2017–18 Departmental Results Report and 2019–20 Departmental Plan of the Office of the Auditor General of Canada

Opening Statement to the Standing Committee on Public Accounts

2017–18 Departmental Results Report and 2019–20 Departmental Plan of the Office of the Auditor General of Canada

14 May 2019

Sylvain Ricard, Chartered Professional AccountantCPA, Chartered AccountantCA
Interim Auditor General of Canada

Mr. Chair, we are pleased to have this opportunity to discuss our 2017–18 Departmental Results Report and our 2019–20 Departmental Plan. With me today are Andrew Hayes, Deputy Auditor General; Lucie Cardinal, Assistant Auditor General of Corporate Services and Chief Financial Officer; Kim Leblanc, Principal of Human Resources; and Ron Bergin, Principal of Strategic Planning.

The Office of the Auditor General of Canada supports Parliament and territorial legislatures by providing independent and objective information, advice, and assurance 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 to independent external reviews to provide assurance that you can rely on the quality of our work.

We also help to advance legislative audit methodology and accounting and auditing standards, and we work internationally to build audit capacity and to promote better-managed and accountable international institutions.

2017–18 Departmental Results Report

Let me turn first to our 2017–18 Results Report. As shown in our financial statements, our net cost of operations was $94.2 million, and we employed the equivalent of 568 full-time employees.

With these resources, we delivered 90 financial audits, 6 special examinations, 19 performance audits, and our first annual commentary report on our financial audits. The Commissioner of the Environment and Sustainable Development also published a collaborative report on climate change, working with provincial auditors general, and delivered a review of departmental progress in implementing sustainable development strategies and our annual report on environmental petitions.

This represents all planned audit work except for our cancelled performance audits on federal science programs and on infrastructure on reserves; and our performance audit on federal scientific facilities where, instead of a tabled audit report, we issued a management letter at the conclusion of the audit.

In our Results Report, we note that parliamentary committees reviewed 88% of the reports we presented to Parliament in the 2017–18 fiscal year. This represents an increase from 72% in the 2016–17 fiscal year. In total, we participated in 52 parliamentary hearings and briefings on our audit work.

The mission of the Office of the Auditor General of Canada is to contribute to well-managed and accountable government for Canadians. To assess this, we measure whether all of our audit opinions on financial statements are unqualified, and whether all of our special examination reports identify no significant deficiencies. In the 2017–18 fiscal year, we issued unqualified opinions on all but 2 (or 95%) of the financial statements we audited. In both cases, we are working with the organizations to address the issues we identified and can inform you that in one of those cases, we have since been able to issue an unqualified audit opinion.

For all 6 of the special examinations of Crown corporations that we reported in the 2017–18 fiscal year, we identified significant deficiencies. In addition to making recommendations to the corporations, we have since issued our first commentary report on these audits to bring our concerns to the attention of Parliament. With the help of this Committee, we are seeking to improve the management systems, practices, and controls in these corporations, particularly in areas that need government support to resolve the problems.

Our assessment of our own organizational performance was generally positive with no significant opportunities for improvement identified. In particular, in our internal practice reviews, which serve as a key quality control in our audit methodology, the reviewers found that our audit reports were appropriate and supported by proper evidence. Our 2017–18 Results Report includes several indicators of the impact of our work, along with measures of our operational performance, which are provided in an appendix to this statement.

2019–20 Departmental Plan

Let me turn now to our 2019–20 Departmental Plan. The Office of the Auditor General is funded through various appropriations and transfers. For the 2019–20 fiscal year, the program expenditures of the Office of the Auditor General under vote 1 of the Main Estimates, for this Committee to consider reporting to the House of Commons is $78 million. Our planned number of full-time equivalent employees is 580.

Our strategic framework 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 2019–20 fiscal year, we will focus most of our efforts on the following 3 objectives.

First, to ensure that we are financially well managed, we need to address the financial challenges that we are facing. Although the 2018 federal budget provided us with some new ongoing funding, we did not get any of the new funding that we requested in the 2019 federal budget. We are continuing to explore our options to ensure that we are properly funded and accountable only to Parliament. In the near term, we have no choice but to decrease the number of performance audits that we conduct.

Second, to develop and maintain a skilled and engaged workforce, we will better match our audit and support service requirements with the human resources we have available to do the work. We will continue to defer certain audit-related work where we can. We will also defer a number of projects in our support services.

Third, to ensure effective, efficient, and accountable Office governance and management, we will continue to enhance our information technology security controls. We also need to renew the information technologyIT infrastructure that supports our audits, and we have begun to implement a multi-year plan based on the resources that we have available. In the 2019–20 fiscal year, we will complete the replacement of our human resource management system and begin to replace our audit management software.

In conclusion, Mr. Chair, the Office of the auditor General thanks you for your ongoing support and use of our work. We look forward to continuing to serve you in the coming year. We would be pleased to answer your questions.

Appendix

Audit operations

We use the first 6 of our strategic objectives to guide and monitor our audit operations (Exhibit 3).

The following results focus on the objectives for which we did not meet our targets.

Improving results in areas we have audited (Strategic objective 1)

We issued unqualified opinions on 95% of the financial statements that we audited in the 2017–18 fiscal year. Our target was 100%. We issued qualified opinions for the audits of two entities—the Nunavut Housing Corporation and Qulliq Energy Corporation—because of our inability to obtain sufficient, appropriate evidence to conduct audit work on the valuation of inventory at these entities. We have been working with senior management at the Nunavut Housing Corporation and are satisfied that the issue is being resolved. We have had discussions with the Legislative Assembly of Nunavut’s Standing Committee on Oversight of Government Operations and Public Accounts, and the responsible minister, about the Qulliq Energy Corporation to raise awareness and understanding of the issue that we found in that organization.

We were also not able to do an audit of National Defence’s Reserve Force Pension Plan in the 2017–18 fiscal year because of the long-standing problem of getting appropriate audit evidence to support the pension benefit obligation.

In the 2016–17 fiscal year, we issued two qualifications in our financial audit opinions, for the Nunavut Housing Corporation and Qulliq Energy Corporation. Neither audited entity addressed the qualifications in the 2017–18 fiscal year.

For all 6 of the special examinations of Crown corporations that we reported, we identified significant deficiencies. Again, our target was 100%. In addition to making recommendations to the management of the corporations, we have since issued our first commentary report on these performance audits of Crown corporations to bring our concerns to the attention of Parliament. With the help of the House of Commons Standing Committee on Public Accounts, we are seeking to improve the results achieved by these corporations, particularly in areas that need government support to resolve the problem.

Providing value to our clients and those we audit (Strategic objective 1)

We survey our clients and senior management in the organizations that we audit following each audit that we conduct to understand their assessments of our work: Is it understandable, timely, and fair, and does it add value? We did not meet our target of 80% for responses from senior management (our result was 75%).

Although responses from senior managers in organizations subject to a financial audit showed that over 80% found our work to be understandable, timely, fair, and adding value, only 60% of senior managers in Crown corporations subject to a special examination felt the same way. For senior managers in organizations subject to performance audits, the result was 50%.

Senior managers in the organizations subject to special examinations and to performance audits noted a variety of concerns in their comments. With respect to special examinations, concerns included the time required to conduct the examination, the difficulty of sharing documents, and the need for improving our reporting format. With respect to performance audits, concerns included the challenge of defining the audit scope, the difficulty of sharing drafts of our reports, and the duplication of requests for information. However, in both groups, there was no discernible pattern to these comments that indicated a consistent issue.

Selection and continuance of audit products (Strategic objective 4)

This strategic objective is about the long-term development of the Office’s mandate and products. Though there is no performance indicator that we measure and monitor annually, we review developments in the federal government and in the accounting and auditing professions to determine whether we need to make changes to our product and service offerings. In the 2017–18 fiscal year, we began to better integrate measures of end results into our performance audits and to prepare a follow-up report to Parliament on what progress federal organizations had made to improve end results in areas that we have audited. Through this new report, we expect to better communicate the results that the government delivers to Canadians in areas that we have audited.

Office administration

The last 5 of our strategic objectives are used to guide and monitor our Office administration (Exhibit 4).

We note the following results for these objectives.

Advancing our strategic priority projects (Strategic objective 9)

Although we completed most of the projects under our strategic priorities in the 2017–18 fiscal year, some projects were not completed until later in 2018. Our target is to complete all of these projects within the year. In our performance audit practice, we are working to enhance our reporting on the end results achieved by federal organizations in areas that we have audited. In May 2018, we completed a guidance document to assist our auditors in taking a common and systematic approach to integrating the measures of end results into the planning, conducting, and reporting of all performance audits. We are also still developing our first follow-up report on the results of measures, which we plan to publish in the fall of 2019.

We completed phase one of our compliance review in the 2017–18 fiscal year and will be building ongoing monitoring and oversight of our compliance requirements into our annual risk assessment process beginning in 2018.

We completed the efficiency review of our performance audit methodology, with the resulting recommendations being approved in March 2018. Integrating the recommended changes into our audit methodology will occur as part of our fall 2018 annual methodology update.

We also completed changes to the way that we conduct and report special examinations.

Office governance and management (Strategic objective 9)

We survey our employees to understand their assessment of how we govern and manage the Office. Our target is that 85% of their responses indicate that they strongly or somewhat agree that the Office is well managed and governed. The result for this year was 78%. In their responses, our employees told us that while they are highly satisfied with the leadership provided by their immediate supervisor, senior management could improve their communication and do a better job of leading by example. The Office’s Executive Committee is working on solutions to issues raised.

Service standards not met (Strategic objective 8)

We monitor a number of service standards across the Office. We did not meet two of our targets.

First, we responded to priority 1 information technology (IT) incidents in less than four hours in 50% of cases (one of two situations). Our target was 100%. In the second situation, which involved proprietary software, we were dependent on the software owner for a solution.

Second, although our target is to have no security breaches, we experienced seven security breaches in the 2017–18 fiscal year. In all cases, it was determined that the Office properly mitigated and resolved the incidents.