International Journal of Government Auditing – July 2004
Canada
Special Report Cites Failure in Governance and Control
On September 30, 2003, the Auditor General of Canada, Sheila Fraser, tabled in the House of Commons of the Canadian Parliament a special report on the results of her office’s audit of the administration of the Office of the Privacy Commissioner of
Canada.
This special report was tabled in accordance with the provisions of subsection 8 (2) of the Auditor General Act, which allows the Auditor General to make “a special report to the House of Commons on any matter of pressing importance or urgency that, in the opinion of the Auditor General, should not be deferred until the presentation of the next report under subsection 7(1).” Under subsection 7(1), the Auditor General submits periodic value-for-money reports to the House of Commons. This was the first time that the Auditor General used this special reporting power since the Auditor General Act became effective in 1977.
The audit found conditions that seriously impaired the ability of the Office of the Privacy Commissioner to function. It found an environment of fear and arbitrariness in the office that led to a major breakdown in controls over financial management, human resources management, contracting, and travel and hospitality expenditures.
The former Privacy Commissioner had abdicated his responsibilities for ensuring the proper administration of the office. Many senior executives had also ignored breaches of law and policy. The effect of this breakdown was a climate that allowed the abuse of the public treasury for the benefit of the former Commissioner and a few senior executives.
The situation was cause for concern, given that parliamentarians provided the Office of the Privacy Commissioner with power in an area of critical importance—assisting Parliament in protecting and preserving the privacy rights of Canadians. According to the Auditor General’s report, a great deal of rebuilding will be needed to restore the office’s management capabilities.
A new House of Commons committee, the Standing Committee on Government Operations and Estimates, had requested that the Auditor General undertake this audit after its hearings pointed to irregularities in the conduct of the Office of the Privacy Commissioner. Under the Auditor General Act, the Auditor General can choose which audits to undertake. In this case, the Auditor General accepted the committee’s request because of the seriousness of the issues brought to her attention.
The Office of the Privacy Commissioner of Canada was created to advocate for the privacy rights of Canadians. Its legislative mandate is to investigate complaints and conduct audits under the Privacy Act and the Personal Information Protection and Electronics Document Act, publish information about the handling of personal information in the public and private sectors, research privacy issues, and promote public awareness and understanding of privacy issues. The Office of the Privacy Commissioner is one of the five offices Parliament created to provide it with information and advice, among other services. The other Officers of Parliament are the Auditor General, the Commissioner of Official Languages, the Chief Electoral Officer, and the Information Commissioner. Officers of Parliament must take special care in managing their offices, which are unlike typical government departments (ministries) and agencies in that they have a considerable degree of independence from government oversight. However, as the audit of the Office of the Privacy Commissioner made clear, these officials are still accountable for the way they conduct their affairs. Officers of Parliament and other public servants in positions of leadership must be held to account for the prudent management of both their employees and the funds entrusted to them.
International Peer Review Yields Positive Results
In February 2003, the Auditor General of Canada asked members of the international audit community, through the Auditors General Global Working Group, if they would be interested in participating in a review of the Canadian Office of the Auditor General (OAG) value-for-money audit practice. This was to be the first time the legislative audit practice of a national audit office would be assessed by a team of its international peers.
The purpose of the review was to assess the extent to which the OAG value-for-money practice is designed to reflect recognized standards of professional practice and is operating effectively to produce independent, objective, and supportable information that Parliament can rely on to examine the government’s performance and hold it to account.
The review was carried out over the course of a year by a team led by the United Kingdom’s National Audit Office, with representatives from the national audit offices of Norway, the Netherlands, and France. Each country contributed two members to the review team. The U.S. General Accounting Office participated as an observer.
In preparation, the OAG conducted a thorough assessment and update of its Quality Management Framework and launched a revised Value-for-Money Audit Manual in December 2002. The peer review team met in February 2003 to work out details of the peer review, such as leadership, participants, objectives, scope, and criteria. They met again in April 2003 to plan the necessary work, and in May 2003 they signed a memorandum of understanding with the OAG for the peer review.
The peer review team began the first phase of the review, a design assessment, in June 2003 and analyzed the OAG’s policies and procedures for value-for-money audits. The team looked at whether the direction given to value-for-money auditors reflected the
recognized standards of professional practice and the legislative authorities in the Auditor
General Act.
The team began the next phase, the implementation assessment, in June 2003—simultaneously with the design assessment—and looked at the OAG’s practice review function. It focused on whether the value-for-money audit practice operated effectively to meet its objective of providing parliamentarians with independent, objective, and evidence-based information that they could use to examine the federal government’s performance. In addition to reviewing the OAG’s internal review process and results, the team examined selected audit files from the four 2003 periodic reports.
The peer review team met three times over 5 months to compare notes and discuss preliminary findings and recommendations. They also communicated regularly by e-mail and telephone. In November 2003, the team spent 2 weeks at the OAG’s Ottawa office conducting interviews and focus groups with value-for-money practitioners and subject matter specialists. The discussions were to verify whether (1) staff understood the purpose and requirements of the OAG’s Quality Management Framework, including the policies, procedures, and controls that govern its value-for-money audit work, and (2) the work was managed with due regard to economy, efficiency, and effectiveness.
The peer review team presented its initial findings to the OAG’s Executive Committee at the end of November 2003 and completed its report in February 2004. In summary, the team found that as of December 31, 2003, the OAG’s value-for-money audit practice was suitably designed and operating effectively to achieve its objectives. The OAG has prepared an action plan in response to the suggestions made in the peer review report.
The Peer Review Report on the Value-for-Money Audit Practice of the Office of the Auditor General of Canada and the action plan prepared by the Office of the Auditor General of Canada to address the suggestions for improvement were tabled at a meeting of the Standing Committee on Public Accounts on March 11, 2004. These documents are available on the Office of the Auditor General of Canada Web site.
For further information, contact: Office of the Auditor General of Canada, fax: ++1 (613) 957 4023; e-mail: communications@oagbvg.gc.ca; or Web site: www.oag-bvg.gc.ca.