Thank you, Mr. Chair.
We are very pleased to be here today to present my fifth status report, which was tabled in the House of Commons yesterday. I am also pleased that we're reporting satisfactory progress in five areas.
As you noted, I am accompanied by four assistant auditors general: Richard Flageole, who was responsible for the passport audit; Nancy Cheng, who was responsible for the audits on the social insurance number and the National Research Council; Andrew Lennox, who was responsible for the coast guard audit; and Lyse Ricard, who did the audit on heritage properties.
Status reports are particularly important because they show what departments and agencies have done to address recommendations from a selection of our past audits. In determining whether progress is satisfactory or unsatisfactory, we take into account the complexity of the issue and the amount of time that has passed since the original audit.
The Status Report shows how departments and agencies have acted on our concerns in seven specific areas. We revised the management of advertising and public opinion research activities, federal built heritage, leading-edge research, the Coast Guard's fleet and marine navigational services, passport services, the social insurance number, and international taxation.
Let me turn now to the areas where progress has been satisfactory.
I will begin with the management of advertising and public opinion research. Given the serious weaknesses that we identified in our 2003 audit of government advertising activities, this year's findings are good news.
We found that Public Works and Government Services Canada has made satisfactory progress in ensuring that advertising and public opinion research contracts are awarded in a fair and transparent manner. It used a competitive process to establish a pool of qualified firms who can provide advertising and public opinion research services. The process for choosing the agency of record was fair and transparent.
Departments have made satisfactory progress in ensuring that they plan for advertising activities and manage suppliers in accordance with the communications policy of the Government of Canada. I am pleased that the government did not create new rules and controls as a response to our previous report. Instead, it focused on following the rules that were already in place.
There was also progress in the area of international taxation. The globalization of the economy and growth in international investment have a significant impact on the taxes owed to Canada. This affects Canadian residents doing business abroad as well as non-residents earning income in Canada.
The use of tax havens by Canadians and abuse of tax treaties with other countries could divert tax away from Canada, and the amounts at risk could be significant. For example, the Canada Revenue Agency estimates that in 2005, Canadian corporations conducted $1.5 trillion in transactions with related parties in foreign countries. Non-residents paid over $4.9 billion in taxes last year on income earned in Canada.
We found that the agency is now better able to identify potential non-compliance with the tax rules on international transactions. It has taken steps to detect aggressive international tax planning schemes and has directed more resources to auditing international tax avoidance.
However, in some of the tax offices handling the highest-risk files, the agency still lacks sufficient expertise in international tax auditing. Taking into account the difficulty of retaining sufficient expertise, the agency needs to develop a consistent national approach to auditing taxpayers with international transactions.
Another area where globalization has a significant impact is passport services. In 2005, we reported that the passport office, now Passport Canada, was struggling to meet higher expectations for security and growing demands for service. Since then, it has dealt with an unprecedented demand, issuing over three million passports in 2005-06. High-demand pressures will continue, given the more stringent U.S. requirements for passports.
I am pleased at the progress Passport Canada has made in the relatively short time since our 2005 audit. The agency has clearly directed a major effort toward resolving the problems we had identified. For example, examiners now have appropriate tools and training to determine whether identity documents provided with passport applications are authentic. Passport Canada has also significantly enlarged its watch list and has used the information to refuse applications or to investigate them further.
But Passport Canada still has some major issues to resolve, particularly in the areas of security and identity verification. It faces a complex undertaking that will need the full cooperation of other government organizations at the federal, provincial, and territorial levels.
We also examined the progress made by the National Research Council in its management of leading-edge research. The NRC is the federal government's largest research organization. I'm pleased with the progress it has made toward implementing the recommendations from our audit in 2004.
The appointed council that governs the NRC's operations has strengthened its role, and the NRC's research institutes have taken steps to improve the way they manage research projects. We also noted satisfactory progress in several human resources management initiatives.
But action on some of our recommendations was delayed while the NRC laid the foundation for its new corporate strategy. It is important now that the organization meet its own milestones so it can fully address our recommendations.
Moving on to the conservation of federal built heritage—that is, historic buildings, battlegrounds, forts, and so on—I am pleased that Parks Canada has made satisfactory progress in addressing the concerns we raised in 2003 on the need for better protection of our built heritage. The agency has proposed a policy to strengthen the legal protection of federal built heritage and has improved its management tools.
Nevertheless, not all the problems have been resolved. The fate of heritage sites and buildings in the custody of federal organizations other than Parks Canada remains uncertain. The loss of heritage buildings and sites means that future generations will no longer have access to significant aspects of our history. It is therefore important that the federal government strengthen its conservation regime for built heritage. It also needs to set priorities to decide which heritage buildings and sites should be preserved.
Now let me turn to areas where we found unsatisfactory progress in implementing recommendations from previous reports. In those two areas, the problems are long-standing.
Let's start with the management of the social insurance number, which is used to issue billions of dollars in federal benefits to Canadians. It is also used widely outside the federal government. Even though Human Resources and Social Development Canada has improved several aspects of its management of the Social Insurance Number, two important issues, first reported nine years ago, remain unresolved.
First, the department cannot be sure of the quality of the information it retains in the social insurance register, the data base of personal information provided by everyone who has been issued a social insurance number. The department does not have goals for the quality of the information and does not measure it systematically.
Second, the policies on how federal departments may use the social insurance number are still unclear. This has led to inconsistent interpretations of the rules, which make it difficult for departments to ensure they use it appropriately.
This is the fourth time since 1998 that we have reported these two problems. The government should have resolved them by now. Good management of the social insurance number—including clear guidance on its use in the federal government—is more important than ever, in light of security concerns and the growing incidence of identity theft and fraud.
The other unsatisfactory area is the management of the coast guard fleet and marine navigational services. I am concerned that the coast guard has not solved long-standing management problems. It has not responded adequately to recommendations made a number of years ago, and many of the problems cited in our report are in fact similar to those raised in a 1983 audit.
The coast guard still operates largely as five regional coast guards, each with its own way of doing things. It has not become the strong national institution the government expects it to be.
Canadian mariners, like others around the world, also rely more and more on electronic navigation. While the coast guard is introducing new marine navigation services, it has been unable to develop strategies for traditional aids such as buoys and light stations, which are costly to maintain and operate and no longer serve their original purpose.
The coast guard has a history of failing to complete initiatives, partly because it takes on too much at once. It needs to decide on a few of the most urgent priorities and then get the job done.
In conclusion, audit by nature focuses on areas in need of improvement. I am very pleased to see that our work made a difference. This Status Report shows that the government has taken satisfactory action in the majority of the areas we revised this year.
Success can be attributed mostly to the setting of priorities, a strong commitment from senior management to achieve them, clear action plans, and support in the form of adequate resources to achieve the goals. Credit is due to the many public servants who have worked hard on resolving these issues.
Mr. Chair, my colleagues and I would now be pleased to answer any questions that committee members may have.
Merci.
