Thank you very much, Mr. Chair.
We are pleased to present our 2009 spring report, which was tabled in the House of Commons this past Tuesday, May 12. As you mentioned, I'm accompanied by John Wiersema, Deputy Auditor General, and Doug Timmins and Wendy Loschiuk, assistant auditors general.
Our job is to provide parliamentarians with reliable and independent information on how well the federal government manages and spends taxpayers' dollars and whether it keeps its environmental and sustainable development commitments.
Before I present the details of our individual audits, I would like to raise a matter that has implications for all of our audit work, and that is the government's approach to documenting its analysis of policy initiatives submitted by departments and agencies.
Central agencies have an important role in ensuring that policy and recommendations put to Cabinet have been thoroughly analyzed. In one audit for this Report, we wanted to see that this had taken place — not to question the recommendations or decisions but to see that the analysis had been carried out.
We were told that it had taken place but that the only evidence was in the recommendations to the Treasury Board and Cabinet, documents that we do not see or wish to see. We believe this analysis should be documented in a form that can be made available to us.
I strongly urge the government to ensure that relevant analysis is documented and maintained in information systems. Should the analysis not be available to us, I must conclude that it was not performed.
Mr. Chair, I would like to now turn to last Tuesday's report. Let me begin with our audit of the government's use of gender-based analysis in its policies and programs.
Gender-based analysis is used to assess how spending initiatives and policy proposals might differ in their impact on men and on women. The federal government committed in 1995 to implement this tool throughout its departments and agencies. However, it has not made it mandatory. Our examination of seven departments showed that despite the fact that some departments and central agencies are making efforts to consider gender differences in designing their programs, the 1995 commitment has still not been implemented.
Indian and Northern Affairs Canada is clearly a leader in this area as the only department that has fully implemented the elements of a sound framework for gender-based analysis. On the other hand, Transport Canada and Veterans Affairs Canada have no framework.
We also found that very few of the departments that perform gender-based analysis can show that the analyses are used in designing public policy. Their proposals to Cabinet and to the Treasury Board provided little information on how policies would specifically affect women and men.
The government has recognized that policy decisions can affect men and women differently. It should keep its longstanding commitment to consider these differences in developing its policies and programs.
Turning now to the government's management of intellectual property. Intellectual property refers to legally protected rights, such as patents and copyrights in the industrial, scientific, literary, and artistic fields. The federal government generates intellectual property through its own activities as well as activities carried out by the private sector under federal contracts for goods and services.
Intellectual property is a valuable asset that can provide social and economic benefits to Canadians. For example, National Research Council Canada developed a vaccine for meningitis that is used in Canada as well as internationally. In addition to the health benefits, it has generated over $25 million for the organization.
We found that despite their significant expenditures on science and technology, Health Canada and Fisheries and Oceans Canada have identified little intellectual property developed by their scientists and researchers. None of the three organizations that were audited adequately identify and report whether work performed under contract is likely to generate intellectual property.
As well, the government's policy requires that, apart from some specific exceptions, ownership of intellectual property resulting from contracted activities should go to the contractor to increase the potential for commercialization. Yet Health Canada and Fisheries and Oceans Canada retained ownership in more than half the contracts examined where intellectual property was reported, often without adequate justification.
We did see some good practices by the National Research Council that other departments and agencies could adopt to improve their own management of intellectual property.
The Report also looks at how the government ensures the health and safety of federal employees working in office buildings administered by Public Works and Government Services Canada. The Department administers more than 1,400 buildings in all regions of the country, where more than 230,000 public servants work. Individual departments have a responsibility for the health and safety of their employees working in those buildings.
Many of the federal departments we audited did not clearly understand their roles and responsibilities for fire safety planning. Although departments are required to hold fire drills every year, they could not demonstrate that they were doing so in 18 of 54 buildings covered by our audit.
We also found that for the majority of buildings in our audit, departments had not submitted fire safety plans to Human Resources and Skills Development Canada, as required. During our audit, and in response to letters we sent to departments indicating the serious nature of these shortcomings, we noted that many of the departments took corrective action.
In addition, we found that Public Works and Government Services Canada has clear policies for managing the condition of the office buildings it administers. However, it could not demonstrate that it consistently corrects high-priority deficiencies in these buildings. The federal government has an obligation to protect the health and safety of its employees. It has appropriate policies in place, and it should ensure that departments follow them.
Let me go back to Chapter 4. There's an issue that came to our attention during our financial audits of the Canada Revenue Agency. The Agency has incurred more than $90 million in unnecessary interest costs over the past three years, as a result of large balances that a number of corporations have been keeping on deposit with the Agency. The Agency has a responsibility to ensure that it does not make large interest payments that could be avoided. It has recognized for years that certain corporations might be leaving large balances in their accounts to take advantage of favourable interest rates.
The Canada Revenue Agency needs to develop a robust administrative policy on managing advance deposits and apply it consistently to reduce unnecessary interest costs.
We also examined the Department of National Defence's financial management practices. National Defence has a yearly budget of about $19 billion and manages more than $33 billion in equipment, inventory, and real estate around the world.
Its financial decisions have long-term impacts, not only on the department but also on national security. We found that while National Defence has taken steps to improve financial management and control, its systems and practices do not adequately support financial decision-making for the medium or long term. The department needs more highly developed financial management practices to meet the demands of its complex operations.
We found that National Defence lacks a corporate business plan that aligns its operations with its investments and the Canada First Defence Strategy. In addition, we saw no evidence that senior decision-makers are routinely briefed on the status of key risks. In addition to better information, senior management at National Defence needs to be more involved in financial management. It will take strong leadership and commitment to make the necessary changes.
The next issue was brought to our attention in August 2006 by Natural Resources Canada. In response to concerns raised by NRCan's internal auditors, we examined five contribution agreements, and we found a serious conflict of interest. A consultant who helped the department develop two contribution programs also worked for organizations that received funding under the same programs. We were very concerned that, knowing all the circumstances, the department went ahead with these contribution agreements without identifying this obvious conflict of interest.
Furthermore, NRCan made over $3.2 million in payments to an organization of which the consultant was the president, despite evidence that it was insolvent and was not paying its subcontractors. This was contrary to the terms and conditions of the contribution agreement. Natural Resources Canada needs to develop policies and guidance on conflict of interest for contribution agreements to prevent a recurrence of this type of problem.
Finally, we are also presenting the main points of special examinations of eight crown corporations that we completed in 2008. We identified significant deficiencies in three of these corporations. Crown corporations represented an important part of federal government activity. They employ 92,000 people and manage $185 billion in assets. They are accountable to Parliament through the responsible minister, and special examinations are an important mechanism in their accountability.
The report tabled on Tuesday contains two chapters from the Commissioner of the Environment and Sustainable Development. Unfortunately, the commissioner is unable to be here today, so on his behalf I would like to take a few minutes to summarize the finding of those two chapters for you.
Let me begin with the section on protecting fish habitat. We examined the role played by two federal departments, Fisheries and Oceans Canada and Environment Canada, in the protection of fish habitat. Fish habitat is a national asset. It provides food and shelter for aquatic wildlife, as well as water for human consumption. We found that efforts to protect fish habitat have been inadequate. In the 23 years since the habitat policy was adopted, we found that some parts of it had not been implemented at all, and others only partially. This could be putting fish habitat in jeopardy.
We found limited information regarding the state of fish habitat across Canada. Fisheries and Oceans Canada does not know whether its actions are achieving the stated objective of the habitat policy—that is, to contribute to a net gain in fish habitat.
We noted that Environment Canada has not identified what it has to do to fulfill its responsibilities under the Fisheries Act related to prohibiting the deposit of harmful substances like pollutants into waters that contain fish. We found that it does not have a systematic approach that allows it to focus its resources where significant harm is most likely to occur.
Finally, we found little formal coordination between the two departments to set priorities or to develop common criteria for habitat protection.
The Fisheries Act is among the most important laws of the federal government intended to promote environmental protection and conservation. We are concerned that many of the issues identified in our audit have been raised repeatedly over many years, and they are still unresolved.
Turning now to the Kyoto Protocol Implementation Act. The Act was passed by Parliament in 2007. It requires the government to produce a plan each year showing how Canada will meet its obligations under the Kyoto Protocol by 2012.lt also requires the Commissioner to issue reports to Parliament on Canada's progress. This is our first report in accordance with these obligations.
The government has completed two climate change plans, which include targets for reductions in emissions of greenhouse gas within the Kyoto Protocol period, 2008 to 2012. We found that the plans are missing some of the information required under the Act.
We found that the government will be unable to determine actual emission reductions achieved for each of the measures in its plans as the act requires. Without a system to count real emission reductions that result from its measures, the government will not be able to inform Parliament whether the measures are working. We also found that Environment Canada has overstated the expected reductions in greenhouse gas emissions for the 2008-2012 Kyoto Protocol period.
Environment Canada has accepted most of our recommendations and has committed to follow through on them in the next climate change plans.
Mr. Chair, I thank you. This concludes my opening statement. We would be pleased to answer any questions the committee members may have.
