As part of the estimates process, federal departments and agencies
prepare and present to Parliament reports on plans and priorities and
departmental performance reports. Reports on plans and priorities outline an organization’s priorities, its planned allocation of
financial and human resources, as well as the expected results of its
activities and performance indicators to determine whether the results have
been achieved. Performance reports provide information about what resources
were used during the fiscal year and what results were achieved in comparison
to the targets outlined in the corresponding reports on plans and priorities.
As the House of Commons Standing Committee on
Public Accounts (the Committee) has a role to play on behalf of Parliament and
Canadians in holding the Office of the Auditor General of Canada (OAG) to
account for its past performance and future plans, it reviews the OAG’s
departmental performance report and its report on plans and priorities in
conjunction with its consideration of the OAG’s main estimates.
The Committee held a hearing on the OAG’s 2015–2016 Main Estimates,
2013–2014 Departmental Performance Report[1] and 2015–2016 Report on Plans and Priorities[2] on 4 May 2015.[3] The Committee met with Michael Ferguson, Auditor General of
Canada; Sylvain Ricard, Assistant Auditor General,
Corporate Services and Chief Financial Officer; Lucie
Cardinal, Comptroller; and Kimberly Leblanc, Director,
Human Resources Services. The Committee presented its report on the
2015–2016 Main Estimates to the House of Commons on 11 May 2015.[4] This report represents the
Committee’s observations on the OAG’s departmental performance report and its
report on plans and priorities.
According to its 2013–2014 Departmental Performance Report, the OAG
accomplished the following activities during 2013–2014:
- 29 performance audits and 1 study;
- 100 financial audits; and
- 2 special examinations.[5]
The departmental performance report summarized some of the OAG’s
results during the year:
- In its follow-up performance audits, the OAG found that
departments had made satisfactory progress in addressing five of the ten
recommendations reviewed;
- Of the five qualifications identified in financial audit reports
issued in 2012–2013, two were addressed in 2013–2014. Of the three
qualifications not addressed, two were for late filing of annual reports or
financial statements and one was for the inability to obtain sufficient audit
evidence for inventory;
- For one of the two special examinations of Crown corporations
completed during the year, there had been a significant deficiency in the
previous examination, which had been addressed; and
- In 2013–2014, the OAG participated in 23 committee hearings and
briefings, down from 27 in 2012–2013. The percentage of performance audits
reviewed by parliamentary committees decreased from 30% to 21%, but the number
of times the OAG appeared before the Committee was consistent with previous
years.
The report also noted a couple of areas for improvement:
- The OAG did not meet its target of having 80% of performance
audits and 80% of special examinations completed within their budgets; instead,
73% of performance audits were completed within their budgets and 50% (one of
two) special examinations were completed within their budgets; and
- The OAG’s practice reviews identified
a need to improve the documentation of the nature and extent of oversight
by senior auditors.[6]
Periodically, the OAG follows up on whether departments and
agencies have made progress in implementing recommendations made by the OAG in
previous audits. When asked about the fact that the OAG determined in 2013–2014
that departments had made satisfactory progress in addressing only five of the
ten recommendations followed up, Michael Ferguson, Auditor General of Canada,
described the recommendations: two of the recommendations were from a follow-up
audit on internal controls over financial reporting, one recommendation
pertained to monitoring lookouts in an audit on preventing illegal entry into
Canada, and two recommendations related to an audit by the Commissioner of the
Environment and Sustainable Development on the ecological integrity of national
parks.[7] Mr. Ferguson said that the OAG’s target of having satisfactory progress for 75%
of recommendations followed up is based on a recognition that it occasionally
takes a few years for departments to put in place improvements to deal with the
recommendations.[8]
Mr. Ferguson provided some advice to the Committee when selecting
audits. He said, “When the committee is choosing which audits to have hearings
on, it is very important to consider whether any follow-up audit we have done
has shown that a department's progress in complying with the recommendations
has been unsatisfactory.”[9] He also observed:
One message that has been very helpful to us,
coming from this committee, is the message to departments that you don't want
to be coming back to the public accounts committee talking about
recommendations you said you were going to fix. We have repeated the message to
departments fairly often over the last couple of years, and reiterated from
this committee, that it's expected they will follow up, they will meet their
commitments, and they will bring forward action plans. Those things, being a
very clear message from this committee, are very helpful to us as we go about
the work on follow-ups.[10]
The OAG believes that its appearances before parliamentary
committees help parliamentarians in fulfilling their oversight role and provide
the OAG the opportunity to increase awareness and understanding of the issues
raised in its reports.[11] The OAG has a target of having 65% of its performance audits reviewed by
parliamentary committees. According to further information provided to the
Committee by the OAG, the OAG produced 23 performance audit chapters in
2011–2012, 23 chapters in 2012–2013 and 29 chapters in 2013–2014.[12] Mr. Ferguson listed the
percentages of performance audits reviewed by parliamentary committees over the
past number of years, stating, “in 2008-09, it was at 57%; in 2009-10, 68%; in
2010-11, 62%; and then 48% [in 2011-2012], 30% [in 2012-2013], and 24% [in
2013-2014].”[13] He observed that the target had been set when the result was in the 50% to 60% range.[14] In response to the overall
trend of a declining percentage of performance audits being reviewed by
parliamentary committees, Mr. Ferguson asked, rhetorically, “Does it mean
that we are producing reports that are of less interest to parliamentary committees?
Does it mean that we are producing more reports than the committees can
handle?”[15]
With respect to the 2013–2014 result, Mr. Ferguson said that there
were 14 hearings and briefings with the Committee,[16] and, according to further
information provided by the OAG, three hearings and briefings were held with
Senate committees and six with other House of Commons committees.[17] He also commented that
while the number of appearances before the Committee was not exactly the same
as previous years, it was essentially the same, or consistent, with the
previous two years.[18] In 2014–2015, the Committee met with officials from the OAG on 14 occasions.
When asked whether audits that were not studied by the Committee
were any less valid, Mr. Ferguson replied:
We present the report to the departments, present
the recommendations to the departments, and get the response of departments as
well as their action plan. Of course all of that happens. Our job, however, is
to report to Parliament, so we do present the reports to Parliament. Obviously
when I present reports, such as for example, the recent spring report, there's
a hearing and there's an opportunity there for the committee to ask questions
about every one of the audits that has been put in place. But that's not the
same as the opportunity to have a full hearing on a report, and to include
departmental representation at the hearing.
There is still a lot of value, obviously, in the
audits that we do, even without a hearing, but I think we maximize the value of
those audits by fulfilling that part of our role, which is to report to
Parliament and to help Parliament understand, through committees, the
significance of what we have found, and to give Parliament the opportunity to
hear the perspective of the departments we have audited with regard to those
audits. So I think there's more value from the audits when we have a hearing.[19]
As outlined in its 2015–2016 Report on Plans and Priorities,
the OAG identified three strategic objectives as priority areas for improvement
in 2015–2016:
- ensuring effective, efficient and accountable governance and
management;
- developing and maintaining a skilled, engaged and bilingual
workforce; and
- ensuring a culture of empowerment.
- In order to meet these objectives, the OAG plans to:
- move to a smaller executive committee;
- define new senior management roles and responsibilities;
- redefine desired outcomes and measures with regard to maintaining
a skilled, engaged and bilingual workforce;
- assess the degree to which employees feel empowered to do their
work; and
- develop plans to address any issues arising from the research on
empowerment.[20]
In 2015–2016, the OAG plans to complete:
- 21 federal and territorial performance audits;
- 95 financial audits;
- 5 special examinations; and
- an audit of senators’ expenses.[21]
Mr. Ferguson told the Committee that in order to identify its
strategic objectives, the OAG went through a strategic planning exercise using
a balanced-scorecard approach, looking at the office from customer, financial,
internal, and learning and growth perspectives, which led to the identification
of 12 strategic objectives.[22] As the OAG can’t work on all of the objectives every year, the OAG prioritized
three objectives and associated activities for 2015–2016, and a project
management group is monitoring progress on each of the objectives.[23]
With respect to the OAG’s plan to define new senior management
roles and responsibilities, Mr. Ferguson explained that the OAG is “making sure
that the decision-making authority within the organization is done at the level
of people with the skill and the experience to make those decisions.”[24] The OAG will be reducing
its executive group from 16 to nine, and in doing so, it will be making
assistant auditors general more strategic-oriented about what the OAG should be
doing and principals will be responsible for delivering audit products.[25]
When asked about training and development, including official
language training, Mr. Ferguson commented that in order to deliver its mandate,
the OAG needs to ensure that its employees have the necessary professional and
linguistic competencies.[26] The OAG is currently undertaking an exercise of determining where training gaps
exist and updating its official languages strategy to support its staff in
maintaining or obtaining their language skill level.[27]
Mr. Ferguson also told the Committee that the OAG is working to
make its performance audits more accessible and clearer to readers by changing
the format of the reports to focus on audit findings.[28] The result will be audits
that are more “information dense.” Additionally, the OAG is developing a report
that will help parliamentarians understand its work on financial statement
audits. The report will communicate the results of the OAG’s financial audit
practice as a whole.[29]
As part of the 2015–2016 Main Estimates, the OAG is requesting a
parliamentary appropriation of $78.3 million, and it will have the equivalent
of 557 full-time employees.[30] Mr. Ferguson indicated that about half of the OAG’s budget
goes towards performance audits and the other half goes towards financial
audits.[31] The OAG also has a professional practices group that supports both the
financial and performance audits groups.[32]
Mr. Ferguson told the Committee that the OAG was able to reduce its
financial and human resources requirements in the past several years by
reducing the required number of financial audits by 19, making fairly
significant reductions in support services, and rationalizing the number of
senior management positions from 16 to nine.[33] With respect to the issue of whether the OAG has sufficient funds to fulfill
its statutory mandate, Mr. Ferguson noted that the OAG has a statutory mandate
to conduct financial audits and special examinations of specific organizations,
and while it has a statutory responsibility to do performance audits, the
number of performance audits to be conducted is not specified.[34] He concluded:
[W]e're now still at a level where we are able to
produce within that historical range of the number of performance audits that
we have produced. I think any reduction from here, and any requirement to
absorb any additional costs, will start to get us below that traditional amount
of performance audits. We can continue to do performance audits, as our mandate
requires, but we're at the point where any reduction will cause us to produce
fewer performance audits than we historically have.[35]
With respect to the planning of performance audits, Mr. Ferguson
noted that the OAG selects audit topics on the basis of a strategic planning
process. He said, “During that process we have a lot of conversations with
departments and organizations, and we try to identify the risks that those
organizations face and assess those risks to determine if there is something we
should audit, relative to those risks, and bring to the attention of
Parliament.”[36] The strategic planning process results in three-year plans of audits, and the
OAG has limited flexibility to change those plans, especially when budgets are
tighter.[37] Mr. Ferguson indicated that having a larger budget would give the OAG more
flexibility and permit it to cover a wider range of topics, but the OAG is not
totally in control of determining when an audit can be conducted.[38] Flexibility is required
not only by the OAG but also by the organizations audited, as being ready for
an audit takes preparation, time and planning on the part of the organizations
being audited.[39] Also, as it takes about 18 months from planning to completion of a performance
audit or a special examination, it is difficult for the OAG to react quickly in
response to requests for audits of particular topics.[40] Mr. Ferguson summarized
this in the following words:
We've never really had a lot of flexibility in
terms of being able to change those plans midstream. Certainly when budgets are
tighter, there is less flexibility, but we've always been in a process of
trying to plan out. We've never made a practice of changing things a lot
midstream. We want to make sure our auditors know what they're working on and they
can do that preplanning. We also need to inform the organizations we're
auditing that we will be coming in and doing an audit on them so that they can
be prepared to receive our auditors when they come on site.[41]
When asked why the number of performance audits conducted per year
was decreasing, Mr. Ferguson pointed out that the reduction was due in part to
having five special exams scheduled for 2015–2016, whereas two were completed
in 2013–2014, and doing more special exams means fewer performance audits.[42] The other factor is the
audit of senators’ expenses, which has taken more resources than anticipated,
and is the equivalent to two or three performance audits.[43] Adding the extra special
examinations and the audit of senators’ expenses to the 21 performance audits
planned for 2015–2016 brings the total to 26 or 27, compared to 29 in the
previous year.[44]
Periodically, the OAG has had peer reviews of its audit practice
conducted. The last peer review was completed in 2010 and was led by the Australian
national audit office.[45] Mr. Ferguson told the Committee that this review found that the OAG’s audit
methodology was out of date, so the OAG put in place a project to renew its
audit methodology and now has an ongoing process to prevent the methodology
from becoming outdated again.[46] Mr. Ferguson also indicated that the norm is to have a peer review
conducted at least once during the mandate of each auditor general, and he
expects to have a peer review conducted later in his mandate, possibly in 2018–2019.[47]
The OAG is conducting an audit of senators’ expenses. Mr. Ferguson
told the Committee that the OAG plans to provide the final audit report to the
Speaker of the Senate in the first week of June.[48] He indicated that it is a
fairly large audit in terms of the time taken to complete it and the number of
transactions reviewed, but it is fairly simple in terms of what is being
audited—expense claims and payments.[49] The budget for the audit will come out of financial and performance audit lines
and will be reported to Parliament.[50] Mr. Ferguson noted, “As I've said a number of times, once we have presented
that report we will put together the full cost estimate in terms of how much we
spent on contractors, how much we put towards the direct cost of staff, fully
loaded, and all of that. We'll make all of that information available on our
website the moment we present that report.”[51]
Through its audits, the OAG seeks to ensure that proper financial
records are kept, public funds are spent with due regard for economy and
efficiency, and mechanisms are in place to report on effectiveness. This
Committee has an important role to play in monitoring whether federal
departments and agencies address the OAG’s recommendations, especially in follow-up
audits. While the number of performance audits reviewed by this Committee has
remained consistent with the previous two years, the percentage of performance
audits reviewed by parliamentary committees has declined. Looking forward, the
OAG has set several strategic objectives and has reduced its budget while
continuing to fulfil its audit mandate; though any further reductions may lead
to fewer performance audits being produced. The OAG has a three-year planning
process in place for its performance audit practice, but it had sufficient
flexibility to conduct an extensive audit of senators’ expenses.
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