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ARCHIVED - RPP 2006-2007
Office of the Auditor General of Canada

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Message from the Auditor General of Canada

Sheila Fraser, Auditor General of Canada

I am pleased to present my Office's Report on Plans and Priorities for 2006–07.

As Parliament's auditor, the Office of the Auditor General plays an important role in promoting government accountability and well-managed public administration in Canada. As Auditor General, I lead a staff of highly qualified auditors in the independent scrutiny of federal government operations. Following professional standards, we examine the government's activities against established criteria, such as its own laws, policies, and targets. We look at whether the government is carrying out its programs and initiatives with due regard for economy, efficiency, and environmental impact, and whether it has measures in place to determine how effective they are.

Canadians support government-funded programs such as old age security, international development assistance, and environmental protection through their tax dollars and deserve to know how well these funds are being managed. Our financial and performance audits provide parliamentarians with fact-based information they can rely on in their oversight of government spending and performance. In 2006–07, we will conduct more than 130 annual financial audits and we plan to complete 37 performance audits that we will report on to Parliament.

In 2005, Parliament expanded the mandate of the Office through Bill C-43, which was enacted in June as the Budget Implementation Act. This Act amends both the Auditor General Act and the Financial Administration Act—the main pieces of legislation that govern our work. This move signals considerable confidence in my Office on the part of parliamentarians, which my staff and I greatly appreciate. Let me take this opportunity to assure parliamentarians and Canadians alike that we will work diligently to uphold the trust they continue to place in us.

In practical terms, an expanded mandate will mean two things beginning in 2006–07. First, we will be able to include foundations in our performance audits. Foundations are non-profit corporations that are entrusted with large amounts of public money to fulfill significant public policy roles. For many years, one of the concerns I have expressed about the accountability of foundations to Parliament stems from the fact that there was no provision for auditing their contribution to achieving government objectives. I am pleased that this concern has been addressed.

Second, we will conduct financial audits of three additional Crown corporations, making us the auditors or joint auditors of all but two of the government's Crown corporations. In addition, changes to the Financial Administration Act mean that five Crown corporations have been added to the list of those requiring a special examination every five years. A special examination is a form of performance audit that assesses the management systems and practices of a Crown corporation and provides reasonable assurance that there were no significant deficiencies. The results of a special examination are provided to a Crown corporation's board of directors. As with our other audits, they contribute to improved governance and greater accountability.

To be credible and effective, my Office must be independent of the government of the day. Numerous safeguards are in place to protect our independence, many of which are set out in our legislation. For example, the Auditor General is appointed for a 10-year, non-renewable term, and can be removed only upon resolution of both the House of Commons and the Senate. In conducting performance audits, I have the right to decide what to audit, when to audit, and how to audit, and the power to ask for any information I need to do my job. Another key to our independence is the ability to remain unbiased and stay faithful to the evidence in our audits. This is safeguarded by our allegiance to a professional discipline that requires us to adhere to stringent standards and our own deep commitment to producing high-quality work.

It is important to all public sector audit offices that the process used to establish their funding levels be sufficiently independent. I am pleased to report that our long-standing concern in this area is close to being resolved. Although my Office is funded by Parliament, historically we have negotiated our level of funding with the Treasury Board Secretariat, which is one of the organizations we audit. For some years now, we have been working toward a more appropriate and independent funding process. Recently, the government committed to piloting a new funding and oversight mechanism that would apply to all Agents of Parliament, including us, for 2006–07 and 2007–08. A parliamentary oversight panel was formed, a process agreed to, and work commenced. We look forward to the resumption of this work under the 39th Parliament, the success of the pilot project, and a permanent resolution to this long-standing issue.

Not only does the Office of the Auditor General audit the federal government and the governments of the three territories, but we also participate in the auditing of international organizations. We take part in international public sector accounting and auditing organizations and support the development of professional auditing standards and the transfer of knowledge between national audit offices. We believe that playing a role in the international community is a serious responsibility, but one that comes with many benefits. It lets us contribute to improved governance and accountability throughout the world while at the same time strengthening our own work as legislative auditors in Canada. Our new international strategy, which will take effect in 2006–07, will help us build on past successes and put us in a strong position to meet the opportunities and challenges that lie ahead.

I look forward to carrying out the plans outlined in this report. I consider myself extremely fortunate to be supported by an exceptional group of employees who are dedicated to excellence, integrity, and making a difference for Canadians. Together, we will continue to serve the Parliament and the people of Canada with energy and enthusiasm.

Sheila Fraser, FCA
Auditor General of Canada

6 March 2006

Management representation statement

We submit, for tabling in Parliament, the 2006–07 Report on Plans and Priorities for the Office of the Auditor General of Canada. Management of the Office is responsible for preparing this report, which

  • is based on the Office's results chain consistent with its approved program activity architecture,
  • presents fair and reliable information,
  • provides a basis of accountability for the results achieved with the resources and authorities entrusted to it,
  • reports finances based on approved planned spending numbers from the Treasury Board Secretariat, and
  • is based on the reporting requirements outlined in the Treasury Board Secretariat guidance.

The Office's Executive Committee oversees the preparation of the report, and approves it based on the recommendation and advice of the Office's Audit Committee.

Sheila Fraser, FCA
Auditor General of Canada

Robert D'Aoust, CA
Comptroller and Senior Financial Officer

Ottawa, Canada
6 March 2006

Section I—Overview

What we do: Legislative auditing

The Office of the Auditor General of Canada conducts independent audits and studies that provide objective information, advice, and assurance to Parliament, territorial legislatures, government, and Canadians. With our reports and testimony at parliamentary hearings, we assist Parliament in its work related to the authorization and oversight of government spending and operations, and answer many important questions (Exhibit 1).

Exhibit 1—The Auditor General answers many important questions

Audits and studies1


Performance audits and studies of departments and agencies, including audits on the environment and sustainable development

Are programs well managed? Were they run with due regard to economy, efficiency, and their environmental effects? Does the government have the means to measure their effectiveness where it is reasonable and appropriate to do so?

Audit of the summary financial statements of the Government of Canada

Is the government presenting fairly its overall financial situation?

Financial audits of Crown corporations, territorial governments, and other organizations

Is their financial information presented fairly, and are they complying with their legislative authorities?

Special examinations of Crown corporations

Do their systems and practices provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively?

Sustainable development monitoring activities and environmental petitions

Are departments and agencies meeting the objectives and implementing the plans set out in their sustainable development strategies? Are ministers responding as required to environmental petitions?

Assessments of the performance reports of the Canadian Food Inspection Agency, Parks Canada, and the Canada Revenue Agency 2

Are the agencies presenting their performance information fairly and in a reliable way?

1 These audits and studies are explained in more detail in the Auditor General Act (sections 5, 6, 7, and 23) and the Financial Administration Act (Part X).

2 These assessments are published annually in the statutory reports of these organizations.

Supporting and promoting accountability is an important part of our work with Parliament. Our audit reports, tabled in the House of Commons, provide members of Parliament with objective information to help them examine the government's activities and hold it to account.

The Auditor General Act, the Financial Administration Act, and other acts and orders-in-council set out the duties of the Auditor General. These duties relate to legislative auditing and monitoring of federal departments and agencies, Crown corporations, territorial governments, and other entities that include international organizations.

In 2005, Parliament passed Bill C-43 to amend the Auditor General Act and the Financial Administration Act, which expands our mandate in two areas:

  • First, we are now able to include foundations in our performance audits. This addresses one of our long-standing concerns about the lack of accountability to Parliament of foundations—organizations entrusted with large amounts of public funds to fulfill significant public policy roles.
  • Second, with the addition of three Crown corporations to our mandate, we are now the auditors or joint auditors of all but two Crown corporations. Five Crown corporations have also been added to the list of those requiring a special examination every five years.

This bill received royal assent on 29 June 2005.

Who we are: An Agent of Parliament

The Auditor General is an Agent of Parliament who is independent from the government and reports directly to Parliament (Exhibit 2).

Exhibit 2—The Auditor General's role as an Agent of Parliament

  The Auditor General's role as an Agent of Parliament

Objectivity and independence. Maintaining our objectivity and independence from the organizations we audit is critical. Our independence is assured by a broad legislative mandate, freedom from certain government controls, and a 10-year mandate for the Auditor General that is not renewable.

Additional mechanisms are in place to ensure the independence of the Office:

  • The reports of the Auditor General are presented to Parliament.
  • The Auditor General is accountable to Parliament directly and not to the government of the day.
  • Funded by Parliament, the Office does not receive fees for its services from the departments, agencies, and Crown corporations that it audits.
  • As a separate employer, the Office appoints its employees, has its own classification standards, and performs human resource functions including determining the terms and conditions of employment.
  • Auditors follow the standards of the Auditing and Assurance Standards Board of the Canadian Institute of Chartered Accountants and the Office's audit policies, methodology, and Code of Values, Ethics, and Professional Conduct.
  • The Auditor General may, within the total dollar limitations established for the Office in appropriation acts, contract for professional services without the approval of the Treasury Board.

Funding. The Office is funded by Parliament; however, historically we have negotiated the level of funding with the Treasury Board Secretariat, one of the organizations we audit. That process is not sufficiently independent to ensure that our budget is appropriate for meeting Parliament's expectations. Since 2001, we have been discussing with the Treasury Board Secretariat alternative ways to determine the Office's future funding requirements.

In 2005, the government committed to implementing a pilot project for a new funding and oversight mechanism for the 2006–07 and 2007–08 Estimates process for all Agents of Parliament. The new mechanism seeks to respect the role of Parliament and the independence and distinct mandates of its Agents, and also to reflect the responsibility of the government for sound stewardship of public resources.

A parliamentary oversight panel was formed, a process agreed upon, and work commenced. The panel ceased to exist upon the dissolution of the 38th Parliament on 29 November 2005. We look forward to the establishment of a new parliamentary panel under the 39th Parliament and the resumption of the pilot project, leading to the permanent resolution of this long-standing issue.

Who we serve

Our primary responsibility is to Parliament, and our relationship with parliamentarians is key to our effectiveness.

Parliamentary standing committees. The Auditor General's main relationship is with the House of Commons Standing Committee on Public Accounts. In turn, much of the work of the Public Accounts Committee draws on the work of the Office. The Standing Senate Committee on National Finance and other parliamentary committees also rely on our work.

The House of Commons Standing Committee on Environment and Sustainable Development and the Standing Senate Committee on Energy, the Environment and Natural Resources draw on the work of the Commissioner of the Environment and Sustainable Development, who leads the environmental audit function within the Office.

Appearing at committee hearings is an important way that the Office promotes awareness and understanding of the issues in our reports. Hearings also help gain department and agency commitment to implement our recommendations. After hearings, committees may report and make recommendations to the government. Departments and agencies are usually expected to report to the committees on what they have done in response to the recommendations.

Territorial legislatures. As the legislative auditor of the three territories, the Auditor General's opinions on financial statements and reports on other matters are presented to the territorial legislatures and discussed in hearings of their public accounts committees.

Our strategic framework

The strategic framework of the Office of the Auditor General presents our vision and summarizes who we are, what we do, and the values that guide our work (Exhibit 3).

Exhibit 3—The strategic framework of the Office of the Auditor General of Canada

Our vision

An independent audit office serving Parliament, widely respected for the quality and impact of our work.

We promote

  • Accountable government
  • An ethical and effective public service
  • Good governance
  • Sustainable development
  • The protection of Canada's legacy and heritage

We do this by

  • Conducting independent audits and studies that provide objective information, advice, and assurance to Parliament, government, and Canadians.
  • Working collaboratively with legislative auditors, federal and territorial governments, and professional organizations.
  • Providing a respectful work place in which our diverse workforce can strive for excellence and realize their full career potential.

Our values

  • Serving the public interest
  • Independence and objectivity
  • Commitment to excellence
  • Respectful workplace
  • Trust and integrity
  • Leading by example

Our program activity

Our Office has one program activity: legislative auditing. Legislative auditing consists of seven major sub-activities, of which the four largest are performance audits and studies; the audit of the summary financial statements of the Government of Canada; financial audits of Crown corporations, territorial governments, and other organizations; and special examinations of Crown corporations.

Exhibit 4 provides summary information on the Office's financial and human resources and program activity.

Exhibit 4—Summary information: The Office's financial and human resources and program activity

Financial resources ($ millions)







Human resources (full-time equivalents)







Program activity: Legislative auditing ($ millions)


Forecast spending

Planned spending

Performance audits and studies of departments and agencies



Financial audits of Crown corporations, territorial governments, and other organizations



Audit of the summary financial statements of the Government of Canada



Special examinations of Crown corporations



Sustainable development monitoring activities and environmental petitions



Assessments of the performance reports of three agencies



Professional practices






Less: Non-respendable revenue



Net cost of program



*We have allocated the cost of administrative and other overhead expenses to each sub-activity.

Our planning priorities

Following the general election of 23 January 2006 our first priority is to inform new and returning members of Parliament about our role and mandate, and of the work we have conducted on their behalf over the past several years. Through letters to standing committees and meetings with new ministers, we highlight issues within their purview that we believe remain outstanding. We seek to meet with committee chairs and vice-chairs to obtain their views on matters of mutual interest. We also participate in information sessions that are organized for parliamentarians by the House of Commons.

We are continually looking to improve how our audit reports, testimony, information, and advice can best meet Parliament's needs. For the planning period 2006–09, there are three specific priorities for our Office.

Our expanded mandate

In 2005, Parliament expanded our mandate. In the coming year we will be working to integrate these changes into our audit planning and operations. We will increase our financial audits and special examinations of Crown corporations, and include foundations in our performance audit planning over the next three years.

Our audit products

The Office has modernized its financial audit practice by introducing an electronic file management system along with supporting methodology and staff training, and by evaluating internal financial controls in departments, agencies, and Crown corporations. This is leading to more risk-focussed audits, more timely recommendations, and lower audit costs.

During 2006–09, we will be expanding our use of this new management system to our special examinations and performance audit practices. We will also continue implementing our risk-based audit planning approach. As a result of these initiatives, we anticipate that similar improvements to those noted above will be realized in these two practice areas.

Building on the successful 2003 external peer review of our performance audit practice, we are continuing an extensive internal review of that practice. Our review is focussed on ensuring the appropriate mix of performance audit products, and balancing the elements of our performance audit mandate. We are also looking to improve our scoping and management of individual audits, and generally ensure that we continue to deliver performance audits of the highest quality.

Our human resources

In the coming years, the Office will come under increasing pressure to recruit and retain a strong employee base for a number of reasons. Our workload will increase due to additions to our Crown corporation and performance audit mandates. Expected turnover and retirement rates and increased recruitment by federal departments will add to the demand for available talent. Changing professional standards and more complex audit environments will require additional investment in methodology and training. The Office has started developing a multi-year recruitment and retention strategy to respond to these pressures.

We also have two significant long-term commitments that we will be updating during the coming three years: sustainable development and our international program.

Sustainable development

Parliament has asked 31 federal departments and agencies to prepare sustainable development strategies and to update them at least every three years. While the Office is not required to table such a strategy, we do so voluntarily.

Our 2003–06 sustainable development strategy strives to ensure that the environmental consequences of the federal government's activities are considered as we plan, conduct, and report our audits. In the coming year we will be reviewing and updating our strategy for the planning period 2006–09.

Our international program

The Office of the Auditor General now has more than 50 years experience working with the international community in developing professional standards, building capacity, sharing knowledge, and conducting audits of international institutions.

We have just completed a strategic review of our international program to ensure that we can best contribute to the interests of Parliament and the Government of Canada. We have established the following four goals for the 2006–09 planning period:

  • Increase our involvement in international standard setting and the adoption of international standards.
  • Develop with the Canadian International Development Agency an understanding of how we can best target our capacity-building efforts, consistent with the government's international development priorities, while maintaining our current level of effort.
  • Reduce and re-focus our knowledge-sharing activities to provide maximum benefit to our auditors.
  • Work with Foreign Affairs Canada to promote better managed and accountable international institutions through our involvement in auditing international organizations.

Our governance structure

The Auditor General. The Auditor General leads the Office, and as an Agent of Parliament is accountable to Parliament for the Office's performance.

The Executive Committee. The Executive Committee provides overall professional and administrative direction for the Office. It sets policy and oversees all aspects of management and operations in the Office. It comprises the Auditor General, the Deputy Auditor General, the Commissioner of the Environment and Sustainable Development, and 11 assistant auditors general.

External advice. The Auditor General receives advice from a number of committees with external members:

  • The Audit Committee. It oversees the quality of audit practices and internal controls. It is made up of senior Office auditors and is chaired by a retired senior executive from the private sector.
  • The Panel of Senior Advisors. It provides strategic advice on the work of the Office, and is composed of leading representatives from the private sector, the accounting profession, the academic community, and other parties.
  • The Independent Advisory Committee. It advises the Auditor General on the audits of the financial statements of the Government of Canada, Crown corporations, territorial governments, and other organizations. The Committee helps the Auditor General monitor developments in the accounting and auditing profession and considers their impact on the Office. It is made up of senior accountants and financial consultants.
  • Panels on Aboriginal Issues. They advise the Auditor General on matters affecting Canada's Aboriginal peoples, and include Aboriginal and non-Aboriginal leaders.

The Commissioner of the Environment and Sustainable Development receives advice from one external committee:

  • The Panel of Environmental Advisors. It advises the Commissioner on her work and on environmental and sustainable development matters. It includes leading representatives from environmental groups, the private sector, and the academic community, as well as former senior public servants.

Audit advisory committees. These committees advise on the objectives and approach of performance audits or special examinations, and on significant matters and findings to be reported. Members are experts with relevant experience from inside and outside the Office with a variety of backgrounds, such as former senior public servants, and leading representatives from the private sector, academia, and First Nations.

Further information on the Office's organization is available in the organization chart in Section III and on our Web site under About Us.

How we are held accountable

Who audits the Auditor General?

Each year, an external auditor appointed by the Treasury Board Secretariat audits the Office's financial statements. Our financial statements are prepared on a full accrual basis of accounting, in accordance with generally accepted accounting principles. These financial statements are included in our performance report, which is submitted to the President of the Treasury Board for tabling in the House of Commons.

The Office is also subject to scrutiny by the Official Languages Commissioner on language issues, by the Public Service Commission on staffing and classification practices, by the Privacy Commissioner on adherence to the Privacy Act, and by the Canadian Human Rights Commission.

We are accountable to Parliament

The Auditor General's reports are reviewed and discussed in hearings of the Standing Committee on Public Accounts and 15 other parliamentary committees.

The Auditor General submits annual Estimates documents to Parliament. The Public Accounts Committee calls on the Auditor General to explain the Estimates and discuss our reports on plans and priorities and performance as well as our management practices.

How we assess our work

Our audit work is guided by a rigorous methodology and quality management framework. The framework provides reasonable assurance that our audits are conducted in accordance with established standards of professional practice and with due regard for economy, efficiency, effectiveness, and the environment.

Our audit work is also subjected to internal audits and practice reviews and to external reviews by peers. Each year we publish summaries of the results of our practice reviews and internal audits on our Web site under About Us.

  • Practice reviews. We conduct internal practice reviews of our financial audits, performance audits, and special examinations by assessing their quality and compliance with Office policies and professional standards. The reviews assure the Auditor General of the quality of our audits and identify areas for improvement as well as good practices. We will conduct eight practice reviews in the coming year.
  • Internal audits. We audit our management and administration practices. The audits assure the Auditor General that the Office is complying with government and Office policies. They also provide managers with assessments and recommendations. Table 6 presents details of our internal audit plan for 2006–07 and beyond.
  • External review of our performance audit practice. In 2003, an international team of legislative auditors carried out a peer review of the Office's quality management framework for performance auditing. The team reported that our framework was suitably designed and operating effectively. The team's report highlighted some good practices and made suggestions for improvement. Its report and our action plan to address its suggestions were presented to the Public Accounts Committee and are available on our Web site under About Us.
  • External reviews of our financial audit practice. In 1999, we hired an audit firm to assess our quality management system for annual financial audits. Its report is available on our Web site under About Us.

The provincial institutes of chartered accountants review our compliance with professional standards for financial audits, and determine whether our training of chartered accounting students meets the requirements for certification. These reviews have concluded that we are following professional standards and meeting the requirements for certification.