of Strategic Planning.

As the legislative auditor of the federal government and the three northern territories, we support Parliament and territorial legislatures by providing independent and objective assurance, advice, and information about government financial statements and the management of government programs. The Commissioner of the Environment and Sustainable Development carries out our mandate related to the environment and sustainable development.

We conduct all of our audits in accordance with Canadian Auditing Standards. We subject our audits and our System of Quality Control to internal practice reviews, and to periodic external reviews, to provide assurance that you can rely on the quality of our work.

In addition to carrying out our audit work, we are engaged in the advancement of legislative audit methodology; accounting and auditing standards; and best practices. We also work internationally, supporting projects funded by Global Affairs Canada, sharing knowledge, building professional capacities, and promoting better-managed and accountable international institutions.

2014–15 Performance Report

As reflected in our financial statements, our net cost of operations was $92.4 million in the 2014–15 fiscal year, of which $77.7 million was provided through the main estimates. We had a budget of 565 full-time equivalent employees and employed the equivalent of 547 full-time employees.

With these resources, we delivered 87 financial audits, 3 special examinations, 25 performance audits, and 2 case reports under the Public Servants Disclosure Protection Act. This represents all planned audit work except for one performance audit, on sustainable development of commercial fisheries, which was cancelled.

Our 2014–15 Performance Report identifies several indicators of the impact of our work, along with measures of our operational performance, which are attached to this statement as Appendix A.

In monitoring the impact of our work, specifically the extent to which federal government organizations addressed the issues and concerns raised in our audits, our targets were met for special examinations and performance audits. Our target was not met for financial audits though the affected audits represent less than four percent of our total work.

In our 2014–15 Performance Report, we note that parliamentary committees reviewed 32 percent of our performance audits. This finding represents an increase from 24 percent in the 2013–14 fiscal year, although it is below our target of 65 percent. In total, we participated in 21 parliamentary committee hearings and briefings on our audit work.

Among senior managers of organizations subject to performance audits, 59 percent either “agreed” or “strongly agreed” that our audit reports were understandable and fair, and added value. This result was below our target of 80 percent, and below recent results, which ranged from 74 to 79 percent. Our analysis shows that most of the remaining respondents were neutral, neither agreeing nor disagreeing that our reports added value, and they identified no particular opportunities for improvement.

Our measures of organizational performance remained generally positive. In particular, our practice reviews, which serve as a key quality control in our audit methodology, found that our audit reports were appropriate and supported by proper evidence.

2016–17 Report on Plans and Priorities

Turning now to our 2016-17 Report on Plans and Priorities. Our strategic plan identifies a number of client, operational, and people management objectives that we use to manage the Office and direct our continuous improvement efforts. In the 2016–17 fiscal year, we will focus most of our improvement efforts on the following three priorities.

First, we will improve the governance and management of the Office through the implementation of new senior management roles and responsibilities, and improvements to our risk management procedures. These actions should lead to more streamlined decision making at the most appropriate level in the organization.

Second, to develop and maintain a skilled, engaged, and bilingual workforce, we will monitor employee participation in our required professional development program, develop and deliver empowerment workshops, and implement second-language learning plans. We are committed to providing our staff with the training and development opportunities they need, and to supporting them in meeting the language requirements of their positions.

Third, to meet our objective of ensuring that we continue to select audits that are likely to have significant impact and value, we will review our audit mandates and the allocation of our audit resources to focus on audits of greatest importance.

We are also reviewing the performance indicators that we use to manage the Office and to report to you on our performance. We expect to complete this work in the coming months. Tables containing our current performance measures are attached to this statement as Appendix B.

For the 2016–17 fiscal year, we are requesting parliamentary appropriations of $78.5 million in our main estimates. Our planned number of full-time equivalent employees is 570. With these resources, we expect to complete more than 85 financial audits, 24 performance audits, and 6 special examinations.

In conclusion, Mr. Chair, my staff and I look forward to continuing to provide you with products of the highest quality and value in the coming year. We thank you for your ongoing support of our work. We would be pleased to answer your questions.

Appendix A—Performance Measures and Results for the 2014–15 Fiscal Year

Performance indicators for which targets were not met or performance was not measured

The following discusses, by strategic objective, the performance indicators for which we did not meet our targets or, in one case, where we did not measure our performance.

Strategic Objective 2—Report what is working, areas for improvement, and recommendations in a manner that is understandable, timely, and fair, and adds value

Parliamentary feedback. We did not survey members of Parliament this year; therefore, we cannot report this assessment of the value of our work. However, we meet annually with the Standing Committee on Public Accounts to discuss our plans and review our performance. In our most recent meeting, the Chair of the Standing Committee provided the following endorsement of our work: “We want to reflect to you how much Canadian people appreciate and respect the work that your Office does and its importance.”

Parliamentary engagement. When we and senior representatives of the organizations we audit appear before parliamentary committees, the value of our work increases. In the 2014–15 fiscal year, Parliamentary committees reviewed 32 percent of our reports. This reflects an increase from 24 percent in the 2013–14 fiscal year and from 30 percent in the 2012–13 fiscal year, although it is below our target of 65 percent. In total, we participated in 21 parliamentary committee hearings and briefings on our audit work. The number of times we appeared before the Standing Committee on Public Accounts—the primary client for our work—increased noticeably compared with the previous two years.

Senior managers’ feedback. Among senior managers of organizations subject to performance audits, 59 percent either “agreed” or “strongly agreed” that our audit reports were understandable and fair, and added value. This result was below our target of 80 percent. Results for the past four years have ranged between 74 and 79 percent. While a review of individual responses indicates that this result is more neutral than negative, we are analyzing the responses in detail to understand what may have caused this change in perception, and whether action on our part is required.

For the three special examinations we completed this year, only one senior manager responded to our survey. The manager neither agreed nor disagreed that our examination added value.

Strategic Objective 3—Contribute to the development and adoption of professional standards and best practices

Adoption in financial audits. For our financial audits, we measure the adoption of professional standards and best practices by monitoring corrective action taken by the organizations we audit in response to qualifications and “other matters” contained in our audit reports. Our indicator is the percentage of qualifications and “other matters” that are addressed from one report to the next. Although we do not control whether organizations respond to our findings, our target is that they address them all.

In our financial audit reports, there are three possible types of qualifications: the financial statements are materially misstated (qualified opinion or adverse opinion); the auditors are unable to obtain sufficient appropriate audit evidence (qualified opinion or disclaimer of opinion); and the organization fails to comply with legislative authorities. Our reports may also include “other matters”—for example, comments concerning an organization’s financial sustainability or ability to fulfill its mandate.

Exhibit 11 summarizes the qualifications and “other matters” in the financial audit reports we issued in the 2013–14 fiscal year and whether or not they were addressed in the 2014–15 fiscal year.

Of the seven qualifications and “other matters” we reported in the 2013–14 fiscal year, one qualification was for an entity that has since been dissolved by the government. Three of six remaining qualifications and “other matters” (50 percent) were addressed in the 2014–15 fiscal year, compared with two of five remaining qualifications and “other matters” (40 percent) addressed in the 2013–14 fiscal year. The three qualifications that were not addressed arose in the territories. Two were matters of non-compliance with authorities and involved the late tabling of annual reports or financial statements. The third qualification concerned the audit entity’s inability to supply sufficient and appropriate audit evidence for inventory. The audit entity expects to have inventory recorded for all sites within two years.

Appendix B—Performance Measures for the 2016–17 Fiscal Year

Internal perspective

Seven of the objectives in our strategic framework focus on our internal processes and long-term learning and growth as an organization. Exhibit 11 summarizes the indicators for monitoring the achievement of these objectives.