Holding the Government Accountable for its Management of Risk
The Empire Club of Canada Addresses (Toronto, Canada), 30 Apr 2003, p. 457-468
Fraser, Sheila, Speaker
Media Type
Item Type
Risk management. Threates to our well-being. How federal government departments are managing risk. What the federal government can do to step up its efforts. Some examples from the speaker's recent report. Risk Management and the Public Sector. Post September 11. The introduction of the Integrated Risk Management Framework. Recent audits and what they have shown. Role of Auditor General. The speaker's responsibiities as Auditor General. Integrated Risk Management. Taking a systematic approach to risk. Better management in the public service. Several key things that departments need to do. What has been done to date. Managing Risk at Our Borders. Some problems and issues. A good example of allocating resources according to risk. Some summary concluding remarks. This year the 125th anniversary of the appointment of Canada's first independent auditor general.
Date of Original
30 Apr 2003
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Full Text
Sheila Fraser Auditor General of Canada
Chairman: Ann Curran
President, The Empire Club of Canada
Head Table Guests

Charles S. Coffey, Executive Vice-President, Government and Community Affairs, RBC Financial Group; Tristana Martin-Rubio, Student, Parkdale Collegiate Institute; Rabbi Perry Cohen, Facilitator, Teacher and Author; David W. Smith, FCA, President and CEO, Canadian Institute of Chartered Accountants; Erik Peters, FCA, Provincial Auditor of Ontario; Fred Gorbet, Director, The Empire Club of Canada; Alain Benedetti, Vice-Chair, Ernst & Young; Elizabeth Dowdeswell, President and CEO, Nuclear Waste Management Organization; and Allan P. O'Dette, Director, External Relations, GlaxoSmithKline.

Introduction by Ann Curran

On the way in this morning, I couldn't help thinking of how this luncheon is a sign of the times and will probably cause one or two of this club's founding fathers to roll in their graves.

You see, 100 years ago, the club was founded by men to discuss government, business and other issues of the day.

Today, the club is presided by a woman. We have an honours student who is devoted to opening opportunities for female students and a speaker who is the first woman to hold the position of Auditor General of Canada--one of our government's most senior and accountable positions. Imagine their horror! A woman is ensuring federal government operations and spending are efficient and effective!

However Sheila Fraser is not afraid of breaking new ground, being controversial and raising eyebrows.

Since taking office in May 2001, she has tabled four reports in Parliament, all of which have garnered significant attention. She has been widely praised for the clear and candid way in which she holds the government accountable for its stewardship of public funds.

In December, Ms. Fraser's report took the government to task for failing to give Parliament sufficient information about the escalating costs of the Canadian Firearms Program. Ms. Fraser released another report in early April.

Ms. Fraser will discuss how the work of her office contributes to improving the management, performance and accountability of the federal government. She argues that success in this realm will not only give taxpayers greater value for their money, but will give Canadians stronger public institutions, a better country and a healthier, democratic society.

But first, let me tell you a little bit more about Sheila Fraser and her background. You see, she never planned to be an accountant. She actually started out in science, but by her second year, she found that the math was too theoretical for her taste. It was her family doctor, of all people, who suggested she try accounting. She did and she's never looked back.

She graduated from McGill with a Bachelor of Commerce in 1972 and was hired by Clarkson Gordon, which is now Ernst &Young. Of the 150 accountants in the Montreal office, she was one of a handful of women. Two years later, she became a Chartered Accountant and doors started opening.

Her new designation helped her get a promotion to manager in 1976. A year later, she was transferred to the firm's Quebec City office. There, she was responsible for a wide range of private and public-sector clients.

In 1951, she became the second woman to become a partner in the firm. Two years later, she had her first child--not just her first but it was also a first child for an accounting partner, not only in Canada, but also in the United States and the United Kingdom as well.

In fact, it was such a novelty that the firm had no maternity leave provisions for partners. Needless to say they do now!

Sheila stayed with the firm for 27 years. In 1999, she joined the Auditor General of Canada as Deputy Auditor General of Audit operations. Then as mentioned, in 2001 she was named Auditor General of Canada.

Mrs. Fraser has always been active in her profession at both the provincial and national levels. For her noteworthy service to the auditing and accounting professions, she was awarded the Prix Emerite 1993 and the designation "Fellow" by the Ordre des Comptables Agrees du Quebec in 1994 and by the Institute of Chartered Accountants of Ontario in 2000. She is also a recipient of the Governor General's medal commemorating Canada's 125th anniversary and a member of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.

She is currently Chair of the Working Group on Environmental Auditing, and Chair of the Sub-Committee on Independence of Supreme Audit Institutions, two committees of the International Organization of Supreme Audit Institutions (INTOSAI). She is also a member of the Executive and Board of Governors of the Canadian Comprehensive Audit Foundation.

Ladies and gentlemen I give you Sheila Fraser.

Sheila Fraser

Good afternoon everyone.

Thank you for that kind introduction. I must say I feel very honoured and quite humbled to follow in the footsteps of so many distinguished men and women who have addressed the Empire Club throughout its long and illustrious history.

Today I would like to talk to you about risk management. I am very conscious that the abstract concept of risk is taking on ever more concrete meanings in our daily lives.

New diseases like SARS and the West Nile virus have heightened our awareness of threats to our well-being. And have compelled us all to carefully think through how we will manage such risks, as individuals and as a collective.

A few weeks ago I tabled a report in Parliament that looked at how federal government departments are managing risk.

As Auditor General, one of my key priorities is to promote an effective public service. I believe that good risk management is fundamental to good management and to serving the public effectively.

In my time here today, I'd like to talk about what the federal government can do to step up its efforts. I'll draw some examples from my recent report of where the government needs to manage risks better, and where it is doing well.

Risk Management and the Public Sector

Almost nothing we do in life is risk-free. Taking risks is part and parcel of being human. The "great American philosopher" Homer Simpson even goes so far as to say that taking stupid risks is what makes life worth living! I can't say I share THAT belief!

To deal with uncertainty, we all actively manage risks every day--both large and small--as we go about our business and live our lives.

We manage risks when we bring an umbrella to work in the morning, when we buckle up our seatbelts, when we have our children immunized, when we invest in a particular stock, when we move to another city to accept a more challenging job...

Not only do we try to prepare for and minimize calamity when we take risks, but we also take risks in order to profit from a good opportunity.

And just as risk is a given in life, it is also a given in organizations--and the federal government is no exception.

I'm sure we'd all agree that the public sector has a special responsibility to manage risk well, given its unique and critical role in assuring the safety and security of

Canadians and in protecting their health and the environment.

After September 11, we are now all much more aware of negative risks such as terrorism. It is always worth remembering that the ultimate consequence of poor risk management can be the loss of human life.

In the government context, managing risk means more than focussing on what can go wrong. It also means taking advantage of opportunities--to improve services or lower costs, for example.

As the deadline to submit tax returns rapidly approaches, it's worth mentioning that a number of years ago, the Canada Customs and Revenue Agency took the risk of introducing filing over the Internet, which has made preparing tax returns a lot quicker and easier for many Canadians.

The agency's decision to do that had to take into account some serious risks--security and taxpayer confidentiality, among others--and how to manage them. And the payoff--increased taxpayer compliance--had to be worth the effort and expense of managing these risks.

A sound and systematic approach to risk management distinguishes managing effectively from merely coping. Two years ago, the federal government introduced its Integrated Risk Management Framework. This was a definite move in the right direction. It explicitly recognized the importance of good risk-management practices and linked them to a larger initiative to modernize management within the federal government.

But so far, government departments have only just begun to implement this framework. And our recent audits have turned up a number of specific areas in which government departments are not managing risk as well as they could.

Role of Auditor General

But before I get into more detail about risk management in government, let me explain how this fits into my responsibilities as Auditor General.

In our political system, Parliament, the government and the public service are the guardians of public funds entrusted to them for delivering programs and services to benefit Canadians.

An important part of the confidence that people have in our democratic institutions is their belief that public funds are spent wisely and effectively.

There must be--and there must be seen to be--value for money spent, compliance with authority, and environmental stewardship.

It is the job of the Auditor General to audit government operations and provide the objective information that Parliament needs to hold the government to account for its actions.

For most of our existence, the main role of the office was to audit the government's books, but in 1977 our mandate was broadened significantly.

We acquired the authority to conduct value-for-money audits that look at the three "E's" of government activity: whether programs are delivered economically and efficiently, and whether measures are in place for determining their effectiveness.

In 1995, a fourth "E" was added: environment. Parliament created the position of the Commissioner of the Environment and Sustainable Development within the Office of the Auditor General. Today, that position is held by Johanne Gelinas.

Along with her team, she audits environmental issues and monitors how well the federal government is doing in meeting its commitments to sustainable development. In addition to auditing about 70 federal government departments and agencies, 40 Crown corporations, 10 departmental corporations and 60 other entities and special audits, my office audits the governments of the three territories and some 15 territorial agencies. We also audit several United Nations agencies, including UNESCO.

By the very nature of our auditing work, we often find ourselves in the position of reporting on cases where risks have not been managed well and where problems have resulted. Or where we have to sound the alarm about risks that are not being managed well and which may create potential problems.

Integrated Risk Management

That's a key reason we looked specifically at how well risk management was being carried out by government departments in our recent report. By taking a systematic approach to risk, integrated risk management can make a significant contribution to better management in the public service.

To make this happen, departments need to do several key things.

First, they need to ensure that they have reliable information about the hazards and opportunities at stake, and that they have good tools for assessing risk and competent people trained to use them.

Then they need to think through and communicate their tolerance or "appetite" for risk--the levels of risk they are prepared to accept.

Finally, they need to integrate risk-related factors and the development of mitigation factors into their day-to-day management practices and their overall strategy and decision-making processes. They also need to establish good performance indicators.

So, what have federal departments done to date?

In our recent audit, we looked at a sample of six departments--and all six were missing crucial elements in their strategies to implement the framework. Only two departments had any action plan at all, and even those didn't specify who was responsible for carrying out specific tasks and by when. None of the departments had completed risk profiles that set out their risk tolerances, even though this is the very foundation of integrated risk management.

We recognize that the federal government is an extremely large and complex organization and that making government-wide management reforms will take time and effort. Ensuring that this initiative doesn't stall across all 70 federal departments will require the commitment of senior management, coordinated efforts to communicate its benefits to those responsible for implementation, and lots of practical guidance and advice from the central agencies. We urge the government to take the time and make the effort.

When the Integrated Risk Management Framework is fully in place in the federal government, it will help take the guesswork out of managing risk. This will go a long way toward creating a risk-smart work force and a culture in the public service that promotes innovation, while at the same time protecting the public interest and maintaining public confidence. And it will ultimately benefit all Canadians.

Managing Risk at Our Borders

As I mentioned earlier, my recent report noted a number of areas in which government departments are not managing risk as well as they could.

Let me take the risk at our borders as an example. Every year, 100 million people present themselves at Canada's ports of entry. Determining who is a legitimate traveller and who should not be admitted to the country is an enormous challenge, but a vital one, given the need to facilitate the movement of people into the country, while helping to protect our safety and security.

The sheer volume of visitors rules out an in-depth, time-consuming assessment of every single visitor. This could slow trade and discourage tourism.

Immigration officials rely on primary inspectors from the Canada Customs and Revenue Agency to interview travellers as they arrive at ports of entry. Customs officers refer about two million of these for secondary examination by immigration staff.

One problem is that the Immigration Department can't tell us how effective these border controls are. To manage risk effectively, it's important to know how well we are doing at keeping people, who should not be here, out of the country. The fact is that border controls have not been assessed since the mid-nineties, and in the past, both primary and secondary screening has been found to be inadequate.

A 1992 study of primary inspection found that in one period studied, up to 80 per cent of potentially inadmissible people who should have been sent for more in-depth screening by immigration officials were allowed into Canada.

A 1994 study of secondary inspection showed that immigration officers identified only half of the people who shouldn't be allowed into the country. Officers admitted they were particularly poor at catching people who should be blocked from entry because of a criminal record, or because they were a threat to public safety, or were using false travel documents.

Has the situation improved? The fact is we don't know because there has been no recent assessment.

We strongly urge Citizenship and Immigration Canada to regularly examine the performance of its border controls. It's the only way of knowing for sure whether the steps they take to improve the security of our borders are effective.

Once people are in the country who should not be--for whatever reason--it is the job of Citizenship and Immigration to enforce their removal.

Another problem that we highlighted is the large gap between the number of removals that have been ordered and the number of departures that have been confirmed. This number has grown by 36,000 in the past six years. Now, we should be careful not to jump to conclusions about what this means. It doesn't necessarily mean that all these people are still in Canada illegally, and it certainly doesn't mean that they are all security risks. Immigration doesn't actually know how many are still here, because Canada does not have exit controls and some may have left without reporting their departure. I think it's unrealistic to expect this gap to be reduced to zero.

It seems to me that the combination of imperfect border controls and the backlog in removals threatens to undermine the integrity of our immigration law. If you have a law in place and never enforce it, why would people bother to respect that law? Why would people go through the procedure of trying to arrive legally in this country, if they can come in illegally and there's no consequence?

But this is where good risk management comes in. The department needs to determine how much risk it is willing to tolerate, and then work toward meeting that goal. On the positive side, the department has taken a significant step to stop inadmissible travellers from entering the country in the first place.

In the past three years, its immigration control officers have worked with airlines overseas to prevent some 20,000 people with improper or fraudulent travel documents from boarding flights to Canada.

Given that it is easier and more cost-effective to stop travellers from entering the country before they board an aircraft than to remove them after they come in, this is a good example of allocating resources according to risk.


So to sum up, I hope I have succeeded in communicating the importance of good risk management in the

federal government. Not only is it vital to managing resources more efficiently and making better decisions, but ultimately it will contribute to making the public service more effective.

Integrated risk management will help departments make wiser decisions about the environmental strategic, operational, political and financial risks within their control and help them to respond better to risks beyond their control.

As auditors, we are too often perceived as being out to expose government waste and corruption. But our ultimate objective is really to help government operate better. And so, as we go about this work, we strive to be constructive in our criticisms.

Yes, our audits do find shortcomings. That's the nature of the beast. But we also try to suggest solutions to the problems we identify.

We also recognize the huge challenges inherent in delivering large and complex government programs and services and in undertaking wide-ranging government management reforms.

When we make recommendations for change, it is with the utmost respect for federal institutions and for the men and women who dedicate themselves to public service. Canada is very fortunate in the calibre of women and men that work for all of us--both those who provide day-to-day services and those who have life-and-death responsibilities.

After almost two full years of serving as Auditor General, what I've seen convinces me that the vast majority of public servants and politicians take very seriously the need to carefully manage public money to meet the needs of Canadians.

A critical source of people's confidence in government is their belief that public funds are spent.wisely and effectively. Another source of this confidence is the transparency that supports criticism of government operations many times a year. This is a hallmark of an open democracy--one that is envied by citizens of many countries throughout the world.

This year the office celebrates the 125th anniversary of the appointment of Canada's first independent auditor general. My staff and I are extremely proud to be part of a long history of dedicated service to Parliament and to Canadians. We're proud to play such a unique and important role in making Canada a better place for all of us.

The appreciation of the meeting was expressed by Fred Gorbet, Director, The Empire Club of Canada.

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Holding the Government Accountable for its Management of Risk

Risk management. Threates to our well-being. How federal government departments are managing risk. What the federal government can do to step up its efforts. Some examples from the speaker's recent report. Risk Management and the Public Sector. Post September 11. The introduction of the Integrated Risk Management Framework. Recent audits and what they have shown. Role of Auditor General. The speaker's responsibiities as Auditor General. Integrated Risk Management. Taking a systematic approach to risk. Better management in the public service. Several key things that departments need to do. What has been done to date. Managing Risk at Our Borders. Some problems and issues. A good example of allocating resources according to risk. Some summary concluding remarks. This year the 125th anniversary of the appointment of Canada's first independent auditor general.