Auditor-General 2013 0

Spring 2013
Report of the Auditor General of Canada
Message from the Auditor General Main PointsChapters 1 to 10 Appendix
Office of the Auditor General of Canada
The Report is available on our website at www.oag-bvg.gc.ca. For copies of the Report or other Office of the Auditor General publications, contact Office of the Auditor General of Canada Distribution Centre 240 Sparks Street Ottawa, Ontario K1A 0G6 Telephone: 613-952-0213, ext. 5000, or 1-888-761-5953 Fax: 613-943-5485 Hearing impaired only TTY: 613-954-8042 Email: distribution@oag-bvg.gc.ca Ce document est galement publi en franais. Her Majesty the Queen in Right of Canada, represented by the Minister of Public Works and Government Services, 2013. Cat. No. FA1-2013/1-0E-PDF ISBN 978-1-100-22105-2 ISSN 1701-5413
Auditor General of Canada Vrificateur gnral du Canada
To the Honourable Speaker of the House of Commons: I have the honour to transmit herewith this 2013 Spring Report to the House of Commons, which is to be laid before the House in accordance with the provisions of subsection 7(5) of the Auditor General Act. Yours sincerely,
Michael Ferguson, FCA
OTTAWA, 30 April 2013
Table of Contents
Message from the Auditor GeneralSpring 2013 Main PointsChapters 1 to 10
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Status Report on Evaluating the Effectiveness of Programs Status Report on Security in Contracting Status Report on Collecting Tax DebtsCanada Revenue Agency Official Development Assistance through Multilateral Organizations Promoting Diabetes Prevention and Control Creating a Historical Record of Indian Residential Schools Federal Search and Rescue Activities Spending on the Public Security and Anti-Terrorism Initiative Employment Insurance OverpaymentsHuman Resources and Skills Development Canada
9 12 15 17 19 22 25 27 29 31 1
Chapter 10 Advance FundingP3 Canada Fund
Appendix
Main Points of the Report of the Commissioner of the Environment and Sustainable DevelopmentFall 2012
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Report of the Auditor General of CanadaSpring 2013
iii
Message from the Auditor GeneralSpring 2013
Message from the Auditor General Spring 2013

I am pleased to present my Spring 2013 Report to Parliament. Our audit work assists parliamentarians in holding government to account for its management of resources and for the results achieved. We serve Parliament through various types of performance auditing:
new audit work; status reports that follow up on progress made in addressing
issues identified in previous audit work;

performance audits conducted by the Commissioner of
the Environment and Sustainable Development; and

special examination reports presented to Boards of Directors of
Michael Ferguson, FCA Auditor General of Canada
Crown corporations, indicating whether a corporation has the necessary systems and practices in place to achieve its objectives.
New audit work
Our performance audits are independent, objective, and systematic assessments of how well government is managing its activities, responsibilities, and resources. We assess whether activities are managed economically and efficiently, achieve their intended results, and demonstrate due regard to their impact on the environment. This report includes new performance audit work covering the following government activities:
official development assistance provided through
multilateral organizations,
diabetes prevention and control, creating a historical record of Indian residential schools, search and rescue, spending on the public security and anti-terrorism initiative, management of Employment Insurance overpayments, and financing of the P3 Canada Fund (which funds infrastructure
projects by public-private partnerships, or P3s).

Report of the Auditor General of CanadaSpring 2013 1
MESSAGE FROM THE AUDITOR GENERALSPRING 2013
The report identifies a number of areas where resources are not being managed economically and efficiently. For example, our chapter on Employment Insurance overpayments identifies the need for a comprehensive analysis of overpayments because Human Resources and Skills Development Canada is missing opportunities to collect tens of millions of dollars. Our chapter on advance funding to PPP Canada for the P3 Canada Fund notes that the government is exposed to financing costs with the current arrangement of providing money to PPP Canada years before it is disbursed for infrastructure projects. We also found that diabetes prevention and control activities are fragmented and poorly coordinated, so the government is not making the most of the resources that are devoted to this important health issue. We also identify areas where the government could achieve better results for Canadians. Our chapter on creating a historical record of the Indian residential school system describes a situation where a lack of cooperation has hindered progress. Aboriginal Affairs and Northern Development Canada and the Truth and Reconciliation Commission have been unable to agree on what work needs to be done and how. With just over a year remaining in the Commissions mandate, the Commission and the Department need to resolve their disagreements in order to finalize the historical record as envisioned, and, ultimately, support the goal of reconciliation. Our audit of search and rescue activities found that while National Defence and the Canadian Coast Guard have responded adequately to air and marine search and rescue incidents, significant improvements are needed to continue providing the necessary personnel, equipment, and information systems.
Status Reports
Status Report audit work is devoted to reporting whether the governments progress in response to our previous audits has been satisfactory or unsatisfactory. We select previous audits for follow-up based on their significance, and we examine areas where government has made commitments in response to our recommendations. We sometimes devote entire audits to this work, or we follow up on selected recommendations and also carry out new performance audit work. These follow-up reports are our opportunity to provide parliamentarians with information on whether previously identified problems have been resolved. Where they have not, the reports provide a vehicle for parliamentarians to pursue matters with the responsible government departments. Where the departments have
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made satisfactory progress, the reports provide assurance that things are on track and confirm that our audits do have an impact. Even where progress is satisfactory, parliamentarians can play an important role by their persistence in pursuing issues until they are fully resolved. In concluding whether or not satisfactory progress has been made overall, we take into account the complexity of the original issues, the time elapsed since the previous audit, what kind of actions have been taken, and whether those actions address the most significant issues. The overall results we arrive at are not a grade for government as a whole; areas selected for follow-up work usually represent particularly complex, high-risk, or long-standing issues. This report includes follow-up chapters reporting the status of government action in the following previously audited areas:
evaluation of program effectiveness, security in contracting, and collection of tax debts.
We found satisfactory progress in two of the three areas. Satisfactory progress does not necessarily mean that a problem has been fully resolved. For example, our status report on evaluating the effectiveness of programs notes that while progress has been satisfactory, evaluations are still not fully serving the decision-making process as intended. Progress has been unsatisfactory overall in the area of security in contracting. Despite a number of improvements, including a new policy on government security, significant weaknesses remain. For example, National Defence falls short of policy requirements and has yet to develop a departmental security plan. Many contracts we examined in several departments also had incomplete or missing security documentation, or did not follow control procedures, which resulted in contracts being awarded before all appropriate security clearances were completed. Parliamentarians have expressed a strong interest in our follow-up work, and departments have told us they appreciate public acknowledgement when they make satisfactory progress or resolve problems previously identified.
Performance audits conducted by the Commissioner of the Environment and Sustainable Development
Amendments to the Auditor General Act in 1995 created the position of Commissioner of the Environment and Sustainable Development. This position has enabled us to better serve Parliament by considering environmental effects when determining what to report to the House of Commons. We conduct performance audits to determine whether activities designed to respond to federal environment and sustainable development policies are being implemented effectively and are delivering results. This work is reported to Parliament by the Commissioner. He also reports annually on the environmental petitions process. In addition, he reports on the extent to which federal departments and agencies are contributing to meeting the targets set out in the Federal Sustainable Development Strategy and meeting the objectives contained in their departmental sustainable development strategies. In his most recent report, presented in February 2013, the Commissioner expressed his concern that environmental protection is not keeping pace with resource development. For example, the offshore petroleum boards and their federal partners are not prepared to deal with a major spill from offshore oil and gas development in the Atlantic, should they need to step in. And Canada is moving too slowly toward its commitment to meet international targets for establishing marine protected areas to preserve biodiversity in our oceans. The Main Points for the Fall 2012 Report of the Commissioner of the Environment and Sustainable Development are provided in an appendix at the end of this section of the Report. This was the last report of the current Commissioner, Scott Vaughan. He has accepted a position as president and CEO of the International Institute for Sustainable Development. We thank him for the valuable contribution he has made as Commissioner, and we congratulate him on his new position. His knowledge, insight, and commitment are sure to serve the Institute well.
Special examinations of Crown corporations
Similar in many ways to a performance audit, a special examination looks at whether a Crown corporation has systems and practices in place to ensure that its assets are safeguarded and controlled, its resources are managed economically and efficiently, and its operations are carried out effectively. If we find a major weakness in systems or
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practices that would compromise this assurance, we report a significant deficiency. Our reports also provide information and recommendations about other opportunities for improvement, even where we find no significant deficiencies. Under the Financial Administration Act, we report to Boards of Directors rather than directly to Parliament, and Boards are required to make our special examination reports public. Parliamentarians have an interest in the operations of Crown corporations because the corporations play a role in achieving government policy objectives. Both the House of Commons Standing Committee on Public Accounts and the Standing Committee on Government Operations and Estimates have held hearings on our special examination reports. For the past several years, we have provided Parliament with an annual summary of our special examination work in Crown corporations. We continue this practice in Chapter 11 of this Report. The chapter includes the Main Points from each of the special examination reports.
Conclusion
Our performance audits take us into a wide range of government activities that are important to Canadians. The objective information they provide can be used by parliamentarians to scrutinize government spending and performance, and press for change where it is needed.
Main PointsChapters 1 to 10
Status Report on Evaluating the Effectiveness of Programs
Chapter 1 Main Points

What we examined
Evaluation is defined by the Treasury Board as the systematic collection and analysis of evidence on the outcomes of programs to make judgments about their relevance, performance and alternative ways to deliver programs or to achieve the same results. Federal departments have been required to evaluate their programs since the 1970s. In 2009, the Treasury Board issued a new Policy on Evaluation to strengthen the evaluation function in departments and agencies. Also in 2009, this Office issued a report that raised a number of concerns identified in our audit of evaluation practices in six departments and the leadership role played by the Treasury Board of Canada Secretariat. Our audit observations and recommendations addressed three issues in particular: the availability of ongoing performance information to support evaluation, departmental capacity to meet established requirements for evaluation, and use of evaluation findings and recommendations to support program improvement and expenditure management. In this chapter, we looked at progress made by Agriculture and Agri-Food Canada, Fisheries and Oceans Canada, Human Resources and Skills Development Canada, and the Treasury Board of Canada Secretariat in implementing our 2009 recommendations. We looked at how the departments responded to the expanded requirements of the 2009 Policy on Evaluation as they relate to evaluation coverage of programs and to ongoing performance measurement, as well as how the Treasury Board of Canada Secretariat supported departments to meet these new requirements. Full implementation of the 2009 Policy is subject to a transition period that ends 31 March 2013. This audit was scheduled to provide assurance that implementation of the new requirements was being well managed during this period. We are also responding to a request from the House of Commons Standing Committee on Public Accounts to follow up on our 2009 audit within five years.
Chapter 1
MAIN POINTSCHAPTERS 1 TO 10
Audit work for this chapter was completed on 5 November 2012. More details on the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
Governments are under continual pressure to spend money on a range of programs designed to serve particular needs of society. Many factors affect the decisions that governments must ultimately make about programs. Evaluations can aid their decision making by providing objective and reliable information that helps identify programs or components of programs working as intended, those no longer needed, and those not accomplishing the desired objectives. In addition, evaluations can help departments inform Parliament and taxpayers about the results they are delivering for Canadians.
What we found
Progress on recommendations from 2009 is satisfactory. The three audited departments maintained or increased their capacity to evaluate their programs. They have introduced systematic processes for using findings and recommendations from evaluations to improve program performance and support decision making. Furthermore, the three departments have established performance measurement strategies and have made progress in collecting performance information for most of their programs. However, more work remains to be done by departments to collect all planned data and ensure data quality. Significant weaknesses continue to limit the contribution of program evaluation to decision making in the government. For instance, in 14 of the 20 evaluations approved in 201112, departments noted that the limited availability of ongoing performance information prevented them from properly addressing program effectiveness. As a result, decisions have been made about programs and related expenditures with incomplete information on their effectiveness. Agriculture and Agri-Food Canada and Human Resources and Skills Development Canada did not evaluate all ongoing grant and contribution programs during the five-year period 2007 to 2011, as required under the Financial Administration Act. Furthermore, Agriculture and Agri-Food Canada is at risk of not meeting the related requirement in the 2009 Treasury Board Policy on Evaluation to evaluate all direct program spending starting in 2013.
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Chapter 1
Department officials expressed concerns about Treasury Board requirements to evaluate all programs every five years and to address the full range of evaluation issues in all evaluations. They indicated to us that these requirements limit their ability to put their evaluation resources to the best use.
The entities have responded. The entities agree with our recommendations. Their detailed responses follow the recommendations throughout the chapter.
Chapter 1
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Status Report on Security in Contracting

What we examined
The government regularly contracts with private sector firms and their staff to undertake work or obtain expertise to meet its objectives. These individuals and firms may be required to access protected or classified government information and assets to complete the work they have been contracted to do. The guidelines and standards for government security activities that departments are expected to follow are set out in the Treasury Board Policy on Government Security (2009), which replaced the 2002 Government Security Policy. Public Works and Government Services Canada (PWGSC) is responsible for providing leadership and for coordinating activities that help ensure the application of security safeguards in the contracting process within the scope of the Industrial Security Program. Departments are individually responsible for protecting sensitive information and assets under their control, and this requirement applies at all stages of the contracting process. They rely on the personnel security of the contractor (screening, education, and sanctions of contractors) to safeguard government information and assets. Should a private sector firm retain information at its work site, departments also rely on the inspection of the physical security of the firms facilities (location and design of facilities and physical measures to prevent, detect, and respond to unauthorized access at the contractors place of business). Our 2007 audit included five entitiesThe Treasury Board of Canada Secretariat, PWGSC, National Defence, Defence Construction Canada, and the Royal Canadian Mounted Police. We examined how these entities were implementing the Government Security Policy (2002) and its related operational and technical standards. We found that weaknesses in the Policy led to uncertainty about responsibilities and accountability for security in contracting and about the effectiveness of the security in contracting processes. We concluded that the roles and responsibilities for security in the federal governments contracting were unclear and that accountability was lacking.
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In this audit, we followed up with the same entities to determine whether they have made satisfactory progress in addressing the issues we reported in 2007. We focused on the policies and processes in place to safeguard classified information and assets in these entities as well as two other security agencies that were not included in our 2007 audit the Canadian Security Intelligence Service and Communications Security Establishment Canada. Audit work for this chapter was completed on 3 December 2012. Details on the conduct of the audit are provided in About the Audit at the end of the chapter.
Why its important
The Treasury Board Policy on Government Security (2009) outlines the governments roles and responsibilities for protecting information, assets, and individuals. This assists in ensuring the governments ability to achieve its objectives related to security and to safeguard the health, safety, security, and economic well-being of Canadians. Given the potentially significant consequences that could arise if protected or classified information or assets were to be compromised, the government must manage sensitive assets and information held within its own departments and entrusted to external parties to ensure that they are protected from unauthorized access, disclosure, removal, modification, use, or interruption.
What we found
Overall, progress has been unsatisfactory in implementing the commitments made in response to our 2007 recommendations. Although the government has made a number of improvements, including providing clearer requirements for departments to monitor and report on their security programs, in our opinion significant weaknesses remain. There is a gap in the 2009 Policy on Government Security as well as the Security and Contracting Management Standard, as they do not explicitly address the clearance of private sector firms with access to protected and classified information. In addition, departments use a variety of practices to identify whether a contract security requirement exists or not. As a result, contracts are sometimes awarded to those who lack the appropriate security clearance. PWGSC has implemented standard operating procedures. It does not award a contract on behalf of client departments until it receives a completed Security Requirement Check List or an attestation that no security requirement exists. Funding for the Industrial Security Program has been provided through cost recovery from client departments. PWGSC has not been able to demonstrate whether
Chapter 2 13
the charging methodology is appropriate for the services being provided. Further, more than 1,400 security clearances at the secret level have been in process for almost eight months.
The Canadian Security Intelligence Service (CSIS), Communications Security Establishment Canada (CSEC), and the Royal Canadian Mounted Polices policies and procedures provide assurance beyond the level required by the Policy on Government Security. CSIS, CSEC, Defence Construction Canada, and Public Works and Government Services Canada comply with the Policy on Government Security and have put in place security policies, a departmental security plan, and a Departmental Security Officer or Corporate Security Officer. However, the departmental security plan for the RCMP has not yet been approved and National Defence has not yet developed its plan. In the contract files we examined, CSIS consistently included security requirements in contracts, while National Defence and the RCMP did not. Defence Construction Canada included requirements to the extent that they had been communicated by National Defence. CSEC included security requirements in contracts, but requirements for clearances of firms were not met at the time the contract was awarded.
The entities have responded. The entities agree with our recommendations. Their detailed responses follow the recommendations throughout the chapter.
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Chapter 2
Status Report on Collecting Tax DebtsCanada Revenue Agency

What we examined
The level of tax debt is driven by the economic climate, tax policy, and taxpayer behaviour, as well as by the Canada Revenue Agencys efforts to assess and collect taxes in a timely manner. In Canada, the vast majority of taxes are paid to the Agency on time, without intervention. However, a balance of unpaid taxes and payroll deductions remains, growing over the years. The outstanding balance in undisputed unpaid taxes was $29 billion at 31 March 2012. Each year, the Agency writes off a certain amount of debt that it considers uncollectible. In 201112, it wrote off $2.8 billion. In 201112 the Agency had a budget of $242.6 million to collect tax debt, with some 4,000 full-time equivalent staffmainly collection officers, team leaders, and managersin tax services offices across Canada and at the national Debt Management Call Centre. In 2006, we reported that the Agency had not made satisfactory progress on recommendations from our 1994 audit related to tax debts. We said that risk assessment lacked sophistication. Further, the Agency lacked information such as performance measures and strategies, fundamental to assist with managing tax collection. Our current audit examined how the Agency implemented its action plan to address the recommendations we made in 2006 on the more important weaknesses we had identified. Where the plan varied from our recommendations or the Agency had modified its action plan, we considered whether the actions taken addressed our original underlying observations. Audit work for this chapter was completed on 23 November 2012. Details on the conduct of the audit are provided in About the Audit at the end of the chapter.
Why its important
The mission of the Canada Revenue Agency is to administer tax, benefits, and related programs and to ensure taxpayer compliance, on behalf of governments across Canada. As Canadas tax administrator, in addition to protecting Canadas revenue base, one of the Agencys primary goals is complianceensuring that taxpayers meet their
Chapter 3 15
obligations. Under the Canada Revenue Agency Act, the Agency is responsible for enforcing the Income Tax Act and the Excise Tax Act. The timely collection of overdue accounts is the final element in taxpayer compliance. If taxpayers are not convinced that the Agency will take action to collect taxes owing, compliance will decline. A decline in compliance would affect the countrys revenue base.
What we found
Overall, the Agency has made satisfactory progress on the issues raised in our 2006 audit. It has introduced many new tools to improve the way collectors manage accounts. Under a new national approach, collectors can work on accounts from anywhere in the country, so work can be assigned where collectors are available instead of being delayed by bottlenecks in the busier offices. The Agency has taken timely collection action on more than 85 percent of files over $1 million, exceeding its target. However, its target is the same regardless of the size of the account. We note that it may be appropriate to set a higher target for collection action for larger files. While the Agency has developed several new models to assess outstanding accounts of individuals for risks to the collection of income tax debts, it did so without first evaluating the effectiveness of its existing methods. It has also delayed the completion of work to improve how it assesses collection risks related to business accounts. The Agency has identified and collected the information it needs to analyze the makeup of the tax debt. For example, it can now break down the debt by tax, interest, and penalties and by revenue stream, such as GST or payroll deductions. The tax debt has increased from $18 billion to $29 billion since 2006. The Agency is working to refine and improve its tools and strategies and to encourage taxpayer compliance. The Agency has significantly more comprehensive and complete management information than we reported in 2006. However, it has yet to finish developing additional performance measures to show the extent to which it is meeting its program objectives.
The Agency has responded. The Agency agrees with all of the recommendations. Its detailed responses follow the recommendations throughout the chapter.
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Chapter 3
Official Development Assistance through Multilateral Organizations

What we examined
The Official Development Assistance Accountability Act (2008) establishes that Official Development Assistance (ODA) is to contribute to poverty reduction, take into account the perspectives of the poor, and be consistent with international human rights standards. Official Development Assistance is not a distinct government program. More than a dozen federal departments report spending on ODA through their individual mandates and programs. Our audit examined federal spending on Official Development Assistance delivered through multilateral organizations. Most of our audit work was conducted at three departments that collectively accounted for more than 90 percent of federal government spending on ODA: the Canadian International Development Agency, Department of Finance Canada, and Foreign Affairs and International Trade Canada. We did not audit the multilateral organizations that receive funds. We examined whether federal departments ensure that funding to multilateral organizations reflects the governments international assistance priorities and is consistent with the Official Development Assistance Accountability Act. We also examined whether the departments obtain and analyze sufficient information to report on spending of ODA delivered through multilateral organizations, as required under the Act. Audit work for this chapter was completed on 5 March 2013. More details on the conduct of the audit are provided in About the Audit at the end of the chapter.
Why its important
Canadian aid is important to people living in poverty around the world. It plays a key role in the future of Canadian security and prosperity. It also makes a significant contribution to establishing Canadas place internationally and promoting Canadian values. The Government of Canada reported to Parliament that $5.2 billion was spent on Official Development Assistance in the 201011 fiscal year. More than half of that amount, about $3 billion, went to
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multilateral organizations, which play a significant role in both delivering aid and fostering international development cooperation. The effectiveness of Canadian aid delivered through multilateral organizations depends on how well these organizations are managed and can deliver results.
What we found
Departments responsible for the money spent on Official Development Assistance delivered through multilateral organizations have established priorities for working with these organizations and have monitored their performance. They also work with international partners to assess whether multilateral organizations are achieving common objectives, such as the implementation of the Paris Declaration on Aid Effectiveness (2005). Official Development Assistance that the federal government provides to multilateral organizations has a central focus on poverty reduction. However, the spending proposals and other reviews we examined did not identify how the assistance met two of the three key conditions for the provision of ODAtaking into account the perspectives of the poor, and being consistent with international human rights standards. Decision makers do not have all the information they would need to determine that the conditions in the Act are respected. Government reports to Parliament contain limited information on the actual results being achieved with Official Development Assistance to multilateral organizations. The annual statistical report on the disbursement of ODA lacks clarity, and we identified some inaccuracies. As a result, in some cases, the report may not clearly convey how ODA is spent. For example, government departments are expected to report spending on aid in the year Canada gives money to multilateral organizations, but it is not clear in the report that the organizations may not immediately use these funds to deliver aid in developing countries.
The departments have responded. The departments agree with our recommendations. Their detailed responses follow the recommendations throughout the chapter.
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Chapter 4
Promoting Diabetes Prevention and Control

What we examined
Diabetes is a chronic condition that occurs when the body cannot sufficiently produce or properly use insulin to absorb sugar. In recognition of the increasing burden of diabetes in Canada, the federal government in 1999 announced the creation of the Canadian Diabetes Strategy. The objectives of the Canadian Diabetes Strategy were to be the prevention, early detection, and self-management of diabetes and its complications; and national surveillance. At the same time, the government identified diabetes prevention and control among Aboriginal populations as a focus of the Canadian Diabetes Strategy, in recognition of the increasing burden of diabetes in this population. In 2005, the federal government renewed its funding for the Canadian Diabetes Strategy to implement a pan-Canadian approach to diabetes, and provided funding of $18 million per year to the Public Health Agency of Canada to do it. The Agency, Health Canada, and the Canadian Institutes of Health Research were to be key federal players in delivering the approach. Partners were also to include the provinces and territories and various diabetes stakeholder groups across the country. The provinces and territories are primarily responsible for delivering health care programs and services, while the federal government is to act as a catalyst to both lead and support activities aimed at chronic disease prevention and control, including diabetes. Also in 2005, diabetes activities for Aboriginal populations were separated from the Canadian Diabetes Strategy and established under the Aboriginal Diabetes Initiative within Health Canada. The Department received annual funding which reached $55 million in the 201011 fiscal year for the initiative. The government required that linkages be made between the Canadian Diabetes Strategy and the Aboriginal Diabetes Initiative, particularly in the areas of surveillance and national coordination. The Canadian Institutes of Health Research is the federal health research arm. It funded nearly $44 million in diabetes research in the 201011 fiscal year. Through consultations, including with its health portfolio partners, it is responsible for identifying research gaps
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and prioritizing the funding of research to fill these gaps. It then helps facilitate the use of the results of the research by Canadians. We examined how the Public Health Agency of Canada, Health Canada, and the Canadian Institutes of Health Research have implemented and coordinated activities with their partners in diabetes prevention and control. Audit work for this chapter was completed on 28 February 2013. Details on the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
Diabetes is a chronic disease that is rapidly growing in Canada. According to the Public Health Agency of Canada, the prevalence of diabetes among Canadians increased by 70 percent from 1999 to 2009. Almost 2.4 million Canadians live with diabetes, and it is estimated that about 20 percent of diabetes cases remain undiagnosed. Compared with individuals who do not have diabetes, those with the disease are over 3 times more likely to be hospitalized with cardiovascular disease, 12 times more likely to be hospitalized with end-stage renal disease, and almost 20 times more likely to be hospitalized for lower limb amputations. The Public Health Agency reported that health care costs are three to four times greater for individuals with diabetes. The prevalence of diabetes among First Nations is estimated to be two to three times higher than in the general Canadian population. Health Canada funds a wide range of programs for diabetes prevention, screening, and management in more than 600 First Nations communities across the country.
What we found
While the Public Health Agency of Canada has collaborated with the provinces and territories to address common risk factors for chronic diseases, such as childhood obesity, its management practices for delivering programs and activities under the Canadian Diabetes Strategy are weak. It has not defined a strategy, priorities, performance measures, deliverables, timelines, and expected results to effectively deliver programs and activities. Furthermore, the Agency has not coordinated its diabetes activities internally. As a result, the Agency does not know whether its activities have had an impact on the well-being of people who live with diabetes or who are at risk of developing the disease. The success of the Canadian Diabetes Strategy depends on partnerships that are only partially in place. The Agency established a forum to get advice from diabetes experts, but it has not functioned as intended. A committee established to coordinate activities within the
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federal health portfolio is no longer active. For example, the Agency aims to deliver evidence-based diabetes policies and programs, but it has established no mechanism for collaborating regularly with the Canadian Institutes of Health Research on its research needs. As a result, federal diabetes activities are fragmented, and the impact of efforts and money spent has not been maximized.
The Agency has a well-established diabetes surveillance system and has data-sharing agreements in place with provinces and territories. However, Health Canada and the Agency have made little progress on collaborating to improve the limited diabetes surveillance information on Aboriginal peoples. Furthermore, Health Canada gathers limited performance information on the results of its Aboriginal Diabetes Initiative projects. The lack of information hampers the Departments ability to track the nature and extent of Aboriginal diabetes and to determine the impact of the diabetes programs it promotes and funds for Aboriginal peoples.
The entities have responded. The entities agree with all of our recommendations. Their detailed responses follow the recommendations throughout the chapter.
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Creating a Historical Record of Indian Residential Schools

What we examined
Starting in the 1870s, the Government of Canada began funding a system of church-run residential schools. These schools isolated Aboriginal children from the influence of their parents and culture with the objective of integrating them into mainstream society. When the last residential school closed in the 1990s, approximately 150,000 children had passed through the system. More than 13,000 former students took legal action against the churches and the federal government. They were seeking compensation for emotional, physical, and/or sexual abuse suffered during the time they had spent in residential schools. The government tried various approaches to resolve their claims and address the legacy of Indian residential schools. Because of perceived limitations in these approaches, calls for a global settlement became more pressing. In May 2005, the federal government appointed a federal negotiator. His mandate was to represent Canada and work with legal counsel for former students, legal counsel for churches, and other representatives of former students, including the Assembly of First Nations and other Aboriginal organizations, to negotiate an agreement that would address compensation for claims of abuse and the broader legacy of the residential schools. In May 2006, the Indian Residential Schools Settlement Agreement was ratified by all parties. It included the establishment of the Truth and Reconciliation Commission with a budget of $60 million and a five-year mandate. The current Commission was created in July 2009 as a federal department. The Commissions mandate, which ends in July 2014, includes creating as complete a historical record as possible of the residential school system and legacy. The Commission is also responsible for preserving the records collected and created during its mandate and for establishing a national research centre in a manner and to the extent its budget permits. Under the Agreement, the federal government has an obligation to provide all relevant documents to and for the use of the Commission.
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Our audit examined whether Aboriginal Affairs and Northern Development Canada, with support from Library and Archives Canada, had taken adequate steps to provide the Commission with all relevant documents about the residential school system and legacy. We also examined whether the Truth and Reconciliation Commission has taken adequate steps to receive and protect those documents for the historical record and to establish a national research centre. Audit work for this chapter was completed on 13 February 2013. Details on the conduct of the audit are provided in About the Audit at the end of this chapter.
Why its important
The Agreement was intended to be a fair, comprehensive, and lasting resolution of the legacy of Indian Residential Schools. On 11 June 2008, in the presence of Aboriginal leaders and residential schools survivors in the House of Commons, the Prime Minister apologized to Aboriginal peoples on behalf of the Government of Canada and all Canadians. He described the Truth and Reconciliation Commission as a cornerstone of the Agreement. It offered a unique opportunity to educate all Canadians on the residential school system and was a positive step in forging a new relationship with Aboriginal peoples. The creation of the historical record and the establishment of the national research centre will be a permanent legacy of the work of the Commission.
What we found
Aboriginal Affairs and Northern Development Canada, on behalf of Canada, and the Truth and Reconciliation Commission have been unable to cooperate and agree on a definition of the relevant documents required to help the Commission create as complete a historical record as possible of the Indian residential school system and legacy. Consequently, they were unable to define the scope of the work to be done so that Canada would meet its obligation and the Commission would fulfill its mandate. Despite the lack of agreement, Canada has provided thousands of documents it considered relevant to the Commission and has continued to collect and digitize thousands more to be provided. However, it is not possible to assess whether the Commission has obtained or will obtain from Canada all the relevant documents it reasonably requires for the historical record, what remains to be done, how long this will take, or what resources are needed to accomplish this undertaking.
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The Commission has selected an organization to host the national research centre. However, it has no detailed plan to resolve issues regarding the transfer of its documents to that organization. For instance, it must develop a process to transfer its documents in compliance with federal law, including the Privacy Act and the Library and Archives of Canada Act.
The entities have responded. The entities agree with all of the recommendations. Their detailed responses follow the recommendations throughout the chapter.
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Chapter 6
Federal Search and Rescue Activities

What we examined
Search and rescue (SAR) takes many forms in Canada: for example, receiving distress alerts, coordinating and conducting searches for people in distress, administering emergency medical aid at crash sites, and transporting injured people to hospital. Search and rescue activities draw on the resources and capabilities of various levels of government, the private sector, and volunteers in order to prevent tragedies and to quickly respond to the needs of people in distress. In Canada, marine and air search and rescue are federal responsibilities, while responsibility for ground SAR is shared with the provinces, territories, and municipalities, except for federal Crown lands. We examined whether federal organizations adequately oversee search and rescue activities, are ready to respond to SAR incidents, and have implemented prevention activities to reduce the number and severity of SAR incidents. Our audit included National Defence and the Canadian Forces, Fisheries and Oceans Canada and the Canadian Coast Guard, and Transport Canada. Our audit also examined the National Search and Rescue Secretariat, established in 1986 to develop and coordinate a national search and rescue policy framework. We did not audit provincial, territorial, and municipal search and rescue activities, or the activities of other federal organizations involved in search and rescue activities. Audit work for this chapter was completed on 15 February 2013. Further details on the conduct of the audit are in About the Audit at the end of the chapter.
Why its important
Cooperation and collaboration are essential to the success of search and rescue activities, especially considering Canadas size, topography, and climate. Effective management and support, including adequate human resources, reliable equipment, and information systems, make it possible to carry out efficient search and rescue activities.
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25
What we found
Overall, federal search and rescue activities have met established minimum standards of readiness to respond when people in distress need assistance. However, two factors present significant risks to readiness: the continued availability of sufficient numbers of trained search and rescue personnel, and the maintenance of aging equipment. Significant improvements are needed if the Canadian Forces and the Canadian Coast Guard are to continue to adequately respond and provide the necessary personnel, equipment, and information systems to deliver SAR activities effectively. The Canadian Forces and the Canadian Coast Guard adequately respond to air and marine SAR incidents. However, ongoing staffing and training challenges are impacting the sustainability of SAR operations. SAR activities have also been affected by the Royal Canadian Air Forces continued use of older airplanes that require extensive maintenance and of helicopters that are either insufficient in number or less capable of responding to incidents. The Canadian Coast Guard has replaced a number of its lifeboats and has a maintenance schedule for its SAR vessels. The information management system used to manage search and rescue cases does not adequately support operational requirements and is nearing its breaking point. System failures, such as the one experienced in 2009, could delay responding to an incident. A replacement system is not expected until 201516, and National Defence does not have a plan to address this gap. While roles and responsibilities are clear at the operational level for the Canadian Forces and the Canadian Coast Guard, the departments do not have a common set of principles for coordinating with other levels of government on national matters. In addition, the National Search and Rescue Secretariat has not implemented its 1986 mandate to establish a national policy framework, nor does it have the ability to measure overall federal program performance.
The departments have responded. The departments agree with all of the recommendations. Their detailed responses follow the recommendations throughout the chapter.
26
Chapter 7
Spending on the Public Security and Anti-Terrorism Initiative

What we examined
Following the terrorist attacks on the United States in 2001, the Canadian government put in place its Public Security and AntiTerrorism (PSAT) Initiative. Under the Initiative, the Treasury Board of Canada Secretariat was to gather government-wide financial and non-financial information and to support the Treasury Board Presidents participation at various Cabinet committees. The Secretariat also established a reporting framework for departments and agencies on PSAT spending and results. In our 2004 audit, we examined the management framework of the Public Security and Anti-Terrorism Initiative, including funding allocations and spending. We identified weaknesses in the way the Treasury Board of Canada Secretariat assessed departmental proposals for funding. We also found that the reporting process needed to be improved. In this audit, we examined whether reporting of funds was accurate and whether programs were consistent with the objectives of the Initiative. We also examined how the Secretariat reported to the Treasury Board its analyses of the data submitted by departments. We did not examine the implementation of individual departmental programs and projects. We also did not examine spending by provincial and municipal partners. Audit work for this chapter was completed on 13 November 2012. Details on the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
Between 2001 and 2009, the Treasury Board allocated about $12.9 billion to 35 departments and agencies to fund activities related to public security and anti-terrorism. It provided the Treasury Board of Canada Secretariat with an additional $2.75 million over five years to gather information on behalf of the Treasury Board, to be used for decision making and to reallocate funds to higher-priority projects. It is important that government knows whether the funds
Chapter 8 27
allocated to protect Canadians and fight terrorism are being spent to achieve the PSAT objectives.
What we found
Our analysis showed that departments and agencies reported about $9.8 billion in spending by 2009, about $3.1 billion less than the amount allocated for PSAT activities. Our review of the financial and non-financial information reported by departments and agencies showed that projects were consistent with the announced objectives of the Initiative. However, information to explain the difference of $3.1 billion between the funding allocated to departments and agencies and the amount reported spent was not available. Departments and agencies prepared annual reports and conducted evaluations of their activities to review progress, which were submitted to the Secretariat as required. However, no summary reports were prepared for the Treasury Board. Only the Secretariat collected detailed performance information on public security investments, but there was no obligation to provide a government-wide perspective on the Initiative. In our opinion, this resulted in a lost opportunity as the ability to generate a government-wide perspective on achieving results was not established.
The Treasury Board of Canada Secretariat has responded. The Secretariat agrees with our recommendation. Its detailed response follows the recommendation at the end of the chapter.
28
Chapter 8
Employment Insurance OverpaymentsHuman Resources and Skills Development Canada

What we examined
The Employment Insurance program, managed by Human Resources and Skills Development Canada, is one of the largest federal programs providing direct financial support to individuals. The Employment Insurance program provides short-term financial relief and other assistance to workers who lose their jobs. It also provides special benefits where necessary to individuals balancing work commitments with family responsibilities and personal illness. In the 201112 fiscal year, program officials processed 2.9 million Employment Insurance income benefit claims, resulting in $16.1 billion in benefits paid. Given the volume of Employment Insurance transactions, the complexity of Employment Insurance rules, and the need to ensure that payments are processed in a timely manner, a certain amount of overpayment is expected as part of the Employment Insurance program design. The Department is responsible for preventing, detecting, and investigating benefit overpayments. At 31 March 2012, the total amount of benefit overpayments owed, including penalties and interest, was $662 million. We examined the activities that Human Resources and Skills Development Canada undertakes to make informed decisions about where and how to invest its resources to minimize the loss associated with overpayments of Employment Insurance income benefits. Audit work for this chapter was completed on 15 January 2013. More details on the conduct of the audit are provided in About the Audit at the end of the chapter.
Why its important
In delivering the Employment Insurance program, Human Resources and Skills Development Canada has to balance the objectives of providing individuals who have become unemployed with timely benefits while ensuring the correct amounts are paid outno more and no less than the amounts to which claimants are entitled. With so many beneficiaries and such a large amount of benefits paid annually, even a low rate of incorrect payments can lead to additional costs for the Employment Insurance program. Ensuring that payments
Chapter 9
29
are accurate and that overpayments are quickly identified is fundamental to sound stewardship of the program and prudent management of Employment Insurance funds. Departmental data suggests that over one third of newly identified overpayments each year are due to fraud and misrepresentation. The Department must be vigilant in preventing, detecting, and investigating overpayments to ensure fairness, enhance trust and confidence in the program, deter abuse, and minimize costs to contributors.
What we found
Human Resources and Skills Development Canada analyzes the trade-offs it must make to balance the timeliness of Employment Insurance payments with the need for accuracy. It uses various tools to determine and allocate the resources required to maintain service levels as volumes of applicants change. The Department has also quantified the recovery potential and considered various options for addressing its significant backlog of cases that have been investigated but are pending final review. The Department has various means of identifying overpayments for recovery, and it identified overpayments of $295 million in the 201112 fiscal year. It uses a variety of automated programs and data matches, including a risk-based predictive model, to target its investigations and detect overpayments. Departmental data suggests that these investigative efforts facilitated the detection of close to 60 percent of new overpayments identified for recovery in the 201112 fiscal year. The Department has not used all the available information on overpayments and has done limited monitoring of the effectiveness of recovery actions to prioritize its activities to identify recoverable overpayments. This means that the Department may be missing opportunities to minimize costs to the program, in particular by seeking opportunities to cost-effectively identify and recover tens of millions of dollars more of overpayments each year.
The Department has responded. The Department agrees with our recommendation. Its response follows the recommendation at paragraph 9.25.
30
Chapter 9
Advance FundingP3 Canada Fund
Chapter 10
What we examined
Main Points
PPP Canada is a Crown corporation created in February 2008. The Corporation is wholly funded by the government and reports to Parliament through the Minister of Finance. It manages the $1.2 billion P3 Canada Fund on behalf of the federal government. The Fund provides funding to infrastructure projects procured by other levels of governments through public-private partnerships (P3). Each year, PPP Canada makes a special request to receive P3 funding ahead of its disbursement needs. Government officials indicate that PPP Canada, as a non-agent of the Crown when administering the P3 Canada Fund, cannot bind the government by its actions and must therefore have cash in hand to commit funds. We examined the amounts provided to PPP Canada to fund P3 projects, when these funds were disbursed, and the related financing costs. Audit work for this chapter was completed on 1 March 2013. More details about the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
The Treasury Board Directive on the Use of the Consolidated Revenue Fund for Crown Corporations prevents the disbursement of funding in advance of short-term needs to minimize the impact on the government borrowing levels. However, PPP Canada has received yearly exemptions such that it has received P3 funding ahead of its disbursement needs. As a result, the Corporation had accumulated about $670 million in short-term investments as of 30 September 2012.
Chapter 10
31
What we found
PPP Canada receives its funding long before its disbursement needs, and the amount of advance funding it receives is expected to grow over the next two fiscal years. As of 30 September 2012, PPP Canada had received $683 million of the $1.2 billion approved for the P3 Fund, and had disbursed $23 million for P3 projects. PPP Canada is expected to receive the remainder of the $1.2 billion by the end of the 201314 fiscal year, with only $83 million of those funds likely to be disbursed by that time. We estimate that advance payments made for the P3 Canada Fund from the 200910 to the 201112 fiscal years resulted in $1.6 million avoidable financing costs to government. Until the current P3 funding arrangement is reviewed, the government remains exposed to incurring further financing costs.
The entities have responded. The entities agree with our recommendations. Their detailed responses follow the recommendations in the chapter.
32
Chapter 10
Appendix
APPENDIX
Appendix
Main Points of the Report of the Commissioner of the Environment and Sustainable DevelopmentFall 2012
Our Fall 2012 Report of the Commissioner of the Environment and Sustainable Development was presented to the Speakers of the House and the Senate on 18 December 2012, as required by legislation. The Speakers tabled our report in Parliament on 5 February 2013. We provide here the Main Points for the Fall 2012 Report of the Commissioner of the Environment and Sustainable Development. For the full reportthe Commissioners Perspective and five chaptersplease go to www.oag-bvg.gc.ca.
Chapter 1
What we examined
Atlantic Offshore Oil and Gas ActivitiesMain Points

Canadas offshore oil and natural gas exploration and development activities in the Atlantic region are regulated by the Canada Newfoundland and Labrador Offshore Petroleum Board and the CanadaNova Scotia Offshore Petroleum Board. The boards are joint federalprovincial bodies. Their core regulatory responsibilities include safety, protection of the environment, and management and conservation of petroleum resources. The boards are responsible for managing significant environmental risks associated with offshore oil and gas activities. According to the governing legislation, offshore operators are required to respond to spills. However, if the operator cannot or does not take appropriate measures, the board may lead the response to a major spill. The boards may seek support from federal parties, including the Canadian Coast Guard, Environment Canada, Transport Canada, and Natural Resources Canada. We examined how the boards are managing the environmental risks and impacts associated with offshore oil and gas activities. Our audit work included the boards procedures for assessing and authorizing offshore petroleum projects; ensuring compliance with environmental requirements; and preparing for and responding to spills. The boards work with the federal departments of Natural Resources, Environment, Transport, and Fisheries and Oceans, including the Canadian Coast Guard. We also looked at the advice and support those departments provide to the boards. Our audit did not include any provincial organizations or private sector operators.
Appendix
35
APPENDIX
Audit work for this chapter was completed on 24 August 2012. More details on the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
Marine ecosystems in Atlantic Canada are biologically diverse, providing critical habitat for species at risk and migratory birds in locations such as the Grand Banks, Sable Island, and The Gully Marine Protected Area. The offshore regions are also a vital part of the countrys economy, providing employment for thousands of people and supporting activities such as aquaculture and fisheries, tourism and recreation, and shipping and transportation. The potential impacts of an offshore oil spill in Atlantic Canada, such as seen in the Gulf of Mexico in 2010, could be widespread and devastating to the environment, industry, and the livelihoods of many Canadians. As a result, it is essential that the offshore petroleum boards manage the risks and impacts associated with the oil and gas activities they regulate.
What we found
The boards have applied some good practices when assessing and
approving offshore projects and activities, such as seeking input from key stakeholders. However, the boards have not yet established or updated their policies and procedures to guide environmental assessments, nor are they systematically tracking the measures to prevent or reduce environmental impacts. It will be important for the boards to determine how they will meet the objectives of their governing legislation to protect the environment, given the changes introduced by the new Canadian Environmental Assessment Act, 2012.
The boards have taken adequate steps to ensure that offshore
operators comply with environmental requirements. More remains to be done to implement risk-based audits of the operators management systems, and to establish more formal arrangements for obtaining independent observations of offshore oil and gas activities.
The boards have managed the current environmental impacts
associated with oil and gas activities in Canadas Atlantic offshore areas in a manner consistent with the existing size and scale of operations. However, if a board were to take over the response to a major oil spill, the board and the federal entities that might contribute to the response efforts are not adequately prepared to play this role.
Specifically, we found that the response plans of the boards and the
federal entities are not coordinated and are sometimes inconsistent; the boards and federal entities have not tested or exercised their collective plans or collective capacity; and several memoranda of
36 Appendix Report of the Auditor General of CanadaSpring 2013
APPENDIX
understanding are either out of date or not in place. In addition, the NewfoundlandLabrador Board has not yet completed the assessment of the operators spill response capabilities that it began in 2008.
Unlike the NewfoundlandLabrador Board, the Nova Scotia Board
does not currently regulate activities that produce oil. It expects exploration for oil within its jurisdiction in the near future, and so has work to do to prepare for this. The entities have responded. The entities agree with our recommendations. Their detailed responses follow the recommendations throughout the chapter.
Appendix
37
APPENDIX
Chapter 2
What we examined
Financial Assurances for Environmental RisksMain Points

Environmental financial assurances are an important mechanism the federal government uses to help shield taxpayers from the costs of environmental protection, cleanup, and reclamation for a range of natural resource development projects of the private and public sector, including mining, energy projects, the transport of oil and gas, and nuclear. Absolute liability limits are used in certain sectors to limit or cap the total amount that an operator may be liable for if an incident occurs, without proof of fault. Such absolute liability caps are used in Canada and in other countries. Assurances can be in the form of letters of credit, trust funds, guarantees, and insurance. The federal government holds or has access to these assurances during the lifetime of a project. The responsibility for natural resource development rests primarily with the provinces. However, there are several specific and welldefined federal regulatory responsibilities covering natural resource development, energy production, and transportation. We examined whether selected federal entities have appropriate systems in place for obtaining and managing environmental financial assurances. Our audit focused on federal regulation of four sectors: mining (north of the 60th parallel), nuclear, offshore oil and gas, and marine transportation. We also examined liability limits established for nuclear facilities and oil spills from ships, as well as the liability regime for offshore oil and gas production, which includes both an absolute liability limit and an unlimited liability for parties at fault. Audit work for this chapter was completed on 31 August 2012. More details on the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
The environmental costs resulting from natural resource development projects can run into tens of millionsor in rare cases billions of dollars. Environmental financial assurances are an important safeguard, since they provide funds for future environmental liabilities to be paid for by a proponent or operator. They provide for liabilities arising from projects with long lifespans where risks associated with decommissioning and their related costs may not become known for decades. In conjunction with a regulatory framework, they can act as a powerful incentive to industry to reduce environmental impacts as a core part of business.
38
Appendix
APPENDIX
Environmental financial assurances are a tangible example of the polluter-pays principle in action, since the project proponent or operator is expected at the outset to cover all costs associated with environmental protection, site reclamation, longer-term protection of closed sites, and damages from accidents.
What we found
Federal entities we examined have procedures in place for obtaining
environmental financial assurances. Based on available information, we estimate that the assurances they have received give them access to approximately $11.6 billion.
Federal entities lack information to know if the assurances received
are sufficient to cover the financial risks of projects, such as the cost of decommissioning and reclamation. We noted that Aboriginal Affairs and Northern Development Canada did not compare, on a regular basis, whether the financial securities obtained during the life of a mine are sufficient to meet the cost of reclamation of land and water. Fisheries and Oceans Canada was not able to confirm the total dollar value of the securities it held, whether the securities were still valid, or if they fully covered the estimated cost of fish habitat compensation plans.
In two of the examined sectorsnuclear and offshore oil and gas
liability limits for damages to third parties are outdated and generally much lower than those in other countries. Liability limits for damages to third parties from nuclear facilities have not changed in 35 years. Similarly, the offshore oil and gas liability limits have not changed in more than 20 years. In the marine transportation sector, Transport Canada acknowledges a risk that the current maritime liability limits and compensation regimes may not be sufficient to cover the cost of any major spill in Canadian waters. As a result, taxpayers may have to cover shortfalls and pay for environmental remediation.
The Canadian Nuclear Safety Commission has obtained
environmental financial assurances to cover the decommissioning costs of major nuclear sites. It is working to expand the requirement for such assurances to include licensees in the areas of medical and industrial applications and academic research. The entities have responded. The entities agree with all of our recommendations. Their detailed responses follow the recommendations throughout the chapter.
Appendix
39
APPENDIX
Chapter 3
What we examined
Marine Protected AreasMain Points

Marine protected areas (MPAs) are a key tool that Canada has committed to using to protect and conserve marine biodiversity. As a signatory to the United Nations Convention on Biological Diversity, Canada agreed to an international target of conserving 10 percent of marine areas by 2020 through networks of protected areas and other conservation measures. A network of marine protected areas is a collection of individual marine protected areas that operates cooperatively in order to fulfill ecological aims more effectively and comprehensively than individual sites could do alone. Fisheries and Oceans Canada, Parks Canada, and Environment Canada are the three federal authorities with specific, complementary mandates to establish and manage marine protected areas in Canadas oceans and Great Lakes. Fisheries and Oceans Canada is responsible for leading and coordinating the development and implementation of a national network of MPAs on behalf of the Government of Canada and also has a mandate to establish individual marine protected areas. Parks Canada is responsible for establishing marine protected areas to protect and conserve representative examples of Canadas natural and cultural marine heritage, to provide opportunities for public education and enjoyment, and to contribute to a national network of marine protected areas. Environment Canada is responsible for protecting habitat for a variety of wildlife, including migratory birds and species at risk. We examined actions taken by Fisheries and Oceans Canada and Parks Canada to plan, establish, and manage marine protected areas. Audit work for this chapter was completed on 28 August 2012. More details on the conduct of the audit are in About the Audit at the end of this chapter.
Why its important
The worlds oceans are under threat from the effects of pollution and over-exploitation. According to Fisheries and Oceans Canada, in 2009 the quantity of Canadas fishery catches was 41 percent less than the peak harvest volumes of the late 1980s; the 2009 landed values were among the lowest on record since 1984. Conserving and protecting marine biodiversity is not solely an environmental priority. As recently reported at the 2012 World Economic Forum, the oceans natural capital (the stock of ecological goods and services that can be maintained for use in the future) is intrinsic to the health and functioning of the world economy. Today, more than 1.5 billion people count on fish for their daily protein source.
40
Appendix
APPENDIX
With the world population projected to reach 9 billion by 2050, humankind needs to double the production of food without further depleting Earths natural capital. In concert with other ocean management initiatives, the benefits of marine protected area networks include protecting species and ecosystems, protecting unique and threatened species, capturing and storing carbon, and providing refuge for species displaced by habitat change. MPA networks can also provide social and economic benefits, such as sustained fisheries, and enhanced recreation and research opportunities.
What we found
Fisheries and Oceans Canada has established eight MPAs, led the
development of the 2011 National Framework for Canadas Network of Marine Protected Areas, and is now developing technical guidance for implementing the Framework. However, the Department has not coordinated with other authorities and stakeholders to produce a plan for a network of marine protected areas as called for by the Oceans Act (in force in 1997). The Department has not identified the specific areas that need to be protected by it and others to create a national network that would conserve and protect Canadas marine habitats, animals, and plants.
Parks Canada has made substantial progress toward its plan for
establishing MPAs that would be representative of Canadas marine environments. The Agency has defined 29 marine regions in Canada, identified representative areas within 28 of those regions, decided on MPA candidate sites within 14 regions, and established two MPAs in legislation. However, significant work remains to be done. Parks Canada needs to select candidate sites for MPAs in 15 of its marine regions, and establish MPAs in the 26 of 29 regions where they have yet to be established. Although it has not set a timeline for doing so, the Agency plans to have MPAs in each of its 29 defined marine regionsthese MPAs will be the Agencys contribution to Canadas MPA network.
Both Fisheries and Oceans Canada and Parks Canada have
recognized through their commitments within the Federal Sustainable Development Strategy that concrete actions are needed to complete this work, but they have not met these commitments. It has been 20 years since Canada ratified the United Nations Convention on Biological Diversity and 15 years since it committed to leading and coordinating the development and implementation of a national network of marine protected areas under the Oceans Act. Yet there is no national network of marine protected areas. Fisheries
Report of the Auditor General of CanadaSpring 2013 Appendix 41
APPENDIX
and Oceans Canada estimates that marine protected areas currently cover about 1 percent of Canadas marine environment. At the current rate of progress, it will take many decades for Canada to establish a fully functioning MPA network and achieve the target established in 2010 to conserve 10 percent of marine areas under the United Nations Convention on Biological Diversity. The entities have responded. The entities agree with all of the recommendations. Their detailed responses follow the recommendations throughout the chapter.
42
Appendix
APPENDIX
Chapter 4
A Study of Federal Support to the Fossil Fuel Sector Main Points

As a member of the G-20, Canada has officially recognized that efforts to deal with climate change, wasteful energy consumption, market distortions, and barriers to clean energy investment are undermined by inefficient fossil fuel subsidies. The purpose of this study was to provide parliamentarians with information on the various means, including but not limited to subsidies, by which the government supports the fossil fuel sector, and the cost of that support. Because there is no single entity within government that is responsible for assembling a listing of government programs and activities that support the fossil fuel sector in Canada, our study undertook to compile such an inventory. Where a program offered support to other economic sectors as well, we considered to the extent possible only the value of the support attributable to the fossil fuel sector. We also included programs that reduce carbon footprint through clean energy technology. This document is not an audit report. For this reason, our observations should not be considered an assessment of the governments current practices. Our study did not assess the effectiveness or efficiency of the programs and activities identified or their impacts. Our work for this chapter was completed on 28 August 2012. More details about the objectives, scope, and approach are in About the Study at the end of this chapter.
What we examined
Why its important
In general terms, subsidies have a direct effect on public sector budgets. Subsidies can help address market failures, respond to social needs, and encourage environmental improvements. At the same time, subsidies can also exert market and pricing distortions that can have negative impacts on environmental quality. The Organisation for Economic Co-operation and Development has identified fossil fuel subsidies in its member nations amounting to between US$45 billion and US$75 billion annually between 2005 and 2010. Approximately 30 percent of that amount was received by producers, and the majority was provided through tax expenditures. A report submitted to the G-20 noted that subsidies to producers of fossil fuels worldwide may be around US$100 billion per year.
Appendix
43
APPENDIX
According to the International Energy Agency (IEA), the complete phase-out of global subsidies for fossil fuel consumption could reduce greenhouse gas emissions by 1.7 gigatonnes by 2020. This would amount to approximately 40 percent of the abatement needed to limit global warming to a 2C rise by 2020. Although reform of fossil fuel subsidies on its own may not be sufficient to resolve climate change, according to the IEA it is a necessary step forward.
What we found
The government has a broad range of programs that provide support to
the fossil fuel sector. That support can be grouped into two main types: direct spending through various programs; and tax expenditures under the Income Tax Act, which represent the majority of financial support.
Based on the data that the government provided to us, the majority
(97 percent) of direct spending to support the fossil fuel sector was for research and development, more than half of which related to clean technology. Other direct spending went to economic development activities. Total direct spending amounted to $508 million over the fiscal period 200708 to 201112. Extended over 30 years, this would represent a significant decline in direct spending support to the sector since the 30 years preceding our 2000 study of government support for energy investments.
The costs of tax expenditures are not as easily determined as are
direct expenditures, due to limitations in data availability and the methodological challenges of developing cost estimates.
The estimated costs of tax expenditures that Finance Canada was
able to attribute specifically to the fossil fuel sector amounted to $1.47 billion over the fiscal period 200607 to 201011, primarily relating to the accelerated capital cost allowance for oil sands projects. This tax expenditure is being phased out over four years. A number of other tax expenditures are also being phased out over varying time periods. The estimated costs of tax expenditures attributable to the oil and gas, mining, and clean energy sectors as a whole amounted to about $2 billion, accounted for largely by deductions for flow-through shares. Finance Canada was unable to estimate the proportion of this support that was attributable specifically to the fossil fuel sector. For other tax expenditures, such as the accelerated capital cost allowance for mining and Canadian exploration expenses, the Department was unable to provide an estimate of the costs.
44
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Spring 2013

Report of the Auditor General of Canada

Message from the Auditor General Main PointsChapters 1 to 10 Appendix

Office of the Auditor General of Canada

Auditor General of Canada Vrificateur gnral du Canada

Michael Ferguson, FCA

OTTAWA, 30 April 2013

Chapter 10 Advance FundingP3 Canada Fund

Report of the Auditor General of CanadaSpring 2013

Message from the Auditor GeneralSpring 2013

Message from the Auditor General Spring 2013

issues identified in previous audit work;

the Environment and Sustainable Development; and

Michael Ferguson, FCA Auditor General of Canada

projects by public-private partnerships, or P3s).

MESSAGE FROM THE AUDITOR GENERALSPRING 2013

MESSAGE FROM THE AUDITOR GENERALSPRING 2013

Report of the Auditor General of CanadaSpring 2013

MESSAGE FROM THE AUDITOR GENERALSPRING 2013

MESSAGE FROM THE AUDITOR GENERALSPRING 2013

Report of the Auditor General of CanadaSpring 2013

Status Report on Evaluating the Effectiveness of Programs

Chapter 1 Main Points

Report of the Auditor General of CanadaSpring 2013

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Status Report on Security in Contracting

Chapter 2 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Status Report on Collecting Tax DebtsCanada Revenue Agency

Chapter 3 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Official Development Assistance through Multilateral Organizations

Chapter 4 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Promoting Diabetes Prevention and Control

Chapter 5 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Creating a Historical Record of Indian Residential Schools

Chapter 6 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Federal Search and Rescue Activities

Chapter 7 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Spending on the Public Security and Anti-Terrorism Initiative

Chapter 8 Main Points

Why its important

Report of the Auditor General of CanadaSpring 2013

Report of the Auditor General of CanadaSpring 2013

Employment Insurance OverpaymentsHuman Resources and Skills Development Canada

Chapter 9 Main Points

Why its important