Report of the Joint Auditors to the Board of Directors of Canada Mortgage and Housing Corporation—Special Examination—2018
Opening Statement to the Standing Committee on Public Accounts
Report of the Joint Auditors to the Board of Directors of Canada Mortgage and Housing Corporation—Special Examination—2018
30 April 2019
Clyde MacLellan, Fellow Chartered Professional AccountantFCPA, Fellow Chartered AccountantFCA
Assistant Auditor General
Mr. Chair, thank you for this opportunity to discuss our special examination report on the Canada Mortgage and Housing Corporation. I am accompanied today by Lissa Lamarche, Assistant Auditor General, who was the Principal responsible for this audit at the time of the report. Because this audit was done jointly with Ernst & Young, we are also accompanied by Michel Bergeron, a partner with the firm.
As you know, in a special examination, we seek to determine whether the Crown corporation’s systems and practices provide reasonable assurance that its assets are safeguarded and controlled, its resources are managed economically and efficiently, and its operations are carried out effectively.
Our examination covered the period from March to December 2017.
Overall, we found that the Corporation had in place good corporate management practices. However, we identified a significant deficiency in the Board of Directors’ complement and the related impact on Board oversight. Specifically, we found that 4 of the 12 Board positions were vacant, which left gaps in the competencies and diversity of the Board and hindered the effectiveness of its oversight.
This deficiency matters because an incomplete Board of Directors with competency gaps could compromise the Board’s ability to effectively oversee the Corporation. Given the complexity of the multiple transformation initiatives under way and their significance to the Corporation’s operations, adequate oversight and competencies were critical. In December 2017, a number of appointments to the Board were announced.
We also found good strategic planning, performance measurement, and risk management practices, but there was room for improvement in the Corporation’s capital management and stress-testing practices. We noted that the Corporation did not quantify the impacts of all material risks to ensure that sufficient capital was earmarked for these risks, and that it did not perform ad hoc stress testing to further explore its vulnerabilities.
These weaknesses matter because determining the level of capital the Corporation needs to address all significant risks helps mitigate financial risks to the Government of Canada and to the Canadian taxpayer. Furthermore, without the additional ad hoc stress testing, the Corporation could not explore its hidden vulnerabilities and inform senior management and the Board about potentially harmful scenarios.
We found that the Corporation had in place good practices for its mortgage loan insurance, securitization, and assisted housing activities. Specifically, the Corporation planned these activities, implemented them effectively, and monitored and reported on them. However, we noted weaknesses that were related to the significant organizational transformation initiatives under way—particularly in the integrated management of the technological and non‑technological transformation initiatives, and in the identification and monitoring of performance metrics at the individual project level.
These weaknesses matter because for a large-scale, complex transformation program, managing all transformation initiatives together ensures proper integration of project interdependencies and facilitates change management and risk management. In addition, without clearly defining and documenting objectives, outcomes, performance metrics, and expected benefits, the Corporation may not have been able to assess whether expected benefits were achieved once the projects were completed.
The Corporation agreed with all of our recommendations and prepared an action plan in response to our concerns. However, because our audit work was completed in December 2017, I cannot comment on any measures the Corporation has taken since then. The Committee may wish to ask the Corporation’s officials to clarify what measures it has taken in response to our recommendations.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the Committee may have. Thank you.