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VÉRIFICATEUR GÉNÉRAL DU QUÉBEC

Reportto the National Assembly

for 2002-2003Volume I

Highlights

Report to the National Assembly for 2002-2003, Volume I — Highlights

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INTRODUCTION

This brochure is a brief version of volume I of the Report of the Auditor General to theNational Assembly for 2002-2003. This abbreviated form brings together the mainobservations arising from our work and summarizes the results of the mandates that ouraudit teams have carried out in recent months.

In providing this shorter version, we want to give readers access to information that isboth concise and effective. We hope that the Members of the National Assembly andcitizens who are interested in the subjects that we address will appreciate this quickreference designed to meet specific needs.

Of course, this text in no way replaces the full report, but is only meant as a supportingtool. The Auditor General invites readers to examine the full report, which makes adetailed presentation of the results of the audits and follow-up, in addition to offering thepoint of view of the entities that were audited. The Report of the Auditor General to theNational Assembly for 2002-2003 is available on the Institution’s web site.

Please note that the masculine gender, when used in the text, designates both women andmen.

You will find the French version of these highlights and the full report, also in French, atthe following Internet address: http://www.vgq.gouv.qc.ca/HTML/Rapports.html


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Table of contents1

CHAPTER 1 OBSERVATIONS OF THE ACTING AUDITOR GENERAL

CHAPTER 2 GOVERNMENT INITIATIVES IN THE NON-PROFIT ORGANIZATION SECTOR

CHAPTER 3 MANAGEMENT OF THE IMPROVEMENT OF SERVICES FOR CITIZENS

CHAPTER 4 QUALITY OF PERFORMANCE INFORMATION

CHAPTER 5 INSTITUT DE LA STATISTIQUE DU QUÉBEC

CHAPTER 6 FOLLOW-UP ON VALUE-FOR-MONEY AUDITS

6.1 Introduction

6.2 Grants to municipalities

6.3 Use of geomatics for managing the territory and its resources

6.4 Grants awarded to public mass transit organizationsconcerning their capital expenditures

6.5 Development of the information systems of the ministère du Revenu

6.6 Quality of management at the Office of the Québec Ombudsman

6.7 Government grants to non-profit organizations

CHAPTER 7 CERTIFICATION OF FINANCIAL INFORMATION

7.1 Introduction

7.2 Public Curator of Québec

7.3 Société de l’assurance automobile du Québec

APPENDIX A REPORT TO THE NATIONAL ASSEMBLY CONCERNING

THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

OF THE GOVERNMENT OF QUÉBEC FOR THE FISCAL YEAR

ENDED ON MARCH 31, 2002

APPENDIX B EXCERPTS FROM REPORTS OF THE COMMITTEE

ON PUBLIC ADMINISTRATION

SUPPLEMENTSAUDIT REPORT ON « COMPLEXE CDP CAPITAL »

AUDIT REPORT ON MONTRÉAL MODE INC. AND

MONTRÉAL MODE INVESTISSEMENTS INC.

Note to reader: The names of the entities were up-to-date as of April 28, 2003.

1 The numbers of the chapters as well as those of the paragraphs used in this brochure correspond to those of the fullreport.


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CHAPTER 1 OBSERVATIONS OF THE ACTING AUDITOR GENERAL

Introduction

1.1 The Québec National Assembly has entrusted the Auditor General with the mandateof fostering, through audit, parliamentary control over public funds and other publicproperty. This mandate comprises, to the extent deemed appropriate by the AuditorGeneral, financial audits, audits to ensure the compliance of operations with statutes,regulations, policy statements and directives, as well as value-for-money audits. TheAuditor General’s field of jurisdiction mainly encompasses the government, itsagencies and its enterprises. The auditing of funds paid out in the form of grantsalso falls under the purview of the Auditor General.

1.2 In the annual report that the Auditor General submits to the National Assembly, hedraws attention to those topics ensuing from his work that deserve to be brought tothe attention of parliamentarians. This report is published in two volumes, one inJune, and the other in December.

1.3 Each volume begins with a chapter that gives the Auditor General the opportunityto establish a more personal contact with readers and to share his observations andconcerns about his mission and the directions taken in government administration;moreover, the reader will find a brief presentation of the questions addressed in thepublication.

Interim term of office

1.4 On December 16, 2001, the term of office of my predecessor ended. On that samedate, the President of the National Assembly designated me to perform the duties ofthis office on an interim basis until such time as the National Assembly appoints thenext Auditor General.

Revision of the Auditor Genertal Act

1.5 An initiative to evaluate and revise the Auditor General Act has been under waysince 2000. Initially, the assessment of the 15 years of application of this Act waspresented in Volume II of the Report of the Auditor General to the NationalAssembly for 1999-2000. In September 2001, the Committee on PublicAdministration examined this report. In the conclusions of its work, the Committeeexpressed the wish that the Auditor General prepare draft legislative amendments tofollow up on the recommendations made in the report.

1.6 The Committee also stated that it wanted the Auditor General to play a greater rolein supporting parliamentary control in the environment and sustainabledevelopment field. Other discussions were held with the Committee on this subjectin September 2002.


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1.7 In the wake of these discussions, I continued to prepare draft legislativeamendments for presentation to the National Assembly in the upcoming months. Inthe paragraphs that follow, I draw attention to the main amendments that will beproposed.

1.8 On the subject of value-for-money audits in government enterprises, the current Actdistinguishes between those enterprises whose financial data the Auditor Generalexamines and those audited by other auditors, namely private firms. In the firstcase, the Act empowers me to examine the quality and management of theseenterprises after having reached an agreement with their respective board ofdirectors. In the second case, the Act does not entrust the other auditors with such amandate. Consequently, since the enactment of the Act in 1985, no commentemanating from these auditors has been included in the annual report of the AuditorGeneral to inform parliamentarians about these entities. Indeed, the Act is not veryexplicit about the latitude given to the Auditor General in the field of value-for-money audits carried out in these enterprises. It is therefore important that the Actbe clarified in this respect to allow me to carry out, without difficulty, the work thatI deem advisable, in order to inform the National Assembly adequately.

1.9 In my opinion, it should be possible to exercise with the same efficiencyparliamentary control over the public funds and other public property of all entitiescontemplated by the Auditor General Act. The effect of the proposed legislativeamendments will be to permit the carrying out of value-for-money audits in allgovernment enterprises, without being required to reach a prior agreement.Moreover, only an auditor appointed by the legislative branch has the necessaryindependence to perform such a delicate task, which leads to a public report. That iswhy I believe that the supervision of such auditing mandates should lie with theAuditor General. The private firms that certify the financial statements ofgovernment enterprises could be called upon to make a contribution, given theirknowledge of these enterprises.

1.10 Nevertheless, in light of the discussions with the members of the Committeeconcerning the consequences that might ensue from the public dissemination of thereport on the value-for-money audit performed in certain enterprises having acommercial vocation, I plan to propose an exceptional measure. It would allow thegovernment to specify in a order in council the activities of a government enterprisefor which the results of an audit of this type would not be made public. The aimhere would be to avoid the risks posed by such a publication with respect to theenterprise’s competitive position. This order in council would be tabled in theNational Assembly and would be of limited duration. However, it would bepossible to renew the order in council. If the enterprise in question failed to give asatisfactory follow-up to the Auditor General’s recommendations within anappropriate time period, the Auditor General would still be able to submit a specialreport to the President of the National Assembly who would entrust it to thecompetent parliamentary committee for examination in closed session.


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1.11 Moreover, to meet the expectations of the members of the Committee who wish tosee the subject of the environment and sustainable development become a priorityfor the Auditor General, the bill in the process of being drafted will propose theappointment of a commissioner in this field. Under the authority of the AuditorGeneral, the commissioner would be entrusted with the duties of monitoring theevolution of the concept of sustainable development and the progress made on thissubject, as well as assisting the Auditor General during audits in the sustainabledevelopment and environment field. Sustainable development makes it possible tomeet current needs without compromising the possibility for future generations tomeet their needs. Within this context, the departments as well as the governmentagencies and enterprises designated by their lead Minister would be required toadopt a sustainable development strategy. The commissioner would prepare, onbehalf of the Auditor General, a separate annual report intended for the NationalAssembly and presenting the results of his work.

1.12 Increasingly, the government is resorting to forms of financial support, which,without corresponding to what is understood by the term “subsidy”, closelyresemble it. Refundable tax credits, in particular the fiscal measures related to thenew economy, are a case in point. Clarifications to the Act will specify thejurisdiction of the Auditor General to audit all forms of support coming directly orindirectly from a government entity, all the way up to the final beneficiary.

1.13 Finally, I feel that it is essential that the Act explicitly state that the AuditorGeneral, including his employees and expert advisors, cannot be compelled totestify on the results of his audits and investigations, and that he obtain thenecessary immunity to avoid distorting his role by transforming it into that of anexpert witness. It is vital that the Auditor General be able to express freely theobservations and recommendations that ensue from his work with the assurance thathe will not be caught up in legal proceedings. At stake is the very independencerequired to carry out the duties of the Auditor General on behalf of the NationalAssembly and, ultimately, citizens. The National Assembly is the recipient of myreports and it can question me on their content.

Consolidated Financial Statements of the Government

1.14 When I sent Volume Two of my annual report for 2001-2002 off to press lastNovember, the preparation and the certification of the government’s consolidatedfinancial statements had not yet been completed. Hence, I was unable to include inthe volume in question my comments regarding this audit. These comments werebrought to the attention of parliamentarians in a separate document, which is thecontinuation of Chapter 8 of the aforementioned volume, published in earlyDecember. These comments relate five reservations that I issued in my opinion onthe financial statements; these reservations result from significant misstatementsthat were identified in those financial statements. I also make other comments onvarious questions that are of concern to me, with a view to improving thepresentation of the financial information in the government’s consolidated financialstatements. These comments are reproduced in Appendix A of this volume.


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1.15 The ultimate goal of the certification of financial information is to providereasonable assurance that, in accordance with generally recognized accountingprinciples and standards, the financial statements are free from significantmisstatements. When they contain such misstatements, I am required to issuereservations in my auditor’s report accompanying the financial statements. If Ideem it advisable, I can also add other comments to the opinion that I express.These reservations and comments are prepared following a meticulous auditingprocess. Such reservations are not very frequent and when they are issued, it is forserious reasons.

1.16 The increase in the number of reservations and comments is related to the delaysascertained in the implementation of the recommendations made by the AuditorGeneral. Of the 12 recommendations that I made last December, eight have beenreiterated for at least the last three years.

1.17 For example, for several years now, the government’s consolidated financialstatements have been tabled in the National Assembly nine months after the end ofthe fiscal year, i.e. a few days before the end of the parliamentary session. For sevenyears, the Auditor General has been recommending in vain that these statements betabled earlier, considering that, from the reader’s standpoint, the usefulness of thisinformation diminishes with time. In my opinion, the government should table itsconsolidated financial statements in the National Assembly not later than 15 daysafter the resumption of parliamentary business in the fall.

1.18 The financial statements are the only financial information documents that are dulycertified and that, for this very reason, have all the desired credibility. Moreover,they are an important tool to help parliamentarians exercise control over publicfunds and other public property.

1.19 Between the end of the fiscal year and the tabling, on December 18, 2002, of itsaudited financial statements, the government made public on two occasions itsunaudited results for the fiscal year ended on March 31, 2002; first, in the quarterlysummary published on September 18, 2002 and then in the quarterly summarypublished on December 6, 2002, namely less than two weeks before the tabling ofits audited financial statements. As the result of this late tabling, readers turn to thefirst documents which disclose the results of the fiscal year in question, even thoughthe information presented is incomplete, in particular with respect to thegovernment’s financial position. Moreover, this information, which is not certified,may differ from the information that will be found later in the public accounts;hence, it may be a source of confusion.

1.20 I encourage the government to promptly present an action plan containing precisetimetables for the application of my recommendations and for reporting on theprogress made.


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1.21 On this subject, I wish to reiterate that the Committee on Public Administrationdiscusses the content of my annual report with the managers of the entitiesconcerned by my auditing work, which promotes the application of therecommendations intended for them. It is my wish that a similar exercise be heldconcerning the exam of my report on the government’s consolidated financialstatements. Indeed, I feel that such a discussion framework could speed up thesearch for and implementation of solutions to the problems raised in my report.Ultimately, this would encourage the government to present an action plan toimprove its accountability in the financial field.

Integrated Resource Management Project (GIRES)

1.22 The Auditor General has been monitoring the Integrated Resource Management(GIRES) project for three years, given its scope, the financial stakes involved andthe impact of the new practices that it introduces on the productivity of thegovernment apparatus. I reiterate that the aim of this project is to unify themanagement of information pertaining to the Administration’s human, financial andmaterial resources. This project was initiated in 1998 and its implementation fallsunder the responsibility of the Sous-secrétariat à la gestion intégrée des resources(Under-secretariat for integrated resource management) (GIRES team) of theSecrétariat du Conseil du trésor. The GIRES solution will be deployed in some125 departments and agencies grouped in 49 implementation sites. Animplementation site represents a department or an agency that is autonomous from aresource management standpoint and includes the entities that it serves in thisrespect.

1.23 The GIRES solution is divided into four parts or deliveries (payroll, staffing andperformance, financial and material resources, and financial reports). The content ofeach delivery will initially be implemented at five pilot sites and then progressivelymade available to the other sites grouped in four waves.

1.24 My observations deal with the progress of the GIRES project since the publication,in June 2002, of my last comments on this subject. I will address the workaccomplished both by the GIRES team and by the departments and agencies.

Work accomplished by the GIRES team

1.25 I first note that the solution is increasingly taking shape, in particular with respect tothe functional capabilities that will be put in place. To date, the centralizeddevelopment and implementation activities have resulted in $152 million in outlays.It is worthwhile recalling that for these activities, the planned budget is$345.8 million, excluding financing costs, and that the budget has remained stableduring the past year. The same is true for the costs pertaining to the operation andthe evolution of the system in the future, which the GIRES team has evaluated at$26 million per year, and of which the departments and agencies will assume theirshare beginning in 2006-2007.


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1.26 The team has also provided the departments and agencies with tools to allow themto estimate the benefits that should ensue from the new system and has now adopteda tangible change management approach. Finally, an implementation timetable hasbeen established and disseminated. According to this timetable, the solution will beput into service gradually, from September 2003 to January 2006.

1.27 In June 2002, I had indicated that the full support of entities and users for thesolution advocated by the GIRES team was more than ever among the challengesthat needed to be taken up. I observe that this support is more marked now. Exceptfor one major agency, the entities have entered into an agreement regarding theimplementation dates.

1.28 Moreover, the Sous-secrétariat à la gestion intégrée des ressources does not intendto exercise a greater role in controlling the costs and managing the benefits in thevarious entities, as it considers that each department or agency is responsible forthese aspects. Yet it is advisable that the government know the full costs of theGIRES project. Indeed, in the absence of integrated information on thedevelopment, implementation, evolution, operating and financing costs, as well asthe spin-offs, I am of the opinion that it will be difficult for the government toevaluate the scope and, in the final analysis, the cost effectiveness of thisinvestment.

1.29 For the time being, only eight sites, including the five pilot sites, have estimatedtheir development and implementation costs, which stand at just under $100 millionfor this group of eight. Furthermore, an initial survey of the benefits, occasionallyquantified, has been made at seven sites. These amounts vary considerably fromone entity to the next according to the opportunities envisaged to better meet needs,the specific characteristics of each entity and the nature of the resources to do thework; it would be wishful thinking to try to extrapolate. Based on theimplementation timetable in effect, the costs and benefits associated with the otherimplementation sites will be known by January 2004.

1.30 I also observe that in relation to the initial timetable, the design and carrying out ofthe project is significantly behind schedule and that the delays are growing as timepasses. In the fall of 2002, the follow-up done by the GIRES team showed that theproject was four weeks behind schedule in relation to the situation that should haveexisted at that time. In April 2003, the delay now totals close to 16 weeks andcorresponds to a few thousand person-days. This is a major delay for work that hasonly been under way for approximately 15 months. As a result, special attentionneeds to be paid to the progress of the project. Indeed, it is recognized that a projectthat is behind schedule generally results in additional costs, in particular at themanagement level. This situation compromises the ability to respect theimplementation timetable, at least for the first sites in question, and results in thepostponement of activities carried out by other sites that are waiting for tools anddecisions before they act.


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1.31 Moreover, I note that the GIRES team has put off giving structured support to thecentral agencies responsible for certain general functions associated, for example,with the calculation of payroll or the holding of inter-ministerial recruitmentcompetitions. Yet the adaptation of the processes in question must be harmonized ina timely manner with the implementation of the GIRES solution in the departmentsand agencies. For example, it would not be very efficient to have these departmentsand agencies implement temporary means while awaiting permanent solutions.

Work accomplished by the departments and agencies

1.32 Several tasks have been assigned to the various departments and agencies that willbe called upon to use the GIRES solution. For each of the deliveries, they will haveto adopt the new processes, adapt their information systems and technologies,manage change, perform tests associated with the conversion of data and systeminterfaces, and set up a user support and assistance team.

1.33 My examination of the situation as of April 1, 2003 is limited to those sites which,by reason of the implementation timetable, had to finalize various tasks by that date.I examined the approach taken in the five pilot sites and the five others of the firstwave that will implement the GIRES solution. Once again, I note a time lag inrelation to the timetable, as I should have ascertained the completion of certainactivities. This time lag varies according to the activities and the sites; moreover, itsimportance was not estimated by all of the persons in charge.

1.34 Owing mainly to the fact that the GIRES team has fallen behind schedule, only onepilot site has completed the global positioning stage. This first stage helps toprovide a global view of the impacts and benefits of the GIRES solution, to take aposition on various strategic components, to plan and organize the project as awhole, and to adopt a training strategy. While this stage is very advanced at theother pilot sites, it has just begun at three of the first wave sites. As for the planningof the delivery in the case of payroll, 4 of the 10 sites examined have nearlycompleted the exercise. Finally, the first pilot site was unable to complete some ofthe preparatory work associated with this delivery, even though this work shouldhave been finished in February 2003. This situation, whose impact on the other39 sites is not yet noticeable, is of concern, as the time lag is occurring at the startof the implementation activities.

1.35 Turning to the efforts required from the entities to bring the operation to conclusion,I note that the estimates made by the pilot sites have been revised over the last year.The current forecasts are 12 percent less than those anticipated one year ago. Giventhe greater knowledge that these sites now have of the system, such an observationis reassuring. I also note that 4 of the 5 pilot sites are still aiming for the expectedgain in efficiency in the current resource management processes, which variesbetween 7 and 12 percent. As for the fifth site, no advantage of this type ishenceforth anticipated.


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1.36 My examination shows that the follow-up done by the 10 sites that I visited is stillnot very structured for a number of them. This observation concerns notably theperformance of existing teams and the timetable. Yet the follow-up is an essentialelement in a government project involving multiple stakeholders.

1.37 All in all, I consider that the project has progressed significantly over the last year.However, the government still does not have a global vision of the costs andbenefits associated with the project. Moreover, despite the marked effort of theGIRES team to manage the risks, the latter have grown in recent months due,among other things, to the accumulated delays and the little support given to theimplementation of general functions under the responsibility of centralorganizations. These pitfalls are likely to postpone the start-up of the system, toincrease costs or, in a worse case scenario, to reduce the scope and quality of thesystem.

1.38 Within this context, the GIRES team and the departments and agencies will have tolook for ways to make adjustments to attain the set targets. I also invite them toprovide more information to the National Assembly on not only their achievements,but also their ability to deliver the expected system, as well as the anticipated andreal costs of the operation.

Follow-up on the application of the recommendations

1.39 The auditing work that I perform provides parliamentarians with an independentopinion to support the control that they exercise over the actions of the government,its agencies and its enterprises. In addition to being a source of information for theNational Assembly, my work should contribute to improving the management ofpublic funds.

1.40 That is why after an audit, I usually make recommendations that prompt themanagers of the audited entities to correct the shortcomings that I observed. When Isend the audit report to the directors of an entity, I encourage them to prepare anaction plan to implement my recommendations.

1.41 The entities in question are all the more eager to prepare such a plan in that theCommittee on Public Administration invites their directors to present publicly toparliamentarians the steps that they plan to take to rectify the shortcomings that Iidentified in the government administration. Since the creation of this parliamentarycommittee in 1997, close to 60 percent of the chapters of the Auditor General’sreports that present the results of value-for-money audits have been examinedpublicly.

1.42 Despite these measures, which tend to foster parliamentary control as well as theapplication of the recommendations, the follow-up that I do each year on past auditsshows that the real effort made to follow the recommendations varies significantlyfrom one entity to the next. For example, Chapter 6 of this volume, which presentsthe results of the follow-ups done in recent months, shows that the Ombudsman has


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implemented 100 percent of the recommendations and that progress is satisfactoryin 91 percent of the cases. However, in the case of the management of grants paid tonon-profit organizations, the departments in question have applied only 60 percentof the recommendations made, and less than 30 percent show satisfactory progress.

1.43 More generally, the six follow-ups included in the volume show that 78 percent ofthe recommendations gave rise to tangible actions on the part of the entities inquestion. However, I consider that the progress made is satisfactory in only48 percent of the cases. Indeed, several of the actions undertaken only partiallyfollow the recommendations, or not enough progress has been made in theapplication of these actions.

1.44 Having ascertained that some audited entities could show greater determination inthe application of my recommendations, I am delighted with the timely governmentinitiative that will promote a better follow-up. Indeed, in February 2003, thegovernment asked its departments and agencies to include in their annualmanagement report a special section dealing with the corrective steps that they havetaken in response to the recommendations made in my report to the NationalAssembly. Precise instructions to this effect have been added to the Guide sur lerapport annuel de gestion (Annual management report guide) published by theSecrétariat du Conseil du trésor.

1.45 These instructions specify that, beginning this year, the departments and agencieswill have to describe in their annual report for 2002-2003 the procedures put inplace to ensure a follow-up on my recommendations.

1.46 Beginning in 2003-2004, the departments and agencies will specify in their annualmanagement report the actions that they have taken to follow up on therecommendations found in my reports to the National Assembly.

1.47 This new accountability requirement will help to increase the rate of application ofthe recommendations and will certainly be an additional tool that will prove veryuseful for parliamentary control.

Summary of the content of this Volume

1.48 The following paragraphs briefly describe the topics dealt with in the otherchapters.

1.49 Chapter 2 reports on the results of an audit concerning government initiatives inthe non-profit organization sector (NPOs). There are numerous non-profitorganizations in Québec, more than 60,000, and they provide invaluable services. In2001-2002, the Québec government paid more than $1.9 billion in direct grants toseveral such organizations. One must also take into account the tax credits ensuingfrom donations that individuals and businesses made; these donations totaled$1.5 billion in 2001. Moreover, NPOs are exempted from paying income tax andthe tax on capital.


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1.50 My work allows me to conclude that, despite the importance of the sums inquestion, the current management framework does not promote a concerted actionby all government players. The government does not have sufficient knowledge ofthese organizations, their needs, their inherent risks and their contribution toQuébec’s economy to direct its action properly.

1.51 The audit also shows that there are shortcomings in the administration of theregulations applicable to NPOs. Finally, I noted that the departments, governmentagencies and NPOs examined and that manage financial assistance measures do notdo so in an effective and efficient manner. Furthermore, they do not ensure a sounduse of public funds.

1.52 As for Chapter 3, it deals with the management of the improvement of servicesfor citizens. This theme is at the very heart of the modernization of managementwithin Québec’s public service which began in May 2000 with the assent of thePublic Administration Act. The departments and agencies contemplated by this Actand that directly provide services for citizens have prepared and made public aservice statement to citizens; in this statement, they present their commitmentsregarding the level and quality of the services offered.

1.53 In light of the scope and the seriousness of the efforts made by the variousstakeholders, I consider that this initiative is on the right track. However, it isimportant that the ministère des Relations avec les citoyens et de l’Immigrationcontinue to play a support role with the departments and agencies, and that the latterkeep up their efforts to improve their delivery of services.

1.54 We tested the efficiency of government telephone information services. Our workreveals a major accessibility problem. Indeed, we found that in the case of40 percent of the calls, processing was arduous. We also experienced majordifficulties when trying to reach the clerks of three entities. However, we did findthat the information clerks were generally courteous and respectful, eager to followup on our request, attentive and happy to serve their fellow citizens. As for thequality of the information obtained, two-thirds of the responses were deemedsatisfactory.

1.55 In Chapter 4, I examine the quality of performance information published in theannual management reports of government entities. With the enactment of thePublic Administration Act, the annual management report has become a keyelement of transparency and accountability. It is essential that the informationdisclosed be of good quality to permit a fair evaluation of the performance, inparticular by parliamentarians.

1.56 The 16 reports evaluated would require improvements, at times major, to meet thequality criteria that we applied. As this is the first generation of reports produced inaccordance with the newly formulated expectations of the legislator, it isunderstandable that these documents leave room for improvement. Nevertheless,


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some entities stand out by the quality of the information that they published. Thischapter underscores several good practices from which all departments andagencies should draw inspiration.

1.57 Chapter 5 presents the results of an audit concerning the Institut de la statistiquedu Québec. The Institute is a key centre for the production and dissemination ofstatistical information for government departments and agencies. This organizationreceives an annual grant to update and preserve the history of statistical dataregarding Québec. Moreover, the Institute has own-source revenues arising fromagreements with partners or contracts with its clientele.

1.58 We found that there were deficiencies in the management of the statistical projectscarried out by the Institute. This leads to cost overruns and losses for certainprojects funded by own-source revenues. The shortcomings observed in this respectdeal with essential management functions, namely planning, follow-up and internalaccountability. The fact that the Institute has a cumulated deficit is related to thissituation.

1.59 We also noted that the Institute makes no evaluation of the quality of its statisticalprojects. While the Institute is concerned about quality when carrying out its work,no policy has been prepared and no evaluation framework has been established.

1.60 Turning to Chapter 6, it presents six follow-ups on value-for-money audits; theydeal with grants to municipalities, the use of geomatics, grants awarded to publicmass transit organizations for their capital expenditures, the development of theinformation systems of the ministère du Revenu, the quality of management at theOffice of the Québec Ombudsman and finally, government grants to NPOs.

1.61 Next follows Chapter 7 in which I present my comments ensuing from thecertification of financial information work done with two entities in recentmonths.

1.62 Finally, the reader will find additional information in the appendices. Appendix Apresents my Report to the National Assembly concerning the audit of theconsolidated financial statements of the Government of Québec for the fiscal yearended on March 31, 2002. Appendix B reproduces excerpts from two recent reportsof the Committee on Public Administration following the examination of my work.

Conclusion

1.63 The reports of the Auditor General deliberately draw attention to deficiencies andpropose actions to rectify them. This approach allows parliamentarians to focustheir discussions with managers on the improvements that should be made to publicservices.

1.64 However, I would like to underscore the competence and the dedication of themanagers and the employees of the entities that I audit. Québec benefits from a


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highly professional public service. The improvements, at times substantial, thatmust be made to the government apparatus must not allow us to lose sight of thequality of the services that we already enjoy.

1.65 The management of the government administration requires constant efforts tostrike a balance between limited resources and needs that at times seem unlimited.This is no easy task.

1.66 Finally, I would like to thank all of the persons who cooperated in the carrying outof my work and in the preparation of this report.

Doris Paradis, CAActing Auditor General


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CHAPTER 2 GOVERNMENT INITIATIVES IN THE NON-PROFIT

ORGANIZATION SECTOR

2.1 Non-profit organizations (NPOs) are a pillar of our society. It is estimated that thereare more than 60,000 NPOs in Québec, about 15,000 of which are registeredcharities (RCs) that have the possibility of issuing tax receipts to donors. Thegovernment, individuals and businesses make a major contribution to the funding ofNPOs. In 2001-2002, the Québec government paid them more than $1.9 billion indirect grants, namely a 98% increase over the last five years. Based on the data ofthe ministère du Revenu du Québec (MRQ) for 2001, individuals made donations of$668 million, whereas the donations of businesses reached $882 million. Moreover,NPOs are exempted from paying income tax and the tax on capital.

2.2 The purpose of our audit was to make sure that government supervision regardingthe management of NPOs is adequate and that it promotes joint actions and control,in particular. Another of our objectives was to determine if the regulationsrespecting NPOs are applied adequately. The Inspector General of FinancialInstitutions (IGIF), the ministère du Conseil exécutif (MCE), the MRQ and theRégie des alcools, des courses et des jeux (RACJ) were visited. Finally, we wantedto see if the management of government assistance measures and the use of thefunds allow the departments, agencies and NPOs to achieve government objectives.To do this, we audited the management of 15 assistance measures intended forNPOs in the following departments and agencies: the ministère des Affairesmunicipales et de la Métropole (MAMM), the ministère de la Culture et desCommunications (MCC), the MCE, the ministère des Finances, de l’Économie et dela Recherche (MFER), the ministère des Relations internationales (MRI) and theConseil des arts et des lettres du Québec (CALQ). Finally, we audited themanagement of grant programs with four NPOs which redistribute the moniesreceived, namely the Fondation du patrimoine religieux du Québec, the Société dediversification économique des régions (SDER), the Société des événementsmajeurs internationaux du Québec (SEMIQ), and Valorisation-Recherche Québec(VRQ).

2.3 Our audit took place from September 2001 to February 2003 and deals with theactivities of the 2000-2001 to 2002-2003 fiscal years, but some comments concernsituations that existed before or after that period.

2.4 Our work indicates that, in view of the absence of clear guidelines that would guidegovernment entities that intervene with NPOs, there is no concerted governmentaction. We find that the activities and assistance programs intended for NPOs aremanaged “in a vacuum” by each entity. Moreover, government initiatives in thisfield are not based on a sufficient knowledge of NPOs, their needs, their inherentrisks and their contribution to Québec’s economy. What is more, it is difficult for aNPO to list all of the grants for which it is eligible. In Québec, the supervision ofNPOs is limited and divided, as it is ensured in part by the MRQ, the RACJ and the


16

entities that manage assistance measures. Requirements in the field ofaccountability and transparency are not always defined according to the importanceof the organizations and the risks.

2.5 Regarding the administration by the IGIF, the MRQ and the RACJ of theregulations concerning NPOs, our work reveals shortcomings. The IGIF does notadequately inform the users of its data of the nature and scope of the controls that itperforms. As for the MRQ, on the one hand, its files do not provide an accurate andcomplete portrait of all of the NPOs and RCs, which prevents the department fromensuring that all of these organizations comply with the fiscal requirementsapplicable to them. On the other hand, each incorporated NPO is required to file anincome tax return. Only 57 percent of the 16,500 NPOs registered for corporateincome tax purposes with the MRQ filed this return for the fiscal year that ended in2001. In the files that we examined, information reports are missing for 56 percentof the 25 NPOs required to submit such reports and for more than half of the68 NPOs, which all have this obligation. Furthermore, these reports are notexamined closely. As a result, the MRQ does not spot delinquent NPOs and RCs. Inaddition, the department has not evaluated if its audit and fiscal analysis workpertaining to these organizations is sufficient.

2.6 The RACJ does not ensure compliance with all of the rules applicable to bingo anddraws. Consequently, it is unable to verify if the profits generated by these activitiesare used for the stipulated purposes.

2.7 Moreover, several aspects of the administration of assistance measures intended forNPOs are deficient. The objectives of the grant programs are defined in verygeneral terms, the expected results are not described, and no performance indicatorhas been devised. Such a situation does not promote results-oriented management.All of the entities (departments, agencies and non-profit organizations) havedetermined eligibility criteria and several have used a standard application form.However, they have not designed precise and relevant selection criteria. Yet theapplication of such criteria guarantee, among other things, respect for transparency,by allowing other persons to deem if the decisions made are objective.

2.8 Furthermore, the decisions to grant assistance are not supported by sufficient andrelevant documents, and the analyses are lacking or incomplete. Those analyses thatare made are not elaborate enough; the risks associated with the presence oftransactions between subsidized NPOs and their related enterprises were not takeninto account. Moreover, for most of the files examined, the amount granted was notjustified in a satisfactory manner. Often, the entities had not evaluated what theimpact would be on the project’s results if the funding were less than that requested.Moreover, despite the sums involved, there is no agreement stipulating the rightsand obligations of the parties for 42 percent of the assistance measures that weexamined. Some agreements do not include the essential conditions to allowfunding entities to ensure that the assistance granted will be used for the stipulatedpurposes.


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2.9 The follow-up on subsidized projects is not rigorous enough. The quality and thelevel of relevance of the reports requested from grant beneficiaries vary. In somecases, the information is insufficient to evaluate the use made of the assistancegranted. There is little documentation pertaining to the analysis of these reports.What is more, in some cases, major sums were paid without the files containing theappropriate supporting documents. To complete the analyses and financial controls,entities may resort to auditing. No entity has performed an audit or justified itsdecision not to perform an audit, even if some NPOs have benefited from financialsupport for several years.

2.10 Finally, our work reveals that there have been few program evaluations to date andthat the accountability dealing with the assistance measures that we audited is verylimited. In light of the information received, the National Assembly cannotconclude that the departments and agencies manage these measures efficiently andeffectively.


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CHAPTER 3 MANAGEMENT OF THE IMPROVEMENT OF SERVICES

FOR CITIZENS

3.1 The improvement of services for citizens is at the heart of the modernization ofmanagement within Québec’s public service. In May 2000, the Publ icAdministration Act instituted a management framework that puts the emphasis onachieving results, accepting greater responsibility and showing more transparency.It was within this context that the departments and agencies that directly provideservices for citizens made public a statement listing their objectives regarding thelevel and quality of the services offered.

3.2 The aim of our audit is to evaluate if the means put in place make it possible to givetangible form to the desire to improve the delivery of services by way of the varioussteps taken by the departments and agencies. We paid special attention to thecoordination of activities, the quality of service statements (SS), the accessibility oftelephone information services and accountability reporting.

3.3 The scope and the seriousness of the efforts made by the various stakeholders helpto ensure that the initiative is on the right track.

3.4 The advice provided by the ministère des Relations avec les citoyens et del’Immigration (MRCI) and the creation of a table to discuss good practices help topromote, in several respects, effective support for departments and agencies.Nevertheless, this department must continue the development and dissemination ofappropriate management tools. It must also propose a strategic vision concerningthe level and the quality of the services that should be offered to citizens.

3.5 As for the other entities, they have generally established standards and terms andconditions specific to their respective delivery of services taking into account mostof the basic parameters required, including a clear definition of the products andservices, as well as of the clienteles. However, they still have some way to go tobetter support their commitments according to their ability to deliver the services.

3.6 A more in-depth analysis made with three entities reveals that, despite the existenceof often relevant and realistic standards, those that deal with the qualitative aspectsof the service, such as the behaviour of employees, would benefit from being moreexplicit.

3.7 In just over two-thirds of the SSs that we examined, the commitments deal withcertain essential aspects of the service, such as courtesy and respect, time frame,confidentiality and reliability.


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3.8 As for integrating in the organizational culture the concern about offering adequateservices and maintaining their quality, some ingredients are already present. Indeed,efforts have been made to make managers more responsible and to promote staffawareness; however, other ingredients are still lacking. Mention may be made ofmaking known specific expectations to front-line employees, the regular follow-upon commitments and the preparation of a plan to improve services on an on-goingbasis.

3.9 We tested the efficiency of telephone information services. Our work reveals amajor accessibility problem. In the case of 40 percent of the calls, processing wasarduous: voice mail, the line was busy, we were put on hold for more than3 minutes, the conversation was cut off, etc. We also had major difficultiescontacting the clerks of three entities. However, the myths concerning long waitingtimes and multiple call transfers appear to be unfounded. The average waiting timefor a call to be taken is 16 seconds and it takes 58 seconds to reach the first personable to provide the information sought. Within the context of our survey, theinformation clerks were generally polite and respectful, eager to follow up on ourrequest, attentive and happy to serve their fellow citizens. As for the quality of theinformation obtained, two-thirds of the responses were deemed satisfactory.

3.10 Finally, the examination of the annual management reports of three audited entitiesshowed that they had endeavoured to provide results for almost all of theircommitments. However, the information included in these reports regarding the SSwill have to be improved in relation to the context associated with the results, aswell as to the link between results and resources. The entities will also have to addcomparative information in their reports to help readers evaluate the informationconveyed.

3.11 Our recommendations are, of course, intended for those entities that were thesubject of an audit. Given the scope of the work that we carried out, we are of theopinion that it would be in the interest of all of the departments and agencies thatproduce a SS to examine the content of our report.


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CHAPTER 4 QUALITY OF PERFORMANCE INFORMATION

4.1 To affirm the priority given to the quality of services for citizens, the NationalAssembly established a new management framework oriented towards achievingresults, respect for transparency and greater accountability of the governmentadministration. In the wake of this initiative, the Public Administration Act (2000, c.8), assented to on May 30, 2000, requires that departments and agencies, as definedin the Act, prepare and table in the National Assembly an annual managementreport at the end of the 2001-2002 fiscal year. This annual management report is thekey element of accountability. It is therefore essential that the information found inthis report be of high quality in order to permit the evaluation of performance.

4.2 Performance measurement is a tool that is necessary for carrying out essentialduties, in particular planning, decision-making and evaluation. For managers, it is aguide that orients the decision-making process, as neglecting to take performanceinto account is like navigating without a map and a compass. For parliamentariansand citizens, this measurement determines those aspects which, from the standpointof the entity, are the most telling, to allow them to gauge its performance.

4.3 The purpose of this audit was to ensure the quality of the performance informationpublished in the annual management reports of entities subject to the PublicAdministration Act; to do this, we selected 16 reports. We also sought to putdepartments and agencies on the path towards better accountability. To carry outour analysis, we looked for the presence of the characteristics of performanceinformation proposed by CCAF-FCVI inc., known under the name of the “CanadianComprehensive Auditing Foundation”. We also made sure that each entity hadadequately dealt with respect for the main legal and government requirements in thefield of accountability and the commitments made in the service statement (SS).

4.4 Considering that the implementation of the Public Administration Act and theensuing accountability is recent, it is understandable that the information found inthe first generation of annual management reports leaves room for improvement.Indeed, the documents that we analyzed would require changes, at times major, tomeet the quality criteria that we applied. However, some entities already stand outby the quality of the information that they published, for almost all of the criteria(Appendix 3). We presented several examples of good practices, which shouldencourage the entities to draw inspiration from them.

4.5 The audit highlights certain strengths concerning the quality of performanceinformation. Fourteen of the sixteen entities reported on orientations covering theirentire mission. Another positive observation is that the organizations provideinformation on the level of confidence that readers can place in the reliability of theinformation. Indeed, 15 of the 16 reports contain a statement by the deputy ministeror the director of the agency certifying the reliability of the data and the relatedcontrols, with 12 of these 15 reports also including an auditor’s report on theplausible nature of the information or a reference thereto.


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4.6 Among the good practices, mention should be made of a few entities that include intheir annual management report graphs that efficiently illustrate the link betweenthe goals set and the results achieved, for both the fiscal year under considerationand previous fiscal years. Some entities explain a cost overrun in relation to thetarget by disclosing the financial impact of each of the factors having contributed tothis overrun; such an initiative is also very appropriate.

4.7 The 16 organizations examined in our work present financial results for the periodin question and more than 80 percent of these organizations compare these datawith those of the previous fiscal year. This is a practice that should be continued, asshould the approach chosen by 4 entities, which give the cost of their main productsand services.

4.8 Globally, the shortcomings are more marked for the following evaluation criteria:“relating goals and results”, “putting results in context” and “presentingcomparative information”. Needless to say, such weaknesses significantly limit thescope of the information provided to the reader, who finds it very hard to make aninformed evaluation of the performance.

4.9 The absence of targets is one of the major flaws that we detected in 50 percent ofthe results analyzed. Special attention will have to be paid to set clear and credibleobjectives for the current year and for subsequent years, to serve as foundations foraccountability. In addition, our analysis concerning the presentation of the results intheir proper context shows the need, for almost all of the entities, to provide moreinformation about the internal and external environments, including the relatedorganizational risks. Only 25 percent of the reports examined address the notion ofrisk.

4.10 Finally, our work reveals a major shortcoming regarding the inclusion, in annualmanagement reports, of data seeking to promote the comparison of results withthose of previous periods or of similar organizations. Moreover, two entitiesprovide no information of this nature. Yet comparability is an essential condition inorder for the interpretation of the results to be both fair and qualified. In the absenceof reference points, the reader ignores whether the situation is improving orworsening, and it is hard for him to conclude either way.

4.11 All in all, even though there is room for improvement, this first wave of reportsprepared within the framework of the Public Administration Act presents resultsthat make it possible to orient the decision-making process. We can only encourageall of the organizations to keep up their efforts in the search for solutions to improveperformance measurement and accountability.


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CHAPTER 5 INSTITUT DE LA STATISTIQUE DU QUÉBEC

5.1 Born out of the merger of four agencies or administrative units, the Institut de lastatistique du Québec began its activities on April 1, 1999. According to theagency’s incorporating Act, the mission of the Institute is to “provide reliable andobjective statistical information on the situation of Québec as regards all aspects ofQuébec society for which such information is pertinent”.

5.2 For the 2001-2002 fiscal year, the Institute’s revenues totaled $20.6 million;$14.3 million came from a grant from the Government of Québec and $6.3 million,from services rendered and other revenues.

5.3 The purpose of our work was to determine if the Institute manages its statisticalprojects with due regard for economy, efficiency and effectiveness. We also soughtto ensure that the agency systematically evaluates the quality of the statisticalprojects that it carries out. We did not seek to gauge the actual quality of the dataproduced and we make no comment on this subject.

5.4 To perform our audit, we examined 16 statistical projects for which expenditures inexcess of $5.2 million were recorded for the 8-month period ended on November30, 2002. Our work extended from September 2002 to March 2003 and dealt mainlywith the activities carried out between April 1, 2001 and January 31, 2003.

5.5 We ascertained that there were deficiencies in the management of statisticalprojects, which led in particular to cost overruns, as well as losses for certainprojects funded by own-source revenues that ensue from agreements with partnersor with the clientele of the Institute. It should be noted that this situation is relatedto the Institute’s cumulated deficit, which stood at $902,282 as of March 31, 2002.In February 2003, an additional operating grant was authorized and should,according to the Institute, allow it to bring down its deficit. However, we are of theopinion that the Institute could do more with its current resources if it improved itsmanagement of projects.

5.6 The Institute made known its intention of paying special attention to themanagement of projects when it was created. Yet no action plan had been preparedon this subject as of March 2003, even though the Institute knows that thesupervision needs for activities related to statistical projects are major. Moreover,no structured training on project management is offered at the present time. Indeed,each division manages its projects in its own way, without guidelines.

5.7 The carrying out of the various planning stages of the statistical projects is notrigorous enough. Our audit shows that the needs of clients are specified for thoseprojects funded using own-source revenues. However, recurrent projects carried outusing the government grant are not re-evaluated at regular intervals according to arigorous process. As a result, the Institute does not ensure that the content of its


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recurrent statistical projects is evolving according to the needs of its clientele.Furthermore, the evaluation of the risks associated with the projects is a step that isneglected. It is worthwhile noting that the Institute has devised no strategy to reducethese risks.

5.8 We also found that the definition of activities and the evaluation of the resourcesrequired to estimate the costs of recurrent projects are made on the basis of whatwas done the preceding year or according to available resources. Due to this fact,the efficiency of these projects is not assured. For those projects funded with own-source revenues, our work reveals that the precision and quality of the costestimates are variable due to a lack of uniformity in the methods and the tools usedto produce tenders. In addition, some data of these tenders are not sufficientlysupported by relevant documents. As a result, there is a risk that the price set willnot correspond to the actual costs of the project

5.9 The absence of adequate planning is related to the fact that 6 out of the 10 projectsfunded with own-source revenues, which we examined, resulted or will result in aloss.

5.10 There are also shortcomings in the follow-up on projects. Our work shows that thescope and frequency of the control over project costs and progress are insufficient.Managers do not know the state of progress of their projects in relation to forecasts.When they realize that the projects are behind schedule or that there are costoverruns, it is too late to intervene adequately. The little management informationand the lack of tools do not promote an adequate follow-up; as a result, the ensuinginternal accountability can only be incomplete. Moreover, the Institute does notknow its global financial position in a timely manner.

5.11 Furthermore, we observed that the agency makes no evaluation of the efficiency orthe quality of its statistical projects. While we noted that the Institute is concernedabout the quality of its work, no evaluation framework has been established. Suchabsences do not promote an improvement of practices.


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CHAPTER 6 FOLLOW-UP ON VALUE-FOR-MONEY AUDITS

Introduction

6.1.1 After an interval of a few years, we do a follow-up on our audit work. Ourobjective is to see if the recommendations originally made have been taken intoaccount and if the audited entities have remedied the shortcomings that we hadidentified with respect to their management.

6.1.2 This exercise, which completes the initial audit, allows us to informparliamentarians about the actions that have been taken to compensate for thedifficulties that we reported. When the problems persist, we once again determinetheir nature and scope.

6.1.3 Table 1 presents the list of follow-ups examined in this volume, with reference tothe initial audits.

Table 1 Follow-ups examined in this volume

Original audit Report for the year concerned

Grants to municipalities1997-1998, Volume II, Chapter 6

Use of geomatics for managing the territoryand its resources 1997-1998, Volume II, Chapter 7Grants awarded to public mass transitorganizations concerning their capitalexpenditures 1998-1999, Volume II, Chapter 5Development of the information systems of theministère du Revenu 1999-2000, Volume I, Chapter 8Quality of management at the Office of theQuébec Ombudsman 1999-2000, Volume II, Chapter 3Government grants to non-profit organizations 2000-2001, Volume I, Chapter 2


25

6.1.4 As part of this work, we did a follow-up on 136 recommendations. A few havebecome obsolete or are no longer applicable, given the discontinuation of someactivities, legislative amendments or the fact that the situations in question havenot reoccurred since the initial audit. Table 2 specifies the level of application ofthe recommendations. Globally, 78 percent of the applicable recommendationsgave rise to tangible actions on the part of managers. However, we are satisfiedwith the progress achieved in only 48 percent of the cases.

6.1.5 This latter rate is still too low. The audited entities will have to step up theirefforts to implement our recommendations and to correct the shortcomings thatcontinue to cast a shadow over the management of the activities that weexamined. Paragraphs 1.39 to 1.47 of Chapter 1 present new requirements in theaccountability field set by the government for its departments and agencies to helpimprove the level of application of the recommendations made by the AuditorGeneral.


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Table 2 Results of the follow-ups and level of applicationof the recommendations

Number of recommendationsPartially applied Not

appliedObsolete or

non-applicableApplied

Satisfactoryprogress

Unsatisfactoryprogress

Total

Grants tomunicipalities

3 6 9 4 2 24

Use of geomaticsfor managing theterritory and itsresources

– 1 1 2 – 4

Grants awarded topublic mass transitorganizationsconcerning theircapitalexpenditures

11 3 4 2 5 25

Development ofthe informationsystems of theministère duRevenu

1 3 9 1 – 14

Quality ofmanagement at theOffice of theQuébecOmbudsman

6 4 1 – – 11

Government grantsto non-profitorganizations

16 2 11 17 12 58

Number ofrecommendations

37 19 35 26 19* 136

Breakdown 32% 16% 30% 22%Tangible actions 78%Full applicationor satisfactoryprogress

48%

* The obsolete or non-applicable recommendations are not considered for statistical purposesas they no longer had to be or did not have to be applied.


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Grants to municipalities

6.2.1 We did a follow-up on the value-for-money audit performed in 1997-1998 withsome departments and agencies providing funding. The purpose of this initiativewas to determine the extent to which the departments and agencies providingfunding had rectified the shortcomings identified initially. Our work ended inMarch 2003.

6.2.2 The objective of the initial audit, the results of which were published in Chapter 6of Volume II of the Report of the Auditor General to the National Assembly for1997-1998, was to obtain the assurance that the departments and agencies wereadequately managing the grant programs intended for municipalities. Table 1presents the various programs audited at that time.

Table 1 Audited programs

Entity Programs

Canada-Québec Infrastructure Program (now known as“Canada-Québec Infrastructure Works Program 2000” -components 1 and 3

Ministère des Affaires municipaleset de la Métropole

Grant to the Kativik Regional Government

Government assistance program for public transit – capitalexpenditures component

Assistance program to help assume responsibility for the localnetwork (now known as “Assistance program for the upkeep ofthe existing network”)

Assistance program to improve the local network (now known as“Assistance program to improve the municipal network”)

Ministère des Transports

Assistance program for the adapted transportation ofhandicapped persons

Ministère de la Culture et desCommunications

Support for heritage enhancement

Commission de la capitalenationale du Québec

All of the grants awarded to municipalities

6.2.3 The results of this audit showed that the awarding and control of grants were notrigorous enough. More specifically, shortcomings had been noted with respect tothe rules and standards established to provide a framework for the awarding ofgrants, the documentation included in analysis files, cost forecasts that motivateddecisions, the auditing of the use made of grants, and the evaluation of programs.Moreover, we had raised the shortcomings regarding the information published inthe Expenditure Budget and in the Public Accounts. Finally, we observed that thetax paid by the operators of telecommunications, gas and electricity networks(TGE) was not collected in full and that the cost of managing the tax was notcalculated by the departments in charge.


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General conclusions

6.2.4 Our follow-up reveals that 18 of our 24 recommendations gave rise to tangibleactions. However, only 3 recommendations were applied, while the progressachieved is satisfactory for 6 other recommendations. As for the 6 remainingrecommendations, 4 were not applied and 2 are no longer applicable. Significantimprovements have been made with respect to the rules and standards but, forseveral subjects, the results are insufficient. For example, progress isunsatisfactory with respect to the documentation included in files, cost forecastsand the auditing of grants. Table 2 reports on of the state of each of therecommendations.

Table 2 Status of recommendations

RecommendationPartially appliedApplied



Not applied Obsolete

Rules and standardsSpecify the rules and standards forawarding grants to municipalities toprovide a suitable framework fordecision-making as it applies tochoosing projects, setting the amountof grants and auditing the use madethereof.

MCC CCNQMAMM

MTQ

Continue its efforts to better informmunicipalities of all of the majorconditions of application of theCanada-Québec Infrastructure WorksProgram 2000.

MAMM

Documentation included in theanalysis files

Ensure that the documentation requiredto justify decisions is included in thefiles.

CCNQMAMM

MCCMTQ

Cost forecastsShow that they ensure that costforecasts are reasonable beforeagreeing to participate in the funding ofa project.

MAMMCCNQMCCMTQ

Auditing of grantsProceed with the auditing of grants toensure that they are used for thestipulated purposes, collect any excessamounts paid and record the results oftheir audits in the files.

CCNQ MTQ MCC

Evaluation of programsMake an evaluation of grant programsintended for municipalities or continuetheir efforts in this direction.

MCCMAMM

MTQ


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Not applied Obsolete

Information published in theExpenditure Budget and in the PublicAccounts

Ensure that the information publishedin the Expenditure Budget and in thePublic Accounts regarding the sumsawarded to municipalities is presenteduniformly.

MFER

SCT

TAX ON THE TGE

Full amount of the receipts from thetax on the TGE

Continue its efforts to claim fromoperators of TGE networks, other thanthose involved in wireless tele-communications, all of the sums thatare owing, as property tax, under theAct respecting Municipal Taxation.

MRQ

Collection and distribution fees

Determine the cost of collecting anddistributing the tax on the TGE.

MAMM

MRQ

Number of recommendations 3 6 9 4 2*

Breakdown 14% 27% 41% 18%

Tangible actions 82%

Full application or satisfactoryprogress

41%

* Obsolete recommendations are not considered for statistical purposes.

Use of geomatics for managing the territory and its resources

6.3.1 We did the follow-up on the value-for-money audit performed in 1997-1998 withthe ministère des Resources (MRN) and some other departments and agencies.Our work ended in January 2003.

6.3.2 The objective of the initial audit, the results of which were published in Chapter 7of Volume II of the Report of the Auditor General to the National Assembly for1997-1998, was to obtain the assurance that the supervision of the activitiesrelated to geomatics promoted the optimal yield, at the government level, of theinvestments made in this cutting-edge technology and that the accountability wascomplete. We had also checked to see if the departments and agencies showed


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economy and effectiveness in managing these activities and in disseminating theirdigitized spatial reference data.

6.3.3 Our audit focused on the activities related to the coordination of geomatics andcarried out by the persons in charge of the Geomatics Plan of the Government ofQuébec since 1988, as well as on those activities done by the departments andagencies most affected by the management of the territory and its resources. Theyincluded the MRN, the ministère de l’Environnement et de la Faune (which hassince become the ministère de l’Environnement), the ministère des Affairesmunicipales (now known as the ministère des Affaires municipales et de laMétropole), the ministère des Transports, the ministère de l’Agriculture, desPêcheries et de l’Alimentation, the Régie de l’assurance agricole du Québec(whose activities now come under the responsibility of Financière Agricole duQuébec), and the Commission de protection du territoire agricole du Québec.

General conclusions

6.3.4 In November 1988, the government put in place the Geomatics Plan of theGovernment of Québec to optimize its initiatives throughout the territory. Indeed,the Plan must guide the actions and investments of departments and agencies inthe geomatics field. Its purpose is to promote a comprehensive vision of thedevelopment and management of the territory and its resources. Its clientelecomprises departments and agencies whose budget is voted on by the NationalAssembly.

6.3.5 The MRN acts as a representative of the government for the implementation ofthe Plan, the management of which is ensured by a coordination structure thatincludes the Committee of Deputy Ministers and the Steering Committee.

6.3.6 Our follow-up reveals that there are still tangible actions that need to be taken toresolve the problems raised initially. Of the four recommendations made in 1997-1998, we consider that the progress achieved is satisfactory for only one of them,unsatisfactory for another, while two recommendations have not been applied.Table 1 presents our assessment in this respect.


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Not applied

Implementation of geomatics

Accelerate the implementation of geomatics, inparticular by stepping up the effort to digitizespatial reference data.

X

Exchange of digitized spatial reference data

Facilitate the exchange of digitized spatialreference data between departments and agencies.

X

Dissemination of digitized spatial reference data

Promote the dissemination of the digitized spatialreference data of departments and agencies. Forthat purpose, propose a data dissemination policy.

X

Accountability

Provide full accountability regarding theimplementation of geomatics in the government.

X

Number of recommendations 1 1 2

Breakdown 25% 25% 50%


Full application or satisfactory progress 25%

Grants awarded to public mass transit organizations concerning theircapital expenditures

6.4.1 We did a follow-up on the value-for-money audit performed in 1998-1999 withthe ministère des Transports du Québec (MTQ) and public mass transitorganizations (PTOs). The purpose of this initiative was to determine the extent towhich the department and the PTOs had rectified the shortcomings initiallyidentified. Our work ended in March 2003.

6.4.2 The objective of the initial audit, the results of which were published in Chapter 5of Volume II of the Report to the National Assembly for 1998-1999, was to obtainthe assurance that the grants paid to PTOs for their capital expenditures met theconditions for awarding and using the grants. We had concluded that, except forthree projects, the grants met these conditions. There were shortcomings withrespect to certain subjects pertaining to the awarding of grants. They concerned, inparticular, the authorization, the payment and the auditing of grants, both for


32

projects dealing with the acquisition of buses and for those associated with othercapital expenditures.

6.4.3 Some territorial divisions of the ministère des Transports as well as the Réseau detransport de la Capitale (previously known as the Société de transport de laCommunauté urbaine de Québec), the Société de transport de Montréal (prior to2002 known as the Société de transport de la Communauté urbaine de Montréal)and the Société de transport de Sherbrooke (previously known as the Corporationmétropolitaine de transport – Sherbrooke) had been selected at the time of thisaudit.

General conclusions

6.4.4 Our follow-up reveals that 90 percent of the recommendations led to tangibleactions on the part of the ministère des Transports and the PTOs. We consider thatthe progress achieved is satisfactory for 70 percent of the recommendations. Table1 presents the general Status of recommendations.

Table 1 General status of recommendations

Recommendation

Partially applied Not appliedNon-

applicableApplied



Ministère des Transports 5 3 4 0 0

Public mass transit organizations 6 0 0 2 5

Number of recommendations 11 3 4 2 5*

Breakdown 55% 15% 20% 10%


Full application or satisfactoryprogress

70%

* The non-applicable recommendations are not considered for statistical purposes.

6.4.5 However, tangible actions are still required to remedy the problems raisedinitially. The ministère des Transports, for its part, applied 5 recommendations outof the 12 that were addressed to it. Moreover, we are satisfied with the progressachieved regarding 3 other recommendations. Those dealing with the payment ofgrants were followed. However, improvements must be made with respect to theaudit related to buses as well as that concerning other capital expenditure projects.Table 2 shows the state of each of the recommendations intended for thisdepartment.


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6.4.6 As for the public mass transit organizations audited, we find that the Société detransport de Montréal (STM) has applied four of our six recommendations.Another recommendation was not followed, and the final one was non-applicableowing to the absence of new files. As for the Réseau de transport de la Capitale(RTC), it met our expectations in full. Given the fact that there had been no newprojects since our initial audit with the Société de transport de Sherbrooke (STS),it did not need to follow several of our recommendations. However, thisorganization did not apply our recommendation dealing with the bus acquisitionand disposal dates. Table 3 presents the state of each recommendation.


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Table 2 Status of recommendations – Ministère des Transports




Notapplied

AUTHORIZATION OF GRANTSBuses

Define what constitutes an increase in the fleet, do a follow-upwith PTOs to check if the acquisition of buses is used to maintainthe fleet or increase it and, in this latter case, require that theneed for new vehicles be justified.

X

Other capital expenditure projectsEnsure that project authorizations are given in accordance withthe rules and standards for attributing them.

X

PAYMENT OF GRANTSBase the calculation of payments on the projected total eligibleexpenditures.

X

Proceed with the collection of overpayments on the same basis,whether a project is funded through one or more issues.

X

AUDIT PERTAINING TO BUSESAcquisition and disposal dates

Ensure the reliability of the bus acquisition and disposal dates todetermine their useful life.

X

Consideration of the selling priceConsider the selling price of replaced buses in the calculation ofthe net value of acquired vehicles.

X

Expenditures exceeding the amount authorized by the ministerContinue to ensure that no expenditure in excess of the amountauthorized by the minister gives rise to a grant.

X

Surplus funding revenuesConsider the interest revenues generated by the loan surpluses ofthe Société de transport de la Communauté urbaine de Montréalwhen determining subsidized expenditures.

X

AUDIT PERTAINING TO OTHER CAPITAL EXPENDITURE PROJECTS

Supporting documentsVerify the existence of sufficient supporting documents to showthe eligibility of all subsidized expenditures.

X

Compliance with rules and standardsMake sure that the rules and standards for awarding grants arecomplied with.

X

Compliance with the minister’s authorizationsVerify the compliance of the expenditures with the minister’sauthorizations when he checks their eligibility.

X

Audits performed by the internal auditor of the Société detransport de la Communauté urbaine de Montréal

Make sure that the audit programs applied by the internal auditormake it possible to certify the eligibility of the expenditures inaccordance with the conditions for awarding grants and that hisattestations are suitably supported.

X

Number of recommendations 5 3 4 –Breakdown 42% 25% 33% –

Tangible actions 100%Full application or satisfactory progress 67%


35

Table 3 Status of recommendations – Public mass transit organizations

Recommendation

Partially applied Notapplied

Non-applicable

Applied



AUDIT PERTAINING TO BUSES

Acquisition and disposal datesHave in their possession supporting documents toshow the accuracy of the bus disposal dates.

RTCSTM

STS

Surplus funding revenuesRecord interest revenues generated by borrowingsurpluses minus temporary financing charges.

STM

AUDIT PERTAINING TO OTHER CAPITAL

EXPENDITURE PROJECTS

Supporting documentsHave in their possession the supporting documentsrequired to show the eligibility of the subsidizedexpenditures.

RTC STS

Compliance with rules and standardsPrepare its public call for tenders in such a way asto clearly distinguish between eligible andineligible expenditures, and ensure that thisrequirement is met when the supervision of aproject, whether in whole or in part, is entrusted toa third party.

STM STS

Obtain an additional authorization from theminister, if they want the costs related to thechanges to the plans and specifications to beeligible.

STMSTS

Compliance with the minister’s authorizationsRecord separately the expenditures pertaining toeach project.

STS

Audits performed by the internal auditor of theSociété de transport de la Communauté urbainede Montréal

Show that the expenditures pertaining to workdone under state supervision are marginal costswith respect to the replacement of escalators inmetro stations.

STM

Obtain an authorization from the department forthe orders pertaining to the changes if it wants therelated costs to be eligible for the project tomanufacture rolling stock associated with theMontréal/Deux-Montagnes commuter linemodernization project.

STM

Number of recommendations 6 – – 2 5*Breakdown 75% – – 25%



RTC Réseau de transport de la CapitaleSTM Société de transport de MontréalSTS Société de transport de Sherbrooke


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Development of the information systems of the ministère du Revenu

6.5.1 We did the follow-up on the value-for-money audit performed in 1999-2000 withthe ministère du Revenu. Our work ended in March 2003. Given the fact that theprojects contemplated by our initial audit had been completed, our follow-up dealtwith three new projects that concern the development or management of thesystems presented in the appendix – these choices are in keeping with the basicmodel that we had used initially. These projects were selected based on thefollowing criteria:

• project initiated at a date that allowed the department to take ourrecommendations into account;

• project that is sufficiently advanced to allow us to apply the evaluationcriteria;

• significant project for the department that should require accountability.

6.5.2 The anticipated costs are $1.6, $2.7 and $3.9 million respectively.

6.5.3 The initial audit, the results of which were published in Chapter 8 of Volume I ofthe Report of the Auditor General to the National Assembly for 1999-2000, haddealt with the following aspects: the appraisal of the projects, the qualityassurance and peer review functions, risk management, benefit management, thefollow-up on system development activities, and accountability. Globally, wewanted to have the assurance that the department had implemented the processesrelated to these critical aspects of system development.

General conclusions

6.5.4 Our follow-up reveals that the department took steps regarding 13 of the 14recommendations that we had made. Significant improvements were noted withrespect to the appraisal of projects as well as risk management. However, somemeasures are incomplete with respect to quality assurance and peer review,benefit management and the follow-up on development activities. Despite thesereservations, the department has succeeded in implementing the computer toolsrequired to carry out its mission, while respecting all of the authorized budgets.

6.5.5 Moreover, the project to develop the system “Deployment of electronic exchanges– Registration of enterprises” is the one for which we observed the best practices.

6.5.6 Table 1 reports on the Status of recommendations.


37


Recommendation

Partially appliedApplied



Notapplied

Project estimatesAdopt a procedure seeking to provide a framework for projectestimates, and established taking into account their characteristics;this procedure should specify the elements to be estimated, theapproach, the tools to be used, the documentation to be devised, aswell as the details for reviewing and approving estimates.

X

Collect the data required to support and improve the estimates made. XQuality assurance and peer review

Review its quality assurance procedures regarding the developmentof information systems to have them deal both with the conformity ofdeliverables and activities and the efficiency of the latter, and toensure that independence or, failing that, objectivity is more assuredregarding the performance of this function.

X

Ensure that the reviews made by peers are better supervised andcarried out more systematically.

X

Risk managementDefine its orientations and guidelines in risk management andacquire tools designed for this purpose.

X

Further systematize the management of risks associated with thedevelopment of its information systems– by identifying and quantifying as early as possible all of the risksincurred;– by taking into account the importance and the degree of probabilityof risks when they are assumed.

X

Benefit managementPeriodically update its estimates regarding the anticipated benefitsand re-examine, if necessary, its system development and benefitrecovery strategies.

X

Put in place benefit recovery procedures before deploying the variouscomponents of a new information system.

X

Ensure that the anticipated benefits are obtained according to thetimetable and justify the disparities, where applicable.

X

Follow-up on system development activitiesImprove the follow-up on information system development projects– by taking into account all of the changes requested and madeduring the carrying out of the project; X– by considering, during monthly follow-ups, all of the efforts madeand the costs incurred;

X

– by comparing the effort and the actual cost with initial forecasts; X

– by using indicators to measure its performance. X

AccountabilityProvide comprehensive information to the National Assemblyregarding its information system development activities and, inparticular, underscore in its annual activity report to what extent andwhy the functionality, the cost, the time periods required and thebenefits of the developed systems differ from the forecasts, inaddition to stating why the requirements of the Conseil du trésor arenot fully met.

X

Number of recommendations 1 3 9 1Breakdown 7 % 21 % 65 % 7 %

Tangible steps 93%Full application or satisfactory progress 28%


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Quality of management at the Office of the Québec Ombudsman

6.6.1 We did the follow-up on the value-for-money audit performed in 1999-2000 withthe Ombudsman. Our work ended in April 2003.

6.6.2 The purpose of the initial audit, the results of which were published in Chapter 3of Volume II of the Report of the Auditor General to the National Assembly for1999-2000, was to evaluate the quality of the management at the Office of theQuébec Ombudsman. To do this, we had analyzed his management frameworkfrom the standpoint of planning, the definition of roles and responsibilities, andaccountability. Our work also dealt with the quality of the supervision of servicedelivery, the meticulousness with which the Ombudsman manages his human andfinancial resources, as well as the motivation and satisfaction of his personnel.However, we had not examined the quality of the responses to consultations byindividuals or that of the processing of their complaints.

General conclusions

6.6.3 Following our report, the Ombudsman took prompt action. Indeed, our follow-upwork shows that all of our recommendations gave rise to tangible actions on thepart of the managers of the Ombudsman. Moreover, we are satisfied with theprogress achieved in 91 percent of the cases. Table 1 presents the level ofapplication of each recommendation.


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Notapplied

Management frameworkDetermine its strategic orientations.

X

Prepare an annual action plan. XSpecify the roles and responsibilities of theadministrative units.

X

Supervision of service deliveryDevelop reference tools with respect to the processesto be applied.

X

Put in place quality control mechanisms. XHuman resources

Show that all of the positions are filled by candidateswho meet the requirements of their job.

X

Determine training needs. XSystematically evaluate the individual performance ofhis employees.

X

Financial resourcesAdopt administrative rules.

X

Motivate any departure from the administrative rulesin effect in the public service. X

AccountabilityDisclose, in a timely manner, the information neededto evaluate the organization’s performance.

X

Number of recommendations 6 4 1 –Breakdown 55% 36% 9% –


Government grants to non-profit organizations

6.7.1 We did the follow-up on the value-for-money audit performed in 2000-2001 anddealing with government grants to non-profit organizations (NPOs). The initialaudit concerned six of the eight NPOs created in March 1999 and in March 2000,as well as six departments that had paid grants to these NPOs and the ministèredes Finances, which has since become the ministère des Finances, de l’Économieet de la Recherche (MFER). The table, presented in the appendix, reproduces thelist of these departments and organizations, as well as various data regarding eachof them. Our follow-up work ended in March 2003.

6.7.2 The initial audit, the results of which were published in Chapter 2 of Volume I ofthe Report of the Auditor General to the National Assembly for 2000-2001,initially sought to determine if the six NPOs had obtained amounts in excess ofthose received as of March 31, 2000. We had also checked to see if the neworganizations had, in turn, benefited from grants under the same conditions as


40

those described in a previous report dealing with the audit of the consolidatedfinancial statements of the Government of Québec for the fiscal year ended onMarch 31, 2000.

6.7.3 The initial audit had also dealt with the use made of the grants paid to theseNPOs, which are in charge of redistributing the sums that they are entrusted with.First, we wanted to obtain the assurance that this way of funding certain activitiesdoes not result in additional costs for the government. Another of our objectiveswas to check that all of the relevant data pertaining to the allocation of the publicfunds received by the NPOs are transmitted in a timely manner to the departmentsin question. We also wanted to evaluate if the measures put in place by thedepartments and the NPOs allow them to make sure that the sums entrusted tothese organizations will be used for the purposes stipulated in the agreements thatthey entered into with the departments. Finally, we had to examine if the NationalAssembly is adequately informed of the use made of the grants.

6.7.4 At the time, we did not check if the sums allocated by the NPOs to the ultimatebeneficiaries were indeed used to fund the activities stipulated in the agreementssigned with the departments, as little financial assistance had been granted to thirdparties then. To this end, we audited some of the NPOs concerned within thecontext of the report entitled Government initiatives in the non-profit organizationsector published this year in Chapter 2 of this volume.

General conclusions

6.7.5 Our work reveals that, for the departments, very few of our recommendationswere applied or showed satisfactory progress. Indeed, the application rate is only27 percent. However, we were unable to express an opinion for somerecommendations, as no new NPO of this type was created to be entrusted tothese departments. Moreover, no new government grant was paid to these NPOs,with the exception of the $30 million awarded to Innovation-Papier (IP). As forthe recommendations concerning the NPOs, 69 percent were applied or showedsatisfactory progress. Tables 1 and 2 present the state of each of therecommendations intended for the departments and NPOs respectively.


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Table 1 Status of recommendations – Departments

Recommendation

Partially applied Notapplied

Non-applicable*

Applied



Early payment of grantsPay the grants awarded to non-profit organizations asthey make known their cash requirements.

MRN

MAMM,MCE,

MRST,MTQ, TQ

Choice of the manager of a financial assistance programDetermine, at the time of decision-making, if the fact ofentrusting the management of a financial assistanceprogram to a non-profit organization results in additionalcosts that outweigh the benefits ensuing from thisapproach.

MRN

MAMM,MCE,

MRST,MTQ, TQ

Ceiling on the operating expenses of non-profitorganizations

Determine, using objective criteria, the expenses requiredfor the proper operation of non-profit organizations andmake the necessary adjustments.

MAMM,MCE,MRN,MRST,MTQ,

TQEstablish, where applicable, the cost of the services thatthey provide free of charge to non-profit organizations inorder to report on all of the administration costs of theassistance programs in question.

MAMM MRN, MTQ

Information sent to the departmentsEnsure that the accountability of non-profit organizationsdeals with precise targets and that the performance isevaluated using appropriate indicators.

MAMM,MCE, MRST,

MTQ

MRN,TQ

Make sure with non-profit organizations that the externalaudit reports that are to be submitted provide sufficientinformation concerning the use of the grants for thestipulated purposes.

MAMM,MCE,MRN

MRST,MTQ

TQ

Control measures applied by the departmentsComplete the control measures that are used in theiranalysis of the information from non-profit organizations.

MAMM,MTQ,MCE

MRST, TQ MRN

Accountability to the National AssemblyReport to the National Assembly on the use made ofpublic funds entrusted to non-profit organizations.

MAMM,MCE, MRN,

MRST

MTQ,TQ

Number of recommendations 9 – 11 13 12Breakdown 27% – 33% 40%



MAMM Ministère des Affaires municipales et de la MétropoleMCE Ministère du Conseil exécutifMRN Ministère des Ressources naturellesMRST Ministère de la Recherche, de la Science et de la TechnologieMTQ Ministère des TransportsTQ Tourisme Québec


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Table 2 Status of recommendations – Non-profit organization

RecommendationApplied Partially applied Not

appliedSatisfactory

progressUnsatisfactory

progressTransmission deadline

Respect the stipulated deadlines for the transmissionof documents to the departments.

IP, IQ, IT,SGFJ,VRQ

SEMIQ

Processing of applications for assistance bynon-profit organizations

Complete the preparation of the procedures requiredto process and follow up on applications for financialassistance.

IT

Awarding of financial assistanceRevise their procedures to ensure that the awarding offinancial assistance is proportional to the degree ofattainment of the objectives of their respectiveprogram.

SGFJIP,

SEMIQ

Ensure that the projects are carried out at the bestcost, with respect to the anticipated results.

SEMIQ

Follow-up on subsidized projectsCheck, during the follow-up on subsidized projects,the extent to which the objectives stipulated in theapplications for assistance were achieved by theultimate beneficiaries.

IP, VRQ

Number of recommendations 7 2 – 4Breakdown 54% 15% – 31%


IQ Infrastructures-QuébecIT Infrastructures-TransportIP Innovation-PapierSGFJ Société de gestion du Fonds jeunesseSEMIQ Société des événements majeurs internationaux du QuébecVRQ Valorisation - Recherche Québec


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CHAPTER 7 CERTIFICATION OF FINANCIAL INFORMATION

Introduction

7.1.1 Each year and pursuant to his mandate, the Auditor General does financialinformation certification work, the results of which are recorded in a documentknown as the “auditor’s report”. This work deals with the financial statements ofthe government, its agencies and its enterprises.

7.1.2 The certification of financial information is carried out using recognizedtechniques. It includes tests of the various elements in support of the financialdata and other information, an evaluation of the accounting policies used and thefinancial estimates produced by the directors of the entity for the purposes of itsfinancial statements. Moreover, the auditor makes an assessment of their overallpresentation. As is established in the accounting field, the purpose of thecertification of financial information is to “provide a reasonable assurance as tothe absence of material misstatements in the financial statements”.

7.1.3 When the auditor ascertains a departure from the generally accepted accountingprinciples (GAAP) of Canada or from the accounting policies, or if a limitationwas imposed on the scope of his work, he must express a reservation in his report.The reservation may take one of the following forms:

• a qualified opinion, when the auditor has a favorable opinion of the financialstatements taken as a whole, but then qualifies the opinion by a departure fromGAAP or from the appropriate accounting policies or by a limitation of hisauditing work;

• an adverse opinion, when the auditor is of the opinion that the financialstatements do not give a fair presentation according to GAAP or to theappropriate accounting policies;

• a denial of opinion, when the auditor is unable to give an opinion on thefinancial statements following a limitation on his auditing work.

7.1.4 Within the context of the financial information certification work, the AuditorGeneral also audits the compliance of operations having a financial impact withstatutes, regulations, policies and directives. It may happen that non-compliancesituations are detected. Moreover, the nature of the work that the Auditor Generalperforms may lead him to ascertain shortcomings related to management. In suchcircumstances, the Auditor General conveys to the interested parties hisobservations and his recommendations in a management report.

7.1.5 This chapter presents the main reservations, observations and recommendationsmade following the financial information certification work carried out in recentmonths.


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7.1.6 Moreover, Appendix A of this volume reproduces the report published followingthe audit of the consolidated financial statements of the Government of Québecfor the fiscal year ended on March 31, 2002.

7.1.7 This report was tabled in the National Assembly on December 18, 2002, at thesame time as the government’s consolidated financial statements for the fiscalyear ended on March 31, 2002. Paragraphs 1.14 to 1.21 of Chapter 1 present othercomments of the Acting Auditor General on these financial statements.

Public Curator of Québec

7.2.1 We audited the books and accounts of the Public Curator of Québec for the fiscalyear ended on March 31, 2002. Our audit work ended on October 25, 2002. Theauditor’s report that we prepared on this entity’s financial statements contains tworeservations dealing with the individual fund and one reservation concerning thecommon trust fund. These reservations are of the same nature as those made inour auditor’s reports on the financial statements for the fiscal years ended onDecember 31, 1999, as well as on March 31, 2000 and 2001.

Individual fund – Completeness and accuracy of the assets and liabilities

7.2.2 During the audit of the balance sheet of the individual fund for the last three fiscalyears, the number of errors detected, the number of items affected and theimportance of the misstatements were such that it was impossible to ensure thatall of the assets and all of the liabilities of the individual fund had been recordedand, if they had, that they reflected their book value as of the balance sheet date.

7.2.4 [...] we maintain, for a fourth fiscal year, the reservation appearing in the auditor’sreport, as we cannot express an opinion regarding the fairness of the presentationof the balance sheet of the individual fund in accordance with generally acceptedaccounting principles of Canada.

Financial statements pertaining to administered property

7.2.6 At the end of our audit of the books and accounts of the fiscal year ended onMarch 31, 2000, we invited the Public Curator to review the presentation of hisfinancial statements in order to provide comprehensive and understandableinformation on the property that he administers, in accordance with generallyaccepted accounting principles of Canada; we had reiterated this recommendationwith respect to the fiscal year that came to an end on March 31, 2001. [...] As ofMarch 31, 2002, the presentation of the financial statements remains unchanged.

7.2.9 [...] the information remains incomplete, and it is impossible to follow, from one

fiscal year to the next, the variation in the net assets of the property entrusted tothe administration of the Public Curator. Moreover, the auditor’s report on thefinancial statement of the individual fund for the fiscal year ended on March 31,


45

2002 contains, in this respect, the same reservation as for the previous fiscalyears.

Follow-up on employment assistance (social aid) 7.2.12 For the purposes of preparing his financial statements, the Public Curator

recorded, under the item “accommodations and allowances for petty expenses”,outlays equivalent to the total of the sums paid directly by the ministère del'Emploi et de la Solidarité sociale to the representatives. The Public Curatortherefore assumed that these employment assistance benefits were all used tomeet needs of this nature. The Public Curator has no audit evidence in support ofthese operations, for which he is responsible. Consequently, we were unable toverify the outlays made using these sums, which total $10.5 million as of March31, 2002. Our opinion on the financial statements of the Public Curator contains areservation in this respect.

Société de l’assurance automobile du Québec

7.3.1 We audited the books and accounts of the Société de l’assurance automobile duQuébec for the fiscal year ended on December 31, 2002. Our audit work ended onMarch 28, 2003. Our work allowed us to express an unqualified opinion on theentity’s financial statements. However, we felt that it was advisable to include inthe auditor’s report a comment concerning the comparability of the financialstatements following successive accounting changes.

Comparability of the financial statements

7.3.2 The Société made revisions of its estimates in 2001 as well as a change to itaccounting policies in 2002.

7.3.3 On January 1st, 2001, the Société changed the accounting method regarding therecognition in the income of the gains (loses) of the market values onparticipation deposit units of the Caisse de dépôt et placement du Québec. It alsochanged the method of accounting for deferred gains and losses based on the realrate of return assumption. These changes were mentioned in notes 4 and 16 to theSociété’s financial statements as of December 31, 2001. Without these changes tothe estimates, the deficit of revenues over expenditures of this fiscal year wouldhave been $197.1 million greater, and the surplus would have been reduced by thesame amount.

7.3.4 In 2002, the Société retroactively eliminated the ceiling mechanism in theestablishment of the deferred gains and losses based on the real rate of returnassumption, as indicated in note 23 of its financial statements. Without thischange to the accounting policy, the deficit of revenues over expenditures for thisfiscal year, which totals $160.5 million, would have been $104.0 million greater,and a surplus of $226.8 million would have been posted instead of a deficit of$32.4 million. Moreover, if the financial statements of December 31, 2002 had


46

been prepared in accordance with the accounting policies in effect on December31, 2000, the deficit of revenues over expenditures would have been $368.7million and the deficit, $74.6 million.

7.3.5 Although these successive changes were made in accordance with generallyaccepted accounting principles of Canada, they increase the risk of confusionregarding the interpretation of the results and the financial position of the Sociétéand do not promote the comparability of financial statements from one fiscal yearto the next. Moreover, this comparability is reduced, given the fact that thefinancial statements of the fiscal year ended on December 31, 2001, presented forcomparison purposes, were not adjusted to take into account the retroactiveaccounting change made in 2002.


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APPENDIX A Report to the National Assembly concerningthe audit of the consolidated financialstatements of the Government of Québecfor the fiscal year ended on March 31, 2002

8.141 Our work led us to ascertain misstatements in the financial statements. The mostimportant ones gave rise to reservations expressed in the auditor’s report thataccompanies these statements and are taken up in this document. […] It should bepointed out that, except for the effects of these material misstatements, theconsolidated financial statements provide, in all material respects, a fairpresentation of the financial position of the Government of Québec as of March31, 2002, as well as of the results of its operations and the changes in its financialposition for the fiscal year then ended, in accordance with the government’saccounting policies.

Reservation

8.144 […] Table 1 presents the reservations other than the one pertaining to theretirement plans and the amounts in question, when they could be determined;moreover, these reservations are explained in detail later in this document.

Table 1 Financial impacts of the reservations

Overstatement (understatement) (in millions of dollars)

Revenues Expendi-tures

Annualdeficit

Assets Liabilities Net debtand

cumulateddeficits

Revenues from agovernment enterprise 323.0 (323.0)

Reporting entity n.a. n.a. n.a. n.a. n.a. n.a.

Provision for tax claims (147.5) (147.5) (64.5) 64.5

Provision for losses onguaranteed financialinitiatives

50.1 50.1 178.4 178.4

Total 323.0 (97.4) (420.4) (64.5) 178.4 242.9


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Commitments regarding three retirement plans

8.146 As was the case for the preceding fiscal years, the government does not clearlyrecognize, in its financial statements for the fiscal year ended on March 31, 2002,having contracted commitments for the funding of the plans […] [Retirement planof employees of the government and public organizations, Retirement plan ofsupervisory staff and Retirement plan of peace officers in correctional services].In our opinion, the government did, in fact, make such commitments totaling$37,049 million as of December 31, 2001 (December 31, 2000: $39,327 million).In relation to these commitments, $22,166 million are recorded as liabilities as ofMarch 31, 2002 (March 31, 2001: $20,332 million).

8.152 […] While these commitments have no effect on the liabilities, the net debt, thecumulated deficits and the deficit of the fiscal year ended on March 31, 2002, it isnecessary to make an appropriate disclosure thereof so that the person reading thefinancial statements can evaluate the government’s financial position.

Revenues from a government enterprise

8.155 To comply with the new standards of the CICA [Canadian Institute of CharteredAccountants], Hydro-Québec, a government enterprise, changed on January 1,2002, its accounting policies concerning the conversion of foreign currencies. […]the enterprise retroactively applied its modified accounting principles by adjustingthe figures of 2001.

8.156 When recording its participation in this enterprise, the government entered theportion of this adjustment attributable to the period comprised between April 1and December 31, 2001 directly in the consolidated statement of cumulateddeficits and in the net debt rather than in the operating results of the year. […]

Reporting entity

8.163 […] We therefore conclude that [the] consolidated financial statements [of theGovernment of Québec] for the fiscal year ended on March 31, 2002 are not inaccordance with the recommendations of the CICA regarding the reporting entity.The accounts of the entities of the [education and health and social services]networks should have been combined line by line with those of the government.

Provision for tax claims

8.170 On the one hand, the ministère du Revenu correctly records a provision for baddebts related to tax claims based on a statistical analysis of files. However, aglobal provision is added thereto to compensate for the risk resulting from the useof a statistical method and to take into account the increase in debts written offduring the fiscal year. Since the creation of this global provision, in 1998, wehave been mentioning that it is unjustified. […]


49

8.173 Moreover, the provision for bad debts pertaining to tax claims of the ministère duRevenu was determined based on the accounts receivable recorded as ofDecember 31st instead of March 31st. […]

Provision for losses on guaranteed financial initiatives

8.177 The provision for losses on guaranteed financial initiatives (PPPIFG) concerningthe financial initiatives of Investissement Québec is calculated by the governmentbased on a method that differs from the one used by this agency, which is moreappropriate.

Comparability of financial statements

8.181 The Commission de la santé et de la sécurité du travail (CSST) retroactivelychanged its accounting policy regarding the provision for fluctuation in the realrate of return during its last two fiscal years, namely the one ended on December31, 2000 and the one ended on December 31, 2001. Moreover, the amortization ofthe provision for fluctuation in the real rate of return for 2001 is not establishedaccording to the same procedure as the one used previously. These repetitivechanges have an impact on the government’s consolidated financial statements, asthe CSST’s operations are recorded in those statements according to the modifiedequity accounting method.

8.183 While the successive changes to the accounting policies of the CSST are inaccordance with generally accepted accounting principles of Canada, theyincrease the risk of confusion […] moreover, they do not promote thecomparability of the financial statements from one year to the next.

Recording of transfer payment revenues and tax revenues

8.186 The general standards for presenting government financial statements, whichcome from the PSAB [Public Sector Accounting Board], stipulate that revenuesshall be recorded on an accrual basis. This method requires that revenues berecognized in the year in which occur the operations or the facts from which theyensue. Certain accounting policies of the government do not comply with thisrequirement.

Publication of the consolidated financial statements

8.198 […] since 1991, the government has never tabled its financial statements beforeDecember, namely nine months after the closing of its books, which is too late.


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APPENDIX B Excerpts from reports of the Committee onPublic Administration

Introduction

Under the Public Administration Act and the Standing Orders of the National Assembly,the Committee on Public Administration hears deputy ministers and directors of agencieswhom it invites to discuss their administrative management and, where applicable, anymatter raised in a report of the Auditor General.

To allow the reader to see the contribution of the Auditor General’s work toparliamentary control, we present in this Appendix excerpts, mainly conclusions, fromthe last two reports of the Committee, tabled in the National Assembly in December 2002and in March 2003.

First, the Ninth report on the accountability of deputy ministers and directors of publicagencies presents the results of the public examination by parliamentarians of four of ourreports as well as of the first report of the Conseil du trésor concerning the application ofthe Public Administration Act, of which we made a brief summary. Three of the reportsexamined are recorded in Volume II of the Report of the Auditor General to the NationalAssembly for 2000-2001. Another report was disclosed in Volume I of our report for2001-2002.

A report on the conclusions ensuing from the hearing of the Deputy Minister of NaturalResources concerning the management of the forestry resource was then tabled in theNational Assembly on March 11, 2003. The report that gave rise to this hearing waspublished in Volume II of our report for 2001-2002.


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SUPPLEMENT 1AUDIT REPORT ON «COMPLEXE CDP CAPITAL»

1. In light of the conclusions of an internal working committee, the Board of Directorsof the Caisse de dépôt et placement du Québec (the Caisse) gave its permission, inApril 2000, for the project to build the Caisse’s business office in Montréal.Construction work began in October 2000. The construction of a new building, whosevocation is not commercial but rather corporate, had two objectives: to bring togetherin the same place the Caisse and all of its subsidiaries, and to carry out a real estateproject that promotes the development of Montréal’s International District.

2. The business office construction project comprised several innovative features froman architectural, technological and environmental standpoint. One of these featureswas the construction of a horizontal building on a piece of land located aboveAutoroute Ville-Marie.

3 . Given the wish to control the development of the entire block, the Caissesubsequently acquired all of the lands and buildings of the block on which thebusiness office is erected. One of these buildings, the Herald, is integrated in thebusiness office as one of the subsidiaries plans to house its offices there. The Meco ispartially designated as a commercial project. The third, the former Bank of Canadabuilding, will be converted into a hotel.

4 . The entire project is being carried out under the supervision of the Sociétéimmobilière Camont (Camont), a wholly owned subsidiary of the Caisse and createdspecifically for the business office construction project. This subsidiary entrustedSITQ, another Caisse subsidiary, with the mandate of managing this constructionproject as well as those of the Herald and the Meco.

5. The project underwent changes with the arrival of the new management of the Caisse.The refocusing of the activities and the revision of staff growth forecasts would lead,in particular, to the conversion of the Herald into a commercial project. The Board ofDirectors of the Caisse approved these changes on November 29, 2002. Subsequently,the hotel project would be reexamined. According to senior management, the decisionto pursue the work associated with this project represented the best commercial use ofthe building in light of the costs incurred and the anticipated revenues

6. We performed an audit of the project to build the Caisse’s new business office inMontréal and the adjacent buildings, hereinafter designated as the Complex. Thepurpose of our work was to check if the Caisse managed this construction project andits investment projects with due regard for economy and efficiency. For this purpose,we focused on three components: the construction costs and the investments made bythe Caisse, the management of the construction project and the awarding of contracts.Our work extended from December 2002 to May 2000.


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7 . As of December 31, 2002, the anticipated total costs for the Complex reached$418.3 million, including $393 million for the construction costs. Moreover, anadditional sum of $4 million will have to be invested due to the refocusing ofactivities, the safety of the premises and the dissatisfaction expressed by currentusers. Another aspect, not considered when the costs were estimated, concerns thosethat are related to the leasing contracts, the terms of which the Caisse and somesubsidiaries will have to continue meeting until they manage to sub-lease thepremises. Two leases, expiring between 2005 and 2010, were signed, even though theCaisse had already made the decision to construct a new building and to group itsactivities there in December 2002.

8. At the end of the project, the anticipated construction costs for the business office willbe in the vicinity of $450 per leasable square foot, which is much greater than what isfound for office buildings. For example, for a superior class building in Montréal,these costs are between $270 and $290 per leasable square foot, which is at least35 percent less than the projected costs for the business office.

9. In this project, the Caisse made decisions that have had an impact on the costs and thescope of the devaluation of the Complex, such as the choice of the site and theaccelerated construction method. The market value of the Complex is $141 millionless than the anticipated construction costs, which represents a 37% devaluation.

10. The main elements explaining this devaluation are:

• A change in market conditions ($28 million);

• The site acquisition and preparation costs, including the construction above anunderground highway as well as a subway line and in a classified and protectedsector ($23.5 million);

• The accelerated construction method ($30 million);

• Major indirect construction costs ($9 million);

• The high cost of the hotel ($21 million);

• Miscellaneous elements ($29.6 million).

11. Our work shows that up until November 2002, budget monitoring was deficient: lackof follow-up on the allocated budgets and the reports submitted, spreading ofresponsibilities, and divergence of evaluations between the numerous stakeholders.The Caisse did not ensure that it had a comprehensive and reliable portrait of thesituation in order to take the appropriate corrective actions in a timely manner.

12. Up until November 2002, the project had unfolded without the Board of Directors ofthe Caisse obtaining regular follow-ups on the total costs of the construction projectas a whole. Thereafter, the Board was kept informed of the total costs of theconstruction project.

13. The members of the Board of Directors of the Caisse approved budgets by relying oninformation that gave an incomplete portrait of the nature and the costs of the project.


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From the outset, the approved budgets were underestimated. As a result, it wasdifficult for the Board to make informed decisions, as it did not benefit in a timelymanner from all of the relevant information on the nature of the project, costs, costoverruns, as well as the investments made.

14. Globally, the Board approved budgets totaling $238.5 million for the business office,while the anticipated costs are estimated at $284.9 million, namely a cost overrun of19 percent. However, the Caisse is in disagreement with the amount of the budgetauthorizations which, according to the Caisse, total $265.5 million, whichcorresponds to an overrun of 7 percent. Moreover, the Board obtained fewexplanations regarding this variance; it did not receive more explanations concerningthe high percentage of common areas (36%), which is well above the 10 to 15 percentgenerally found in office buildings in Montréal.

15. Moreover, in June 2000, the Caisse published a press release announcing theconstruction of its new Montréal business office at a cost of $102.5 million. Suchinformation was incomplete as, two months earlier, the Board of Directors hadapproved a $189 million preliminary budget, which itself was underestimated.

16. For the other three buildings – the Herald, the Meco and the hotel – as well as for theparking area, no report on the cost behaviour was submitted to the Board of Directorsof the Caisse until November 2002. Yet the cost overruns total more than $26 million,namely 24 percent more than the approved budgets.

17. As part of the construction project, Camont prepared, in 2000, a procedure thatrequires, among other things, that calls for tenders upon invitation be issued for allwork exceeding $150,000. This procedure is less demanding than that of the Caisse;indeed, according to the latter, public calls for tenders must be issued for allconstruction work in excess of $200,000. In the case of a professional servicescontract totaling $292,000 and extending over 22 months, the Caisse did not proceedby call for tenders and did not sign a contract with the chosen firm. For the awardingand management of the other contracts, our analysis shows that, save for a few casesof non-compliance, the procedure established by the subsidiary was followed.

18. Turning to the hotel, there was a major delay in the hiring of a hotel operator, eventhough a rapid intervention in the development process was crucial. A major problemensued from this delay: the decisions had to be made by members of the developmentand operations control team, but none of them had special knowledge concerning theboutique hotel concept. The interior layout work had to be interrupted for variousreasons: plans not approved, assessment of the advisability of continuing the projectfollowing the increase in costs, and calling into question of the structure of thedevelopment team due to leadership problems. The hotel’s opening date has beenpostponed accordingly, which leads to additional professional fees and increases therisks of claims from subcontractors.


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19. The construction costs of the boutique hotel, which comprises 152 rooms, exceed$340,000 per room. As the normal costs for a hotel of this type are about $230,000,the costs of the hotel are $17.4 million greater than those of a comparable project.

20. For this investment project, our findings are revealing: major premium paid to acquirethe land and the building, significant underestimation of the sums to be committed,considerable variance between the project’s cost and its market value, low return, lossof potential earnings associated with the loan conditions and leadership problems.

21. One is forced to conclude that, up until November 2002, the Caisse did not show dueregard for economy and efficiency when managing the Complex construction projectand its investments.

SUPPLEMENT 2AUDIT REPORT ON MONTRÉAL MODE INC.AND MONTRÉAL MODE INVESTISSEMENTS INC.

1. Montréal Mode inc., a wholly owned subsidiary of the Caisse de dépôt et placementdu Québec, is devoted to the development and promotion of Québec’s fashionindustry. It seeks to enhance the visibility of the enterprises of this sector and increasetheir business volume on local and international markets.

2. With this project, Capital CDPQ inc. became involved in operating an enterprise –which moved the Caisse away from its usual way of managing the funds that itmanages on behalf of depositors, namely limiting its participation to less than 30percent. The incorporating act of the Caisse allows a specialized entity such asCapital CDPQ inc. to proceed in such a manner.

3. Moreover, Montréal Mode inc. planned to go public or attract other investors as partof partnerships and, in so doing, dilute the Caisse’s participation within the first fiveyears of its creation.

4. The official launching of Montréal Mode inc. took place on June 14, 1999 when thePresident-Chief Executive Officer of the Caisse announced a $30 million start-upbudget to fund, over five years, the partnerships with designers and strategic partners.

5. Under the Auditor General Act and government orders in council, we performed aspecial audit of the allegations of poor management leveled against Montréal Modeinc. and its administrative and internal governance practices. This audit also dealtwith the subsidiaries of Montréal Mode inc. as well as with Montréal ModeInvestissements inc., another wholly owned subsidiary of the Caisse. Our work tookplace from December 2002 to May 2003.


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6. Montréal Mode inc. would not give tangible form to the project initially planned forthe fashion sector. First, the Caisse would assume the business risks alone in theabsence of any other investor. Subsequently, the only form of partnership offered todesigners – 10 percent or less – would not succeed in winning over designers despitetheir interest in the exporting component of the project. Finally, instead of developinga new enterprise, Capital CDPQ inc. would acquire the Shan Group, at a cost of $2.3million, to serve as a platform for designers. The choice of the directors and theirenterprise was not the result of a methodical search: indeed, no director of anotherenterprise was approached. Yet this bold project was supposed to generate $100million in revenues.

7. The choice of the directors, their twofold role as directors of Montréal Mode inc. andof the Shan Group, as well as the insufficient separation between the two subsidiariesdevoted to the fashion sector undermined the project’s credibility from the outset.

8. The objective for partnerships with the designers was twofold: to develop a brandimage for each signature label and to make $25 million in sales in 2004.

9. The directors were unable to assume the functions required to set up Montréal Modeinc. They did not know how to structure the enterprise from the Shan Group tointegrate other designers, to ensure them growth and visibility, while continuing topromote the advancement of the Shan Group.

10. Jean-Claude Poitras joined the project at the outset; Pasqualino Catalano and MarcelDénommé would become involved in the fall of 1999. The services that designerswere supposed to be offered were numerous: management, creation, purchasing,production, marketing, exporting and financial support. The announced services werenever delivered and the various studies planned for each designer were not carriedout.

11. Barely two months after being launched, Montréal Mode inc. faced the first of aseries of media crises. A staff turnover rate of 28 percent added to the difficulties. InJanuary 2000, a conflict broke out between a designer and Montréal Mode inc. Asecond media crisis would follow. Two designers left the enterprise in the fall of 2000and the last one, at the end of 2001.

12. Following the failure of the partnership with the designers, Montréal Mode inc.turned to strategic acquisitions: it sought enterprises that offered a potential forinternational notoriety and profitability specific to the upscale market, in order towork in synergy with Montréal Mode inc., which retained the Shan and DénomméVincent signature labels. The objective was set at $65 million in revenues in 2004.

13. Two investments in strategic partnerships were not supported by reliable informationand were not carried out with the prudence expected from a manager of depositors’collective assets. Another investment was incompatible with the objective of thesepartnerships.


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• Montfort Diffusion inc. This $3.1 million investment was made even though thepreliminary analysis advised against investing in this project. An additional sumof $775,000 was paid without the required due diligence audit being performedand without the contractual commitment of making the final payment of $595,000having been shown. The enterprise filed for bankruptcy on February 28, 2003.

• Riverland Nouvelle S.A. Loans totaling $3.4 million were granted, even thoughthe audited financial statements had not been obtained and the due diligence audithad revealed major accounting deficiencies. The guarantees regarding the brandnames were neither validated nor recorded, and could not be obtained. Moreover,Montréal Mode inc. did not make sure of the value of the personal recognizance.In December 2001, the enterprise wound up its operations.

• Rio Sud inc. This enterprise was acquired for $6.7 million. The objective was tohave a regional distribution network to sell designers’ merchandise that was nolonger in fashion. This activity was incompatible with the objective of thestrategic partnerships, namely to do business with enterprises that have a potentialfor international notoriety and profitability specific to the upscale market. Fifteenmonths after the purchase, Montréal Mode inc. evaluated this investment at$2.4 million. It now plans to sell this enterprise.

14. In September 2002, the Caisse decided to no longer invest funds in this project and towithdraw from operating activities in the fashion sector. It mandated a firm to makean assessment of the enterprises of Montréal Mode inc. and to prepare the divestiture.At that time, several enterprises of Montréal Mode inc. were no longer active.

15. A fact soon became clear: the initial structure chosen by the project left the executivecommittee with little leeway when it decided to disinvest. Following the evaluation ofthree scenarios, the solution opted for was to sell the Shan Group to its previousowners, as this enterprise cannot exist without its founder. However, our analysis ofthe facts leads us to conclude that this financial operation is not in accordance withthe Caisse’s incorporating act.

16. Our audit also focused on the expense accounts of the directors of Montréal Modeinc.: the president, the vice-president for sales and marketing, and the vice-presidentfor finance. These expenses totaled $602,111 from January 1999 to December 2002.

17. In our opinion, $74,933 in expenses, or 12.4 percent of the total expenses, were notjustified. They were expenses that should not have been reimbursed: unreasonableexpenses, personal expenses or expenses exceeding the limits set by the Caisse.

18. Expenses totaling $69,127, namely 11.5 percent of the total expenses, were notsufficiently motivated: the information obtained did not make it possible to determineif these expenses were incurred as part of the duties of the directors.

19. Moreover, personal expenses totaling $5,288 were paid directly by Montréal Modeinc. and Collections Shan inc.; they should not have been paid.


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20. The executive committee of Montréal Mode inc., which assumes the role of board ofdirectors, is made up of six members; three of them are nominated by the President-Chief Executive Officer of the Caisse and the other three, by the president ofMontréal Mode inc. and the chairperson of its executive committee. A resolution ofthe Caisse confirms the choice of the directors. It appears that this authority is notmade up of a majority of independent directors. Several members have ties that mayprevent them from making an objective assessment of the work of senior managementand the activities of the enterprise, or may be perceived as having such ties.

21. Confronted with several media crises, the inability to integrate the designers and thepoor performance of strategic partnerships, the executive committee did not manageto make the necessary adjustments, and the actions undertaken did not turn thesituation around. Yet this bold and innovative project called for strong and activegovernance. Indeed, the project presented substantial risks and represented a majorchallenge for the directors who came from a private enterprise and who wereunfamiliar with the workings of a government enterprise. At the end of this project,the Caisse would have lost almost all of the $ 29.8 million from depositors’ assets.

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