Thank you, Mr. Chair.
We're very pleased to be here today to present our 2009 status report, which was tabled in the House of Commons on March 31. As you mentioned, I am accompanied by assistant auditors general Hugh McRoberts and Richard Flageole and by Scott Vaughan, the Commissioner of the Environment and Sustainable Development. Our report revisits seven issues that have been discussed in my recent reports or those of the commissioner.
Status Reports are particularly important because they show what the 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 and significance of the issues and the amount of time that has passed since the original audit.
I am pleased to say that of the seven topics revisited this year, the commissioner and I found satisfactory progress in five. Let me begin with the three from my report.
First, Passport Services. In 2007, with the first phase of the United States Western Hemisphere Travel Initiative, Passport Canada found itself unprepared for the overwhelming number of passport applications from Canadians wanting to fly to the United States.
Our follow-up audit focused on Passport Canada's progress in preparing for a rise in the volume of passport applications leading up to June 2009, when Canadians will need a passport to enter the United States by land or sea.
We are pleased at the extensive action Passport Canada has taken to fix the problems it had with the last surge in demand and to be better prepared for the next one. It conducted “lessons learned” exercises to identify the causes of the problem, built and equipped a new processing and printing centre for mail-in applications, took steps to streamline the processing of walk-in applications, and hired more staff.
It also opened passport clinics in selected communities, revamped its website, and launched a major communication campaign encouraging Canadians to apply for passports well ahead of the June 2009 deadline.
Passport Canada has put a lot of effort into correcting the problems it had with a sudden increase in demand for passports. Time will tell whether Canadians heed its advice to act early.
I'll turn now to the issue of national security. In 2004, we reported that intelligence management across the government was deficient in many areas, from setting priorities to coordinating and sharing information between departments and agencies. This time we found satisfactory progress in managing security intelligence. For example, the government has taken measures to improve the reliability of watch lists of individuals considered of interest to intelligence organizations. It reduced its fingerprint backlog and is progressing in its development of a computerized system to analyze digitized fingerprints.
We also found progress in the organization and coordination of priorities among federal departments and agencies involved in security. For example, the government made progress on developing an integrated secure system that allows the sharing of intelligence information among federal organizations.
We recognize the efforts made so far to resolve the problems we found in previous audits, but there are still important areas where concrete action and leadership are needed.
Transport Canada and the RCMP are still not sharing criminal intelligence information effectively. In granting security clearances to individuals working at airports, Transport Canada does not check all criminal intelligence data banks. It could still be granting clearances to high-risk individuals for access to restricted areas at airports. Furthermore, a number of departments and agencies have cited legal barriers to sharing information with each other.
In the world of security intelligence, information sharing is critical. And where there are legal constraints, the government needs to find a way of resolving them.
Also in this report, we looked at whether Indian and Northern Affairs Canada made progress since our 2005 audit in converting lands to reserves for first nations in Manitoba and Saskatchewan. Conversions of land are part of fulfilling Canada's century-old obligations to provide land owed to first nations under treaties.
First Nations in Manitoba and Saskatchewan are among the most impoverished in Canada, and acquiring land could serve as a means of improving their standard of living. In the last three years, the department has converted more than 315,000 acres of land to reserves in those provinces: a 42% increase since our audit in 2005. It also increased its efforts to coordinate environmental assessments and surveys of selected land.
Meeting Canada's obligations to provide lands owed to first nations will require a significant ongoing effort. The department will need to resolve the management weaknesses we identified in order to sustain the progress of the last three years and meet a 2006 government commitment.
Now let me turn to the areas where we found unsatisfactory progress in implementing recommendations from previous reports. In these two areas, the problems are long-standing.
The first is the process for making GIC, or Governor in Council, appointments to federal organizations. A GIC appointment is made by the cabinet and formally signed by the Governor General following the recommendation of the minister responsible for the organization. The Privy Council Office oversees the administration of the GIC appointment process.
We found that there are still long delays in making GIC appointments to crown corporations, small federal entities, and the Immigration and Refugee Board. The high number of continuing vacancies on the Immigration and Refugee Board has contributed significantly to the backlog of refugee claims waiting to be heard. Delays in making appointments can compromise an organization's ability to function effectively. And I am especially concerned about the consequences for the Immigration and Refugee Board, given the high financial, social, and human costs resulting from the board's backlog of unresolved claims.
We also found serious communication problems about appointments and reappointments. Some chairs and CEOs learned of their appointments through the media, and in some cases directors learned at a board meeting that they had been replaced days earlier.
Poor communication shows a lack of respect for the individuals involved. These are important positions, and the problems we identified could discourage qualified people from accepting them.
The second area of unsatisfactory progress concerns the way the Canada Revenue Agency deals with the risk that some small and medium enterprises might not comply with tax laws.
Businesses that don't report all their income deprive the government of revenues to fund programs for all Canadians. CRA has an important role of ensuring fairness by identifying those with unreported income.
We found that CRA needs to do a better job at targeting businesses to audit for unreported income. For example, the agency audited a far higher proportion of low-risk tax returns than those rated as high risk by its computerized risk assessment system, and about half of its underground economy audits over the past five years did not detect any unreported income.
On a more positive note, though, the CRA conducted a major review to identify all threats to the tax base, and it has increased its outreach activities to promote compliance and taxpayer awareness of what the underground economy costs society. The Canada Revenue Agency has taken some important steps forward, but it needs to resolve the long-standing weaknesses we point out in our report.
In conclusion, you will note two areas in which the government has disagreed with us. The Canada Revenue Agency does not agree with our overall conclusion. The Privy Council Office believes that our audit report on GIC appointments goes beyond the Auditor General's mandate. I am confident that our position is sound on both counts.
Audits, by their nature, focus on areas that need improvement, and I am very pleased that the government has made progress in most of the areas we revisited this year.
Before answering the committee's questions, I would propose that the commissioner present the findings from his two audits.
