2015–16 Performance Report and 2017–18 Departmental Plan of the Office of the Auditor General of Canada

Opening Statement to the Standing Committee on Public Accounts

2015–16 Performance Report and 2017–18 Departmental Plan of the Office of the Auditor General of Canada

5 April 2017

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

Mr. Chair, we are pleased to have this opportunity to discuss our Office’s 2015–16 Performance Report and our 2017–18 Departmental Plan. 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 territories, we provide 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. Our audits and our System of Quality Control are subject to internal practice reviews and independent external reviews to provide assurance that you can rely on the quality of our work.

In addition to our audit work, we help to advance legislative audit methodology, accounting and auditing standards, and best practices. We also work internationally to support projects funded by Global Affairs Canada, build professional capacities, share knowledge, and promote better-managed and accountable international institutions.

2015–16 Performance Report

As reflected in our financial statements, our net cost of operations was $90.7 million in the 2015–16 fiscal year, of which $13 million was services provided without charge by other government organizations. The balance was provided through the Main Estimates, including the $68.3 million that was approved under vote 1. We had a budget of 557 full-time equivalent employees, and employed the equivalent of 546 full-time employees.

With these resources, we delivered 88 financial audits, 4 special examinations, 17 performance audits, and the audit of senators’ expenses. This represents all planned audit work except for one special examination that we delayed.

In our 2015–16 Performance Report, we note that parliamentary committees reviewed 55 percent of our performance audits. This number represents an increase from 44 percent in the 2014–15 fiscal year, although it is below our target of 65 percent. In total, we participated in 20 parliamentary committee hearings and briefings on our audit work.

Audit committee chairs and senior managers of the organizations for which we perform financial statement audits continue to believe that our audits are understandable, fair, timely, and add value. For senior managers in the organizations that are the subject of our performance audits, results are below our target. To address the concerns they raised, we are now communicating our findings and recommendations earlier in the audit process.

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. Our 2015–16 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.

2017–18 Departmental Plan

Turning now to our 2017–18 Departmental Plan, our strategic framework identifies a number of client, operational, and people management objectives that we use to manage the Office and to direct our continuous improvement efforts. In the 2017–18 fiscal year, we will focus on the following three priorities.

First, to develop and maintain a skilled, engaged, and bilingual workforce, we will continue to support our senior audit managers as they adopt their new roles and responsibilities. We will closely monitor the development and execution of second-language learning plans, and employees’ professional development activities.

Second, we want to maximize the value and impact of our audit work. To do this, we will improve how we scope and report our special examinations. We will review some of our financial audits to ensure that we provide value as efficiently as possible. And we will focus on the financial control environment in government, particularly in our annual audit of the Government of Canada’s consolidated financial statements.

Third, to improve the governance and management of our Office, we will review the federal legislative, regulatory, and policy requirements to ensure we can demonstrate our compliance. We will also renew our information technology and physical security risk assessments.

For the 2017–18 fiscal year, the program expenditures of the Office of the Auditor General under vote 1, for this Committee to consider reporting to the House, is $68.3 million. Our planned number of full-time equivalent employees is 560. With the resources allotted to us, we expect to complete more than 85 financial audits, 24 performance audits, and 9 special examinations.

In conclusion, Mr. Chair, my staff and I look forward to continuing to serve Parliament 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 2015–16 Fiscal Year

Discussion of current results

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

Parliamentary feedback. Given the federal election in 2015, we did not survey parliamentarians; we wanted to give new members of Parliament time to become familiar with our mandate and work. However, we meet annually with the Standing Committee on Public Accounts to discuss our plans and review our performance.

Parliamentary engagement. When the Office and senior representatives of the organizations we audit appear before parliamentary committees, the value of our work increases. Parliamentary committees reviewed 55 percent of our reports that were presented to Parliament in the 2015–16 fiscal year. Though this result is below our target of 65 percent, it reflects an increase from 44 percent in the 2014–15 fiscal year and from 31 percent in the 2013–14 fiscal year.

In total, we participated in 20 parliamentary committee hearings and briefings on our audit work. The Standing Committee on Public Accounts—the primary client for our work—reviewed 47 percent of the reports that were referred to it. Both these results are similar to what we observed in the 2014–15 fiscal year, even though the 2015–16 fiscal year had fewer sitting days due to the 2015 general election.

Senior managers’ feedback. For responses from senior managers of organizations subject to performance audits, 68 percent either agreed or strongly agreed that our audit reports were understandable, timely, fair, and added value. This result is below our target of 80 percent, although higher than the 2014–15 result of 59 percent. While results for three of the five elements that make up this indicator were positive, senior managers provided the fewest positive responses on whether our audits focused on areas of significant risk (71 percent) and whether our audits were being reported objectively and fairly (58 percent). Respondents were most concerned that our audits focused on negative findings and did not include enough positive observations to provide balanced reporting.

Meeting statutory deadlines. Of the 59 financial audits and special examinations that were to be completed in the 2015–16 fiscal year, 52, or 88 percent, were completed on time. In all cases where statutory deadlines were not met, we encountered issues with client readiness.

Qualifications in financial audits. Three, or 50 percent, of the six qualifications and other matters in financial audit reports issued in the 2014–15 fiscal year were not addressed in the 2015–16 fiscal year. Of the two qualifications, one was non-compliance with authorities and involved the late tabling of an annual report, while the other concerned the audit entity’s inability to supply sufficient and appropriate audit evidence for inventory. The other matter that was not addressed related to the dissolution of an entity, for which no further action is required.

Follow-up in performance audits. The Office did not report any follow-up work in our performance audits tabled in the 2015–16 fiscal year.

Strategic Objective 4—Build and maintain relationships with parliamentarians and key stakeholders

Relationship expectations. In two of our three audit practices, we met our target for relationship management with senior managers in the organizations we audited. In our performance audit practice, responses to our post-audit surveys from senior management did not meet our target. An average of 74 percent of the responses either agreed or strongly agreed that we met senior managers’ relationship expectations. Senior managers provided the fewest positive results on whether they had a reasonable amount of time to comment on and respond to audit findings and recommendations, and whether auditors resolved issues and significant differences of views in a timely manner. To help identify and resolve differences of views earlier in an audit, we are working to improve our fact validation process with entities.

Strategic Objective 7—Ensure audit products comply with professional standards and Office policies in an economical manner

Completing work on budget. Seventy-four percent of the audits we completed in the 2015–16 fiscal year (83 of 112) were on budget. In our financial audit practice, where 24 audits were over budget, more than two thirds were as a result of client delays or capacity issues, and audit issues or unforeseen work. In 2 of the audits, we believe that staff turnover within our Office also had a significant impact. Two of our performance audits were over budget, including the audit of senators’ expenses, and one other where the large number of organizations added complexity and administrative delays. In our special examination practice, two examinations were over budget. In one case, we experienced turnover of the two senior auditors.

Strategic Objective 8—Ensure effective and efficient support services

Meeting service standards. We have defined many internal service standards, with certain key standards regularly reported to the Executive Committee. We did not meet one of our service standards for information technology as our document management system was unavailable for 24 hours during a major update. We also did not meet our service standard of no significant security breaches:

• Summary information was made public by a consultant engaged in the audit of the Canada Pension Plan Disability program prior to the tabling of the audit report in Parliament. An internal administrative investigation was conducted, which found that the consultant did not follow the terms and conditions of his contract. We have reviewed the process surrounding the return of audit documents that we discuss with our advisors.

Strategic Objective 9—Ensure effective, efficient, and accountable Office governance and management

Office governance. The Office participates in the Public Service Employee Survey every three years. The survey provides feedback from employees across a range of topics. The most recent survey was conducted in 2014, when an average of 77 percent of employees either agreed or strongly agreed with the statements that we monitor regarding Office governance and management. Employees provided the fewest positive responses on whether senior management made timely decisions and communicated effectively, and whether employees were comfortable initiating formal grievances or complaints. The Office has since implemented new senior management roles and responsibilities to improve decision making, and implemented changes to senior management communication tools and processes. The Office has also hired an external conflict resolution service provider, clarified the role of our internal Respectful Workplace Coordinator, and appointed a Respectful Workplace Champion.

Strategic Objective 11—Develop and maintain a skilled, engaged, and bilingual workforce

Bilingual workforce. Senior management and supervisors who work in designated bilingual regions of the country must demonstrate certain proficiency in reading, writing, and speaking in their second official language. While targets were met for reading and writing, approximately 20 percent of our senior management and supervisors still need to demonstrate their ability to speak in their second official language.