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Auditor General of Canada

The Office of the Auditor General holds the federal government accountable for its use of public funds. However, the public is often unaware of the Auditor General’s official function and organization. This article introduces the Office of the Auditor General, including its role, legislative framework, history, basic organization and activities, as well as mechanisms of oversight.

Introduction to the Auditor General of Canada

Role, legislative framework and history of the Auditor General

Organization of the Office of the Auditor General of Canada

Powers, staffing and external committees of the Office

Types of Audits Performed by the Auditor General of Canada

Financial audits, performance audits and special examinations

Oversight of the Office of the Auditor General of Canada

Mechanisms of review and oversight of the Office

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Introduction to the Auditor General of Canada

Role, legislative framework and history of the Auditor General

Role of the Auditor General

The Auditor General’s primary purpose is to provide independent and reliable information concerning the federal government’s use of federal tax dollars. In fulfilling this role, the Auditor General performs regular financial audits of how the federal government collects and spends public funds. This involves independently collecting and reviewing government financial records, and producing reports for Parliament and the general public. As an Officer of Parliament, the Auditor General reports his/her findings directly to the House of Commons. As such, the Auditor General is responsible to the House of Commons, not to the government of the day.

It is important to note that the Auditor General does not simply describe government finances, but also comments on how effectively the federal government spends public funds. In this context, the Auditor General examines the government’s financial records and draws attention to incidents of what s/he deems to be government waste or misuse of public funds. The Auditor General examines the procedures and oversight mechanisms the government has put into place regarding its finances, as well as precisely how and where the government is spending its money.

Moreover, the Office of the Auditor General is responsible for evaluating government performance regarding environmental protection and sustainable development. This role is undertaken by the Commissioner of the Environment and Sustainable Development, which is a position separate from, but attached to, the Auditor General’s Office.

The Auditor General thus plays a key part in ensuring accountability at the federal level. In order for Parliament to effectively hold the federal government accountable for its use of public funds (as well as its environmental policies), it requires access to independent and reliable financial information. It needs to know such things as how the federal government is collecting public revenues, how it is distributing those funds to various government departments and agencies, and how those government departments are spending the money on a day-to-day basis. It is the Auditor General’s responsibility to provide this information to Parliament.

The Auditor General can also take on a highly public profile, especially when it reports on severe misuses of public funds by the federal government. The most recent example of this occurred in the period 2002-2004 when the Auditor General released several reports highlighting financial irregularities in the federal Sponsorship Program. The public and parliamentary outcry that resulted from the Auditor General’s reports eventually led to a full public inquiry on the issue.

For more information on the public inquiry into the Sponsorship Program:

The Auditor General is also the auditor for the territorial governments of Nunavut, the Yukon and the Northwest Territories, and reports directly to their respective territorial legislatures. The provinces have their own official auditors, which are creations of provincial legislation and report to provincial legislatures.

Legislative Framework of the Auditor General

Parliament has granted the Office of the Auditor General specific powers and responsibilities, which are spelled out in two key pieces of legislation. The first is the federal Auditor General Act, which is legislation directly concerned with the operation of the Office of the Auditor General. The Act outlines such things as the Auditor General’s powers and duties, his/her access to government information, staffing entitlements and obligations, as well as who is to audit the financial records of the Auditor General.

The second key piece of legislation is the federal Financial Administration Act, which provides the legal framework for general financial management and accountability of public service organizations and Crown corporations. The Act provides a procedure for the internal control of funds allocated to departments and agencies by Parliament and for the preparation of the Public Accounts, which contain the government’s annual statement of expenses and revenues. Under the Act, these financial statements are to be presented to the Auditor General, who provides an independent opinion on them to the House of Commons.

History of the Auditor General of Canada

An independent office of the Auditor General was first created in 1878. Previously, the responsibility of auditing government finances was performed by the federal Deputy Minister of Finance. Originally, the Auditor General’s duties were much narrower than they are today — they were limited to examining and reporting on past transactions and issuing government cheques. Each year the Auditor General would submit an annual report to the House of Commons, which listed every single transaction made by the federal government over the course of the year.

In 1931, the Auditor General’s duties were altered when a separate government position, the Comptroller of the Treasury, was created for issuing government cheques. This reform created a clear line between the duties of government and the Auditor General. The government was responsible for collecting and distributing public funds, while the Auditor General was responsible for examining and reporting on how those funds were handled.

The modern role of the office first developed in the 1950s, when the Auditor General began to report on “non-productive payments.” This included payments made by the federal government which the Auditor General deemed to have no apparent benefits to Canadians. The shift from simply reporting on government financial activities to assessing their value for taxpayers was controversial, with some arguing that the Auditor General was going beyond his/her mandate by commenting on government policy.

The most significant changes to the Office of the Auditor General came in 1977, with passage of the Auditor General Act. The Act broadened and clarified the Auditor General’s mandate. In addition to reporting government transactions, the Auditor General was officially granted the responsibility of assessing how well the government managed its financial affairs. The Act, however, limited the Auditor General’s role to commenting on how the government implemented its policy choices, as opposed to commenting on the policy choices themselves.

In 1995, the Auditor General Act was amended with the establishment of the position of the Commissioner of the Environment and Sustainable Development within the Office of the Auditor General. The Commissioner provides parliamentarians with independent analysis and recommendations on the federal government’s actions and policies in the context of environmental protection and fostering sustainable development.

Organization of the Office of the Auditor General of Canada

Powers, staffing and external committees of the Office

The Auditor General is more than an individual; s/he is also an office – the Office of the Auditor General. The following provides an overview of the powers, staffing and external committees of the Office of the Auditor General.

Powers and Duties of the Office of the Auditor General

The Auditor General Act and the Financial Administration Act provide the basic powers and duties of the Office of the Auditor General. Generally speaking, the Auditor General has the power to examine and report on the financial activities of government departments, agencies and Crown corporations. While the Auditor General has the power to comment on whether or not the federal government has implemented its policies in a financially effective manner, s/he does not have the power to comment on the government’s choice of policies.

With the inclusion of the Commissioner of the Environment and Sustainable Development, the Office of the Auditor General further has the power to examine and report on government activities relating to environmental protection and fostering sustainable development.

More specifically, the Auditor General is entitled to free access to all information that relates to the fulfillment of his/her responsibilities (although, the federal government may deny access to certain information in some exceptional situations). In this context, the Auditor General has the power to demand and receive from members of the federal public service any information, reports and explanations that s/he considers necessary. The Auditor General may also examine any person under oath on any matter pertaining to an audit undertaken by the Office, and shares the same powers as a public inquiry commissioner in doing so. Finally, the Auditor General has the power to station his/her staff in any public service office whenever it is deemed necessary.

The Auditor General (and his/her staff) is provided with several key legal immunities. S/he cannot be compelled as a witness to testify on any matter coming to the Auditor General’s attention during the course of performing official duties (except in certain criminal proceedings). Furthermore, the Auditor General is immune from prosecution for any action performed in good faith in the course of fulfilling his/her official duties. This includes immunity from prosecution for defamation in cases where the Auditor General reports on the activities of particular individuals.

Staff of the Office of the Auditor General

The Office of the Auditor General employs approximately 600 employees, which are divided amongst the head office in Ottawa and four regional offices in Vancouver, Edmonton, Montreal and Halifax. This multidisciplinary staff includes accountants, engineers, lawyers, management specialists, information technology professionals, environment specialists, economists, historians and sociologists. The staff is organized into teams that are assigned to audits of specific government departments, agencies and Crown corporations.

The Office of the Auditor General also includes an Executive Committee, which provides overall professional and administration for the Office, including setting policies and overseeing all aspects of management and operations. The Committee consists of the Auditor General, the Deputy Auditor General and 12 Assistant Auditors General. Also included in the Executive Committee is the Commissioner of the Environment and Sustainable Development, who is responsible for reviewing government policies and actions in areas of environmental protection and fostering sustainable development.

For the biographies of the members of the Executive Committee:

External Committees of the Office of the Auditor General

In addition to its own internal staff, the Office of the Auditor General also receives advice from several external committees. In some cases, the Auditor General will chair these external committees, while the remainder of their membership will be constituted by experts and advisors from outside the Office’s staff.

As of February 2008, there were five external committees:

Types of Audits Performed by the Auditor General of Canada

Financial audits, performance audits and special examinations

The Office of the Auditor General performs three main types of audits: financial audits, performance audits and special examinations. The following discusses the nature of each.

Financial Audits

Financial audits focus on whether the federal government is keeping proper accounts and records of its financial activities. Of particular importance here is the annual Public Accounts of Canada, which contain the federal government’s yearly statements regarding how much money it collected and how much it spent. It is the responsibility of the Auditor General to verify the correctness of the Public Accounts. In addition, the Auditor General conducts annual financial audits of most Crown corporations and many other federal organizations.

In addition to simply verifying the correctness of the federal government’s books, these financial audits also examine other key issues. The Auditor General is responsible for checking to make sure all financial transactions conform to federal laws and regulations (for example, whether the transactions are legal under federal laws governing the collection and expenditure of public funds by the government). Secondly, the Auditor General is entitled to report on any other matters s/he thinks should be brought to the attention of Parliament.

Performance Audits

Performance audits are commonly referred to as “value-for-money-audits.” Whereas regular financial audits are meant simply to verify the correctness of the federal government’s financial statements, performance audits are assessments of whether the government departments and programs are being run in an adequate manner.

Performance audits can be of two types: finance-oriented or environmentally-oriented. Audits can be strictly finance-oriented, in which the issue is whether the government is using public funds efficiently, and whether a particular department or program has adequate mechanisms to measure efficiency. With the inclusion of the Commissioner of Environment and Sustainable Development, audits can be environmentally-oriented, in which the issue is whether departments and programs are being operated in an environmentally friendly and sustainable manner.

The Office of the Auditor General performs approximately 30 performance audits each year. Under the Auditor General Act, the Office has broad discretion in determining what areas of the federal government to examine and report upon. The Office may audit a single government program or activity, or an area of responsibility that involves several government departments and agencies. In choosing which particular areas to examine, the Office usually focuses on high-risk areas of the federal government; that is, areas which could cost taxpayers significant amounts of money or threaten the health and safety of Canadians.

Performance audits are the most high profile and controversial activities performed by the Auditor General. In some cases, such as the audits performed on the Sponsorship Program during the period 2002-2004, the Auditor General finds significant deficiencies in the federal government’s use of public monies. This, in turn, can raise considerable public outcry and have dire consequences for the government of the day. Moreover, performance audits can be controversial in that they represent public criticism of the government. While the Auditor General is disallowed from commenting on the choice of policies and programs instituted by the government, it nevertheless can comment on the manner in which the government executes those policies. The Auditor General thus plays more of a role than simply an independent accountant, which can cause friction between the Office and the government of the day.

The Auditor General’s performance reports are automatically referred to the Public Accounts Committee for further review. Reports of the Commissioner of Environment and Sustainable Development are submitted to the Committee on Environment and Sustainable Development. These committees then hold hearings to discuss the Office’s report, and may then submit their own report to the House of Commons with recommendations for government action. The government is expected to submit a response to the report within 150 days.

Special Examinations

The final type of audit undertaken by the Office of the Auditor General is special examinations of Crown corporations. Under the Financial Administration Act, federal Crown corporations are subject to a special examination once every five years. These are a form of performance audit in which the Office examines and comments on the management of the corporation as a whole. Key issues in special examinations include whether a Crown corporation has adequate controls and practices to safeguard public assets, and whether resources are managed efficiently and effectively.

Reports resulting from special examinations are usually submitted to the Crown corporation’s board of directors. In some cases, the Office submits the report to the Cabinet minister responsible for the Crown corporation and Parliament.

Oversight of the Office of the Auditor General of Canada

Mechanisms of review and oversight of the Office

The Office of the Auditor General is meant to operate independently of the federal government. This is meant to ensure that the findings of the Auditor General are objective and without influence from government officials. Nevertheless, the Office does submit itself to several mechanisms of review and oversight.

Review by Parliamentary Committees

In the case of performance audits, the reports of the Auditor General go through an extensive review process in parliamentary committees. Central here is the Public Accounts Committee and the Committee on the Environment and Sustainable Development. When relevant, other parliamentary committees will also review reports of the Office. It is these committees, and not the Office of the Auditor General, that make recommendations for government action. Typically though, the committee will base its recommendations in large part on the Office’s report.

Review by External Organizations

The Office will also take part in reviews by external organizations to ensure quality in its auditing practices.

In 2003, the performance auditing practices of the Office were reviewed by a team of peers, led by the National Audit Office of the United Kingdom (the auditing agency of the Government of the United Kingdom), and which also included representatives from France, Norway and the Netherlands. The team concluded that the Office used performance auditing practices that reflected recognized professional standards and which produced independent and objective information. The team also offered suggestions for improvement.

For more information on 2003 external review of the Office:

In 1999, the Office hired a private auditing firm, PricewaterhouseCooper LLP, to conduct an audit of its quality control practices for annual financial audits. The audit found that the Office had suitable quality control practices, which were in accordance with legislative requirements, professional standards and the Office’s own internal policies.

For more information on the 1999 external review of the Office:

Other Mechanisms of Oversight and Review

The Office is also subject to scrutiny by other government organizations. For example, the Official Languages Commissioner reviews the Office’s policies and conduct to ensure that they are consistent with federal policies regarding the use of Canada’s official languages. The Public Service Commission also provides oversight in regard to the Office’s staffing practices, and the Privacy Commissioner reviews the Office to ensure that its conduct respects the privacy of individuals and is consistent with the federal Privacy Act.

Finally, the Auditor General is disallowed from performing financial audits of his/her own Office. Instead, such reviews are performed by an external auditor, which is appointed by the Treasury Board of Canada. The external auditor’s report is submitted to the Treasury Board and then forwarded to the House of Commons.

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