Thank you, Mr. Chair.
We very much appreciate this opportunity to brief the committee on the work of the Office of the Auditor General. As you mentioned, I'm accompanied by John Wiersema, who is the Deputy Auditor General.
I believe you have all received a deck. Slide 2 gives an overview of the presentation that I'd like to go through today. Slide 3 indicates our mandate and the legislative framework.
Just as a little history about the office and how the mandate has evolved over time, the first independent Auditor General was established in 1878, so we've been around for a very long time. What I think is interesting to note is that there was an Auditor General at the time of Confederation, but the Auditor General at that time was also the Deputy Minister of Finance. So there was a little problem with independence and objectivity, though I have heard some deputy ministers of finance rue the day that those two positions were separated.
In 1878 the office of the first independent Auditor General was established. In 1977 the office received a specific mandate to conduct performance audits. In 1995 there was the creation of the position of the Commissioner of the Environment and Sustainable Development within the Office of the Auditor General. And then in 2005 our mandate was expanded again, giving us the right to audit the use of funds that had been transferred, lent, or granted to certain organizations. This was largely to address concerns that we had raised over the years over the accountability of foundations, so initially it was any recipient that had received more than $100 million. That has subsequently been changed to $1 million over five years. We were also, in that amendment, named auditor or co-auditor of all crown corporations except for two, the Bank of Canada and the Canada Pension Plan Investment Board.
Slide 4 schematically shows where we fit in. Our role is, of course, to provide parliamentarians with the information and the insurance they need to hold the government to account.
To fulfill our mandate effectively, it is absolutely essential that we be perceived as an agency that is independent of the government. In fact, our credibility is based on our independence. Several measures have been put in place to this end, and they appear in slide 5. Among other things, the Auditor General is appointed for a non-renewable term of 10 years. We submit our reports directly to Parliament through the Speaker of the House, and not a minister of the Crown. We are an independent employer and we thus have the freedom to recruit our own staff. We have our own classification systems and we also have the right to obtain any information required to do our job.
In slide 6, we mention that we have a budget of roughly $88 million. Most of our staff work here in Ottawa, but we also have regional offices located in Vancouver, which is responsible for the work we do in the Yukon. Edmonton is primarily responsible for the work that we do in the Northwest Territories. The Montreal office oversees the audits of Crown corporations. As for our Halifax office, they carry out a variety of tasks, whether it be auditing Crown corporations or the Department of Veterans Affairs, for example.
We have a total of 625 employees, just over 400 of whom are auditing professionals. Auditing professionals must have an auditing degree or a master's, and some 200 of these people are accountants. Our staff come from several backgrounds, including environmental science, engineering, sociology or public administration.
We basically have four products, which I will describe briefly.
Financial auditing, which appears in slide 8, closely resembles audits carried out in the private sector. However, we pay closer attention to compliance with acts and regulations. In many cases, we are even required to give opinions on this compliance. We conduct roughly 130 financial audits each year, the largest of which is the audit of the public accounts. With revenues and expenditures of over $200 billion, this audit requires some 50,000 hours of work. I am sure that it is the largest one in the country.
As I mentioned, we audit or co-audit almost all Crown corporations. For example, we audit Canada Post, CDC, VIA Rail, the Business Development Bank of Canada, and so forth. In the three territories, we audit about 30 territorial agencies.
We are also the auditors of a United Nations agency, namely, the International Labour Organization. For this audit, we invoice fees that allow us to recover our costs.
While financial auditing is very much like what is done in the private sector, performance auditing is quite unique to legislative auditors. We cover a wide variety of subjects in our performance audits, as the committee will be well aware, covering anything the federal government is involved in doing. We cover everything from child and family services in Indian and Northern Affairs to protection of salmon, to defence acquisitions, and the list goes on and on.
We have a very rigorous process. When we do our performance audits, there is a guide that we use. It is available on our website, if anyone is interested in figuring out what these audits actually are. Essentially, at the beginning, we establish criteria or expectations of performance. These are largely based on the government's own rules and administrative policies. We agree on those criteria or expectations of performance with the departments before we begin the audit. Then, of course, we do the audit to see if those are actually being put into practice.
We will then report the findings of our audit. It is essential to us that we have really good communication with the departments, and there is a lot of effort that goes back and forth to confirm that the facts are correct. At the end of an audit, we ask the departmental head, or the head of the agency, to confirm to us that they agree with the facts. They, of course, may disagree with our conclusions, but the conclusions are ours, and we will note in our reports if there is any disagreement with the department or agency we are auditing, either on facts or conclusions, if significant.
Another of our products is special examinations of crown corporations. This, too, is unique to the federal government. We have to give an opinion essentially on the management of the corporation as a whole to indicate whether systems and practices are in place to ensure that assets are safeguarded and operations are conducted economically and efficiently. The reports go to the boards of directors of the corporation. Up until very recently, crown corporations were required to have a special examination once every five years. That has been changed recently to 10 years, and it is a change that we support. We think that many of the crowns—some very small crowns, in fact—were being audited far more frequently than some of the major departments.
Now, as well, the boards of directors are required to submit these reports to the minister, to the President of the Treasury Board, and to make them public within 60 days of receiving them.
And we have begun, as well, in the last couple of years, to report the summaries of these special examinations. Our next reports on May 12 will present the summaries of eight special examinations that we conducted last year.
The final product line is, of course, environmental auditing. I'm very proud to say that our office is a world leader in this regard. The Commissioner of the Environment has a team of about 40 to 45 people who work specifically on environmental and sustainable development issues. There are two statutory responsibilities for the commissioner. One is to assess the government's sustainable development strategies, and another is to administer an environmental petitions process. If anyone is interested, we can certainly provide you with more information on that.
Many people ask us how we choose the subjects of our performance audits. This is a process based on risk analysis. We also take into account the interest parliamentarians have in the various subjects. We spend several hours in discussion with department administrators or other people interested in the subjects, including parliamentarians, in order to decide which ones are the most important and the most appropriate to be audited.
Sometimes, policy questions may arise, but we do not comment on policy. It would thus be inappropriate for us to conduct an audit on such a topic. We also need to have the skills required to address different subjects, such as human resource management or information technology. We establish an audio plan over three to five years. This plan is updated as developments occur.
We pay particular attention to requests made by parliamentary committees, but we are not obliged to conduct the audits requested. We do not respond to requests made by the public or by individual parliamentarians.
It is essential that we ensure the quality of all our audits. We have adopted several measures to this end. We comply with professional audit standards established by the Canadian Institute of Chartered Accountants. As I mentioned, our professionals are highly qualified and our quality control system is internally or externally reviewed.
During each of our audits, steering committees composed of three or four experts, such as retired public servants or specialists from abroad, help us ensure that the audit subjects are relevant and that our conclusions are accurate.
Other external committees advise me as well. One of the most important ones is the group of senior advisors whom we meet with twice a year, especially to discuss strategic issues or problems that we are confronted with. We are extremely privileged to be able to rely on these people, including the Right Honourable Joe Clark, Mr. Broadbent, Mr. Gordon Ritchie, Mr. David Brown, and Mr. George Erasmus, all of whom sit on this committee.
There is also a committee on first nations issues, which helps us understand the realities and the problems these nations must deal with. The independent advisory committee deals primarily with technical issues. It is chiefly composed of representatives of large chartered accounting firms who assist us in interpreting accountability standards.
Turning to slide 16, several people always ask who audits the Auditor General and who are we accountable to. Our accountability is, of course, with this committee. We will be appearing before you this Thursday, actually, to discuss our report of plans and priorities for this year and our performance report for the year ending in March 2008. So we appear before the committee to discuss our spending estimates.
There has also been created the Advisory Panel on the Funding and Oversight of Officers of Parliament. That panel was established, I guess, to bring more independence to the question of funding of officers of Parliament. Like any department, we have to go through the Treasury Board Secretariat and the process of analysis of our budgets, and we thought that might be a little inappropriate, given that we are often auditing the Treasury Board Secretariat. So the panel was established, and we appear before the panel with the Treasury Board Secretariat to discuss funding requests. I think that has actually gone very well. There was an evaluation that was quite favourable to the panel.
We have an external auditor that's appointed by the Treasury Board each year to audit our financial statements. But perhaps the most important part of our accountability, on page 18, is the independent external reviews that are done by peers. The first one was done in 1999, and one of the major accounting firms examined our annual financial audit quality management system. In 2003 there was an international group of colleagues who reviewed our performance audit practices. That team were representatives of the national audit offices of France, Norway, the Netherlands, led by Great Britain. That was actually the first time this had ever been done internationally.
Since then, many of our colleagues have adopted this process, and we, for example, have led the review of the GAO in the United States twice now under this process. We've been involved in reviews. We also led the review of the European Court of Auditors and we've participated in reviews of Denmark, Mexico, and New Zealand. And there are several other countries that have done this as well, so this is becoming a trend within the international audit community. Up until now we have focused our reviews on individual product lines. We have now asked for a review of all of the office products and services. That review will be beginning a little later this year and it will be led by the Auditor General of Australia.
As for our impact, you will note in our discussions on Thursday that we give statistics on the implementation of recommendations, which is, I would say, positive. To us, too, one of the most meaningful reports is the status report, where we do follow-up and see if government has taken action on recommendations we have made in the past. Since we launched that report in 2002, the majority of our follow-up audits have been positive. In fact, you will probably recall the last one that we tabled on March 31, in which five out of seven of the audits indicated there was satisfactory progress.
In conclusion, Mr. Chair, I wish to say that we are very honoured to assist Parliament in its oversight responsibilities and very much appreciate the excellent relationship that we have with this committee. Without your review of our audit reports, I'm convinced we would not have the impact that we have with our work, so my thanks to you.
