PACP Committee Report

Each spring, departments table annual Reports on Plans and Priorities (also known as RPPs) in order to explain how they intend to use the funds voted to them by Parliament for the coming fiscal year. The RPP for the Office of the Auditor General (OAG) contains numerous performance indicators and targets that the OAG uses to track how well it is doing. Due to the change in government, the 2006-07 RPPs were not tabled until 26 September 2006.

Each fall, departments table annual Departmental Performance Reports (or DPRs) that are intended to demonstrate the results they have achieved with the funds that Parliament provided in the previous fiscal year. The OAG’s departmental performance report demonstrates how it is doing against the performance targets set out in its RPP.

The Standing Committee on Public Accounts has a mandate to review the report on plans and priorities and the performance report of the Office of the Auditor General. The Committee has made a regular practice of reviewing these documents because the Committee has an important role to play in holding the Auditor General and her Office to account for their performance on behalf of Parliament and the citizens of Canada.

The Committee met on 5 February 2007 to discuss the 2005-06 Departmental Performance Report and the 2006-07 Report on Plans and Priorities of the Office of the Auditor General of Canada. The Committee met with: Sheila Fraser, Auditor General of Canada; Rick Smith, Assistant Auditor General; John Wiersema, Deputy Auditor General; and Jean Landry, Acting Comptroller.

The Committee is very pleased with the performance of the Office of the Auditor General and its planned future activities. Parliamentarians and Canadians value highly the hard work of the Auditor General and her dedicated staff, who rightfully feel proud to work for the OAG. The OAG performs a vital function in helping Parliament hold the government to account for good governance and efficient, economical, and effective management.

The Committee is always impressed with what the OAG manages to accomplish in a year. In 2005-06 the OAG tabled 18 performance audits in Parliament; conducted more than 100 audits of financial statements, including those of the Government of Canada, Crown Corporations, and territorial governments; presented 11 special examinations to the boards of Crown Corporations; made 22 appearances before parliamentary committees; and examined the progress of 13 federal organizations in meeting 25 commitments in their sustainable development strategies.

One area of concern in the performance of the OAG is the percentage of recommendations that have been implemented four years after their publication, which was 44% in 2005-06 and essentially unchanged from the previous two years. The Auditor General indicated that her office is trying to improve this number by updating the guidance provided to performance auditors on making recommendations and re-auditing areas to call attention to whether progress is being made or not. However, the OAG can not be held responsible for the low level of recommendation implementation as this is primarily the responsibility of departments, but the departments that are unable or unwilling to implement the OAG’s recommendations do not receive any public attention or Parliamentary censure. In order to push departments to be more proactive in implementing recommendations, it is necessary to focus attention upon the laggards. The Committee recommends that:

Recommendation 1

The Office of the Auditor General publishes in its annual departmental performance report the percentage of recommendations implemented by individual departments.

The Auditor General informed the Committee that Treasury Board Secretariat had begun a review to see why the implementation rate is so low; however, it would appear that this review was discontinued. The Committee believes that a review by the government would be very useful and is disappointed that it was stopped. The Committee recommends that:

Recommendation 2

The Treasury Board Secretariat recommences its review of the implementation level of recommendations of the Office of the Auditor General of Canada and provides the results to the Public Accounts Committee upon completion.

The Committee has commented in the past that having Treasury Board Secretariat review and approve applications by the OAG for additional funding did not provide sufficient independence to the OAG, and created a possible conflict, as the OAG audits Treasury Board Secretariat. In response to the concerns of the Auditor General and other Officers of Parliament, the Advisory Panel on the Funding and Oversight of Officers of Parliament was created. This panel advises the Speaker of the House who then makes a recommendation to the President of the Treasury Board.

The Auditor General appeared before this Panel on 23 November 2006 to request an additional $4 million per year and another $2 million for an information technology project. Apart from this request, the Auditor General told the Committee that her office has sufficient resources; although, the OAG may need more resources in order to conduct annual audits of the financial statements of the 22 largest departments and agencies in 2009. The Committee has previously recommended that the Treasury Board be forthcoming with the necessary resources as the need arises.

While a new funding mechanism has been put in place, the OAG still has another issue of independence from the Treasury Board. While the Auditor General is an Officer of Parliament and the OAG is a separate agency, it still operates under the mandate of Treasury Board, which is the employer for the public service. The OAG’s lack of independence with respect to human resources issues became clear when in October 2006, the Treasury Board Secretariat intervened to deny a tentative agreement between the OAG and the Public Service Alliance of Canada over the adjustment of the pay scale for one classification of audit services employees, which would have resulted in a cost of approximately $80,000. The Treasury Board Secretariat says this was because the OAG exceeded its bargaining mandate, while the OAG disputes this interpretation of events. Nonetheless, this isn’t the first time that Treasury Board Secretariat interfered with the collective bargaining process, as the Board also rejected a previous tentative agreement at the OAG in the spring of 2004.

The Auditor General told the Committee of her frustration of having a negotiated agreement denied:

This is a very frustrating situation for us. I even think that it could affect the office's independence. The Treasury Board of Canada Secretariat gave us the mandate to negotiate with our employees. At the office, there are two unionized groups. We negotiated with them in good faith and we reached an agreement. Now the secretariat refused to approve it, and frankly, I find this unacceptable. We want to solve this problem with the secretariat and to reach a clear understanding of future procedures. They could give us a general mandate or envelope, but they should then honour the agreement.^[1]

The Committee couldn’t agree more. The Committee believes that the collective bargaining process is fundamentally important and must be respected. The OAG needs to have the independence to engage in collective bargaining agreements with its employees without fear that they will be denied by the Treasury Board Secretariat. Hence, the Committee recommends that:

Recommendation 3

As the Auditor General is an independent officer of Parliament, the Treasury Board Secretariat establishes a clear bargaining mandate and envelope, and that the Office of the Auditor General is permitted to negotiate with its union bargaining units independently and without interference within this mandate and envelope through the collective bargaining process.

If this problem cannot be satisfactorily resolved, the Auditor General may wish to take the issue up with the Parliamentary Advisory Panel on Funding and Oversight of Officers of Parliament.

In 1994, the Treasury Board Secretariat began to consult with parliamentarians about its Improved Reporting to Parliament project. As a result of this project, in 1997, the Part IIIs of the Estimates were divided into reports on plans and priorities and departmental performance reports. The goal was to provide improved expenditure management documents that would help parliamentarians assess departmental plans and priorities for upcoming fiscal years as well as departmental performance over the previous year.

However, ten years after the project began, the Public Accounts Committee is quite dissatisfied with the quality of departmental performance reports (DPRs), which some call “self-serving fluff.” Rather than setting out clear objectives and performance targets in their reports on plans and priorities, and then subsequently providing results-based performance information in their performance reports, departments provide glowing accounts of their accomplishments, which is not backed up by any credible or balanced data.

The Public Accounts Committee repeatedly makes recommendations with respect to including specific information in performance reports, and recommended in 2003 that the Treasury Board Secretariat monitor departmental performance reports to ensure adherence to its guidance.^[2] The Office of the Auditor General has conducted reviews of specific performance reports, with the most recent audit in the April 2005 report—Rating Selected Departmental Performance Reports. By looking at three performance reports, this audit concluded that reported results are not always balanced and supported by data sources and data limitations. As well, the reports provide little evidence that performance information is used to make decisions about improving program results in future years.

Despite 10 years of experience, reviews by the Auditor General, and comments by the Public Accounts Committee, departmental performance reports are not adequately fulfilling their purpose. The Committee believes that it is time to review the performance reports to see how they can better meet the needs of parliamentarians and function as true accountability documents. Such a review must be a combined effort between the Treasury Board Secretariat and Parliament, because the documents must meet the needs of Parliamentarians under the guidance provided to departments by Treasury Board Secretariat. This could take the form of consultations between Treasury Board Secretariat and individual parliamentarians, a special committee created for this purpose, or interested committees of the House of Commons and the Senate. The Committee recommends that:

Recommendation 4

The Treasury Board Secretariat works with Parliamentarians and Committees of the House of Commons and Senate to improve departmental performance reports before the next round of performance reports.

The OAG notes that its employees have a very high level of satisfaction—82%, and 92% are proud to work for the OAG. As impressive as these numbers are, retention of employees appears to be an issue at the OAG as the percentage turnover of audit professionals in 2005-06 was 14.7%. The Auditor General told the Committee that this was in part caused by competition for its highly regarded employees by government departments and the private sector. In addition, the OAG faces increased retirements and a shortage of available people, especially in the accounting field, for recruitment purposes.

A high rate of turnover is of particular concern because it can cause audits to be delayed and over budget as new employees have to be trained and restart some of the work of departing employees. The Auditor General told the committee that just over half of the special examinations completed in the current round were transmitted more than a month after the statutory date. The problem of recruiting and retaining trained audit professionals is likely to be further exacerbated as increased demands are placed on the OAG with the requirement to audit departmental financial statements in 2009 and the expansion of the OAG’s audit mandate in the Federal Accountability Act. The Committee is concerned that recruitment and retention does not interfere with the OAG’s ability to maintain its high degree of excellence in serving Parliament and Canadians. The Committee is confident that the OAG can meet this challenge, but it will continue to monitor the situation.

Based in part on a request from the Public Accounts Committee, the OAG recently undertook a review of its report schedule. The OAG is proposing to issue three reports a year: a Fall Report in late October, a Status Report in mid-February and a Spring Report in late April or Early May. The Commissioner of the Environment and Sustainable Development’s annual report would contain reports on environmental petitions and sustainable development strategies and would be included in the Fall Report. Performance audits on environment and sustainable development issues would be included in all three reports and would be automatically referred to the Public Accounts Committee.

When the position of the Commissioner of the Environment and Sustainable Development was first established, the performance audits were referred to the Public Accounts Committee. However, the Committee did not find that this practice worked well. Consequently, the Committee hopes that the Auditor General would undertake further consultations before making any final decisions on its reporting strategy.

The Public Accounts Committee continues to be very satisfied with the work of the Office of the Auditor General, which performs a vital and indispensable role. The OAG’s budget of approximately $85 million is a small fraction of the government’s overall expenditures of over $200 billion. There is little doubt that the OAG represents good value for money in that it operates economically and efficiently and has saved the government, and the taxpayers that support it, considerable sums of money.

The Committee is concerned that the independence of the OAG is threatened by the intervention of Treasury Board Secretariat in the collective bargaining process, and departments and agencies do not appear to be doing everything possible to implement the OAG’s recommendations. The OAG can only be truly effective if it is fully independent of government, and departments and agencies are committed to making the necessary management improvements to provide efficient, economical, and effective governance for Canadians.