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A Message from the Auditor General of Canada

I am pleased to present my Office’s Report on Plans and Priorities for 2011–12. As my term will end in May 2011, this is my last such report on behalf of the Office of the Auditor General of Canada.

The Office has identified two strategic priorities for the coming fiscal year: effectively managing the transition to a new Auditor General, and successfully implementing its Renewal of Audit Methodology (RAM) project.

The Auditor General of Canada serves a fixed 10-year, non-renewable term. With the end of my term approaching, the process has begun to recruit Canada’s next Auditor General and to make the transition as smooth as possible.

Our second strategic priority for 2011–12 is to successfully deploy the RAM project. This project was undertaken to respond both to significant changes in international and Canadian auditing standards and to findings of our internal practice reviews, feedback from practitioners, and recommendations of the 2010 international peer review. It involves renewing the Office’s audit methodology, establishing a sustainable process to ensure that our methodology remains current, and updating the design and documentation of our Quality Management System. The main objective of the project is to provide our staff with the tools, training, and change management support they need to conduct high-quality audits.

The Office is also continuing to focus on two other areas of strategic importance: people management and product management. With regard to people management, we are addressing the results of our 2010 employee survey. An employee committee reviewed the results and, while employee satisfaction and engagement remain high, the committee made recommendations to senior management about areas that could be improved. The Executive Committee responded with an action plan, which we will be implementing in the coming year.

I am pleased to note that for the fourth year in a row, the Office has been chosen as one of Canada’s Top 100 Employers. In addition, this is the third year we have been named one of Canada’s Top 25 Family-friendly Employers.

On the product management side, we are continuing our efforts to ensure that our audits are delivered on time and on budget. We have made some progress in this area but have not yet achieved the results we would like to see. The new accounting and auditing standards coming into effect are making it difficult to make accurate budget forecasts. We expect to overcome these challenges in time and to reach our objective.

I believe that over the last 10 years, the Office, with its dedicated professionals, has strengthened the way it serves Parliament and Canadians. I am fortunate to have been supported by colleagues who are committed to excellence, integrity, and making a difference to Canadians, and I am proud to have served as Auditor General of Canada.

Section I—Office Overview

Who we are

The Office of the Auditor General of Canada is the legislative audit office of the federal government. We are also the legislative auditor of the three territories. We conduct independent audits and studies that provide objective information, advice, and assurance to Parliament, territorial legislatures, governments, and Canadians. With our reports and testimony at parliamentary hearings, we assist Parliament in its work on the authorization and oversight of government spending and operations.

What we do

The Auditor General is an Officer of Parliament, who is independent from the government and reports directly to Parliament. Her duties are set out in the Auditor General Act, the Financial Administration Act (FAA), and other acts and orders-in-council. These duties relate to legislative auditing and, in certain cases, to monitoring of federal departments and agencies, Crown corporations, territorial governments, and other entities.

The Office of the Auditor General’s main legislative auditing duties are

• financial audits,
• performance audits,
• special examinations,
• sustainable development monitoring activities and environmental petitions, and
• assessments of agency performance reports.

Financial audits

Our financial audits provide assurance that financial statements are presented fairly in accordance with the applicable financial reporting framework. Where required, we provide assurance that the organizations we audit comply, in all significant respects, with legislative authorities that are relevant to a financial audit. We conduct financial audits of federal and territorial Crown corporations and of other organizations. We audit the summary financial statements of the Government of Canada and each of the three territories (Nunavut, the Yukon, and the Northwest Territories).

If issues or opportunities for improvement in areas such as financial reporting and internal controls come to our attention during our financial audit work, we make recommendations to management. We also provide information and advice to support audit committees in meeting their responsibilities for oversight of financial reporting and internal control.

Performance audits

Performance audits examine, against established criteria, whether government programs are being managed with due regard to economy, efficiency, and environmental impact, and whether the government has the means to measure and report their effectiveness. Our reports contain recommendations for addressing the most serious deficiencies identified.

The Auditor General Act gives the Office the discretion to determine what areas of government it will examine in its performance audits. We may decide to audit a single government program or activity, an area of responsibility that involves several departments or agencies, or an issue that affects many departments and agencies. We consider requests for audits that we receive from parliamentary committees. However, the final decision about what to audit is made by the Auditor General.

Special examinations

Our special examinations assess the systems and practices maintained by Crown corporations to safeguard their assets; to manage their human, physical, and financial resources economically and efficiently; and to carry out their operations effectively. A special examination provides an opinion to the board of directors of the corporation on whether there is reasonable assurance that there are no significant deficiencies in the corporation’s systems and practices. In addition to reporting on significant deficiencies, our special examinations highlight systems and practices that contribute to success and provide information and recommendations to boards of directors about opportunities for improvement.

All parent Crown corporations are subject to a special examination by the Office, except the Bank of Canada, which is exempt from this requirement, and the Canada Pension Plan Investment Board, which, under its act, is subject to a special examination by an auditor chosen by its board of directors. Under the FAA, special examinations are required at least once every 10 years.

Sustainable development monitoring activities and environmental petitions

The Commissioner of the Environment and Sustainable Development assists the Auditor General in performing her duties related to the environment and sustainable development. The Commissioner conducts performance audits to monitor the government’s management of environmental and sustainable development issues and, on behalf of the Auditor General, reports to Parliament on issues that should be brought to its attention.

Under the Kyoto Protocol Implementation Act, the Commissioner is required to provide Parliament with a biennial report; this report includes an analysis of Canada’s progress in implementing its climate change plans; an analysis of Canada’s progress in meeting its obligations under Article 3, paragraph 1, of the Kyoto Protocol; and any observations and recommendations on any matter that the Commissioner considers relevant.

With passage of the Federal Sustainable Development Act in June 2008, the federal government is required to table a federal sustainable development strategy every three years beginning in 2010. Under the Act, the Commissioner was given the responsibility of reviewing a draft of the federal government’s sustainable development strategies and commenting on whether the targets and implementation strategies can be assessed.

Once every three years, beginning in 2011, the Act requires 28 federal departments to prepare sustainable development strategies that contribute to and comply with the federal strategy. The Commissioner must report annually to the House of Commons on the extent to which departments subject to the Act have contributed to meeting the targets set out in the federal strategy and have met the objectives and implemented the plans set out in their own sustainable development strategies. In June 2011, the government must report on progress in implementing its strategy. The Commissioner must assess the fairness of the information contained in the government’s progress report.

The Commissioner also administers the environmental petitions process. He monitors responses to environmental petitions and reports annually to Parliament on petition activities including instances where ministers’ responses to petitions were not provided within the 120-day time limit specified in legislation. The Office of the Auditor General considers issues raised in petitions when planning future audits.

Integration of environment and sustainable development

The Office is committed to ensuring that our auditors systematically consider environmental risks when they prepare their long-term performance audit plans and carry out their survey work for individual performance audits. Environmental specialists and audit tools are available to support them in fulfilling this commitment. When conducting special examinations of Crown corporations where important environmental risks have been identified, audit teams also receive enhanced support and advice from our environmental specialists.

Assessments of agency performance reports

The legislation governing Parks Canada, the Canadian Food Inspection Agency, and the Canada Revenue Agency requires the Auditor General to periodically carry out an assessment of the fairness and reliability of the performance information reported in their annual reports against corporate objectives they provided to Parliament.

Professional practices

In order to ensure the reliability and consistency of our audit work, the Office makes an ongoing investment in professional practices. This investment supports

• the development and maintenance of up-to-date audit methodology, guidance, and audit tools;
• communication and training to promote consistency in the application of audit methodology and our Quality Management System; and
• the provision of advice on the interpretation and application of professional standards, Office policies, audit methodology, and the Office’s Quality Management System.

The Office also works with other legislative audit offices and professional associations, such as The Canadian Institute of Chartered Accountants, to advance legislative auditing methodology, accounting and auditing standards, and best practices. The Office works together with provincial legislative audit offices in the development and implementation of professional standards, and in methodology development and training. We also collaborate with our provincial colleagues on issues that are cross-jurisdictional. We regularly participate in external reviews of other national legislative audit offices and are the subject of external reviews.

International activities

Our international strategy guides our international activities and positions the Office to meet future opportunities and challenges. The strategy has four goals: contributing to the development and adoption of appropriate and effective professional standards, sharing knowledge among audit offices, building capabilities and professional capacities of audit offices, and promoting better managed and accountable international institutions (see Section III for more details).

Strategic outcome and expected results

The long-term strategic outcome of the Office of the Auditor General is to contribute to better-managed government programs and better accountability to Parliament and territorial legislatures through legislative auditing.

We have identified a number of results that we expect to achieve with our audits in the short, medium, and long term:

• In the short term, we want to engage legislatures and federal and territorial organizations in the audit process, ensure that they are well-informed about our work, and maintain support for our role and work.
• In the medium term, we want to assist legislatures in holding government to account; make our work relevant to federal and territorial organizations, departments, agencies, and Crown corporations; and ensure that the public is well informed about our work.
• In the long term, we want our work to lead to more effective, efficient, and economical government programs and operations, and programs that foster sustainable development.

The following tables provide the Office’s planning summary, including our strategic outcome, expected results, performance objectives, indicators and targets, and details of planned spending for the coming year (Exhibits 1 and 2).

Exhibit 1—Planning Summary

Strategic Outcome: We contribute to a well-managed and accountable government for Canadians

Expected results Legislatures are well-informed Legislatures and federal and territorial organizations are engaged in the audit process Legislatures hold government to account Our work is relevant to federal and territorial organizations, departments, agencies, and Crown corporations The media and public are well-informed Support for our role and work is maintained
Objectives	Indicators and targets
Key users of our reports are engaged in the audit process	Maintain the percentage of audits that are reviewed by parliamentary committees Maintain the number of parliamentary hearings and briefings we participate in relative to the number of sitting days
Our work adds value for the key users of our reports	Maintain or increase the percentage of users who find our audits add value
Our work adds value for the organizations we audit	Maintain or increase the percentage of senior managers who find our audits add value
Key users of our reports and the organizations we audit respond to our findings	Maintain or increase the percentage of recommendations that are implemented or reservations/deficiencies that are addressed

Legislative auditing activity1	Forecast Spending 2010–11 ($ millions)	Planned Spending 2011–12 ($ millions)
Financial audits of Crown corporations, territorial governments, and other organizations, and of the summary financial statements of the Government of Canada	42.0	44.1
Performance audits and studies	40.6	40.7
Special examinations of Crown corporations	0.7	2.8
Sustainable development monitoring activities and environmental petitions	1.7	2.1
Assessments of agency performance reports	0.7	0.7
Professional practices	15.7	15.0
Total cost of operations	101.4	105.4
Less: costs recovered2	0.6	0.8
Net cost of operations	100.8	104.6
1 We have allocated the cost of audit services to each legislative auditing activity. 2 The costs recovered include respendable revenue from the National Professional Practices Group and from the audit of the International Labour Organization, which we conduct on a cost recovery basis

 

Exhibit 2—Voted and statutory items ($ millions)

Vote # or statutory item (S)	Vote or statutory wording	2010–11 Main Estimates	2011–12 Main Estimates
15	Program expenditures	75.1	74.5
(S)	Contributions to employee benefit plans	10.0	10.4
Total1		85.1	84.9
1 The difference between net cost of operations (Exhibit 1) and Main Estimates includes cost of services received without charge from other government departments, costs recovered, other adjustments that are routine in nature, including the carry-forward funding, parental leave/severance payments, and other differences due to accrual accounting (salary accruals and capital asset acquisition less depreciation).

The following tables provide the Office’s planned financial and human resources for the next three years (Exhibit 3).

Exhibit 3—Planned financial and human resources

Financial Resources	Forecast spending 2010–11 ($ millions)	Planned spending 2011–121 ($ millions)	Planned spending 2012–13 ($ millions)	Planned spending 2013–14 ($ millions)
Net cost of operations	100.8	104.6	100.9	100.9
1 We expect to lapse funds in 2010–11 and to be able to carry the funds forward to 2011–12. Any future funds that may potentially be carried forward are not included in subsequent years’ planned spending numbers.

Human Resources	Forecast 2010–11	Planned 2011–12	Planned 2012–13	Planned 2013–14
Full-time equivalents	635	633	633	633

Our priorities for 2011–12

Each year the Office reviews and updates its strategic plan and priorities in response to changes in our operating environment and to the results of our key performance indicators and our risk management processes.

We have established two strategic priorities for the 2011–12 fiscal year:

• Effectively manage the transition to a new Auditor General
• Successfully implement our Renewal of Audit Methodology (RAM) project

Effectively manage the transition to a new Auditor General

One of the Office’s strategic priorities is to manage the transition to a new Auditor General. The Auditor General has a fixed 10-year term that is non-renewable. The mandate of the current Auditor General ends in May 2011.

A selection committee, created by the Privy Council Office and comprised of senior government members and external consultants, will review the applications for the position and make a recommendation to the Prime Minister. The appointment requires consultation with the leader of every recognized party in the Senate and House of Commons. There must also be approval of the appointment by resolution of the Senate and House of Commons. Once the parliamentary approval resolution is passed, officials in the Privy Council Office will prepare the necessary documentation for the appointment by the Governor in Council.

Within the Office, preparations are under way to make the transition as smooth as possible. We hope that the selection and appointment process will be completed in time to provide an overlap period for the current and new Auditor General to work together.

Successfully implement our Renewal of Audit Methodology (RAM) Project

Our other strategic priority is to successfully implement our RAM project, with the objective being to provide our staff with the tools, training, and change management support they need to conduct high-quality audits. This project will renew the Office’s audit methodology, establish a sustainable process for ensuring that our methodology remains current, and update the design and documentation of our Quality Management System.

This project responds, in part, to significant changes in international and Canadian auditing standards, and to the introduction of International Financial Reporting Standards (IFRS) in 2011. A large number of the entities we audit are changing the basis of accounting used to prepare their annual financial statements—some to IFRS and others to public sector accounting standards. As a result, the financial statements that we are responsible for auditing are changing, as well as the manner in which we conduct and report our audits.

The project also responds to findings of our internal practice reviews, feedback received from practitioners, and recommendations of the international peer review of the Office done in 2010. The Peer Review Report and the Office’s Response and Action Plan are available on our website.

We are on track to meet our deadline for the implementation of this project, except in one area related to our financial audit practice. In that practice, we have made the changes necessary to ensure that our methodology is fully compliant with the new Canadian Auditing Standards and have provided the necessary training to audit staff affected. However, our plans to put in place additional guidance and provide related training will be completed by 31 December 2012, one year later than planned. In all other areas and product lines, we are on track to meet our 31 December 2011 target date.

Other

Funding. For the past two years, the Office has not sought additional funding. In March 2010, the government decided to freeze operating budgets at 2010–11 levels for the following two fiscal years, 2011–12 and 2012–13. Therefore, in 2011–12, we will continue to work within our existing funding level. With these funds, we will conduct all of our statutory financial audits and plan to complete 25 performance audits and studies, and 3 special examinations.

Response to our employee survey. The results of our most recent employee survey indicated that employee satisfaction and engagement remains high, that the Office has improved in a number of areas, and that there are some areas for improvement.

An employee committee reviewed the results and made detailed recommendations to senior management, focusing on the areas of people management, product and resource management, and communication. The Executive Committee responded to the recommendations with an action plan including specific initiatives that will be undertaken in each of those areas. The results of the survey are available on our website.

Resource allocation and project management. Beginning in 2008–09, we undertook a number of initiatives to improve our overall project management, including better planning, budgeting, and resource allocation. In 2009–10, we met or exceeded all of our targets for on-budget performance and raised those targets for 2010–11. While it is no longer a strategic priority, project management and resource allocation remains an area of continuing importance to the Office.

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