Report and Observations of the Auditor General on the 2014–15 Consolidated Financial Statements of the Government of Canada

Opening Statement to the Standing Committee on Public Accounts

Report and Observations of the Auditor General on the 2014–15 Consolidated Financial Statements of the Government of Canada

19 May 2016

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

Mr. Chair, thank you for the opportunity to discuss our audit of the consolidated financial statements of the Government of Canada for the 2014–15 fiscal year. I am accompanied today by Karen Hogan, Principal, who is responsible for the audit of the Government of Canada’s consolidated financial statements.

The audit of the Government of Canada’s consolidated financial statements is an important aspect of government accountability. It is the responsibility of the government to prepare the consolidated financial statements. It is our responsibility to express an opinion on whether these consolidated financial statements are fairly presented. The Comptroller General will address any questions related to the government’s consolidated financial statements. We will focus our comments on our audit opinion and our Observations.

The Public Accounts of Canada are tabled in three volumes. Our Independent Auditor’s Report and our Observations are contained in section 2 of volume I. Unless otherwise noted, the information in all other sections of this volume and the two other volumes is unaudited.

Our Independent Auditor’s Report on the 2014–15 consolidated financial statements can be found on page 2.4 in volume I of the Public Accounts. This marks the 17th consecutive year in which we have expressed an unmodified audit opinion.

For the year ending on 31 March 2015, the government adopted a new public sector accounting standard on liabilities for contaminated sites. Over the past few years, the government has started recording its liabilities for contaminated sites in anticipation of this new standard. Therefore, the adoption of the new standard did not increase the recorded liability but did result in more comprehensive note disclosures.

During the audit, and as we discussed in our Observations, we noted that the government has an extensive inventory listing of contaminated sites, and of possibly contaminated sites, which supports the estimated liability. We concluded that there was room for improvement in the timeliness and refinement of the estimation process for contaminated sites. Regular updates are required as sites are remediated, as changes in environmental standards emerge and as estimation techniques improve.

In addition, our Observations over the past several years have highlighted concerns about the financial reporting of inventories at National Defence. Although the Department continues to make progress on several initiatives to improve its financial reporting capabilities, we continue to find errors.

For 12 years, we have been reporting concerns about inventories at National Defence, which are significant to the government’s consolidated financial statements. This year, we noted a reduction in quantity errors, but we continued to find errors related to obsolescence and inaccurate pricing of inventory. We were pleased to see increased awareness of these issues and coordination by the Department’s senior managers, who are beginning to take the steps needed to implement improved financial management controls. Strong internal controls reduce the risks of misstating the consolidated financial statements and making decisions without accurate information.

The audit of the Government of Canada’s consolidated financial statements is a large and extremely important one for our Office. The time devoted to this audit is approximately 48,500 hours of work across several departments and agencies, which is carried out by more than half of our financial auditors. This work adds value by strengthening oversight, promoting transparency, and encouraging continuous improvement, all of which support the accountability relationships among departments and agencies and elected officials.

We thank the Comptroller General and his staff, and others in the departments, agencies, and Crown corporations who were involved with the preparation of these statements. A great deal of effort and work was required, and we appreciate the cooperation and assistance provided to us.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer the Committee’s questions.