2005 Annual Report of the Office of the Auditor General of Ontario

Table of ContentsChapter 1 Overview and Value-for-money Audit Summaries 1Chapter 2 Towards Better Accountability 17Chapter 3 Reports on Value-for-money (VFM) Audits 23Section 3.01 Ambulance Services—Air 24Section 3.02 Ambulance Services—Land 35Section 3.03 Charitable Gaming 60Section 3.04 Child Care Activity 81Section 3.05 Driver and Vehicle Private Issuing Network 100Section 3.06 Driver Licensing 126Section 3.07 English as a Second Languageand English Literacy Development 149Section 3.08 Health Laboratory Services 166Section 3.09 Mines and Minerals Program 181Section 3.10 Office of the Chief Election Officer 202Section 3.11 Office of the Registrar General 217Section 3.12 Ontario Provincial Police 240Section 3.13 Recovery of Health Costs Resulting from Accidents 259Section 3.14 Temporary Help Services 274Chapter 4 Follow-up of Recommendations in the 2003 Annual Report 292Section 4.01 Court Services 293Section 4.02 Children’s Mental Health Services 300Section 4.03 Family Responsibility Office 304Section 4.04 Policy and Consumer Protection Services Division 311Section 4.05 Curriculum Development and Implementation 317Section 4.06 Business and Economic Development Activities 322Section 4.07 Science and Technology 327Section 4.08 Environet 336Section 4.09 Public Health Activity 343Section 4.10 Ontario Student Assistance Program 350

iv2005 Annual Report of the Office of the Auditor General of OntarioChapter 5 Public Accounts of the Province 355Chapter 6 The Office of the Auditor General of Ontario 366Chapter 7 The Standing Committee on Public Accounts 385Exhibit 1 Agencies of the Crown 388Exhibit 2 Crown-controlled Corporations 390Exhibit 3 Treasury Board Orders 392Exhibit 4 Auditor General Act 396

Chapter 1Overview andValue-for-moneyAudit SummariesOverviewNEED FOR BETTER OVERSIGHTIn this, my third Annual Report to the LegislativeAssembly, I want to highlight one overriding themethat was apparent from the 14 value-for-moneyaudits conducted by my Office this year: more rigorousmanagerial oversight is needed to ensure thatservices to the public are being delivered economically,efficiently, and effectively. Such oversight isnecessary not only when services are being delivereddirectly by government staff but also whenservice delivery has been delegated to other organizationsor municipalities on behalf of the government.By way of example, when programs orservices were delivered directly by Ontario publicservants, we noted the following areas where bettermanagement oversight was needed:•Registration of and production of certificates forvital events: Until a few years ago, the Office ofthe Registrar General registered vital events andproduced birth and other certificates on a timelybasis. About two years ago, continuing problemswith the implementation of a new computer systemand human resources issues resulted in asignificant deterioration in that Office’s abilityto provide birth, death, marriage, and other certificateson a timely basis. Only recently has thatOffice started turning this situation around.•Engagement of temporary help: The governmentspends about $40 million to $50 million annuallyengaging temporary help on a short-termbasis. We found widespread non-compliancewith government procurement policies, particularlywith respect to sole-sourcing insteadof using a competitive process, not addressingpotential conflict-of-interest situations, and frequentlyengaging temporary help for long-termperiods.•Use of consultants at the Office of the Chief ElectionOfficer: Senior management was not payingsufficient attention to the principles offair, open, and transparent competition in theengagement of consultants or to the ongoingoversight of consultants’ work.•Community-oriented policing: Although seniorleadership of the Ontario Provincial Police hadplaced an increased emphasis on communityorientedpolicing, insufficient guidance andoversight of detachments meant that they hadlittle assurance that this initiative was beingadequately delivered in communities acrossOntario.Like other provincial governments, theOntario government provides funding to a widevariety of municipal, broader public-sector, andother community-based organizations to deliverChapter 11

62005 Annual Report of the Office of the Auditor General of OntarioChapter 1stroke centre because it was outside theirrespective boundaries.•The Ministry was not determining whethertransfers of patients between institutions wereperformed in the most appropriate and costeffectivemanner, which can result in delayedpatient treatment or longer-than-necessary hospitalstays.•Ambulance response times increased in about44% of municipalities between 2000 and 2004,even though the Ministry has provided about$30 million in additional funding. In addition,64% of municipalities did not meet their legislatedresponse times in 2004, even thoughthe requirements were based on meeting theiractual 1996 response times. Also, 15 of the 18dispatch centres that reported informationdid not dispatch ambulances within the timerequired by the Ministry. Despite a previous recommendationby the Standing Committee onPublic Accounts, response times are still generallynot publicly reported.•Total provincial and municipal costs of providingland ambulance services increased by 94% overfour years, from $352 million in the 1999/2000fiscal year to $683 million in 2003/04. However,total ambulance calls involving patientsremained at about the same level.•The current division of responsibilities and fundingof land ambulance services, as well as significantdifferences in funding levels amongmunicipalities (varying from $57 to $150 perhousehold among 12 municipalities), can resultin varying levels of service across the provincefor people with similar emergency-care needsliving in similar municipalities.•For about 40% of all high-priority ambulancecalls province-wide, once the ambulance arrivedat the hospital it took more than 40 minutes forthe hospital to accept the patient.•While service reviews of ambulance operatorswere generally conducted within the requiredthree-year period, reviews conducted between2002 and 2004 indicated that over 40% of alloperators failed to meet certification standards,even though they received advance notice of thereview.3.03 CHARITABLE GAMINGThe Alcohol and Gaming Commission of Ontario(Commission) regulates charitable gaming inOntario, with a mandate to ensure that the gamesare conducted in the public interest, by people withintegrity, and in a manner that is socially and financiallyresponsible.The Commission estimates that the publicwagered approximately $1.6 billion on charitablegaming province-wide in 2003. Charitable gamingin Ontario benefits thousands of local communitycharitable organizations, which received net revenuesestimated by the Commission at $246 millionfor 2003.The Commission regulates charitable gamingusing a framework of legislation and policies, supplierand employee registrations, licensing of lotteryevents, inspection, and enforcement. Annually,the Commission registers about 9,600 businessesand individuals, and issues about 2,600 lotterylicences, chiefly for province-wide or large-dollarevents. The province has granted municipalitiesthe authority to issue licences, and they issue about43,000 licences annually for smaller local lotteryevents.In the 2003/04 fiscal year, the Commissionspent approximately $11 million on its charitablegaming–related regulatory activities, and receivedapproximately $30 million in fees from charitablegaming sources.Municipalities issue close to 95% of the charitablegaming licences issued in Ontario. Since theCommission believes that it does not have the legislativeauthority to oversee municipal licensing activities,it had not established any processes for doing

Overview and Value-for-money Audit Summaries7so. However, we believe that the Commission’sinterpretation of its legislative authority is overlynarrow. Without appropriate oversight of and coordinationwith municipalities’ licensing activities,the Commission cannot, for instance, effectivelyensure that charitable organizations are getting thegaming proceeds that they are entitled to.We also noted several areas in which theCommission-delivered regulatory activitiesrequired strengthening:•While the Commission has generally establishedgood regulation requirements to assess the character,financial history, and competence of thekey players in the charitable gaming industry,it did not ensure that these requirements wereconsistently met or that registrants adhered tothe terms and conditions of registration.•Procedures were often not followed in assessingan organization’s eligibility for a licence andensuring that lottery proceeds were used forapproved charitable purposes.•The Commission had not established formalpolicies and a risk-based approach for conductinginspections and enforcement with respect tocharitable gaming activities, nor had it informedmunicipalities of the results of inspections andinvestigations carried out in their jurisdictions.•In 1997, the Management Board of Cabinet providedfunding to strengthen controls over theproduction and distribution of break-open tickets.However, many of the key controls werenever put in place.3.04 CHILD CARE ACTIVITYThe Ministry of Children and Youth Services administersthe Child Care Activity (Activity) under theauthority of the Day Nurseries Act. The Activity’smain responsibilities include inspecting, licensing,and monitoring child-care operators that care formore than five children to promote quality childcareservices and ensure the health and safety ofthe children in care. Most of the Child Care Activityis administered by 47 consolidated municipalservice managers (CMSMs), which manage and coordinatefunding and programs in their respectivejurisdictions.The Ministry subsidizes child-care costs for childrenof parents in need (subject to available funding);provides additional financial support for thecare of children with special needs; and providesfunding for community-based resource centresoffering various programs for parents and children.For the 2004/05 fiscal year, ministry child-careexpenditures totalled $575.4 million.We concluded that if the Ministry is to ensurethat licensed child-care centres are providing childrenwith adequate early opportunities for learningand for physical and social development, it mustbetter define and communicate program expectationsto the centres and systematically monitor andassess their implementation. Some of our observationsincluded:•Ontario has not yet developed adequate curriculumguidance to help child-care centres deliverconsistent and comprehensive developmentalprograms.•The Day Nurseries Act and ministry-developedinformation materials provide little specificdirection to individuals providing child care.What direction is provided is subject to broadinterpretation and sometimes missing criticalupdates.•While the timeliness of licensing inspection hasimproved since our last audit, the tools used byministry staff to assess program delivery requirethese staff to exercise a significant degree of discretionand interpretation. Many ministry staffresponsible for licensing and monitoring programdelivery do not have an early childhoodeducation background or equivalent experience,and would therefore benefit from additionalguidance.Chapter 1

82005 Annual Report of the Office of the Auditor General of OntarioChapter 1• The licensing checklists used during the Ministry’sannual inspections of child-care facilitiesaddressed health and safety issues, but did notadequately assess the quality of care or developmentalopportunities provided.•Funding inequities contributed to comparativelylow salaries in some centres, difficulties in staffrecruitment and retention, and high caregiverturnover, further raising the risk that child-careservices provided are not of a consistently highquality across the province.We also concluded with respect to fundingthat the Ministry’s policies and procedures didnot ensure that transfer payments to CMSMs werebased on an appropriate assessment of sufficientlydetailed financial and operational information andadequately controlled. Many of our observationsand recommendations on funding issues in thisreport are similar to those reported in 1999 and1995. Although the Ministry agreed to take correctiveaction in previous years, sufficient action hasnot been taken.3.05 DRIVER AND VEHICLE PRIVATEISSUING NETWORKThe Ministry of Transportation’s Road User Safetydivision has as one of its goals improving the accessibilityof products and services relating to driverand vehicle licensing. The most significant channelfor delivering such products and services are the280 privately operated “issuer” offices, which arelocated in communities throughout the provinceand are collectively known as the Private IssuingNetwork (PIN). The PIN processes almost 19 milliontransactions annually, including approximately80% of Ontario’s vehicle-registration transactionsand 40% of its driver-licensing transactions. In the2004/05 fiscal year, the PIN collected on the government’sbehalf over $766 million in revenue fordriver and vehicle products and services.The Ministry and the government view the PINas a strategic asset of significant value for deliveringfront-line government services. However, severalfactors have contributed to a deterioration in relationsbetween the Ministry and the PIN over the lastseveral years, with the result that the two partiesare now more adversaries than partners. Some ofour more significant observations in this regard andwith respect to the quality of services delivered tothe public include the following:•Issuer compensation has not been increasedsince 1997, and many low-volume issuers appearto be struggling for their financial survival.•Policies and procedures developed by the Ministrywere not applied consistently across the PIN,primarily because almost 90% of issuing officeswere operating under an older contract that doesnot require adherence to several requirementsthat have been incorporated in a newer contractgoverning a small minority of issuers.•Issuers requiring help from the Ministry’s callcenters often experienced delays, and ministrycall-centre operators were not available to takecalls approximately 40% of the time.•Although the government had estimated that,by 2006, 45% to 77% of all plate-renewal transactionswould be conducted over the Internet,less than one-fifth of 1% were processed overthe Internet in 2004. As well, until they are integratedwith licensing systems, Internet transactionscost more to process than issuers arepaid to process the same transactions.•A significant decrease in the number of annualfull audits being conducted of issuing offices, aswell as weaknesses in system and supervisorycontrols, meant that the Ministry:•was not adequately managing the risk ofissuers manipulating transactions to, forexample, generate additional commissions orcreate fraudulent driver’s licences; and

Overview and Value-for-money Audit Summaries9• was not ensuring that temporary driver’slicences and other stock were not going missingand being used for illegal purposes.•Controls to ensure that licensed drivers wereactually insured and that only eligible driversobtained Disabled Person Parking Permits werealso weak.3.06 DRIVER LICENSINGThe Ministry of Transportation’s (Ministry) RoadUser Safety Division’s driver-safety-related responsibilitiesinclude setting road safety standards andmonitoring and enforcing compliance with thesestandards; working to reduce unsafe driving behaviour,such as impaired or aggressive driving; licensingdrivers; and maintaining driver information.During the 2004/05 fiscal year, the Ministry spent$173 million on its Road User Safety Program,while its licensing and registration activities generatedapproximately $950 million in governmentrevenues. Over 4.7 million driver’s licences areissued or renewed every year.We concluded that the Ministry needs tostrengthen its systems and procedures if it is toensure that only legitimate and safe drivers arelicensed to drive in Ontario. The difficulties ofmaintaining a very old and complex computerinformation system and improving its ability tomeet users’ needs have undoubtedly contributed tothe Ministry’s challenges in this regard. Our specificconcerns included the following:•Some of the identification documents acceptedwhen someone applies for a new driver’s licencewere of questionable reliability. For instance,such items as membership cards for wholesalewarehouse clubs and employee or student cardswithout photos were accepted as one of the tworequired identification documents.•Improvements were needed to ensure thatonly individuals entitled to an Ontario driver’slicence have one. Specific areas for improvementwere the procedures for identifying potentiallyfraudulent or duplicate driver’s licences and forexchanging licences from other provinces for anOntario driver’s licence.•While programs relating to drinking and drivingappear to have been successful in contributingto road safety, we found deficiencies in ministryprograms and procedures with respect to dealingwith drivers who were at fault in three ormore collisions within a two-year-period, driverswho continued to drive with a suspended licenceor whose licence was suspended multiple times,young offenders, and drivers over 75 years ofage.•We found weaknesses in the measures taken toprotect the integrity and confidentiality of drivers’personal information.•The Driver Licence System did not always calculatedemerit points accurately; accordingly,driver suspensions were not always generatedautomatically as intended.•The Ministry had not developed adequate policiesand procedures to deal with prospective andexisting driver examination service-provideremployees with criminal records.3.07 ENGLISH AS A SECOND LANGUAGEAND ENGLISH LITERACY DEVELOPMENTEach year, Ontario receives an average of approximately17,000 school-age immigrants who speaklittle or no English or French. The Ministry of Education(Ministry) provides grants to school boardsfor English-as-a-Second-Language (ESL) andEnglish-Literacy-Development (ELD) programs.The Ministry’s overall goals for ESL/ELD programsare to assist students in developing the Englishliteracy skills they require to achieve successat school, in postsecondary education, and in theworkplace on an equal basis with their peers whosefirst language is English. While school boards areresponsible for designing and implementing theChapter 1

102005 Annual Report of the Office of the Auditor General of OntarioChapter 1programs and services needed to achieve thesegoals, the Ministry is ultimately accountable for thequality of the education system.We found that while the Ministry providesschool boards with more than $225 million a yearof ESL and ELD grants, there was a lack of oversightof ESL/ELD program delivery. In particular,the Ministry had no information about whetherstudents whose first language is not English wereachieving appropriate proficiency in English. Inaddition, the Ministry had no information on howmuch school boards were actually spending onESL/ELD programs. One board we visited indicatedthat more than half of its ESL/ELD funding wasspent on other areas.The considerable discretion that school boardsand in some cases individual schools have withrespect to ESL/ELD programs increases the risks ofstudents with similar needs receiving different levelsof assistance. In addition, the lack of a centrallyco-ordinated process to develop ongoing trainingprograms for teachers and various instructionalaids results in under-investment and possible duplicationof effort.We also found that:•The Ministry had not established a measurableEnglish-proficiency standard that ESL/ELD studentsshould attain before ESL/ELD services arediscontinued. Some teachers we interviewedwere concerned that services were discontinuedprematurely due to budget considerations.•There was a lack of tools to help teachers properlyassess students’ progress in achievingEnglish proficiency and determine whetheradditional assistance was needed.•The Ministry has supplied little guidance onimplementing its recommendation that teachersmodify the standard curriculum expectations for,and provide accommodations (for example, extratime on tests) to, ESL/ELD students. The lack ofguidance has resulted in inconsistent practices.In addition, the lack of documentation on accommodationsprovided meant that parents, principals,and school boards could not evaluate theappropriateness of the modifications and accommodationsor their impact on marks.•The Ministry was not ensuring that the ESL/ELDfunding policy targeted students most in need ofassistance, which may have resulted in inequitablefunding allocations among school boards.In 2004, the government established the Literacyand Numeracy Secretariat. The Secretariatspecifically identified ESL students as a group thatcontinues to struggle. In its May 2005 strategy document,the Secretariat states that its key purposesinclude strengthening the focus on literacy andnumeracy, and sharing successful practices amongschools and districts. Each of these directly relatesto the concerns noted during our audit.3.08 HEALTH LABORATORY SERVICESUnder the Laboratory and Specimen CollectionCentre Licensing Act, the Ministry of Health andLong-Term Care licenses and regulates Ontario’s191 hospital and 45 private medical laboratories,and these laboratories’ 341 specimen-collectioncentres. In addition, the Ministry has a contractwith the Ontario Medical Association (OMA) tooperate a quality-management program to monitorand improve the proficiency of licensed laboratories,which includes evaluating the quality andaccuracy of testing performed in all licensed laboratories,and conducting laboratory accreditation.During the 2003/04 fiscal year, the Ministryspent $1.3 billion on laboratory services. Hospitallaboratory expenditures totalled $730 million;$541 million was paid to private-sector laboratories,with three companies receiving over 90% of thesepayments; and the OMA received $3.7 million tooperate the quality-management program.A scope limitation imposed by the Quality ofCare Information Protection Act, which came intoforce on November 1, 2004, prevented us from fully

Overview and Value-for-money Audit Summaries11assessing whether the Ministry had adequate processesin place to ensure that private-sector andhospital laboratories were complying with applicablelegislation and established policies and procedures.Specifically, we were prohibited fromexamining the OMA’s quality-management programor the Ministry’s monitoring of this program afterOctober 31, 2004, and therefore we were unable todetermine whether the quality-management programfor laboratory services was functioning asintended after that time. However, we were able todetermine that, for the most part, the Ministry hadadequate procedures to ensure that specimen-collection centres were complying.Given the considerable responsibility that theMinistry delegates to the OMA for assessing thequality of laboratory services, it is vital that theMinistry obtain adequate information to assesswhether the OMA is fulfilling its responsibilities tothe degree needed to ensure quality patient care.However, based on information available to October31, 2004, we found that the Ministry was notobtaining sufficient and timely information on laboratoriesthat performed poorly and did not ensurethat timely corrective action was always beingtaken. Our specific concerns included:•Although laboratories were notified in advancethat a specimen sample was part of the OMA’squality-management program, the number ofsignificant errors being made when testing thosesamples had increased.•The Ministry was not normally notified that alaboratory was producing inaccurate or questionabletest results (that is, significant andlesser errors) for certain types of tests until thelaboratory had been performing poorly on itsexternal quality-assessment tests for betweentwo and four years.•As noted in our 1995 Audit Report, the Laboratoryand Specimen Collection Centre Licensing Actallows laboratories in physicians’ offices to conductonly simple laboratory procedures, whereasa regulation under the Act effectively allowsphysicians to conduct all laboratory tests. Nevertheless,we remain concerned that laboratoriesin physicians’ offices are not subject to thequality-assurance provisions that apply to otherlaboratories.•No integrated system was in place to make laboratorytest results accessible to all health-careproviders, which could result in duplicate testingand delays in patient treatment.•An inter-provincial study estimated thatOntario’s per-capita spending on all laboratoryservices in the 2001/02 fiscal year was the secondhighest in Canada. Despite high costs, theMinistry:•had not periodically reviewed or studied onan overall basis whether laboratory tests thatwere conducted were appropriate or necessary,even though other jurisdictions hadnoted concerns in these areas and had foundthat best-practice guidelines could significantlyimprove laboratory utilization; and•had not analyzed the underlying actual costsof providing laboratory services so that thisinformation could be utilized in negotiatingthe fees to be paid for private laboratoryservices.With respect to well-water testing by publichealthlaboratories, we noted that the report of theresults of well-water testing issued to well ownersdoes not clearly state that well water that isreported to have no significant evidence of bacterialcontamination may still be unsafe to drink due tochemical and other contaminants.3.09 MINES AND MINERALS PROGRAMThe Mines and Minerals Program/Division of theMinistry of Northern Development and Minesis responsible for the administration of the MiningAct, which sets out the Ministry’s responsibilitiesfor all phases of mining in the province, fromChapter 1

122005 Annual Report of the Office of the Auditor General of OntarioChapter 1exploration to mine development, operation, andclosure. The purpose of the Act is to encourageprospecting, claims staking, and exploring for thedevelopment of mineral resources, as well as tominimize the impact of these activities on publichealth and safety and the environment through therehabilitation of mining lands.The Ministry provides province-wide geologicalmaps, on-line access to geoscience information, andgeological advisory services in field offices throughoutthe province, and promotes Ontario miningdevelopment opportunities in domestic and internationalmarkets. During the 2004/05 fiscal year,the Ministry employed approximately 200 staff andspent $35.5 million to carry out these and otherprogram activities.Due largely to the quality of the maps and advisoryassistance it provides, the Ministry is generallyseen by its stakeholders as contributing to the successof the mining industry in Ontario. However,the Ministry did not have adequate procedures inplace to ensure compliance with legislation andits internal policies or to measure and report on itseffectiveness. For instance:•To maintain a mining claim in good standing,the holder must perform certain explorationwork, referred to as assessment work, and mustreport this to the Ministry. We found that theMinistry’s review of assessment reports was notsufficient to ensure that only allowable explorationexpenditures were approved.•We noted several cases where claims were forfeitedbecause the required assessment work hadnot been carried out to keep the claims in goodstanding, and the same people who had theirclaims forfeited reclaimed the lands as soon asthey became open for staking. A situation wherea claim-holder can in effect indefinitely retainmining rights by continually reclaiming themafter they are forfeited—without performingany assessment work—is contrary to the intentof the Mining Act.• To keep geological information sufficientlycurrent and relevant, the Ministry has determinedthat it needs to map all areas of significantmineral potential over a 20-year period,or about 15,000 square kilometres annually.However, due to difficulties in completing mappingprojects on a timely basis and to resourcingissues, the Ministry had mapped only about8,000 square kilometres annually. In addition,the Ministry did not have a project managementsystem to periodically report on the status ofactive projects.•As of March 2005, closure plans, which commitmine owners to providing financial assurancesufficient to rehabilitate mine sites andreturn them to their former state without harmfuleffects on the environment, were not in placefor 18 of the 144 mine sites that were requiredto have them. Also, the Ministry was not periodicallyreviewing whether the closure-cost estimatesand financial assurances are still sufficientto properly close out the mine.•At the time of our audit, the Ministry had identifiedmore than 5,600 abandoned mine sitesand had estimated that 4,000 of these sites werepotentially hazardous to the environment andpublic health. The Ministry did not have theinformation needed to assess the risk of waterand soil contamination around abandoned sites.3.10 OFFICE OF THE CHIEF ELECTIONOFFICERThe Office of the Chief Election Officer, known asElections Ontario, is an independent agency of theprovince’s Legislative Assembly. Under the ElectionAct, the Lieutenant Governor in Council appointsa Chief Election Officer on the recommendationof the Legislative Assembly. The responsibilities ofthe Chief Election Officer include the organizationand conduct of general elections and by-electionsin accordance with the provisions of the Election Act

Overview and Value-for-money Audit Summaries13and the Representation Act, 1996, and the administrationof the Election Finances Act.Total expenditures incurred by Elections Ontariorelated to the Election Act more than doubled in thefour years leading up to and including the 2003election compared to the four years leading up toand including the 1999 election. As a legislativeoffice, Elections Ontario is independent of government.However, unlike other legislative offices, itis not required by its enabling legislation (the ElectionAct) to submit a budget to, or receive approvalfrom, the Board of Internal Economy for the vastmajority of its expenditures. Furthermore, there isalso no requirement for Elections Ontario to reportannually on its activities.The results of our audit work indicated thatmore care is needed in certain areas in the spendingof taxpayer funds. In particular, we noted that ElectionsOntario:•did not have adequate procedures for acquiringand managing consulting services, as we noted anumber of instances where:•open access;•to significant increases in cost; and•the process followed did not ensure fair andassignments were not clearly defined, leadingassignments or their extensions did not havea written contract or agreement;•had not assessed whether running its own publiccall centre to handle calls from the public was themost economical means of providing the service;•did not adequately consider all options to ensurethat the $4.4 million paid over 49 months tolease computer equipment was cost effective;and•did not always ensure that hospitality and travelexpenses were incurred with due regard foreconomy.The federal chief election officer and chief electionofficers in several other provinces are requiredto report annually to Parliament/the Legislatureand include all or most of their expected expendituresin an annual appropriation request. Giventhe fact that Elections Ontario’s annual expenditureshave increased substantially over the last fewyears—and that budgeted expenditures over thenext three years are projected to be approximately$119 million, of which approximately $100 millionwould not be submitted to the Board of InternalEconomy for approval—increased legislative oversightof Elections Ontario through the processes ofappropriations approval and annual reporting warrantsconsideration.3.11 OFFICE OF THE REGISTRARGENERALThe Office of the Registrar General (Office) registersbirths, deaths, marriages, stillbirths, adoptions,and name changes and provides certificatesand certified copies of registrations to the public.Each year, approximately 300,000 events are registeredand 400,000 certificates and certified copiesare issued. In the 2004/05 fiscal year, the Officehad operating expenditures of over $30.3 millionand collected $19.6 million in fees for issuingcertificates.Until a few years ago, the Office registered allvital events and provided the public with timelyand reliable service for all document requests.However, due largely to significant and continuingproblems with a new computer system and humanresources issues, the turnaround time for gettingessential documents, formerly about three weeks,increased to several months, even a year or more,despite more than a doubling of staff. At the timeof our audit, the Office indicated that the situationhad improved; however, we found that it often stilltook months to obtain certificates.We concluded that significant improvementswere required in a number of key areas. Forinstance:•The Office’s call centres were not effective inhandling the public’s inquiries and complaints—Chapter 1

142005 Annual Report of the Office of the Auditor General of OntarioChapter 199% of calls either produced busy signals orwere disconnected before callers could reachsomeone to help them.•Prudent business and information technologypractices were not being followed in the acquisition,development, and implementation of anew computer system. As of March 2005,the system had cost over $10 million—morethan $6 million above the original estimate of$3.75 million. Furthermore, the system wasimplemented before it was ready, with numerousoutstanding work orders and without manyof the necessary capabilities in place.•Staff morale and productivity had declined significantlybecause of a poorly planned organizationrestructuring and questionable promotionpractices. Specifically, a new level of managerswas appointed, without competition or job specification.Clerical staff with little managementexperience were appointed to supervise existingmanagers to whom they used to report. None ofthe existing managers was given an opportunityto compete for the new positions.•There were inadequate controls to safeguardregistration information from unauthorizedaccess and from loss in the event of a disaster.3.12 ONTARIO PROVINCIAL POLICEUnder the Police Services Act, the Ontario ProvincialPolice (OPP) primarily provides patrols on allprovincial highways, waterways, and trail systems;front-line police services in smaller rural communitiesthat do not have their own municipal policeservice; emergency support services to all communitiesin Ontario; support for complex criminal andorganized crime investigations, as well as intelligencewith respect to anti-terrorism activities; andlaboratory services in support for criminal investigations.The OPP maintains 79 local detachmentoffices and 87 satellite offices (which report to oneof the detachments) throughout the province.With approximately 5,500 uniformed officers,1,800 civilian employees, and 800 auxiliary officers,the OPP is one of North America’s largest deployedpolice services. For the 2004/05 fiscal year, OPPexpenditures before municipal recoveries (costspaid by municipalities for policing services) totalled$733.2 million.While several issues from our last audit—suchas the use of overtime and billings to municipalities—havebeen largely addressed, in other areas—such as staff deployment, shift scheduling, and theimplementation of community-oriented policingprinciples—much work remains to be done. Ourspecific concerns included the following:•The assignment of officers to detachments andthe scheduling of work shifts at detachmentsdid not take into account actual total workloadand the optimal match between the number ofofficers on duty and the demand for police services.Also, the Differential Response Unit wasnot fully implemented province-wide to free upofficer time to respond to more serious calls forservice.•There was little evidence that the objectives ofcommunity-oriented policing were being metat some detachments, and detachments hadlittle guidance for implementing communityorientedpolicing consistently. In addition, nointernal measures were in place to evaluate itseffectiveness.•There were no provincial standards for what anadequate level of traffic patrol should be. Therefore,traffic patrol was often not a high priorityand was found to vary, at times significantly,from detachment to detachment and region toregion.•Even though the collision rate for OPP vehicleswas high and the OPP classified approximatelyhalf of these collisions as preventable, noperiodic and/or remedial driver training wasbeing provided.

Overview and Value-for-money Audit Summaries15• We found weaknesses with respect to adherenceto requirements relating to seized property anddrugs and the storage of armaments.3.13 RECOVERY OF HEALTH COSTSRESULTING FROM ACCIDENTSThe Ministry of Health and Long-Term Care has thelegal authority to recover the medical and hospitalcosts incurred in treating people injured in nonautomobileaccidents (for example, slips and falls,medical malpractice, and product and general liability)caused by someone else. A subrogation unitof 21 staff pursues cost recoveries. The unit spendsabout $2.5 million annually to pursue an average of13,000 active case files, recovering about $12 milliona year (net of legal costs).Until 1990, the Ministry’s right of recoveringsuch costs also extended to injuries arisingfrom automobile accidents where a driver insuredin Ontario was found at fault. Due to changesin the Insurance Act, that right was eliminated,and between 1990 and 1996 no amounts wererecovered. In 1996, the Insurance Act and relatedregulations were amended to require automobileinsurers to pay an annual “assessment of healthsystem costs” (assessment) in lieu of having theprovince pursue individual claims against at-faultdrivers. The Financial Services Commission ofOntario has collected about $80 million annuallysince 1996 from automobile insurance companiesthrough the assessment under the Insurance Act,which is administered by the Ministry of Finance.We believe that the ministries of Health andLong-Term Care and Finance could potentiallyrecover twice as much as they do now, perhaps inexcess of $100 million a year more. However, toaccomplish this, they will need better informationon recoverable health costs actually being incurredby the province. Our particular concerns included:• The Ministry of Finance advised us that, in viewof the instability of auto insurance rates and thepotential negative effect on premiums, it hasnot changed the $80-million annual assessmentcharged to the automobile insurance industrysince its introduction in 1996. As a result,Ontario’s levy per registered vehicle is nowamong the lowest of the provinces, despite thefact that Ontario’s health costs have risen 70%since 1996. Our review of available informationled us to conclude that the actual recoverablehealth costs incurred are considerably higherthan what is currently being recovered from theannual assessment and that Ontario recoversproportionately less than most other provinces.• The Ministry of Health and Long-Term Care didnot have information systems or processes tocollect and analyze health-care costs and insuranceindustry data to quantify the extent andcosts of non-automobile accident cases notreported.•Much more could be done to identify unreportedcases that may justify cost recovery. Ministrystaff acknowledged that many cases in whichthey may have an interest go unreported. Hospitalsalone incurred costs of over $500 million in2004 to treat more than 38,000 people injuredin slips and falls, but the Ministry was recoveringcosts from only about 2,800 such casesannually. The potential for increased recoveriesis thus substantial, even though there has beenno study of the proportion of these accidentsthat is attributable to third-party negligence.•In calculating recoveries of hospital-care costs,the Ministry did not use the uninsured hospitalrates charged to non-residents receivingtreatment here, as required by the legislation.Instead, it used the Interprovincial Hospital Billingrates, normally charged to other Canadiansinjured in Ontario, which are, on average, 77%lower.•The Ministry also needs to review the feasibilityand cost effectiveness of alternative recoverymethods, such as bulk subrogation agreementsChapter 1

162005 Annual Report of the Office of the Auditor General of OntarioChapter 1with liability insurers similar to the automobileinsurance assessment, as a way of increasingrecoveries of health costs arising from non-automobile accidents.3.14 TEMPORARY HELP SERVICESThe Ministry of Government Services, formerlyManagement Board Secretariat, is responsible forthe development of government-wide policies onplanning, acquiring, and managing temporary helprequired by the government.At the time of our audit, about 4,400 peopleworking in the Ontario government were notemployees of the province. Most were temporaryhelp workers, employed either directly by a governmentministry or through a private-sector temporaryhelp agency. In the 2003/04 fiscal year,government-wide expenditures on temporary helpservices were reported to be $43.1 million and overthe last 10 years totalled $460 million.In four of the five ministries we selected fordetailed testing, we found non-compliance withgovernment procurement policies for temporaryhelp services. In the fifth, the Ministry of Communityand Social Services, we concluded that adequateprocedures were in place for some aspects of temporaryhelp procurement, although improvementswere still needed in other areas.Specifically, we noted the following:•Despite a government policy that, with fewexceptions, limits the tenure of temporary helpemployees to six months, more than 60% of thetemporary staff we tested had been working inthe government for more than six months, and25% had been there more than two years. Onetemporary employee had worked for the governmentcontinuously for more than 12 years.•The temporary help engagements we testedwere sole-sourced, with no quotes from othervendors, and none were competitively tendered.Over half of these arrangements resulted in paymentsexceeding $25,000, the threshold forwhich a competitive process is required. Since1999, tens or even hundreds of millions of dollarsmay have been spent without a competitiveprocess in place.•We noted significant differences in the ratescharged by various temporary help agencies,suggesting that ministries could have obtainedthe same services for less had they shoppedaround. We also found that overall, the temporaryagency staff that we reviewed were paidmore—sometimes substantially more—thancomparable government employees.•In the 2003/04 fiscal year, the province paid onetemporary help agency $10.5 million, includingalmost $4 million from the former ManagementBoard Secretariat. We were informed thata former employee of the Secretariat runs thisagency. Another agency, run by a former Ministryof Health and Long-Term Care employee,collected almost $700,000 from that ministryduring the 2003/04 fiscal year. A perception ofunfair advantage can be created when governmentministries award significant business toentities run by former government employeeswithout a competitive process.•We found that a number of temporary employeeswere listed as secondments from organizations,such as hospitals, that received provincialfunding from the Ministry of Health and Long-Term Care. However, many of these individualswere recruited by the Ministry and put on thepayroll of, for example, a hospital that was thenallocated increased provincial funding to coverthe salaries of such secondments. Consequently,money that was recorded as hospital operatingexpenditures was actually being spent on otherhealth-care programs and ministry administrationinstead.

Chapter 2Towards BetterAccountabilityChapter 2 of my Annual Report has traditionallyaddressed issues of accountability in government.This year, the chapter focuses primarily on threenew pieces of legislation that expand the mandateand work of the Office of the Auditor General(Office). The chapter also highlights an access-toinformationissue that I believe should be broughtto the attention of the Legislature. Finally, I outlinerecent efforts to improve results measurement inthe health-care sector.The New Auditor General ActAmendments to the Audit Act were last made in1978. Principal among the changes in 1978 wasan amendment that provided the Office with theauthority to perform value-for-money audits ofministries and Crown agencies. It did not, however,extend this mandate to other bodies, such ashospitals, universities, colleges, school boards, andthousands of smaller, separately governed organizationsthat receive government grants. The Officehas for many years used the term “value for money”to describe the Auditor’s responsibility to report onany cases where it was observed that money wasexpended without due regard to economy and efficiency,as well as any observations regarding theadequacy of procedures undertaken by ministriesand Crown agencies to measure the effectiveness oftheir programs.With regard to organizations that receivedgrants, the 1978 amendments allowed only forinspection audits, which restricted the Auditor toan examination of accounting records to determinewhether grants were used for the intended purposes.While value-for-money–oriented observationscould sometimes arise as a by-product of aninspection audit, the audits could not be value-formoney–focused.Based on the Office’s experience inperforming inspection audits of major grant recipientsin the school-board, university, communitycollege,and hospital (SUCH) sectors from 1984 to1991, the Office came to the conclusion that thelegislated scope of such audits was too narrow toeffectively serve as a vehicle for meaningful reportingto the Legislature.On reaching this conclusion in 1989, the Officeembarked on what has turned out to be a 15-yearquest to have our legislation amended to authorizethe Auditor to perform discretionary valuefor-moneyaudits of organizations that receivegovernment grants. The major factor contributingto the Office’s perseverance in seeking anexpanded audit mandate was our firm belief thatongoing value-for-money audits of grant recipientsand the reporting of the results of those audits tothe Legislature would enhance the ability of legislatorsto hold grant-recipient organizations moreChapter 217

182005 Annual Report of the Office of the Auditor General of OntarioChapter 2accountable for the prudent expenditure of publicfunds. It should be noted that more than 50%of total government expenditures are transferredto organizations in the broader public sector. The2005/06 Expenditure Estimates of the governmentindicate that the SUCH sector alone will receivean estimated $26 billion in operating and capitalgrants, representing almost one-third of the government’stotal estimated expenditure of $81 billionfor the 2005/06 fiscal year.Our efforts finally came to fruition in fall 2003,when I was advised that the Minister of Financewas willing to table amendments to the Audit Act.We were given the opportunity to provide our specificsuggestions at that time for consideration bythe Minister. On December 9, 2003, amendmentsto the Audit Act through Bill 18, the Audit StatuteLaw Amendment Act, were introduced by the Ministerof Finance for first reading in the Legislature.The amendments were passed by a unanimous voteof all three parties in the Legislative Assembly, andthey became law when they received Royal Assenton November 30, 2004. The major changes enactedby this legislation include:•The Auditor General’s value-for-money auditmandate has been expanded to include thethousands of organizations in the broader publicsector that receive government grants. (Theexpanded mandate does not apply to grants tomunicipalities but it does allow the Auditor toexamine a municipality’s accounting records todetermine whether a municipality spent a grantfor the purposes intended.) The effective dateof the expanded value-for-money mandate wasApril 1, 2005, for a reviewable grant receivedby the recipient directly or indirectly, on or afterNovember 30, 2004, when the amendmentsreceived Royal Assent.•The Auditor General now has the power to conductvalue-for-money audits of Crown-controlledcorporations, such as the new Hydro companies.• The title of the Provincial Auditor has beenchanged to Auditor General.•the Auditor General Act.•The title of the Audit Act has been changed toThe term of appointment of the Auditor Generalhas been set to a fixed, non-renewable term of10 years, instead of a term ending at age 65.•The provision regarding the expression of anaudit opinion on the financial statements of theprovince has been harmonized with professionalassurance standards to require that the AuditorGeneral render an opinion on whether the statementsare fairly presented in accordance withgenerally accepted accounting principles.Now that our scope of audit has been extendedto organizations in the broader public sector thatreceive government grants, the Office will be commencingseveral value-for-money audits of suchbodies in fall 2005. Accordingly, my 2006 AnnualReport to the Legislature will include the resultsof the first broader public-sector value-for-moneyaudits.One concern I have in utilizing this extension ofour audit scope is the ongoing challenge we facein attracting and retaining professional staff inthe competitive Toronto job market. The primaryreason for this is our inability to offer competitivesalaries to prospective and current audit staff.Particularly in the last couple of years, the marketvalue of qualified auditors has increased significantly,yet we are constrained by the requirementin the Auditor General Act that our salary ranges becomparable to those for similar positions in the government.Unfortunately, there are no comparablegovernment salary ranges for professional accountantsand auditors that would reflect current marketconditions. As a result, we continue to face highturnover and challenges in recruiting and retainingtop-notch professional staff. As further discussed inChapter 6 of this report, we returned over $1 millionof our approved budget this year due to beingcontinually understaffed.

202005 Annual Report of the Office of the Auditor General of OntarioChapter 2government advertising generally and for the specificadvertising items reviewable under the Act.As my Office begins preparing to administer itsnew responsibility of reviewing proposed governmentadvertising and printed matter, I would like toexpress my appreciation to the staff at AdvertisingStandards Canada, who have provided assistanceand advice to my Office.Legislation on FiscalTransparency andAccountabilityThe Fiscal Transparency and Accountability Act,2004 (Act), which repealed and replaced the BalancedBudget Act, 1999, received Royal Assent onDecember 16, 2004. The Act requires the ExecutiveCouncil to plan for a balanced budget each fiscal yearunless it determines that it would be consistent withprudent fiscal policy to have a deficit in a given fiscalyear as a result of extraordinary circumstances.The Act also includes a requirement that theMinister of Finance publicly release:•papers;• a mid-year review of the fiscal plan;•revenues and expenses for the current year;•• a long-range assessment of Ontario’s fiscala multi-year fiscal plan in each year’s Budgetperiodic updated information about Ontario’sOntario’s economic accounts each quarter; andenvironment within two years after each provincialelection.The Act also requires that, prior to an election,the Ministry of Finance publicly release apre-election report about Ontario’s finances. TheAuditor General is required to review this preelectionreport to determine whether it is reasonableand to release a statement describing theresults of the review.The deadline for the release of a pre-electionreport is to be established by regulation. We areworking with the Ministry of Finance to ensure thatthe prescribed deadline will provide my Office withsufficient lead time to complete the required reviewof the report before the date of the next provincialgeneral election.RELATED PROPOSED LEGISLATIONThe government has also taken steps under itsdemocratic renewal initiatives to fix the dates forfuture general elections. In this regard, the governmentintroduced Bill 214 for first reading on June 9,2005. If passed, Bill 214 would, among other things,amend the Election Act so that provincial generalelections would occur at four-year intervals on thefirst Thursday in October, starting October 4, 2007,unless the dissolution of the Legislature requires anearlier general election.Limitations on Access toInformation Imposed byNew Health InformationProtection LegislationSection 10 of the Auditor General Act states thatthe Auditor General is entitled to free access to allinformation and records belonging to or in use bya ministry, government agency, or grant recipientthat the Auditor believes necessary to perform hisor her duties under the Act. Clause 12(2)(a) of theAuditor General Act states that the Auditor Generalshall report whether, in carrying out the work ofthe Office, all the required information and explanationswere received.In this regard, I regret to inform the Legislaturethat during our value-for-money audit of the Ministryof Health and Long-Term Care’s Health LaboratoryServices (see Chapter 3, Section 3.08), we did

Towards Better Accountability21not have access to all the information we neededto fulfill our audit objective—namely, to assesswhether the Ministry had adequate processes inplace to ensure that medical laboratories were complyingwith applicable legislation and establishedpolicies and procedures. This limitation on thescope of our audit was imposed by the Quality ofCare Information Protection Act, 2004 (Act), whichcame into force November 1, 2004, and prohibitsthe disclosure of certain information. Specifically,except for certain purposes that do not include anaudit by the Auditor General, the Act prohibits thedisclosure of information collected by, or preparedfor, a designated quality-of-care committee.The issue arose on this particular audit becausethe Ministry contracts with the Ontario MedicalAssociation (OMA) to assess the quality and accuracyof private-sector and hospital laboratory services,and in this capacity, the OMA is designated asa quality-of-care committee. My Office was thereforedenied access to the work done by the OMAthat was required for our audit and that we havealways received in the past. While I recognize thatthe legislation is designed to encourage health professionalsto share information more freely in asecure environment, I have concerns with respect tohow it may limit our ability to do our work.My concerns about this issue were first raisedwith the Ministry shortly after the legislation wasintroduced for first reading in the Legislature inDecember 2003. My Office explained the problemswe anticipated and proposed a solution, both in aJanuary 15, 2004 letter to the Ministry and, again,in a presentation to the Standing Committee onGeneral Government on January 28, 2004. In addition,we met with ministry staff and correspondedwith the Ministry, including the Minister, severaltimes in an effort to seek a remedy to the conflict,all to no avail. More recently, we also met with themain stakeholder groups (representatives of theMinistry, the Ontario Medical Association, and theOntario Hospital Association) to discuss our concernswith respect to our lack of access to informationneeded to fulfill our legislative mandate.My Office proposed a solution under which wewould continue to have access to information thatwas available to us prior to the coming into force ofthe Act, except for specific references to personalinformation, and the deliberations and minutes ofa quality-of-care committee. This would respectthe principle of creating a confidential environmentfor the exchange of ideas while still allowingmy staff to access the information submitted to aquality-of-care committee, as well as the committee’sdecisions and recommendations. In my view,such access is necessary, for example, to allow mystaff to review quality-of-care information providedfor decision-making and to determine whether keyrecommendations made by such committees havebeen acted upon. This approach would be consistentwith our access to Cabinet documents, wheremy staff do not have access to cabinet deliberationsbut do have full access to documents submitted toCabinet and the final Cabinet minutes of decisions.I have also emphasized how the confidentialityof any information provided to my Office isensured by several legislated protections, includingconfidentiality restrictions in Sections 21 and 27of the Auditor General Act. The Auditor General Actalso states that our working papers cannot be laidbefore the Legislative Assembly or any of its committees,and my Office is not subject to the provisionsof the Freedom of Information and Protectionof Privacy Act. As a further safeguard, in the courseof preparing our audit reports, we provide the draftreport to senior management of the audited entityto allow them the opportunity to review and commenton the contents and to raise any concerns theymay have. In short, many safeguards are in placeto ensure the confidentiality of the information wecollect over the course of all our audits.In summary, I firmly believe that the Quality ofCare Information Protection Act, 2004 directly conflictswith the access-to-information-and-recordsChapter 2

222005 Annual Report of the Office of the Auditor General of OntarioChapter 2provision in the Auditor General Act. However, theQuality of Care Information Protection Act, 2004provides for a legislative remedy in the event ofa conflict between it and any other act. Accordingly,a workable solution would be to pass a newregulation under the Quality of Care InformationProtection Act, 2004 stipulating that under certaincircumstances, the Auditor General Act prevails overthe Quality of Care Information Protection Act, 2004and its regulations as follows:With the exception of references to personalinformation, the deliberations and theminutes of a quality-of-care committee, theAuditor General Act prevails over this Act andits regulations with respect to any quality-ofcareinformation that is collected by or preparedfor a quality-of-care committee, or isdisclosed by a quality-of-care committee.Because of my obligation to report all issues surroundingaccess to information and because of thepotential negative impact that this restriction mayhave on our expanded mandate to perform futurevalue-for-money audits of health-care facilities inthe broader public sector, I concluded that it wasnecessary to bring this matter to the attention ofthe Legislature for its consideration.Ontario’s Health SystemPerformance ReportIn September 2000, Canada’s Prime Minister andPremiers made a commitment to produce and publiclyissue regular reports on the performance oftheir health systems, with each province and territoryagreeing to report results on a number ofcomparable indicators on the health status of itspopulation, its health outcomes, and the qualityof its health services. As part of this process,each jurisdiction was to determine an appropriatelevel of third-party verification of the indicatorsand thereby provide assurance to the public on thereliability of the reported results. In that regard,my Office accepted a request from the Minister ofHealth and Long-Term Care to audit the health indicatorsincluded in Ontario’s first report on the performanceof its health system, which was releasedin September 2002.In February 2003, the 2003 First Ministers’Accord on Health Care Renewal indicated that eachjurisdiction would continue to provide comprehensiveand regular public reporting on the health programsand services it delivers, as well as on healthsystem performance, health outcomes, and its population’shealth status, and it directed health ministersacross the country to supplement the workpreviously undertaken. In this regard, on July 11,2004, I again accepted a special assignment undersection 17 of the then–Audit Act to perform specifiedprocedures on the health indicators reported in connectionwith Ontario’s Health System PerformanceReport. The reported indicators included, amongothers, life expectancy, patient wait times for radiationtherapy for breast cancer and prostate cancer,patient satisfaction with various types of healthservices, levels of physical activity, and daily smokingrates of youths aged 12 to 19. The results of ourwork were reported to the Minister of Health andLong-Term Care and are included in Ontario’s HealthSystem Performance Report dated November 2004.Ontario’s Health System Performance Report is animportant accountability initiative for Ontario, andI am encouraged by the work undertaken by theMinistry in preparing this report. I am also encouragedthat the Ministry is improving its proceduresfor ensuring the accuracy of its data, because reliableand relevant data are essential for improveddecision-making and accountability.

Chapter 3Reports onValue-for-money (VFM)AuditsOur value-for-money audits are intended to examinehow well the government’s programs and activitiesare being managed and whether they complywith relevant legislation and authorities and, whereappropriate, to identify opportunities for improvingthe economy, efficiency, and effectiveness measuresof their operations. These audits are conductedunder subsection 12(2) of the Auditor General Act,which requires the Office to report on any casesobserved where money was spent without dueregard for economy and efficiency or where appropriateprocedures were not in place to measureand report on the effectiveness of programs. Thischapter contains the conclusions, observations, andrecommendations for the value-for-money auditsconducted in the past audit year.Due to the size and complexity of the province’soperations and administration, it is neitherpracticable nor necessary to audit each programevery year. Instead, the Office audits programs andactivities cyclically—almost all major programsand activities are audited over a five-to-seven-yearperiod. The programs and activities audited thisyear were selected by the Office’s senior managementbased on various criteria, such as a program’sfinancial impact, its significance to the LegislativeAssembly, related issues of public sensitivity andsafety, and the results of past audits of the program.We plan, perform, and report on our value-formoneywork in accordance with the professionalstandards for assurance engagements, encompassingvalue for money and compliance, established bythe Canadian Institute of Chartered Accountants.Before beginning an audit, our staff meet withauditee representatives to discuss the focus of theaudit. During the audit, staff maintain an ongoingdialogue with the auditee to review the progress ofthe audit and ensure open lines of communication.At the conclusion of the audit fieldwork, which isnormally completed by May of that audit year, adraft report is prepared, reviewed internally, andthen discussed with the auditee. Senior office staffmeet with senior management from the ministry oragency to discuss the final draft report and to finalizethe management responses to our recommendations,which are then incorporated into each of theVFM sections.Chapter 323

Chapter 3Section3.01Ministry of Health and Long-Term CareAmbulance Services—AirBackgroundAudit Objective and ScopeChapter 3 • VFM Section 3.01The provision of ambulance services in Ontariois governed by the Ambulance Act. Under the Act,the Minister of Health and Long-Term Care mustensure “the existence throughout Ontario of a balancedand integrated system of ambulance servicesand communication services used in dispatchingambulances.”The air ambulance program was established in1977 to serve remote areas primarily in northernOntario that are inaccessible to land ambulances orthat land ambulances would take too long to reach.Air ambulances are also used to transport medicalteams and organs for transplant.The Ministry contracts with private operatorsto provide aircraft, pilots, paramedics, and bases tohouse the aircraft when not in use.The Ministry operates an air ambulance dispatchcentre located in Toronto. An air ambulance basehospital, also located in Toronto, provides medicaldirection, oversight, and certification of air ambulanceparamedics. Ministry expenditures for theair ambulance program totalled approximately$93 million in the 2004/05 fiscal year.The objective of our audit was to assess whether theMinistry had procedures in place to ensure that itsexpectations for the delivery of air ambulance services,including compliance with applicable legislationand policies, were being met in a cost-effectivemanner.Our audit was conducted in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, established bythe Canadian Institute of Chartered Accountants,and accordingly included such tests and other proceduresas we considered necessary in the circumstances.The criteria used to conclude on our auditobjective were discussed with and agreed to by seniorministry management. We reviewed and, wherewarranted, relied on and referred to work completedby the Ministry’s Internal Audit Services.SummaryThe Ministry needs to take action to ensure that itsexpectations for the delivery of air ambulance services,including patient care, are being met. In particular,the Ministry needs to address the following:24

Ambulance Services—Air25• Although the Ministry had implemented therecommendation from our 2000 audit of EmergencyHealth Services regarding establishingdispatch reaction-time (that is, response-time)standards, we found that the Ministry was notmonitoring dispatch reaction times againstthe standards and only monitored certain airambulance-operatorreaction times. For theair-ambulance-operator reaction times that theMinistry did monitor, contractual reaction timeswere met only between 38% and 67% of the time.• In about 70% of the service reviews we examined,the Ministry certified air ambulance operatorseven though either the operator had clearlynot met the criteria or it was not certain whetherthe operator had met the certification criteria.We saw little evidence of follow-up to ensure thatidentified deficiencies had been corrected.As well, improvements are required to ensurethat air ambulance services are meeting patientneeds in a cost-effective manner. In particular, wenoted the following:•The Ministry was not sufficiently monitoringthe use of air ambulance resources, especiallyin those situations where exceptions were madeto the Ministry’s stated policy of when to use anair ambulance, in that it generally did not documentthe reasons or rationale for choosing an airambulance over a land ambulance.•The percentage of helicopter calls being cancelledafter the helicopter has already been dispatchedhas been increasing, from about 27%in the 2003/04 fiscal year to 33% in 2004/05.However, the Ministry has not formally analyzedthe reasons for the high level of cancellationsto determine whether changes to the dispatchprocess were required. Aside from the costsassociated with cancelled flights, dispatchedhelicopters are generally unavailable to respondto another call, and therefore reaction times forsubsequent patients may be increased.• Based on the coroner’s recommendation, thebase hospital engaged an independent Americanorganization to conduct an accreditation reviewof Ontario’s air ambulance program. One of thekey recommendations it made in 2003 was thata clear line of authority be established to betterensure consistent quality in the delivery of airambulance services. However, this recommendationhas not yet been satisfactorily implemented.Detailed Audit ObservationsREACTION TIMESDispatch CentreAir ambulances are dispatched throughout theprovince by a central air dispatch centre, whichreceives calls from doctors, from land ambulancedispatch centres (which pass on the requests theyreceive from individuals requiring an air ambulance),and, in some remote communities, from“first responders” (for example, firefighters orpolice officers). At the dispatch centre, the calltaker determines the call’s priority (emergency,prompt, deferable, or scheduled transfer), andtransfers it to a dispatcher.In our audit of Emergency Health Services inour 2000 Special Report on Accountability and Valuefor Money, we recommended that the Ministrydevelop air ambulance dispatch reaction-time (thatis, response-time) standards and monitor actualreaction times against the standard. In November2000, the Ministry acted on our recommendationand introduced an air ambulance dispatch centrereaction-time standard for all code 4 (emergency)and code 3 (prompt) calls. The standard was fiveminutes from the time a call is received to when itis transferred to a dispatcher and an additional 10minutes for the dispatcher to contact an air ambulanceoperator—a 15-minute total reaction timeChapter 3 • VFM Section 3.01

262005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.01from call receipt to dispatch. However, we notedthat the Ministry did not formally monitor actualair ambulance dispatch centre reaction times todetermine whether they met the standard.In 2003, ministry documents indicated thatthe air ambulance dispatch centre should consideradopting reaction times similar to those for landambulance dispatch centres: a two-minute totalreaction time from call receipt to dispatch. Whilethe 15-minute reaction time envisioned in the2000 standard may seem long, a two-minute reactiontime may be too ambitious a target to achievegiven the dispatch system technology and additionalcomplexities of dispatching an air ambulanceas compared to a land ambulance. In any case, the15-minute dispatch reaction-time standard has notbeen revised.Air Ambulance OperatorsThe Ministry contracts with private operators toprovide three different categories of helicopter andairplane ambulance service and establishes reactiontimes for each category in its contracts withoperators as follows:•One Preferred Provider operator uses helicoptersprimarily to transport critically ill or injuredpatients and must be ready to be airborne within10 minutes of accepting a call.•Two Critical Care operators use either helicoptersor airplanes primarily to transport criticallyill or injured patients and must be ready to beairborne within 10 minutes of accepting a call,90% of the time.•Ten Standing Agreement operators use airplanesprimarily to transfer patients between hospitalsand to transport organs for transplant. Theseoperators are required to notify the dispatcherwithin 10 minutes whether they accept the call,as only these operators may decline a dispatcher’srequest for an air ambulance. On acceptinga call, the pilot is required to request takeoffclearance within 30 minutes of the agreeddeparture time.All contracts allow for delays due to extenuatingcircumstances, including bad weather.During our audit, the Ministry informed us thatit was monitoring air ambulance operators’ actualreaction times only for code 4 (emergency) calls,and only for Preferred Provider and Critical Careoperators. There was no regular monitoring of reactiontimes for non-emergency calls, and the reactiontimes for Standing Agreement operators—forany type of call—were also not monitored.We noted that Ministry monitoring was based onthe average reaction time for code 4 calls for boththe Preferred Provider and Critical Care operators.However, the Ministry did not ensure that CriticalCare operators’ reaction times were achieved 90%of the time, in accordance with their contractrequirements.Based on ministry approximations, we calculated,as shown in Figure 1, that in fact the reactiontimes achieved by Critical Care and PreferredProvider operators for code 4 calls for the 2003/04fiscal year were not meeting the contract requirementsfor a significant percentage of flights. Furthermore,we noted that, although the StandingCommittee on Public Accounts recommended in2001 that penalties be levied against operatorswhose reaction times did not meet their contractrequirements, no such penalties were in fact levied.RECOMMENDATIONTo help ensure that the air ambulance dispatchcentre and operators respond to calls in a timelymanner, the Ministry should more closely monitoractual reaction times against ministry standardsand contractual requirements and developa strategy to improve both dispatch and operatorreaction times, especially where these reactiontimes are being significantly exceeded.

Ambulance Services—Air27MINISTRY RESPONSEOn July 20, 2005, the Ontario governmentappointed the Ontario Air Ambulance ServicesCorporation (OAASC), a non-profit body, to beresponsible for all air ambulance operations,including the medical oversight of paramedics,air dispatch, and the authorizing of air and landambulance transfers, as well as the developmentand implementation of the software systemtechnology used for air ambulance dispatching.The Ministry agrees to work with theOAASC to have reaction-time fields built intothe new air ambulance software system in orderto monitor performance for emergency calls.DECISION TO DISPATCHCurrent ministry policy states that an air ambulancecan be used instead of a land ambulancewhen:•kilometres;•exhausted;•weather; or•transfers cover a distance of at least 240all land ambulance alternatives have beenthere are poor road conditions or severespecialized equipment or medical escorts arerequired.However, a first responder, paramedic, or dispatchermay use their judgment to override thesecriteria for on-scene emergencies requiring ahelicopter.We recognize that the judgment of such personnelmay be the most appropriate means ofdetermining whether an air ambulance should beused. However, as we noted in our 2000 audit ofEmergency Health Services, the Ministry did notrequire that the dispatcher record why an air ambulancewas required. Given the scarcity and cost ofair ambulance resources, monitoring that theseresources are being used only when necessary isimportant. It would therefore be helpful for theMinistry to have documented reasons for the decisionto dispatch, particularly in those cases whenjudgment, rather than the predetermined criteria,was the deciding factor. Accordingly, we reiteratethe view we expressed in our 2000 audit report thatit would be prudent for the Ministry to ensure thatit has sufficient information to monitor the appropriatenessof the use of air ambulances.Once the necessity for an air ambulance is established,the dispatcher selects an aircraft based onflight time, cost, and patient need. In 2001, theMinistry implemented a new call-tracking systemthat was to use information on the patient’s medicalcondition and flight requirements to select thebest-suited and most economical aircraft. However,ministry documents indicated that this system wasChapter 3 • VFM Section 3.01Figure 1: Code 4 Calls Response-time Requirements and Actual Performance, by Type of Ambulance Service,2003/04Source of data: Ministry of Health and Long-Term CareComplianceType of Ambulance Service Response Requirement Rate (%) 1Preferred—helicopter ready to be airborne within 10 minutes of acceptance of flight 67Critical—helicopterCritical—airplaneready to be airborne within 10 minutes of acceptance of flight with 90%compliance rate 2 61ready to be airborne within 10 minutes of acceptance of flight with 90%compliance rate 2 381. Based on ministry approximations as the Ministry did not track the actual time when the flight became airborne.2. The requirement is 20 minutes if the aircraft required refuelling. However, the Ministry did not track the calls that used aircraft which required refuelling.

282005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.01expected to experience increasing incidents of failure.In addition, 90% of flight planning activity wasstill being done manually. The Ministry informed usthat the Integrated Air Information System Project,discussed in greater detail in the last section of thisreport, will address this issue.RECOMMENDATIONTo better ensure that air ambulances are usedonly when necessary, the Ministry shouldrequire that the reasons for air ambulance useand for the selection of particular aircraft be sufficientlydocumented. The Ministry should alsoperiodically review this information to identifythe need for any corrective action.MINISTRY RESPONSEAir ambulance service is a time-sensitive andcomplex operation, and the merits of documentingall decision-making have limits whenweighed against the associated delays such anapproach can cause in actually providing an airambulance response.In concert with the Ontario Air AmbulanceServices Corporation, the Ministry will undertaketo include additional documentation ofdecision-making in new computer softwarethat will be used in the dispatching of air ambulances,as long as such use does not impair systemoperational response capability or safety.The Ministry will also undertake to periodicallyhave a review conducted of the informationand provide the Director of the EmergencyHealth Services Branch with the results of thereview.CANCELLED CALLSThe Ministry informed us that once dispatched, anair ambulance may be cancelled due to changes ina patient’s condition, deteriorating weather conditions,or use of a land ambulance. Although a certainlevel of cancellations is to be expected, it wouldbe useful, in order to ensure that air ambulanceresources are being used appropriately, to analyzeinformation about the cancellations, including comparingthe reasons for cancelling a call with the reasonsfor selecting a particular air ambulance in thefirst place. Once dispatched, an air ambulance is inuse and therefore is generally unavailable for otherpatient calls—which may increase reaction timesfor subsequent patients—and the Ministry mayincur charges. For example, once a Standing Agreementflight is airborne, the Ministry must pay thecosts incurred for the flight on cancellation.We noted that the Ministry tracked the numberof dispatched air ambulances (both helicopters andairplanes) that were subsequently cancelled. In the2003/04 fiscal year, the most recent year for whichfull data were available, cancellations were as illustratedin Figure 2.The Ministry also tracked cancelled helicoptercalls for the subsequent fiscal year. We noted,based on this information, that the percentage ofhelicopter calls cancelled after dispatch increasedfrom about 27% in the 2003/04 fiscal year to 33%in 2004/05. In addition, approximately 42% of thenearly 2,500 helicopter cancellations in 2004/05occurred after the helicopter was airborne. TheMinistry informed us that the increased cancellationsresulted from a decision to dispatch helicoptersin more situations, since, under its contractswith the helicopter operator, the Ministry wasalready paying for certain costs (for example, staffcosts) regardless of whether the helicopters wereused or not. In our view, such a high level of cancellationswarrants a formal ministry follow-up, especiallywhere air ambulances already airborne arecancelled.

Ambulance Services—Air29Figure 2: Cancelled Air Ambulance Flights, 2003/04Source of data: Ministry of Health and Long-Term Care# of Flights # of Flights % of FlightsAircraft Dispatched Cancelled Cancelledhelicopters (all) 6,782 1,860 27.4airplanes (operated by Critical Care providers) 1,481 77 5.2airplanes (operated under Standing Agreements) 6,779 500 7.4Total 15,042 2,437 16.2RECOMMENDATIONTo better ensure that air ambulances are availableto meet patient needs and are used in acost-effective manner, the Ministry should:• periodically review the level of cancelledcalls;• where the level of cancelled calls is high,analyze the reasons for cancellations; and• take action to minimize unnecessary dispatchof aircraft.MINISTRY RESPONSEThe Ministry distributes a Helicopter UtilizationGuide and training materials to ensure that airambulance on-scene responses are requestedand undertaken in an appropriate manner.The Ministry will work with the Ontario AirAmbulance Services Corporation to include callcancellation statistics and rationale informationfields in the new air ambulance database that isunder development.The Ministry will also have the call cancellationinformation analyzed on a regular basisand reported to the Director of the EmergencyHealth Services Branch.OPERATOR SERVICE REVIEWSAll air ambulance operators must be certified underthe Ambulance Act at least once every three years.Certification is based on the results of scheduledservice reviews conducted by the Ministry in conjunctionwith the base hospital. These reviewsinclude an evaluation of the qualifications of thepatient-care providers, the maintenance of aircraftand equipment in accordance with Ministry standards,and other measures taken to ensure properpatient care.We noted that about 70% of the service reviewfiles in our sample did not contain supportingevidence for the decision to certify or recertifyair ambulance operators. Specifically, in someinstances operators had definitely not met the certificationcriteria, while in other instances it wasunclear whether or not they had done so. We alsonoted that the Ministry has not put in place a documentedpolicy stipulating when service review deficienciesshould be followed up to ensure that theyhad been corrected or when consideration shouldbe given to revoking an air ambulance operator’scertification. Furthermore, although the Ministryinformed us that it contacted operators to inquirewhether deficiencies were corrected, we saw littledocumented evidence of this follow-up. In addition,while the Ministry informed us that it also visitsoperators’ sites, it was unable to provide any documentationconfirming that these site visits determinedwhether operators had actually correctedservice review deficiencies.For example, the Ministry’s service review ofone operator in 2002 indicated a number of deficiencies,including insufficient staff, no documentationof employee qualifications or completion ofChapter 3 • VFM Section 3.01

302005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.01mandatory training, and no system to ensure thatair ambulance call reports were accurately completed(call reports are the medical record used byparamedics to document each call). However, theoperator was certified without any additional documentationto support this decision and without anydocumented follow-up to determine if the identifiedconcerns were ever rectified. The Ministryinformed us that the continued use of this airambulance operator was required to meet the needsof patients. The Ministry further advised us that,notwithstanding the deficiencies noted, it believedthere was no direct threat to patient safety while theoperator worked towards correcting the deficiencies.We recognize that it may be impractical orinappropriate to immediately refuse to recertifyan air ambulance operator in cases where the Ministryhas not identified a direct threat to the safetyof patients. However, some violations, especiallywhen they recur, may require the application ofsuch sanctions as monetary penalties to encouragemore timely compliance. We noted that, whilecontracts with air ambulance operators allowed forfunding to be withheld if the operator defaults onmaterial contractual obligations (by, for example,providing substandard services), the Ministry hadnever withheld funding as a result of service reviewdeficiencies. Furthermore, the contracts had nospecific provisions for penalties for service reviewdeficiencies.RECOMMENDATIONTo help ensure proper patient care by air ambulanceoperators, the Ministry should:• ensure that deficiencies identified in servicereviews are corrected on a timely basis; and• determine the circumstances under which itwill apply sanctions or consider revoking anoperator’s certification.MINISTRY RESPONSECertificates for air ambulance services expirein December 2005. Review schedules are beingfinalized, as are amended survey assessmenttools.Review reports will be finalized and distributedin a timely manner, and revisits and followupswill be completed in a timely manner. Thepurpose of conducting reviews is to identifydeficiencies in meeting the standards and toallow an opportunity for operators to correctthose deficiencies.Sanctions and the revocation of a certificateare considered as last resorts when all other reasonableefforts of recourse to resolving the deficienciesof an operator have failed. The Ministrywill further clarify when such sanctions or revocationoptions are to be considered.LOCATION OF AIR BASES AND AIRCRAFTThe cost-effective use of air ambulances depends,among other things, on matching the demand forair ambulances to the placement of air bases andaircraft. While the Ministry has some informationon the demand for air ambulances, ministry documentsindicated that adequate information was notreadily available on the number and type of aircraftneeded, the required hours of operational availability,or the locations to base the aircraft in orderto best meet patient needs. In addition, while theMinistry did review demand in one large municipalityin 2000, and in 2003 reviewed the use of twoToronto-based helicopters and decided to relocateone helicopter to the near north for the summertrauma season, it has been more than 10 years sincethe Ministry formally reviewed the demand for andplacement of air ambulances province-wide.Coroners’ inquests in 1999 and 2002 recommendedan evaluation of the need for helicopter

Ambulance Services—Air31landing pads (at hospitals, for example) and relatedfunding. Ministry documents from 2003 noted thatinadequate access to helipads (helicopter landingpads) contributes to loss of life, particularly in areaswith little or no land ambulance service. The lackof access to helipads also poses safety and liabilityissues, and it reduces public access to air ambulanceservices. However, the Ministry has neverconducted a systematic province-wide review of theneed for, and availability of, helipads.RECOMMENDATIONTo better ensure that air ambulances are availableto meet patient needs, the Ministry shouldformally assess the number and type of airambulances needed, the required hours of operationalavailability, and the optimal locationsfor aircraft bases and landing areas, includinghelipads.MINISTRY RESPONSEThe Ministry has informally assessed this informationeach time a contract award for air ambulanceprovider services is contemplated. TheMinistry will discuss the need to formally assessthis with the Ontario Air Ambulance ServicesCorporation prior to initiating future contractualrequests.LINES OF AUTHORITYIn December 2001, a coroner’s inquest cited publicand community health concerns over the operationand administration of Ontario’s air ambulance program,and questioned the delivery of the program.The inquest noted a lack of understanding aboutthe capabilities of air ambulances, and when theyshould be used. The coroner recommended that anindependent review be conducted.As a result, the air ambulance base hospitalengaged the Commission on Accreditation of MedicalTransport Systems, an independent Americanorganization, to conduct an accreditation reviewof Ontario’s air ambulance program in 2003. TheCommission’s review found that the program’seffective operation was inhibited by the absence ofa clear line of authority among the dispatch centre,the base hospital, and the air ambulance operatorsresponsible for the service. The Commission notedthat advantages of a clear line of authority include:• assurance that paramedics across the provincework under the same policies and procedures;and•a quality-improvement process that uses consistentand comparable data on service delivery toevaluate air ambulance services.Subsequent to the completion of our audit, inJuly 2005 the Ministry announced that a newlycreated Ontario Air Ambulance Services Corporationwould become responsible for all air ambulanceoperations—including medical oversight ofall paramedics, air dispatch, and authorization oftransfers between air and land ambulances—andwould thereby be expected to establish clear linesof authority.RECOMMENDATIONTo enable the effective co-ordination and deliveryof air ambulance services, the Ministryshould ensure that the lines of authority areclarified among air ambulance dispatch, basehospital, and operators.MINISTRY RESPONSEThe new service delivery model, as providedby the Ontario Air Ambulance Services Corporation,will clarify the lines of authorityand thereby address the Commission onAccreditation of Medical Transport Systems’recommendations.Chapter 3 • VFM Section 3.01

322005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.01ACQUISITION OF OPERATOR SERVICESThe Ministry uses a competitive process to contractwith Standing Agreement, Critical Care, and PreferredProvider air ambulance operators.Operators who meet the Ministry’s minimumrequirements, including certification, and whowish to be on a roster to provide air ambulance servicesunder Standing Agreements submit bids fortheir services. These bids can be adjusted every sixmonths. The Ministry uses the Standing Agreementoperators to respond to air ambulance calls whenCritical Care and Preferred Provider operators arenot available. The Ministry generally requests theservice of the Standing Agreement operator thatcan meet the patient’s needs at the lowest cost.In 2000, the Ministry engaged a consulting companyspecializing in public-sector procurementmanagement to assess the Ministry’s process forobtaining Critical Care air ambulance operators.The consultant concluded that the process wasfair, equitable, and consistent with the request-forproposal(RFP) requirements.The Ministry contracted for Preferred Providerair ambulance helicopter services in September1999 as a result of an RFP process. Ministry documentsnoted that the Preferred Provider contract,unlike the Standing Agreements, was intended toestablish a fixed cost for helicopter air ambulanceservices for the next five years, with no price escalationsover the life of the contract. The contract wasfor a three-year term, renewable at the Ministry’soption for another two years, and “such extensionshall be upon the terms and conditions of thisAgreement or any amendment thereto as may beagreed upon in writing by the parties.” However,either party could terminate the contract without areason with 180 days’ notice.In fall 2001, the Preferred Provider refused tocomplete the ministry-initiated two-year extensionat the contract rate, claiming that it had experiencedvastly reduced profitability due to escalatingcosts. Furthermore, the Preferred Provider statedthat it required higher fees to continue the helicopterservice and provided notification in April 2002that it was terminating the contract. To ensure servicedelivery, the Ministry paid the requested costincrease of $10 million, over and above the contractrate, for the two-year contract extension. Ministrystaff informed us that it relied on one organizationfor most air ambulance helicopter services becausethere were few other providers in Ontario.The Ministry’s Internal Audit Service completeda review of the Preferred Provider contract in 2002to determine the validity of the provider’s claims ofreduced profitability, but the results were inconclusive.The Internal Audit Service also noted, however,that the two-year extension should allowample time for the contract to be re-tendered. Wenoted that in 2004, the Ministry extended the contractwith the Preferred Provider for one more year,for an additional $500,000 above the rate of theprevious year. In addition, although the Ministryhad requested that the Preferred Provider contractbe tendered, the Management Board of Cabinetdeferred doing so and authorized the Ministry tonegotiate an additional contract extension of up tothree years with this Preferred Provider.RECOMMENDATIONTo better ensure that air ambulance helicopterservices are delivered economically, the Ministryshould evaluate the risks posed by its significantdependence on one preferred serviceprovider and develop a long-term strategy toencourage a more competitive environment.MINISTRY RESPONSEThe performance agreement to be executedbetween the Ministry and the Ontario AirAmbulance Services Corporation will require acompetitive procurement environment for airambulance services that is consistent with governmentrequirements.

Ambulance Services—Air33PATIENT BILLINGSIndividuals are generally billed for the cost of theirair ambulance trip if they are not covered under theOntario Health Insurance Plan (OHIP). After an airambulance trip has been completed, the Ministrydetermines if the flight is billable based on the airambulance call report, and validates the informationas necessary with the hospital. In the 2003/04fiscal year, the Ministry billed individuals, mainlyAmericans and Canadians from other provinces,$537,000 for air ambulance services.At the time of our last audit in 2000, patientstravelling on aircraft operated by Standing Agreementoperators were billed for the actual costsincurred to provide the service, while patients usinganother type of air ambulance were billed only forthe time they were aboard the aircraft. We thereforerecommended that the Ministry establisheffective procedures to ensure that all patients areinvoiced in a timely manner for the total cost of theservice provided, regardless of the air carrier used.We noted that most health-care services, suchas those provided in hospitals, are to be billed topatients not covered by OHIP at rates that are atleast equal to the actual cost of providing thoseservices. In January 2004, however, the Ministrychanged the amount that it would bill for air ambulancetrips to “reasonable costs,” defined as 150% ofthe costs associated with the amount of time, or distancein the case of Standing Agreement contracts,that the patient spent on board the aircraft. “Reasonablecosts” excluded the charges associated withthe time it took the aircraft to reach the patient forpickup. The hourly cost to be transported by PreferredProvider and Critical Care operators wasdetermined using the air base with the lowest costs.The kilometre cost to be transported by a StandingAgreement operator was based on the costsbilled to the Ministry for that portion of the flight.As illustrated in Figure 3, we calculated, using ministrydata, the average cost per flight charged beforeand after the policy change. The charges to patientsFigure 3: Average Billing per FlightSource of data: Ministry of Health and Long-Term CareApril–Dec Jan–Oct %Type of Contract 2003 ($) 2004 ($) DecreaseStanding AgreementoperatorsCritical Care andPreferred Provideroperatorswho had been transported by Critical Care and PreferredProvider operators decreased by an averageof 59%, and charges for transportation by StandingAgreement operators decreased on average by 46%and are less than the total actual costs of providingthe air ambulance service.RECOMMENDATION3,875 2,101 467,503 3,057 59To help ensure that the costs of air ambulanceservices are recovered in those circumstanceswhere the Ministry has determined recovery isappropriate, the Ministry should consider billingactual costs similar to other Ontario healthprogram billing practices.MINISTRY RESPONSEThe Ministry is currently recovering the estimatedcost of transporting the patient. Implementingthis recommendation would result incharging air ambulance users for the systemcosts of repositioning the available aircraft(for example, the cost of travelling to pick upthe patient and of returning the aircraft to itsbase location). In concert with the Ontario AirAmbulance Services Corporation, the Ministrywill review whether it is reasonable to chargethese system costs to patients not covered by theOntario Health Insurance Plan, and/or to establisha maximum recoverable amount.Chapter 3 • VFM Section 3.01

342005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.01INTEGRATED AIR INFORMATION SYSTEMPROJECTThe management of air ambulance operationsinvolves various computerized functions, includingapplications relating to call taking and routing, dispatching,and flight and fuel management. In 2001,the Ministry initiated the Integrated Air InformationSystem Project (Project), then scheduled forcompletion in April 2003, to integrate these informationsystems. The Project also included plans tointegrate this proposed air ambulance system withthe computer-assisted land ambulance dispatch systemthen being introduced by the Ministry. With allthese systems integrated, air ambulance dispatcherswere to have single-point access to flight andmedical information, enabling them to communicatemore easily with land ambulance dispatchcentres. This would better ensure that patient needswere met in an efficient manner.In 2003, the Ministry arranged with the air basehospital to independently develop a new medicalalgorithm to prioritize patients. This new algorithmwas to form part of the Project. In November 2004,however, the base hospital informed the Ministrythat it was no longer willing to have its algorithmbecome part of the Project because of a lack of cooperationby the Ministry.In February 2005, the Ministry agreed to paythe base hospital about $430,000 to independentlydevelop a computer-aided dispatch system for airambulances, a central component of the Project.However, we believe there is a risk that an independentlydeveloped computer-assisted dispatch systemmay prove costly and be unable to be readily integratedwith the land ambulance dispatch system.RECOMMENDATIONTo more efficiently meet patient needs withrespect to ambulance services, the Ministryshould ensure more timely and economical integrationof air ambulance information systems,as well as balanced communication between airand land dispatch systems.MINISTRY RESPONSEThe Ministry will work with the Ontario AirAmbulance Services Corporation to assist it toestablish a substantially improved air ambulancedispatch information system.

Chapter 3Section3.02Ministry of Health and Long-Term CareAmbulance Services—LandBackgroundThe provision of ambulance services in Ontario isgoverned by the Ambulance Act (Act). Under theAct, the Minister of Health and Long-Term Caremust ensure “the existence throughout Ontario of abalanced and integrated system of ambulance servicesand communication services used in dispatchingambulances.”On January 1, 2001, responsibility for providingland ambulance services was transferred from theprovince to the 40 upper-tier municipalities and 10designated delivery agents in remote areas (municipalities).The Act states that every municipality willbe responsible for “ensuring the proper provisionof land ambulance services in the municipality inaccordance with the needs of persons in the municipality.”The Ministry of Health and Long-Term Care(Ministry) funds 50% of approved eligible costs ofmunicipal land ambulance services, and 100% ofthe approved costs of ambulance dispatch centres,ambulances for the First Nations and territorieswithout municipal organization, and other relatedemergency services. In addition, the Ministry isresponsible for ensuring that minimum standardsare met for all aspects of ambulance services.Across Ontario, land ambulances are dispatchedby 22 dispatch centres, 11 of which are run by theprovince, seven by hospitals, three by municipalities,and one by a private operator. Twenty-onebase hospitals train, certify, and provide on-the-jobmedical direction to paramedics. Only ambulanceservices certified under the Act may operate in theprovince.The Emergency Health Services Branch(Branch), part of the Ministry’s Acute ServicesDivision, administers the Ministry’s role andresponsibilities under the Act. In the 2004/05 fiscalyear, ministry expenditures on land ambulanceservices were approximately $358 million, including$241 million provided to municipalities for landambulance services, as shown in Figure 1.Audit Objective and ScopeThe objective of our audit was to assess whether theMinistry had procedures in place to ensure that:•its expectations for the delivery of land ambulanceservices, including compliance withapplicable legislation and policies, were beingmet in a cost-effective manner; andChapter 3 • VFM Section 3.0235

362005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02Figure 1: Ministry Land Ambulance ServiceExpenditures, 2004/05 ($ million)Source of data: Ministry of Health and Long-Term Careministry administration ($19)base hospitals ($14)dispatch ($79)• performance in delivering land ambulance serviceswas properly measured and reported.Our audit was conducted in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, established bythe Canadian Institute of Chartered Accountants,and accordingly included such tests and other proceduresas we considered necessary in the circumstances.The criteria used to conclude on our auditobjective were discussed with and agreed to by seniorministry management.Our audit primarily focused on activities at theBranch’s head office and field offices, as well as asample of dispatch centres and base hospitals. Wealso met with representatives of the Association ofMunicipal Emergency Medical Services of Ontario.We did not rely on the Ministry’s Internal AuditServices to reduce the extent of our audit workbecause it had not recently conducted any auditwork on land ambulance services.other ($5)municipal land ambulance services ($241)SummaryWe found that the Ministry needed to take additionalaction to address many of the challengesidentified in our 2000 audit of Emergency HealthServices and the related recommendations madesubsequently by the Standing Committee on PublicAccounts. Specifically, the Ministry had not ensuredthat municipally operated land ambulance serviceswere providing integrated and balanced serviceacross the province. In addition, two-thirds of landambulance operators were not meeting their legislatedresponse times, and the total cost of the programhas increased by 94% over the last four years.In particular, we noted that:•Municipal boundaries could have an impact onthe delivery of health-care services. For example,as part of the Ontario Stroke Strategy, municipalitiesare required to transfer stroke patientsto the nearest stroke centre. At the time of ouraudit, however, at least two municipalities werenot participating in the Stroke Strategy andtherefore not transferring stroke patients to thenearest centres unless they received additionalministry funding because the nearest centre wasoutside their respective boundaries.•The Ministry was not determining whethertransfers of patients between institutions werebeing handled in the most appropriate and costeffectivemanner. Failure to transport patientsin a timely and efficient way can impact patientcare. For example, missed appointments fordiagnostic tests can delay patient treatment andresult in longer-than-necessary hospital stays.• Even though the Ministry has provided about$30 million in additional funding, ambulanceresponse times increased in about 44% ofmunicipalities between 2000 and 2004. In addition,32 of 50, or 64% of, municipalities did notmeet their legislated response times in 2004,even though the requirements were based on

Ambulance Services—Land37meeting their actual 1996 response times. Wemade a similar observation in our 2000 auditof Emergency Health Services, where we notedthat 50% to 60% of municipalities had not mettheir legislated response times in 1998 and thefirst half of 1999.•Fifteen of the 18 dispatch centres that reportedinformation did not dispatch ambulances withinthe time required by the Ministry. In addition,the Ministry had not obtained acceptance fromone municipally run dispatch centre that it wasagreeable to adhering to the Ministry’s dispatchresponse times, and in fact the dispatch centrehad been unable to meet the response-timestandards.•Total provincial and municipal costs of providingambulance services increased by 94% overfour years, from $352 million in the 1999/2000fiscal year to $683 million in 2003/04. However,total ambulance calls involving patients haveremained at about the same level.•The current division of responsibilities andfunding of land ambulance services can resultin varying levels of service across the provincefor people with similar needs living in similarareas. Variations in service may result from, forexample, differences in municipal tax bases.• The Ontario Municipal Chief AdministrativeOfficer’s Benchmarking Initiative calculated thatthe cost per household of land ambulance servicesin 2003 ranged from $57 to $150 and averaged$89 for the 12 municipalities that reportedinformation. We noted that the Ministry had notassessed whether the significant differences infunding levels resulted in significant differencesin service levels to patients.In addition, action is still required by the Ministryto address the following issues, most of whichwere also noted in our 2000 audit report:•Some municipalities experienced significantdelays in hospitals accepting patients arrivingby ambulance. For example, the City ofToronto reported in 2004 that delays at hospitalscost an estimated $4.5 million to $5 millionthat year, much of it caused by increasedovertime staff costs. In addition, for about 40%of all emergency and prompt ambulance callsprovince-wide, once the ambulance arrived atthe hospital it took more than 40 minutes for thehospital to accept the patient.•While we found that service reviews were generallyconducted by the Ministry within therequired three-year period, between 2002 and2004 over 40% of ambulance operators failedto meet certification standards during servicereviews, even though they received advancenotice of the reviews. Furthermore, at least 50%of operators who did not meet certification standardshad no follow-up inspection or servicereview within the following six months to ensurethat serious deficiencies had been corrected.• The Ministry has not established operationalreview and quality-assurance processes for alldispatch centres to ensure that ministry standardsare met. In addition, although we recommendedin our 2000 audit report that theMinistry conduct reviews of all dispatch centreswithin reasonable time frames and the Ministryagreed with the recommendation, there havenot been periodic reviews of all dispatch-centreoperations. The reason, we were informed,was that reviews would further disrupt operations,which were already coping with staffingproblems, such as almost one ambulance dispatcherleaving for every two hired in a sevenmonthperiod, as well as the introduction of newtechnologies.Regarding performance reporting, we notedthat there was minimal annual measuring of andpublic reporting on the delivery of land ambulanceservices by the Ministry, although some municipalitieswere taking steps in this area. We observedthat several other jurisdictions report publicly onChapter 3 • VFM Section 3.02

382005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02response times and other measures of land ambulanceservice performance.Detailed Audit ObservationsRESPONSIBILITY FOR LANDAMBULANCE SERVICESBy January 1, 2001, the province had transferredthe responsibility for delivering land ambulanceservices to all municipalities as part of Ontario’sLocal Services Realignment (Realignment). In ouraudit of Emergency Health Services published inour 2000 Special Report on Accountability and Valuefor Money, we expressed concern that the Realignmentwould not meet its stated goal of improvingaccountability, reducing waste and duplication, andproviding better government services at a lowercost to Ontario taxpayers.In particular, we were concerned that therealigned ambulance system would not provide abalanced and integrated service, as required underthe Ambulance Act, and that it would actually bemore costly to Ontario taxpayers. Various stakeholdergroups, including the Ministry, the ProvincialBase Hospital Advisory Group, the OntarioHospital Association, and the Who Does WhatPanel, raised related concerns. For example, ministryconsultants noted in 1999 that municipalitieswould likely attempt to gain cost efficiencies thatmight not be in the best interests of ambulanceservices province-wide. Also in 1999, the OntarioHospital Association noted the tendency of separatesegments to look after their own requirements,without considering the needs of the whole ambulancesystem.We recommended in our 2000 audit report thatafter Realignment was completed, the Ministryshould ensure that land ambulance services be providedaccording to the five fundamental principlesto which the Ministry had committed:• Seamlessness: the closest available and appropriateambulance should respond to a patient atany time and in any jurisdiction, regardless ofmunicipal boundaries.•Accessibility: municipalities should ensurereasonable access to ambulance services, andambulance services should respond regardlessof the location of the request.•Accountability: ambulance services shouldbe medically, operationally, and financiallyaccountable to the municipalities and theMinistry.•Integration: emergency and transfer servicesshould be integrated with other health-careservices.•Responsiveness: ambulance services should beresponsive to fluctuating health-care, demographic,socio-economic, and medical demands.In 2001, the Standing Committee on PublicAccounts recommended that the Ministry’s assessmentof the Realignment of land ambulance servicesaddress issues such as the maintenance ofstandards, including response times; the financialimpact on municipalities and the province; and adetermination of whether Realignment is providingservices according to the five fundamental principlesabove.The Ministry and the Association of Municipalitiesof Ontario (AMO) established the Land AmbulanceImplementation Steering Committee (LAISC)to facilitate, monitor, and evaluate the transferof services. However, in June 2003, four yearsafter LAISC’s establishment, the AMO informedthe Ministry that it was concerned about the lackof progress on key ambulance service issues andthe role of LAISC, and stated that municipal participationin the process would be “discontinueduntil there is a real opportunity and willingness toresolve these critical issues in a more time-sensitivemanner.” The Ministry agreed that LAISC need nolonger exist, but its reason was its belief that muchof the work on issues of concern to municipalities,

Ambulance Services—Land39such as response times, operational standards, andfunding, had been completed. However, as notedbelow, many of these issues have not yet beenadequately resolved.Balanced and Integrated ServiceAccording to the Ministry at the time of our 2000audit, ambulance services in Ontario prior toRealignment operated within a seamless systemthat crossed all municipal boundaries and dispatchedthe closest ambulance, regardless of itshome municipality. In 2001, the Standing Committeeon Public Accounts recommended that theMinistry establish provincial standards governingambulance dispatch practices and procedures toensure seamless land ambulance services.However, since Realignment, ministry documentshave cited increasing claims that dispatchcentres failed to send the closest available ambulancein non-emergencies, and that, at the requestof municipalities, dispatch-centre boundaries weregenerally realigned to match municipal boundaries.The May 2004 Report of the Land Ambulance AcuteTransfers Task Force, consisting primarily of ministryand base hospital representatives, also notedthat in order to “improve local emergency ambulanceservice delivery, municipalities are resistingnon-emergency inter-facility transfer requests, andambulance calls that require their vehicles to crossmunicipal boundaries.” While dispatch centresdetermine which ambulances respond to each call,municipalities establish where their ambulanceswait for the next call. Therefore, to minimize dispatchesto bordering municipalities, ambulancesmay be positioned towards the centre of the municipalityto reduce the likelihood of being dispatchedoutside its boundaries.The increasing reluctance of municipalities toallow their ambulance fleets to cross municipalboundaries has also affected the integration of anumber of specialized health initiatives, includingthe Ontario Stroke Strategy. Introduced in2003, the Strategy established regional and districtstroke centres in certain hospitals to provide strokepatients with continuous access to specific equipmentand neurologists. This was intended to helpminimize the impact of a stroke by assessing, diagnosing,and treating the patient within a criticalthree-hour window. When an ambulance is called,the paramedic uses a protocol to determine if thepatient should be transported to the closest strokecentre. However, the nearest stroke centre is sometimesoutside municipal boundaries.The Ministry informed us that as of May 2005,at least two municipalities were not participatingin the stroke strategy and therefore not transferringstroke patients to the nearest centre becausethe nearest centre was beyond their boundaries,and they would not transfer the patients unlessthey received additional ministry funding. We weresubsequently informed that one of these municipalitieswould be participating in the stroke strategyafter a stroke centre was opened within its municipalboundaries. In addition, we were informed thatmunicipalities felt transporting patients outsidea municipality’s boundary could have a negativeimpact on the municipality’s ability to respond tosubsequent emergencies within its own borders.RECOMMENDATIONIn order for the public to receive the best possibleemergency care, the Ministry should assesswhat measures are required to ensure thatland ambulance services are seamless, accessible,and integrated regardless of municipalboundaries.MINISTRY RESPONSEThe existence of seamless, accessible, and integratedland ambulance services is a principlethat the Ministry and the municipalities sharethrough a Memorandum of Agreement, signedChapter 3 • VFM Section 3.02

402005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02at the time of the land ambulance transition,and endeavour to adhere to. In emergency situations,ambulance dispatchers always send theclosest, most appropriate ambulance. This isconsistent with the legislated responsibility ofthe municipalities to provide services in accordancewith the needs of persons in the municipality.In non-emergency situations, time is notas important, and use of the closest ambulanceis not as vital.To date, after a stroke centre has been establishedand the stroke protocols have been implementedwithin a municipality, patients withinthat municipality are taken to a stroke centre.The Ministry continues to work with the strokecentres, municipalities, and dispatch centresto provide for seamlessness in regard to thisprogram.The Minister recently announced that landambulance discussions between municipal andprovincial officials would be convened to discussa number of issues. Several of the issues relatedto this recommendation are expected to be discussedat these sessions.Non-emergency Scheduled InstitutionalTransfersMost scheduled non-emergency ambulance callsare for transfers of patients between health-carefacilities—between hospitals, for example, orbetween a hospital and a nursing home. As noted inthe May 2004 Report of the Land Ambulance AcuteTransfers Task Force, requests for non-emergencyinstitutional transfers have greatly increased, due inpart to hospitals’ increasing specialization in certaintreatment areas. Failure to transfer patients in atimely and efficient way can adversely affect patientcare. For example, missed appointments for diagnostictests can delay patient treatment and resultin longer-than-necessary hospital stays. Ministrydata indicated that in 2004, over 40% of scheduledcalls were late by more than 20 minutes from thepromised time.In 1997, the Ministry issued to hospitals a Guideto Choosing Appropriate Patient Transportationto clarify which patients should be transportedby ambulance. The Guide stated that ambulancesshould be used if a physician determines that apatient is medically unstable, requires a medicalescort, and needs a stretcher. The Guide did notprohibit the use of ambulances in other circumstances,but it did say that less costly alternatives,such as taxis, stretcher-capable private medicaltransport services, and volunteer agencies, shouldbe considered.Since June 2003, the Ministry has had accessto some information on the number of interinstitutionalpatient transfers, and in the 2004/05fiscal year, this information indicated that about350,000 such transfers took place. However, wenoted that the Ministry did not track or analyzethe total number of scheduled transfers to institutionsdone by private medical transport services;the number that could safely be done by medicaltransport services but were actually being done byambulances; or the number that should have beendone by ambulances but were done by medicaltransport services. Without this information, theMinistry is unable to determine whether patienttransfers meet the needs of patients in the mostcost-effective manner. The Ministry informed usthat it believed that the use of medical transportservices has been increasing since the transfer ofambulance services to municipalities, which is consistentwith the significant decrease in the numberof scheduled institutional transfers by ambulancessince 2001, illustrated in Figure 2.Non-emergency calls might have declined furtherif not for the fact that hospitals must pay forprivate medical transport services but not for ambulances.Many hospitals still call ambulances for nonemergencytransfers. In addition, since ambulances

Ambulance Services—Land41Figure 2: Number of Scheduled Transfers toInstitutions Performed by AmbulancesSource of data: Ministry of Health and Long-Term Care# of Transfers100,00090,00080,00070,00060,00050,00040,00030,00020,00010,0000must meet vehicle and staffing requirements prescribedby regulation, while medical transport servicesare not subject to any such standards, weacknowledge that hospitals may be choosing ambulancesout of concern for patient safety.In our 2000 audit report, we recommended thatthe Ministry and municipalities jointly develop andput in place standards to address passenger safetyand encourage the use of the most cost-effectivemeans of transferring non-emergency patients. TheLand Ambulance Implementation Steering Committeealso identified inter-institutional transfers asone of its highest priorities. In addition, a consultant’sreport commissioned by the Ministry on behalfof the Land Ambulance Implementation SteeringCommittee in 2002 recommended the regulationof medical transport services, and the use of ambulancespredominantly for emergencies. The reportalso noted that most—but not all—members of thehealth-care community understand that medicaltransport services are to be used only for nonemergency,medically stable patients. The reportfound that some health-care providers were underthe misapprehension that private medical transportservices are regulated in the same way as ambulanceoperators.2001 2002 2003 2004YearThe May 2004 Report of the Land AmbulanceAcute Transfers Task Force indicated that regulatingmedical transport services was the minimumrequired action to ensure patient safety. In addition,the report noted that in order to “improve localemergency ambulance service delivery, municipalitiesare resisting non-emergency inter-facilitytransfer requests and ambulance calls that requiretheir vehicles to cross municipal boundaries.” Thereport observed that the current ambulance systemdid not respond to all needs; municipalities focusedon meeting response-time standards for emergencycalls, while hospital concerns included timely interinstitutionaltransfers to make the best use of availablebeds, diagnostic services, and other resources.The report’s recommendations suggested that newprovincial regulations on medical transport serviceswere needed to ensure patient safety and operatoraccountability. At the time of our audit, no actionhad been taken to implement the report’s recommendations.However, we were informed by ministryofficials that the issues noted by the Task Forcewould be addressed as part of its broader HealthServices Transformation Agenda.RECOMMENDATIONAs recommended in our previous audit of EmergencyHealth Services published in our 2000Special Report on Accountability and Value forMoney, the Ministry should work jointly withmunicipalities and the hospital community to:•develop and put in place standards for nonambulancemedical transport services toaddress passenger safety; and•take steps that will encourage the use of themost cost-effective resources for the scheduledtransfer of non-emergency patients.MINISTRY RESPONSEIn spring 2005, the Ministry appointed a leadfor the transformation of medical transportationin the province. A working group has beenestablished to make recommendations to theChapter 3 • VFM Section 3.02

422005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02Ministry on the future governance and deliveryof non-ambulance medical transport servicesand on the use of appropriate transport servicesfor inter-facility transfers.RESPONSE TIMESAmbulance Response TimesFigure 3: Prioritization of Ambulance CallsSource of data: Ministry of Health and Long-Term Carecode 4 urgent call life or limb threateningcode 3 prompt call serious but stable or underprofessional carecode 2 scheduled call scheduled transfers to institutionscode 1 deferrable call delays not detrimental to patientsafetyPatient-related calls for ambulances are generallyprioritized by dispatch centres as shown in Figure 3.A regulation under the Ambulance Act requiresthat operators meet criteria set out in the Ministry’sLand Ambulance Certification Standards. Thesestandards stipulate that ambulances must respondto 90% of code 4 emergency calls within the actualtime that was achieved for 90% of such calls in1996. Response time is measured from the time theambulance dispatcher notifies the ambulance crewto the time the ambulance arrives at the scene.In our 2000 audit report, we noted that 50%to 60% of municipalities had not met their 1996response-time standards in 1998 and the first halfof 1999, which were prior to Realignment. In addition,we recommended that the Ministry, togetherwith the municipalities, take corrective actionwhere specified response-time requirements hadnot been met. In 2001, the Standing Committeeon Public Accounts also recommended that theMinistry “should ensure compliance with municipalresponse-time standards for all jurisdictionsthroughout the province. The results of the monitoringshould be evaluated and reported on aregular basis … Corrective action should be takenimmediately in cases of non-compliance.”As noted in our 2000 audit report, the Ministryestimated that approximately $52 million wasrequired to meet 1996 response times, including$40 million of ongoing annual funding. In 2001, theMinistry asked municipalities to submit strategiesto achieve a reduction in response times. Municipalitiesindicated that implementation of such strategieswould require $156 million. To help decreaseresponse times, the Ministry distributed $10 millionof one-time federal funding for new ambulancesand replacement of other medical equipment inthe 2001/02 fiscal year. In 2002/03, the Ministryalso began funding municipalities an additional$30 million if they matched the provincial moneydollar for dollar, and committed to decreasingambulance response times by an average of 10%.However, the Ministry’s July 2004 Status Updateon the Transfer of Land Ambulance Services UnderLocal Services Realignment indicated that worseningresponse times were one issue that had yet tobe solved. While 36 municipalities’ response timesimproved from 2003 to 2004, in 2004, 32 of the50 municipalities still failed to meet their 1996response times, while 22 had longer response timesthan in 2000. The Ministry acknowledged in 2005that response-time improvement initiatives to datehad achieved only mixed success.Evidence-based Response TimesThe response-time standards for emergency callsin Ontario vary significantly throughout the province.They are based on measurements of historicaltimes, from dispatch of ambulance to arrivalon scene, actually achieved across the provincein 1996. In our 2000 audit report, we notedwide ranges in code 4 response-time requirementsand inconsistencies in requirements withinmunicipalities of similar geographic makeup. Werecommended that the Ministry, together with

Ambulance Services—Land43Figure 4: Range in Ontario’s Response Times 1 by Typeof Geographic Area, 2004 2Source of data: Ministry of Health and Long-Term CareFastest SlowestType of Geographic Area (minutes 3 ) (minutes 3 )urban 14 17suburban 13 18rural 15 30northern 11 281. Response times are from call receipt to arrival on scene, 90% of the time.2. Results exclude data for five municipalities for which the Ministry did nothave information.3. Results are rounded to the nearest minute.municipalities, review the response-time requirementsfor reasonableness and consistency and,where necessary, make adjustments. The Ministryresponded that it would review standards, includingresponse times, with municipalities. In 2000,the Ministry also informed the Standing Committeeon Public Accounts of a request by municipalitiesto consider developing evidence-based standardsthrough the Standards Subcommittee of the LandAmbulance Implementation Steering Committee(LAISC). As previously noted, however, LAISC wasdisbanded in fall 2003, and no changes were madeto response-time standards.In other jurisdictions, response-time standardsand/or guidelines, while usually not legislated, areoften developed based on such factors as populationdensity and geography. For example, BritishColumbia’s proposed response-time targets foremergency calls, from the time the call is receivedto the time on scene, is less than nine minutes, 90%of the time, in urban areas, and less than 15 minutes,90% of the time, in rural areas. Nova Scotiahas similar response-time goals for emergency calls,with urban areas being less than nine minutes, suburbanareas less than 15 minutes, and rural areasless than 30 minutes, all 90% of the time. As mentionedpreviously, the Ministry normally measuresresponse times from notification of the ambulancecrew by the dispatcher to arrival on scene (asopposed to measuring, as the above jurisdictionsdo, from the dispatch centre’s receipt of the call toarrival on scene). At our request, however, the Ministryproduced reports of response times from callreceipt to arrival on scene based on the ministrydevelopedcategories of urban, suburban, rural, andnorthern areas, as illustrated in Figure 4.England has a national response-time standard,from the time critical information has been receivedfrom the caller to when the emergency responsevehicle arrives, of eight minutes or less, 75% of thetime, for calls where an immediate threat to lifehas been identified. We noted that in Ontario, theactual comparable response time for emergencycalls in 2004 was 10 minutes and 32 seconds, 75%of the time, or about two and a half minutes morethan the standard in England.Prompt responses are critical to the survival andwell-being of patients with certain types of injuriesor illnesses, particularly those experiencing cardiacarrest. In 1994, the Ministry funded the OntarioPre-hospital Advanced Life Support study (OPALS)to support evidence-based decision-making inemergency medical services planning. The eightyearstudy involved 21 communities and about10,000 patients experiencing cardiac arrest. Inaddition, the study investigated the relative value ofrapid access to emergency care, early cardiopulmonaryresuscitation (CPR), rapid defibrillation, andinterventions by advanced-care paramedics to thesurvival of individuals who had suffered an out-ofhospitalcardiac arrest.In 2003, the OPALS researchers reported thataccording to their findings, a response time of sixminutes from call receipt to on-scene arrival couldhave improved survival rates in the study communitiesby 3.6%, or 51 additional lives annually. Aswell, OPALS researchers cited a study on the use ofpublic-access automatic external defibrillators incasinos, and noted a 74% survival rate when defibrillationbegan within three minutes of cardiacarrest.Chapter 3 • VFM Section 3.02

442005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02In 2004, the OPALS researchers reported thatlives were saved through a combination of CPR byon-scene citizens and rapid defibrillation responses.In many places in Ontario, fire and police servicesco-operated with ambulance services in providingemergency responses to cardiac arrest patients andother emergencies, as they can often arrive beforethe ambulance. These response arrangements arevoluntary and vary by municipality. As well, theOPALS research noted that the strategic placementof automatic external defibrillators in public locations,such as shopping malls, could be beneficial.In addition, The New England Journal of Medicinereported in 2004 that training and equipping volunteersto attempt early defibrillation within a structuredresponse system could increase the number ofsurvivors of cardiac arrest in public places, and concludedthat trained laypersons could use automaticexternal defibrillators safely and effectively. Whilethe placement of defribillators in all public placesmay not be reasonable given that OPALS researchersfound that only about 15% of cardiac arrestsoccur in public locations, the OPALS researchersnevertheless recommended the strategic placementof defibrillators in such public places as casinos.RECOMMENDATIONTo help ensure that response times for emergencies,including cardiac arrest, meet the needs ofpatients throughout the province, the Ministryshould:•together with municipalities, review currentresponse-time requirements for reasonablenessand consistency and, where necessary,make adjustments;•work closely with municipalities to helpthem meet the response-time requirements;and•assess the costs and benefits of a fully coordinatedemergency response system thatincludes strategically placed publicly accessibleautomatic external defibrillators.MINISTRY RESPONSEThe Minister recently announced that landambulance discussions between provincial andmunicipal officials would be convened to discussa number of issues. Reponse-time standards andresponse-time performance are expected to beamong the items discussed at this forum.On August 11, 2005, the Ontario HealthTechnology Advisory Committee (OHTAC)requested that the Medical Advisory Secretariatof the Ministry conduct a Health TechnologyAssessment and Policy Analysis of the variouscomponents of a co-ordinated emergencyfirst-response system. This assessment includesresponse times and the use of automated externaldefibrillators (AEDs) to improve survivalin the event of a cardiac arrest. The assessmentwill be reported back to OHTAC by mid-December. At the completion of this review,OHTAC will make recommendations to the DeputyMinister and the health-care system on thesettings in which AEDs are cost effective. This isexpected to assist in future planning for the distributionof AEDs in Ontario.Dispatch Response TimesDispatch response-time standards for code 4 emergencycalls are set out, for ministry-operated centres,in the Dispatch Centre Manual and in contractswith dispatch centres operated by hospitals, municipalities,and a private operator. According to thesedocuments, a call taker must obtain patient informationnecessary to accurately prioritize a call andassign it to a dispatcher within 45 seconds, 90% ofthe time. The dispatcher must select and notify theland ambulance crew within 75 seconds, 90% of

Ambulance Services—Land45the time. In total, the dispatch centre must selectand notify the ambulance crew within two minutesof call receipt. There are no standard responsetimes for code 3 or other types of calls.In our 2000 audit report, we found that dispatchresponse-time standards were not beingmet by most dispatch centres. We recommendedministry monitoring to ensure that response-timestandards were being met, so that timely correctiveaction could be taken where necessary. As discussedin more detail in the Reviews of DispatchCentres section, dispatch centres used varyingquality-assurance processes, although the Ministryinformed us that it was piloting a standardizedquality-assurance process. However, the Ministryhad not conducted any service reviews of dispatchcentres since our last audit. Furthermore, we notedthat 15 of the 18 dispatch centres that trackedresponse times in 2004 did not notify the ambulancecrew within two minutes of receiving a call.Four centres exceeded the two-minute standard bymore than 30 seconds. During our current audit, wenoted that the Ministry had not signed a performanceagreement with the largest dispatch centrein Ontario to formalize its commitment to theresponse-time standards, and, in fact, this dispatchcentre exceeded the dispatch response-time standardby about 110 seconds in 2004.Automatic Vehicle Locator (AVL) technologyuses global positioning satellites and land-basedtransmitters to identify the geographic locationof vehicles in real time on a map. The Ministry ofTransportation uses such technology to identify thelocation of all of its winter snow and maintenancevehicles (both those owned by the Ministry andthose of contractors) so that it can respond to callsand weather incidents in the most cost-effectivemanner. For health emergencies, AVL technologycan assist dispatchers in identifying the closestambulance to a patient.The Ministry informed us that it did not implementAVL in conjunction with the new computeraideddispatch system, which the Ministry beganimplementing in dispatch centres in 2002, becauseit considered AVL to be an emerging technologyat that time. However, in a bid to reduce dispatchresponse times, the Ministry spent about$3.4 million, beginning in the 2003/04 fiscal year,to acquire AVL technology. In addition, one municipallyrun dispatch centre that implemented AVLtechnology prior to the Ministry’s current initiativeshas a system that is incompatible with other systemsin the province. Consequently, its ambulancesare not visible on any other dispatch centre’s AVLsystem. At the end of our fieldwork, the Ministryhad commenced a project to integrate AVL technologywith the computer-aided dispatch systems. Wewill follow up on the integration of the AVL technologyduring our next audit of Emergency HealthServices.RECOMMENDATIONTo ensure that dispatch centres meet therequired ambulance dispatch response times,the Ministry should monitor dispatch-centreperformance throughout the province and taketimely corrective action where necessary.MINISTRY RESPONSEThe call-processing-time performance of dispatchcentres is now being monitored throughoutthe province on a quarterly basis. In thoseinstances where call-processing times are notmeeting the standard, an assessment is undertakento determine the cause of the deficiency.Once a deficiency is identified, measures areinstituted (for example, staff training andrequests for additional resources) to implementthe steps necessary to improve the performance.Chapter 3 • VFM Section 3.02

462005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02Ambulance Time Spent at HospitalsIn our 2000 audit report, we noted that someambulances experienced delays due to:•closest hospital; and•their not being permitted to take a patient to thedelays in hospitals accepting ambulancepatients.These delays usually occurred because hospitalsreported that their emergency rooms were full. Toaddress these delays, the Ministry introduced thePatient Priority System in 2001. The system requiredpatients to be screened using the Canadian Triageand Acuity Scale, an internationally recognizedsystem used for many years in hospital emergencyrooms. Under this system, the most urgent casesare taken to the nearest hospital. The Institute forClinical Evaluative Sciences is conducting ongoingresearch on the Scale with respect to patient outcomesand health-care resource utilization.We were informed by the Ministry that thePatient Priority System has generally ensured thatcode 4 and code 3 patients are, when appropriate,transferred to the nearest hospital. However, thePatient Priority System did not address situationswhere ambulances had to wait extended periodsuntil a hospital was ready to accept a patient. Thesedelays increase the risk of poor response times forother patients, as the ambulance is not available torespond to another call while it waits until a hospitalaccepts a patient. In December 2004, the Cityof Toronto estimated that delays at hospitals costbetween $4.5 million and $5 million in 2004, muchof it in overtime staffing. It further reported thatthese delays were growing in volume and durationand were the principal barrier to Toronto meetingits response-time standard.At our request, the Ministry calculated for 2004how long it took for an ambulance to deliver apatient once it arrived at a hospital. It found that,while times varied significantly across the province,for about 40% of the total code 4 and code 3 calls,delivery of the patient after arriving at a hospitaltook more than 40 minutes. In addition, data fortwo municipalities indicated times of more than 90minutes for 10% of their calls.In winter 2005, the Ministry established a HospitalEmergency Department and AmbulanceEffectiveness Working Group to provide advice ona number of areas, including the management oftransfer of patient-care responsibility from ambulanceservices to hospital emergency departments.The final report was scheduled for completion byMarch 31, 2005, but we were informed that, as ofMay 2005, it had not been finalized and no draftcould be provided to us.RECOMMENDATIONTo help ensure the efficient use of emergencyhealth services and enhance emergency patientcare, the Ministry, in conjunction with municipalitiesand hospitals, should take appropriateaction to minimize situations where patientsare waiting for extended periods of time in anambulance before being accepted by a hospital.MINISTRY RESPONSEThe Minister established the Hospital EmergencyDepartment and Ambulance EffectivenessWorking Group in February 2005. The Ministrywill be reviewing the recommendations fromthis group and will be working with the hospitaland land ambulance sector to implement measuresto reduce the impacts of delays in hospitalsaccepting ambulance patients.FUNDINGMinistry-funded CostsThe Standing Committee on Public Accountsrecommended in 2001 that the Ministry assessRealignment, including the financial impact onmunicipalities and the province.

Ambulance Services—Land47Figure 5: Total Ambulance Calls, 2000–04Source of data: Ministry of Health and Long-Term Care1,800,0001,600,000calls to reposition ambulancespatient-related calls1,400,0001,200,000# of Ambulance Calls1,000,000800,000600,000400,000200,0000We noted that the total cost of providing emergencyhealth services in Ontario has increasedby 94% over the last four years, from $352 millionin the 1999/2000 fiscal year to an estimated$683 million in 2003/04. Ministry documentsindicated that the increased costs were due primarilyto three factors:•2000 2001 2002 2003 2004Paramedic wages have increased. Since wagesconstitute about 85% of the total costs of landambulance services, wage increases can have asignificant impact on program costs.•noted a rise of 18% between 2001 and 2004.• The number of ambulances has increased.The number of paramedics has increased—weIncreases in the numbers of paramedics andambulances were the result of increased calls forambulances and of efforts to reduce responsetimes. The overall number of calls for ambulancesincreased by about 19% since 2000. However, thisYearnumber includes all calls to reposition ambulanceswaiting for the next patient call. We noted that,once these repositioning calls are excluded, thetotal number of patient-related calls has remainedat about the same level, as shown in Figure 5.We recommended in our 2000 audit reportthat the Ministry develop a process to assess relativeneed, ensure reasonable and equitable fundingacross the province, and define which municipalcosts qualify for provincial funding. In addition, theStanding Committee on Public Accounts recommendedin 2001 that the Ministry determine theimmediate and long-term municipal costs associatedwith providing emergency health services andundertake to ensure that provincial funding is reasonableand equitable.Although, as we noted in our 2000 audit report,the Ministry itself raised concerns that differencesin the quality of care and services may appearChapter 3 • VFM Section 3.02

482005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02between municipalities and across the province(due to, for example, differences in municipaltax bases), the Ministry has not ensured that servicelevels are comparable across similar jurisdictionsin Ontario. In fact, the Ministry informed usthat varying service levels are expected, due to thevarying resources of municipalities. As for comparabilityof costs for services, the Ontario MunicipalChief Administrative Officer’s BenchmarkingInitiative, comprising 17 municipalities in Ontariothat identify and share performance statistics andoperational best practices, calculated that in 2003,the cost per household of municipally run landambulance services for the 12 municipalities thatreported information ranged from $57 to $150and averaged $89 among the participatingmunicipalities.The Ministry had not recently assessed theactual costs of meeting the 1996 response-timestandards or determined whether available ministryfunding to municipalities was reasonable andequitable in order to better achieve the existencethroughout Ontario of a balanced and integratedsystem of land ambulance services. Rather, theMinistry has generally funded municipalities for50% of approved eligible costs, based on a fundingformula template developed by the Ministryin conjunction with the Land Ambulance ImplementationSteering Committee and based on availableministry funding. Approved eligible costs arelargely based on the service levels and costs thatexisted prior to 2001, when municipalities tookover responsibility for ambulance services from theprovince with additional funding for negotiatedadjustments and other initiatives such as responsetimefunding.The funding formula indicated that the Ministrywould consider additional funding for special circumstances,provided that a municipality made abusiness case for it. Ministry documents indicatedthat most municipalities did so, but additional Ministryfunding was unavailable to address the specificareas identified. Moreover, the $30 million inResponse Time Improvement Initiative funding wasallocated based not on the relative needs of eachmunicipality, but rather on municipal proposals toreduce response times. The funding allocation wasalso impacted because the Ministry would only providefunding if a municipality matched it dollar fordollar.Ministry funding is therefore below 50% oftotal expenditures reported by municipalities. Forexample, Ministry documents indicate that theestimated cost-sharing of land ambulance servicesin 2003 was 47% provincial and 53% municipal;however, some municipalities bore over 60% of thecost. In addition, the Ministry estimated that actualcosts will be between $72 million and $103 millionhigher than approved eligible costs in 2005, dueprimarily to paramedic wage increases, some ofwhich were determined by a government-appointedarbitrator (the Ministry only funds up to 1% ofapproved eligible costs relating to wage increases,and municipalities fund the rest). Also in thisregard, the Association of Municipal EmergencyMedical Services of Ontario, representing landambulance operators in Ontario, estimated thatMinistry funding in 2005 would only cover between28% and 45% of total municipally reported landambulance costs.RECOMMENDATIONThe Ministry, in conjunction with the municipalities,should develop a process to better achievethe existence throughout Ontario of a balancedand integrated system of land ambulanceservices.MINISTRY RESPONSEThe Minister recently announced that landambulance discussions between municipal andprovincial officials would be convened to discussa number of issues. Recommendations arising

Ambulance Services—Land49from the discussions are expected to promotethe existence of a balanced and integrated systemof land ambulance services.Ministry Monitoring of CostsAs noted earlier, the Ministry provides grants tomunicipalities of up to 50% of approved eligibleland ambulance costs. Each municipality sendsthe Ministry a signed statement of its annual grossoperating costs, which the Ministry relies on toconfirm eligible costs. However, the Ministry doesnot require any additional third-party assuranceon the validity or existence of the stated expendituresand does not otherwise monitor municipalitiesto ensure that funding was spent for theintended purpose (except for some monitoring ofthe Response Time Improvement Initiative). TheMinistry estimates that 85% of ministry-approvedeligible costs relate to wages, and it funds a maximumof 1% of any wage increases annually. Othercosts are generally funded at the same rate as theprior year.The Ministry’s definition of eligible costs includesmunicipal reserve funds to offset future land ambulanceservice costs. Municipalities are permitted tomaintain severance, ambulance replacement, and“other” reserves, and the total additions to, reductionsof, and final balances of these reserves arereported annually to the Ministry. However, generallyno details on the intended use of the “other”reserves or how any of the reserves are ultimatelyspent were requested by or provided to the Ministry.According to the signed cost statements submittedby municipalities, total cumulative reservesfor emergency health services at December 31, 2003were $47 million. This consisted of $10 million forseverance reserves, $16 million for vehicle reserves,and $21 million for “other” reserves. We noted thatthe Ministry did not place limits on the amount ofprovincial funding that municipalities could put intoreserve funds. Furthermore, we noted that the Ministryfunded one municipality at least $4.7 millionin 2003 for reserve funds. We believe that the Ministryshould reassess its position on allowing municipalitiesto build up large reserve funds and considerwhether third-party or internal-audit assurance oncosts claimed by municipalities is warranted—especiallyfor the larger municipalities. For example, theMinistry may want to consider having its InternalAudit Services conduct risk-based audits of municipalcosts claimed.RECOMMENDATIONTo better ensure the cost effectiveness of fundingfor land ambulance services, the Ministry shouldreassess its position on the size of municipalreserve funds allowed and consider obtainingthird-party or internal-audit assurance on costsclaimed by municipalities where warranted.MINISTRY RESPONSEThe Ministry currently monitors municipalspending, including reserves, to ensure thatmunicipalities report that all related ministryfunding is spent on land ambulance services.Based upon the funds required to address thefuture costs of such items as vehicles, equipment,and severance, the Ministry’s position isthat the accumulated reserves for most municipalitiesare reasonable. If a municipality accumulateslarge reserves, the Ministry contactsthe municipality to obtain information on theexpected disposition of these reserves. TheMinistry will conduct further follow-up wherenecessary to ensure the reasonableness ofmunicipal reserves.In accordance with the Municipal AffairsAct, only the Ministry of Municipal Affairs andHousing may conduct an audit of a municipality.Under the Municipal Act, municipalitiesare required to have an annual audit and toChapter 3 • VFM Section 3.02

502005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02file annual audited financial statements withthe Ministry of Municipal Affairs and Housing.If considered necessary, the Ministry willwork with the Ministry of Municipal Affairs andHousing to obtain additional assurance on costsclaimed by municipalities.Cross-boundary BillingsTo compensate municipalities for providing ambulanceservices outside their own boundaries, amunicipality may bill another municipality for across-boundary ambulance trip. A regulation underthe Ambulance Act defines what can be billed, basedon “total costs” and “total number of calls”; it doesnot, however, provide sufficient clarification foreither component. For example, the regulation didnot indicate whether:•“total costs” were net of provincial funding, orthe extent to which overhead or capital items,such as the construction of ambulance baseswhere operators park and maintain fleets, wereto be considered in calculating total costs; and• “total number of calls” included all instanceswhen an ambulance was dispatched, or onlythose calls where a patient was actuallytransported.In fall 2002, the municipal members of theCross-Border Billings Working Group, comprisingmunicipal and ministry representatives, asked theMinistry to clearly define the amount municipalitiescould charge each other for cross-boundary calls. InFebruary 2003, the Ministry provided a formal definitionthat partially clarified “total costs” and “totalnumber of calls.”The Ministry’s July 2004 Status Update on theTransfer of Land Ambulance Services Under LocalServices Realignment observed that the crossboundarybilling issue was still an unresolved problemof Realignment. In late 2004, the Ministrywas informed that municipal representatives weredeveloping a proposal to address cross-boundarycharges, but the Ministry had received no formaldetails on this proposal by May 2005. As well,municipalities had expressed concerns over a lackof timely access to accurate data on calls made outsidetheir municipal boundaries—data that wererequired for billing purposes. In April 2005, theAssociation of Municipal Emergency Medical Servicesof Ontario surveyed its members and foundthat 35 of 39 survey respondents had neithercharged nor paid other municipalities for crossboundaryservices since 2001.RECOMMENDATIONTo encourage the quickest response time regardlessof municipal boundaries, the Ministryshould work with municipalities to help facilitateinter-municipal billing, including:•clearly defining the chargeable amountwhen an ambulance crosses a municipalboundary; and•ensuring that municipalities have timelyaccess to accurate data for billing purposes.MINISTRY RESPONSEThe Minister recently announced that landambulance discussions between provincial andmunicipal officials would be convened to discussa number of issues. It is expected that a reviewof the measures necessary to fulfill this recommendationwill be discussed at that forum.In addition, the Ministry is working withmunicipalities to provide them with timelyaccess to the ambulance data required for billingpurposes.DISPATCH OPERATIONSDispatch centres co-ordinate and direct the movementof all land ambulances in Ontario. As of

Ambulance Services—Land51May 2005, there were 18 computer-aided dispatchcentres: 11 operated by the Ministry, four by hospitals,and three by municipalities. The remainingdispatch centres did not use computer-aided dispatchsystems. The Ministry is responsible for fundingdispatch centres, which had total expendituresof $79 million in the 2004/05 fiscal year.Dispatch PriorityAn effective dispatch protocol assists dispatch centresto rapidly identify patient problems, assignpriority codes (as shown in Figure 3), and provideinstructions to callers. Under-prioritizing a callmay jeopardize patient safety; consistently overprioritizingcalls, however, places stress on the systemand may result in increased response times forthe most serious code 4 calls.In our 2000 audit report, we noted concernswith the dispatch protocol then in use and recommendedthat the Ministry ensure that dispatchcentres appropriately assess and prioritize patientneeds. The Ministry indicated at that time that aworking group was reviewing the Dispatch PriorityCard Index, which is the protocol used by mostdispatch centres. In 2000, the working group determinedthat the Index was “an outdated tool that nolonger served its purpose well.” The working groupconcluded that the Index needed to become moremedically based and offer more meaningful prearrivalinstructions.In 2001, the Standing Committee on PublicAccounts recommended that the Ministry reviewwhether dispatch centres properly assessed and prioritizedpatient needs once new initiatives, such asa dispatch protocol, had been in operation for oneyear. However, the Ministry informed us that a newdispatch protocol Index was being reviewed buthad not been implemented because it could not beintegrated with the computer-aided system then inuse by most dispatch centres. Consequently, at thetime of our audit, the original Index was still beingused by most dispatch centres, with some modificationsin April 2004 to incorporate choking hazardsand CPR. No other significant changes were madeto address problems identified in 2000 by the workinggroup.In September 2004, a coroner’s inquest recommendedthat the Index be replaced with aninternationally used dispatch protocol, which iscontinuously updated and improved based on theexperiences of the system’s users. The coroner’sinquest also noted that this system’s “precise protocolminimizes judgement on the side of the call takersand dispatchers.”As of May 2005, 12 dispatch centres had implementeda new computer-aided dispatch system,with the remainder expected to implement thesystem by 2006. The Ministry informed us thatthis system is compatible with a revised dispatchprotocol Index that it planned to introduce oncethe new computer-aided dispatch system was fullyimplemented. The Ministry also informed us thatit planned to conduct an operational and medicalquality review of other dispatch protocols, includingthe internationally used protocol referred to inthe coroner’s inquest, to determine which was bestfor Ontario.RECOMMENDATIONTo help dispatch centres better respond to eachpatient’s needs, the Ministry should expedite adecision on its choice of dispatch protocols.MINISTRY RESPONSEThe Ministry is evaluating one of many internationallyused dispatch protocols as part ofthe Niagara Ambulance Communication Servicepilot project and will use this evaluation toexpedite a decision on the choice of dispatchprotocols.Chapter 3 • VFM Section 3.02

522005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02Responsibility for DispatchThe appropriate organization and management ofambulance dispatch centres is necessary for effectiveand efficient management of ambulance systemresources. In our 2000 audit report, we notedthere were differences of opinion concerning thegovernance and management of dispatch centres.The Dispatch Subcommittee of the Land AmbulanceImplementation Steering Committee statedthat municipalities should have the right to manageambulance dispatch, but they should not be forcedinto it. The Ontario Hospital Association, meanwhile,maintained that ambulance dispatch servicesshould remain a provincial responsibility to ensurethat both emergency and non-emergency servicesare co-ordinated and seamless to patients.In addition, consultants engaged by the Ministryin September 1998 to consider various optionsfor the future of land ambulance dispatch said thatdividing the responsibility for ambulances and dispatch“creates significant limitations in the abilityto design and implement a more efficient andeffective overall system.” They also reported thatconsolidation of existing dispatch centres wouldimprove co-ordination of resources across a widerarea and better enable patient access to emergencyservices. As well, Ministry documents in 2003 indicatedan international trend towards a reductionin the number of dispatch centres. We also notedthat a number of other jurisdictions were consolidatingdispatch centres at the time of our audit.For example, New Zealand’s strategic review onambulance dispatch operations, expected to befully implemented by late 2006, recommended cuttingthe number of dispatch centres by more thanhalf and having these centres jointly governed bythe ambulance services in that area. While the Ministryhas considered the impacts, including cost, ofincreasing or decreasing the number of dispatchcentres, it has not formally evaluated the appropriatenessof either the number or the location ofdispatch centres across the province since our lastaudit.Since 2000, when there were two municipallyrun dispatch centres in the province, the Ministryhas assigned management responsibility for operationof one more dispatch centre to a third municipalityand, despite the previously mentionedtrends, approved the creation of an additional dispatchcentre, which will be evaluated in a five-yearpilot project to determine the feasibility of municipalitiesoperating their own dispatch centres. Thiscentre was scheduled to open in June 2005 and willbe run by another municipality, whose dispatchboundaries will be primarily the same as its municipalboundaries. The Ministry plans to evaluate thepilot project to determine if individually operatedmunicipal dispatch centres can demonstrate anyimprovement over centralized dispatch. Given thetrend of municipalities being increasingly resistantto having their ambulances respond to callsoutside of their municipal boundaries, the impactof municipally run dispatch centres on a seamlessemergency response system will need to be carefullyassessed.RECOMMENDATIONTo help ensure that ambulance services areintegrated, balanced, and efficient, the Ministryshould expedite its evaluation of the pilotproject, particularly with respect to the issueof municipal versus centralized dispatch, andincorporate best practices and research fromother jurisdictions in its determination of theappropriate number, location, and managementof ambulance dispatch centres.MINISTRY RESPONSEThe Ministry is committed to evaluating thepilot project in a timely manner.

Ambulance Services—Land53Dispatch StaffingIn 2001, the Ministry commissioned an externalreview to investigate the operations of one ministryrundispatch centre and recommend changes toenhance the dispatch system. The review noted thatit is important to ensure that centres are appropriatelystaffed in order to dispatch ambulances asquickly and efficiently as possible. In addition, thereview observed that many ambulance dispatchershad left to join municipal fire and police dispatchcentres. The review recommended more competitivewages to reduce high turnover and attractqualified candidates to ambulance centres. It alsorecommended a reduction in the ratio of calls todispatcher, from the then-current 5,500 calls annuallyper full-time staff dispatcher to about 4,200calls, which more closely approximates the workloadsof other jurisdictions. As a result, the Ministryapproved wage increases in 2002 and again in 2004and introduced policy changes to reduce the ratioto 4,200 calls per full-time staff dispatcher. At thetime of our audit, however, some dispatch centreshad been unable to meet the new target ratio.The Ministry observed in 2003 that, despitethese policy changes, recruiting and retaining staffat dispatch centres continued to be difficult, andthe Ministry found that almost one dispatcherleft for every two hired for the first seven monthsof 2003. While the Ministry informed us that it isreviewing turnover rates, information was not readilyavailable on the total number of dispatchers wholeft in 2004. In addition, the Ministry informed usthat recent contract negotiations have resulted inministry dispatchers being paid a wage more competitivewith municipal dispatchers, including fireand police dispatchers. We will follow up on thestatus of dispatcher turnover rates at the time ofour next audit.REVIEWSReviews of Land Ambulance OperatorsStarting in 2000, the Ambulance Act required thecertification of all land ambulance service operatorsat least once every three years. Service reviewsconducted by ministry-led peer review teamsdetermine if operators are meeting certificationstandards. These reviews include an evaluation ofthe level and type of ambulance service provided,the qualifications of patient-care providers, maintenanceof vehicles and equipment in accordancewith standards, compliance with response-timestandards, and measures taken to ensure properpatient care. The Ministry considered operators tobe meeting certification standards if their only deficiencywas failure to meet response-time standards.Reports on whether certification standards aremet, along with any recommendations, are forwardedto the service operator. Follow-up inspections,or follow-up service reviews for operatorswith more significant issues, are conducted bythe Ministry to ensure that recommendations areimplemented. Under the Ambulance Act, the Ministrymay also issue a Director’s Order to operatorsrequiring that changes be made within a specifiedtime if the operators have failed to meet certificationstandards.In our 2000 audit report, we recommended thatthe Ministry consider unannounced certificationreviews to ensure consistent quality of practice byoperators. We noted in our current audit, however,that ambulance operators continued to receive 90days’ advance warning of a service review. The Ministryalso generally gave advance notice of followupinspections and follow-up service reviews.We found that service reviews were generallyconducted within the required three-year period.However, based on ministry records, we calculatedthat between 2002 and 2004, 43% of operatorsdid not meet the certification standards duringtheir service review. In our 2000 audit report, weChapter 3 • VFM Section 3.02

542005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02recommended that the Ministry ensure a timely,co-ordinated follow-up of all deficiencies identifiedduring service reviews. At the time of our currentaudit, however, ministry policies did not require afollow-up service review or inspection until at least60 days after the Ministry received the operator’sresponse to the service review report. Furthermore,at least 50% of operators who did not meet certificationstandards in 2003 and 2004 had no followupinspection or service review within six months.In addition, some of the files we reviewed indicatedthat, between 2002 and 2004, ambulanceoperators did not meet certification standards butwere still recertified, without any documentationto support the decision. For example, one operatorwe reviewed continued to provide ambulance servicesdespite repeated instances of non-compliancewith certification standards between 2001 and2004. Examples of the operator’s non-complianceincluded improperly completed Ambulance CallReports (including details of patient examinationand status), inadequate securing of patient-careequipment in ambulances, and failing to documentwhether paramedics had completed core trainingor been immunized against communicable diseases.We also recommended in our 2000 audit reportthat the Ministry clarify those circumstances whenoperator certification should be revoked. Such apolicy had not been developed at the time of ourcurrent audit, and no service providers have hadtheir certification revoked since the province begancertifying operators in 2000.The Ministry noted that Director’s Orders wereoften more effective than service review reportsin achieving timely compliance with servicereview recommendations because they were alsoaddressed to municipal councils. We were informedthat Director’s Orders were issued based on the professionaljudgment of senior ministry personnel.We noted, however, that Director’s Orders were notconsistently issued based on service review results.For example, a Director’s Order was issued to oneservice provider who did not pass a service reviewin 2004, while others who also failed to pass—andin fact received lower overall evaluations—did notreceive a Director’s Order.RECOMMENDATIONTo better ensure that land ambulance serviceoperators meet certification standards, the Ministryshould:•conduct, based on risk, a reasonable numberof service reviews on an unannounced basisto increase assurance of consistent quality ofpractice by operators;•where operators do not meet certificationstandards, conduct the required follow-upservice reviews and inspections on a moretimely basis; and•clarify when Director’s Orders should beissued and under what circumstances formalconsideration of revoking an operator’s certificationshould be undertaken.MINISTRY RESPONSEIn accordance with the certification standards,service reviews of ambulance operators areannounced in advance. Since service reviewsrequire a significant commitment of ambulanceoperator time and resources while the reviewteam is on-site, conducting these reviews withoutwarning and proper planning on the partof both parties might present a serious risk ofdisrupting the ambulance operator’s delivery ofland ambulance services. In concert with municipalrepresentatives, the Ministry will reviewthe certification standards and assess the appropriatenessof unannounced service reviews.The standard is to send the draft servicereview report to the service provider within60 days following the conclusion of the reviewvisit. The service provider is given 60 dayswithin which to respond to the review findings.

Ambulance Services—Land55Follow-up visits are scheduled for 60 to 90 daysfollowing receipt of the operator’s response tothe draft service review report. In concert withmunicipal representatives, the Ministry willreview this standard to determine the reasonablenessof conducting follow-up reviews on amore timely basis.Director’s Orders are reserved for infractionsthat have a direct bearing on patient careor public safety (for example, use of unqualifiedstaff or unsafe equipment) or when a municipalityis seen to be consistently failing to complywith the legislation or failing to follow up on therecommendations of a service review. To date,compliance has been achieved without the needfor revocation of a certificate. The Ministry willreview when Director’s Orders or revocation ofan operator’s certificate should be considered.Reviews of Dispatch CentresOperational reviews of dispatch centres areintended to ensure compliance with ministryrequirements, including policies on staff qualifications,appropriate provision of service, and properprocedures for responding to emergency calls. Inour 2000 audit report, we noted that the Ministryhad conducted operational reviews on only 37% ofdispatch centres. We recommended that the Ministryreview all dispatch centres within reasonabletime frames and resolve all identified deficiencieson a timely basis. In 2001, the Standing Committeeon Public Accounts also recommended that theMinistry document the findings and timing of itsoperational reviews of dispatch centres to ensuretimely checks, reporting, and corrective action.Although the Ministry indicated that it woulddevelop schedules to ensure that operationalreviews were conducted within reasonable timeframes, it had conducted only one review of a dispatchcentre since our 2000 audit, and the reviewresults had not been finalized at the time of ouraudit fieldwork. The Ministry informed us thatreviews were generally not conducted becauseit believed that such reviews would disrupt theoperational integrity of dispatch centres and createa public safety risk, due to the previously cited staffingproblems and other pressures, including theintroduction of new technologies. The Ministryexpected greater staffing and technology stabilityat dispatch centres upon full implementation in2006 of the new computer-aided dispatch systemdiscussed in the Dispatch Priority section of thisreport. The Ministry also informed us that it wasredeveloping its operational review process for dispatchcentres and expected to have it implementedin fall 2005.While ministry-performed reviews were generallynot done, an external review of one dispatchcentre, conducted at the request of municipalitiesconcerned with that dispatch centre’s operations,recommended that the Ministry introduce a welldefinedand active internal quality-assurance programto:•routinely monitor and assess the dispatch centre’soverall operational performance, and theperformance of individual dispatchers;•warranted; and•identify and implement corrective actions whenfollow up and evaluate the effectiveness of theseactions.The report noted that quality-assurance programscovering dispatch protocols were in placein other jurisdictions. Such programs track andevaluate how well dispatchers perform their duties,including how quickly they assess calls. We furthernoted that the agreement with one municipalityrequired a rigorous quality-assurance processinvolving the review of a sample of calls to ensurethat proper policies and protocols were followed forcall receipt and ambulance dispatch. Our review ofthe quality-assurance process results indicated thatthis process has contributed to improvements inChapter 3 • VFM Section 3.02

562005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02the dispatch centre’s operations, such as improvementsin the dispatcher’s obtaining of requiredinformation on the patient’s condition from callers.Although the Ministry informed us that it waspiloting a standardized internal quality-assuranceprocess with the objective of implementing it inthe other dispatch centres, at the time of our auditdispatch centres used varying quality-assuranceprocesses.RECOMMENDATIONTo help ensure that land ambulance dispatchcentres are effective and comply with ministrystandards, the Ministry should:•perform periodic reviews of the dispatchcentres’ operations, including a review of asample of calls to determine whether theyare appropriately handled and prioritized;and•implement a standardized quality-assuranceprocess to monitor and assess the overalloperational performance of all dispatchcentres and the individual performance ofdispatchers.MINISTRY RESPONSEDispatch-centre staffing has recently been stabilized,and a prototype service review has beenpiloted. A regular review of dispatch centres isscheduled to commence in fall 2005 with a viewto reviewing six or seven dispatch centres peryear. The review process for dispatch centrescontains a call-sampling tool for use in reviewingcall priority and management by call takersand dispatchers.A standardized quality-assurance process fordispatch centres has been developed, and a pilothas been in progress in four dispatch centresin Eastern Ontario since spring 2005. The finalquality-assurance program will be implementedin all dispatch centres by March 2006.BASE HOSPITALSBase hospitals are ministry-designated hospitalsthat train, certify, and provide on-the-job medicaldirection to paramedics. They also monitor andevaluate the care provided by paramedics byreviewing Ambulance Call Reports, the medicalrecord used by paramedics to document each call.There are 21 base hospitals across the province.In 2002, the Ministry asked the Ontario BaseHospital Group Executive, representing base hospitals,to review base hospital operations. One objectiveof the review was a rationalization of services.The review also included:••paramedics;•delivered more effectively; and•identifying core business activities;examining the changing responsibilities ofdetermining whether core activities could bedetermining whether resources could be appliedmore effectively.The Executive reported in 2002 that there wasa lack of consistency, standardization, and benchmarkingamong base hospitals. It maintained thatan effective standardized provincial approach tobase hospital performance agreements, medicaldirectives, and continuing medical education forparamedics would produce better results and moretimely quality-assurance data. The Executive furthernoted that medical directives providing directionto paramedics were not being updated on atimely basis. The Ministry informed us that it didnot accept the Executive’s report and recommendationsbecause the Executive’s review had not fulfilledits assigned mandate—for example, it did notoutline the core activities of base hospitals.We noted that the base hospital performanceagreements had not been revised to reflect thenew relationship between municipalities and basehospitals arising from Realignment. In addition,we noted that, since 2000, the Ministry had notapproved any new medical directives, which areused by paramedics to treat patients.

Ambulance Services—Land57In 2003, the Ministry established a workinggroup, consisting of ministry and base hospital representatives,to review the organization of basehospitals in order to provide options for a moreefficient, effective, and sustainable base hospitalsystem and to enhance program accountability forbase hospitals. This working group’s recommendationsincluded:•establishing a regional structure for base hospitalsto ensure a more consistent application ofprovincial standards, including medical delegation,and an equitable distribution of resources;•setting a target for the minimum number of paramedicsunder each regional program to enablespecialization and promotion of efficiency, maximizationof available program staff, and reductionof duplication; and•realigning provincial funding of base hospitalsto ensure that it reflects the rationalization.The Ministry indicated to us that, despite thefact that there were ministry representatives inthe working group, it did not accept the workinggroup’s recommendations, for reasons similar tothose it had for not accepting the Executive’s 2002report and recommendations.At the time of our audit, with the exception ofthe recent voluntary amalgamation of two basehospitals, no further rationalization of the 21 basehospitals had taken place. The Ministry indicatedthat a physician had been appointed in spring 2005with the lead responsibility for defining the futurestructure of the base hospital program.Base Hospital ReportingBase hospitals are required to submit annualreports to the Ministry on a variety of operationaland quality-of-care issues. A ministry analysis ofannual reports for the 2003/04 fiscal year notedmany areas where base hospital practices andreporting were inconsistent and where funding ofbase hospitals was not equitable. The analysis indicatedthat:•Fourteen percent of base hospitals did not reportthe number of patient-care errors and omissions(that is, paramedics not providing patient treatmentin accordance with established standards),while the others reported a total of 1,170 errorsand omissions.•Despite a requirement to do so, only 55% of thebase hospitals said that they monitored 100% ofthe Ambulance Call Reports (ACRs) involvingparamedics’ use of advanced life-support techniques,such as non-automated external cardiacdefibrillation and monitoring. For example, onebase hospital was required to have monitoredalmost 8,000 ACRs but monitored only about4,800.•Based on budgeted funding, the cost of providingbase hospital support to paramedics rangedfrom $1,600 to $3,000 per paramedic.We also reviewed a sample of base hospitalannual reports and identified similar issues regardingthe lack of consistency and completeness ofreported information. For example, despite arequirement to do so, none of the base hospitalreports included any summary of the overall resultsof quality-assurance activities regarding patientcareskills, such as the success rates of certain paramedicinterventions.The Ministry conducts service reviews of basehospitals every three years or so, which includesevaluating whether the base hospitals meet therequirements set out in their performance agreementswith the Ministry. One requirement stipulatesa consistent and equitable process for identifying,recertifying, and decertifying paramedics who havebreached medical standards of practice. Anothercalls for chart audits involving ambulance callswhere certain procedures may have been requiredbut were not performed. We further noted that,based on service reviews conducted by the Ministrybetween 2001 and 2004, 23% of base hospitals didChapter 3 • VFM Section 3.02

582005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.02not meet, or only partially met, ministry requirements.In addition, although the Ministry informedus that it regularly followed up to ensure that deficiencieswere corrected, it was generally unable toprovide us with supporting documentation.RECOMMENDATIONTo better ensure that paramedics provide qualitypatient care, the Ministry should determinethe optimal number and distribution of basehospitals (since such hospitals train, certify, andprovide medical direction to paramedics) andensure that base hospitals adhere to consistentstandards regarding areas such as quality assuranceand the continuing medical education ofparamedics.MINISTRY RESPONSEThe lead for the transformation of medicaltransportation for the province, appointed inspring 2005, has been charged with the responsibilityto review the delivery of base hospitalprogram services and to recommend the optimalnumber and distribution of base hospitalprograms. The Ministry is expecting a reportfrom the lead in fall 2005.COMPLAINTS AND INCIDENTSThe Ambulance Act states that the Minister has theduty and power to investigate complaints aboutambulance services. Ministry records indicate thatthe Ministry conducts approximately 80 such investigationseach year.In our 2000 audit report, we recommended thatthe Ministry establish clear lines of responsibilityfor following up on deficiencies identified in complaintinvestigation reports. We also recommendedthat it ensure that follow-ups were completed anddocumented to better enable it to assess whethercomplaints were satisfactorily resolved. In our currentaudit, we found that the Ministry generallylogged, assigned, and investigated the complaintsit received in a timely manner. Furthermore, theMinistry was generally following up on deficienciesidentified.However, most complaints about ambulance servicesare made not to the Ministry but to the serviceprovider. For example, one municipality reportedreceiving about 300 complaints in 2004. Ministrypolicy requires service providers to complete incidentreports for each complaint, each investigationthey conduct, and every unusual occurrence (includingdelays in accessing a patient or an excessiveamount of time on the scene). However, there is norequirement to forward incident reports to the Ministryunless they relate to an unusual occurrence.Furthermore, ministry policy does not specificallydefine what constitutes an “unusual” occurrencewith respect to response times or other delays;rather, this is left up to each service provider. However,municipalities may voluntarily forward otherincident reports to the Ministry.RECOMMENDATIONTo help ensure that recurring potential problemsare identified as early as possible, the Ministryand the municipalities should jointly developand implement a process to ensure that theMinistry receives adequate information on thenature and resolution of the more serious complaintsmade about land ambulance services.MINISTRY RESPONSEMinistry staff have agreed with municipalofficials on an investigations protocol thataddresses the operational practices on the partof both parties when handling complaints aboutservice delivery. Further consultation will beheld with the municipal representatives to

Ambulance Services—Land59improve compliance with the reporting requirementsin the legislation and the protocol.Ministry staff have been tracking investigationsand their follow-up and assessing the type,nature, and frequency of each type of complaint.This process will continue.PERFORMANCE MEASUREMENT ANDREPORTINGEffective accountability requires that patients andtheir families, the Legislature, and the general publicbe provided with timely and reliable informationabout the performance of land ambulance services.As well, performance information is needed toenable the Ministry to make funding decisions, andevaluate the extent to which the system is providingintegrated and seamless service, and quality care.In our 2000 audit report, we recommendedthat the Ministry research systems for analyzingoperator performance and its impact on patientoutcomes to help ensure that the land ambulancesystem effectively meets patient needs.Subsequent to our audit, the Standing Committeeon Public Accounts recommended in 2001that the Ministry should ensure compliance withmunicipal response-time standards throughoutthe province. The Committee also recommendedthat the results of the monitoring be evaluated andmade public on a regular basis. This would providepublic disclosure, transparency, and accountabilityfor achievement of land ambulance response-timestandards in all Ontario jurisdictions.We found that the Ministry monitored dispatchcentreand municipal ambulance service responsetimes on a regular basis but was not making itsfindings public. We noted that some jurisdictionsoutside Ontario reported annually on responsetimes. In addition, as previously mentioned in thisreport, the Ministry conducted service reviews ofland ambulance operators, including elements ofoperator performance, such as patient-care management.These reviews are to be done once everythree years. However, the results of the reviews arenot made public.We also found that other jurisdictions usedadditional performance indicators, including survivalrates for cardiac arrests, patient satisfaction,and appropriate administration of acetylsalicylicacid (Aspirin) for suspected coronary artery disease(heart attack). They reported publicly on theseindicators and stated that they were planning toimplement others.RECOMMENDATIONTo help ensure that ambulance services areaccountable and to support continuous improvementin services, the Ministry and municipalitiesshould jointly establish pertinent performancemeasures such as response times and report publiclyand regularly on these land ambulance serviceperformance measures.MINISTRY RESPONSEThe Minister recently announced that landambulance discussions between municipal andprovincial officials would be convened to discussa number of issues. It is anticipated that a discussionrelating to this recommendation will beincluded at that forum.Chapter 3 • VFM Section 3.02

Chapter 3Section3.03Ministry of Government ServicesCharitable GamingChapter 3 • VFM Section 3.03BackgroundUnder the Criminal Code of Canada, provinces areassigned the responsibility for operating, licensing,and regulating legal forms of gaming. A charitableorganization, pursuant to a licence issued under theauthority of the province, can conduct and managecharitable gaming provided that the net proceedsare used for a charitable purpose. The Alcohol andGaming Commission of Ontario (Commission) wasestablished on February 23, 1998, as a regulatoryagency that operates under the Alcohol and GamingRegulation and Public Protection Act, 1996. Its mandaterelating to charitable gaming is to ensure thatthe games are conducted in the public interest,by people with integrity, and in a manner that issocially and financially responsible.Ontario is one of the largest charitable gamingmarkets in North America. The Commissionestimates that approximately $1.6 billion waswagered in 2003 by the public on charitable gamingprovince-wide. Charitable gaming activitiesinclude bingo events, sales of break-open tickets(a type of instant-win lottery ticket, also calledNevada or pull-tab tickets), and local and provincewideraffles. Each single occasion of such an activityis known as a lottery event. Charitable gamingin Ontario benefits thousands of local communitycharitable organizations, which received net revenuesestimated by the Commission at $246 millionfor 2003. (See Figure 1.)The Commission is responsible for charitablegaming using a regulatory framework of legislationand policies, supplier and employee registrations,licensing of lottery events, inspection, and enforcement.It assumed responsibility for the administrationof legislation previously administered by theformer Gaming Control Commission. Annually, theCommission registers about 9,600 businesses andindividuals, and issues about 2,600 lottery licences,Figure 1: Estimate of Money Wagered in CharitableGaming, 2003 ($ million)Source of data: Alcohol and Gaming Commission of OntarioTotal wagered: $1,643prize payouts ($1,140)proceeds to charitableorganizations ($246)licensing fees paid tothe Commission andmunicipalities ($29)payments togoods andservices suppliers($228)60

Charitable Gaming61primarily for province-wide or large-dollar lotteryevents. The province has granted municipalitiesthe authority to issue licences, and they issue about43,000 licences annually for smaller local lotteryevents.In the 2004/05 fiscal year, the Commissionspent approximately $11 million on its charitablegaming–related regulatory activities, primarily forstaffing costs, and received approximately $30 millionin fees from charitable gaming sources (seeFigure 2).The Commission’s operations are located atits main head/regional office in Toronto and nineregional offices in Ontario. Regional offices arestaffed with members of the Ontario ProvincialPolice and liquor licence inspectors, who conductinspections of gaming facilities and break-openticket sellers.Audit Objective and ScopeOur audit objective was to assess whether the Commissionhad adequate systems and procedures inplace to:•effectively and efficiently fulfill its mandate ofensuring that charitable gaming is conductedin the public interest, by people with integrity,and in a manner that is socially and financiallyresponsible; and•ensure compliance with legislation and Commissionpolicies that are established for charitygaming.Our audit fieldwork included a review ofrelevant files and administrative policies andinterviews of staff at the Commission’s head officeand three regional offices.In addition to our work at the Commission, wealso met with lottery licensing representatives fromsix municipalities and with the Ontario CharitableFigure 2: Charitable Gaming Fees Paid to the Province,2004/05 ($ million)Source of data: Alcohol and Gaming Commission of Ontarioprovincial administrationfees on break-open tickets($15.1)Gaming Association, which represents a number ofcharities involved in charitable gaming activities.We surveyed approximately 100 municipalitieswith lottery licensing offices about their views onthe delivery of the charitable gaming program. Wereceived excellent co-operation from the municipalities,with over 90% of them responding to oursurvey.Our audit was conducted in accordance withstandards for assurance engagements, encompassingvalue for money and compliance, established bythe Canadian Institute of Chartered Accountants,and accordingly included such tests and other proceduresas we considered necessary in the circumstances.Total revenues: $29.5registration fees on goods andservices suppliers ($2.8)licensing fees onlottery events ($11.6)We did not rely on the Ministry of GovernmentServices’ internal auditors, who provide their servicesto the Commission, to reduce the extent of ourprocedures because they had not conducted anyrecent work in the areas covered by our audit.Chapter 3 • VFM Section 3.03

622005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03COMMISSION’S DISAGREEMENT WITHSCOPEPrior to the commencement of our audit, we identifiedthe audit criteria that would be used to concludeon the audit objective. These were reviewedby senior Commission management and accepted,except for the following criteria that pertained tothe Commission’s relationship with municipalities:• Clearly defined roles, responsibilities, and performanceexpectations are understood by allparties.•Appropriate oversight is in place to ensure compliancewith gaming legislation and to ensurethat performance expectations are met.•Processes have been established to report onperformance and mechanisms for ongoingexchange of information and to provide for consistencyin approaches to the extent possibleamong licensing authorities.Senior management at the Commission did notbelieve that it has the legislative authority to overseemunicipal licensing activities. Notwithstanding,we still considered it necessary as part of ouraudit to evaluate whether the Commission hadestablished effective relationships with municipalities,particularly since municipalities issue the vastmajority of licences and the Commission is responsiblefor regulating charitable gaming in the province.This matter is discussed in the Oversight ofMunicipal Gaming section of this report.SummaryMunicipalities issue close to 95% of the charitablegaming licences issued in Ontario. Since the Commissionbelieves it does not have the legislativeauthority to oversee municipal licensing activities,it had not established any processes for doing so.However, we believe the Commission’s interpretationof its legislative authority is overly narrow.Without appropriate oversight of and co-ordinationwith municipalities’ licensing activities, the Commissioncannot effectively fulfill its mandate ofensuring the honesty and integrity of gaming inthe province. For instance, it has no assurance thatcharitable organizations are getting the proceedsfrom gaming that they are entitled to and that thoseproceeds are being used for charitable purposes.Feedback we received from almost 100 municipalitiesidentified best practices and a numberof areas where the Commission’s support to municipalitiescould be improved. Many municipalitiesindicated that they would appreciate additionalsupport and guidance in determining charitableorganizations’ eligibility and assessing their financialreporting. As an example of a best practicethat could be promoted among municipalities, wenoted that an ongoing program of licence reviewsdeveloped by one municipality had identified over$3 million of charitable proceeds since 1997 thatshould have been used for charitable purposes butwere not.We also noted several areas where theCommission-delivered regulatory activities requiredstrengthening, as follows:•The Commission has generally established goodregistration requirements to assess the character,financial history, and competence of the keyplayers in the charitable gaming industry. However,it did not ensure that these requirementswere consistently met, nor did it periodicallyverify whether registrants adhered to the termsand conditions of registration.•Procedures were often not followed withrespect to assessing an organization’s eligibilityfor a licence, ensuring that lottery proceedswere used for approved charitable purposes,and verifying that required terms and conditionsof a licence were met. New licences werestill provided to organizations for subsequentlottery events without evidence of any followupon missing documents required from the

Charitable Gaming63organization, such as reports of the use of proceedsfrom previous lottery events.•The Commission had not established formalpolicies for inspections and enforcement withrespect to charitable gaming activities, such asusing a risk-based approach to planning andconducting its inspections. For example, noinspection programs or audits were conductedfor the two break-open ticket manufacturers thatserve all of Ontario or for the approximately 50break-open ticket agents, which supply about90% of all tickets from these manufacturers.For inspections and investigations that werecarried out on bingo operators and break-openticket sellers, half of the municipalities we surveyedindicated that they were not informed ofthe results by the liquor licence inspectors or theOPP.•In 1997, the Management Board of Cabinet providedfunding to strengthen controls and ongoingfunding to hire six additional staff to monitorand audit the production and distribution ofbreak-open tickets. However, many of the keycontrols and the six dedicated staff approvedto oversee this high-risk area were never put inplace. Consequently, the Commission had noassurances that adequate controls were in placeover break-open ticket sales or that the $15 millionthat ticket manufacturers were remitting tothe province as the provincial administration feewas the correct amount.We also made recommendations for ensuringthat the Commission follows prudent project managementpractices, including the requirements ofthe Management Board of Cabinet directives governinginformation technology projects and useof consultants. We further recommended that theCommission develop more comprehensive indicatorsfor measuring and reporting on its performancewith respect to charitable gaming and includemunicipalities’ contribution to regulating gamingactivities in its indicators.Detailed Audit ObservationsRECENT COMMISSION INITIATIVEChanging market conditions over the last decadehave resulted in a significant decline in the numberof charities raising funds through charitable gaming,and for those charities that have continuedto do so, there has been a significant decline inthe revenues generated. For instance, in 1996 thegross amount wagered on bingo was estimated bythe Commission at $1.2 billion; by 2003, the estimatedgross wager for bingo had declined to justover $1 billion. In 1997, sales of break-open ticketswere estimated at $1.2 billion; by 2003, estimatedsales had declined to $360 million. The supportingindustry has also suffered, with the number ofbreak-open ticket sellers and the number of bingocentres declining by almost 50% since the early1990s.As regulator, the Commission does not promotecharitable gaming, but rather focuses on ensuringthat its regulatory framework allows the industry tooperate in an efficient and effective manner.In May 2005, the Commission initiated a comprehensivereview of the charitable gaming regulatorystructure—the first since the current structurewas put in place in the early 1990s—to ensure thatthe regulatory structure was adequate to achieve itsobjectives. These objectives include charitable gamingactivities that are honest, have integrity, meetexpected standards, and help organizations meettheir financial needs to deliver charitable programsto their communities.A major part of the review involved a consultationprocess during the summer of 2005 to obtaininput from interested parties that will be used tohelp develop the key priorities, and best solutionsand recommendations, for positive change.Chapter 3 • VFM Section 3.03

642005 Annual Report of the Office of the Auditor General of OntarioFigure 3: Summary of Licensing Framework for Lottery EventsPrepared by the Office of the Auditor General of OntarioEvents Licensed by CommissionEvents Licensed by Municipalitiesbingo events for prizes totalling over $5,500bingo events for prizes totalling $5,500 and underticket raffle lotteries for total prizes over $50,000break-open ticket lotteries that sell throughout the provinceor at bingo eventsticket raffle lotteries for total prizes of $50,000 and underbreak-open ticket lotteries for local community organizationsall lottery events conducted in unorganized territories bazaar lotteries with prizes up to $500all lottery events at designated fairs or exhibitionssocial gaming eventsChapter 3 • VFM Section 3.03OVERVIEW OF REGULATORYFRAMEWORKCharitable organizations wishing to hold lotteryevents must apply for a licence and manage theirevents in accordance with the terms and conditionsof the licence. To be eligible for a licence, anapplicant must be a not-for-profit organization thatfunds and/or operates charitable programs for therelief of poverty, the advancement of education orreligion, or other charitable purposes beneficial tothe community. The organization must also havebeen in existence for at least one year, have establisheditself in Ontario, and use the lottery event’snet proceeds to directly benefit Ontario residents(for instance, with few exceptions, net proceedscannot be used to fund the charitable organization’soverhead expenses or for charitable activities outsideOntario).The licensing framework and the limits of provincialand municipal licensing are prescribed underOrder-in-Council, as summarized in Figure 3.The terms and conditions of a licence require theorganization to provide the Commission or municipality,within 30 days after the lottery event, with afinancial report that outlines the results of the lotteryevent and how the proceeds were used. Eachyear, the organization must also provide a financialstatement outlining the financial details of alllottery events conducted during the fiscal year.For organizations that obtain net lottery proceedsof $50,000 or more during a year, the financialstatements are required to be reviewed for reasonablenessby a licensed public accountant. Theseorganizations must also provide a compliancereport from a public accountant assessing compliancewith licensing terms and conditions and withregulations relating to the lottery events.Municipalities issue almost 95% of charitablegaming licences in Ontario. During the 2003/04fiscal year, they issued about 43,000 licences andreceived fees of about $17 million. A municipalitymay attach licence terms and conditions in additionto those established by the Commission providedthat they do not conflict with provincial terms andconditions or policies.To assist municipalities in exercising theirauthority, the Commission establishes the terms andconditions for each type of licence, provides guidanceon determining an organization’s eligibility fora licence, provides training, and conducts and mayassist in compliance and enforcement activities.In the 2003/04 fiscal year, the Commissionissued about 2,600 provincial lottery licences forlarge-dollar or province-wide lottery events and collectedfees of approximately $11.6 million.Under the Gaming Control Act, 1992, businessesand individuals that supply gaming equipmentand services to charitable gaming activities

Charitable Gaming65must be registered by the Commission after passinga background check. In the 2003/04 fiscal year,the Commission registered about 9,600 bingo halloperators, bingo paper and break-open ticket manufacturers,gaming service and equipment manufacturersand suppliers, break-open ticket agents (whosupply tickets on behalf of charitable organizationsto break-open ticket sellers), break-open ticket sellers,and key employees (known as gaming assistants)in gaming establishments.To assess compliance with legislation and Commissionpolicy, and to identify and address violations,the Commission is also responsible for conductinginspections and investigations of gamingequipment and services suppliers and, where warranted,charitable organizations.The province has standards and regulationsin place to ensure the integrity of the charitablegaming industry and that gaming is conducted inthe public interest. Notwithstanding the existingregulatory framework, we identified areas whereadministration needed to be strengthened to ensurethat the standards and regulations were adhered to.OVERSIGHT OF MUNICIPAL GAMINGCommission Roles and ResponsibilitiesThe Commission informed us that the province andmunicipalities are partners in licensing charitablegaming activities. Beyond that, however, seniorCommission management was of the opinion that,outside of establishing the terms and conditions oflicensing and providing municipalities with directionsand training, the Commission had no obligationand legislative authority to oversee municipallottery licensing programs. Such oversight couldinclude ensuring that licences are actually issued toorganizations in accordance with the Commission’srequirements, such as those regarding eligibility,use of proceeds, and financial reporting. The informationroutinely requested from municipalitieswas limited primarily to statistics on the number oflicences issued and the total fees collected.We believe the Commission’s interpretation ofits legislative authority is overly narrow. Municipalitiesissue close to 95% of the charitable gaminglicences issued in Ontario annually. Therefore,without appropriate oversight of and co-ordinationwith municipalities’ licensing activities we believethat the Commission cannot effectively fulfill itsresponsibility of ensuring the honesty and integrityof gaming in Ontario in any meaningful manner.In addition, the Minister of Government Servicesis ultimately accountable for the effective administrationof the gaming legislation and for the actionstaken by the Commission. In this regard, under thecurrent accountability relationship, in our opinionthe Commission is a critical link between themunicipalities and the province in helping the Ministerfulfill his or her mandate. We believe that thegoverning Order-in-Council provides the Commissionwith substantial authority for ensuring thatlicences, including those issued by municipalities,meet minimum standards. For instance:•The Commission may determine whether acharitable organization is eligible for a licence toconduct and manage a lottery event. Municipalitiesare required to determine eligibility usingthe Commission’s policies.•The application for a licence and the licenceissued by a municipality are required to be in theform prescribed by the Commission.•The Commission may attach terms and conditionsto any licence, and a municipal councilmay attach terms and conditions to a licenceissued by the municipal council. However, in theevent that the terms or conditions imposed by amunicipal council conflict with those imposedby the Commission, the ones imposed by theCommission apply.•The Commission may at any time suspend orcancel a licence issued by a municipal councilChapter 3 • VFM Section 3.03

662005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03if the licence was not issued in accordance withthe Commission’s policies or guidelines.•A report prescribed by the Commission or a copyof each licence issued by a municipal council isrequired to be forwarded to the Commission.We recognize that municipalities have substantialindependence. However, in our opinion, theOrder-in-Council does not limit the Commissionin its ability to oversee and to request informationpertaining to municipalities’ licensing operations.Given that the Commission establishes policies andprocedures, we believe that it has the authority toensure that those policies and procedures are beingadhered to. In our interpretation, the Commissionnot only has the legislative authority to overseemunicipal licensing programs but likely has an obligationunder the legislation to do so.As a result of the limited amount of informationavailable at the Commission, we found it necessaryto survey municipalities to request more usefulinformation, as well as their opinions regardingsuch matters as their licensing procedures,reliance on the Commission for training and support,enforcement activities, and quality controlprocesses. The results of an over 90% response rateto our survey and our discussions with a numberof municipalities’ lottery licensing representativesclearly conveyed to us that they strongly supportedactions that would help ensure that charitable gamingactivities were administered in accordance withhigh standards. Specifically, it was clear to us thatmunicipalities were interested and would be cooperativein sharing information on their activities,experiences, and best practices with the Commissionand would be interested in the experiencesof other municipalities in dealing with charitableorganizations.Municipal Licensing Activities and BestPracticesOur discussions with representatives of municipalitiesand the results of our survey identified significantvariances between municipal licensing operationswith regard to information and informationsystems, training provided to charitable organizations,procedures for verification of proceeds, andinspection and enforcement activities. We notedthat many municipalities had already establishedquality-control procedures for their licensing operations,but others had not. We believe that theCommission could provide valuable guidance onestablishing such procedures to ensure that appropriateand consistent standards are met for issuinglicences across the province.We also identified certain areas where theCommission’s support to municipalities could beimproved. For example, the licensing policies andprocedures provided by the Commission to themunicipalities were outdated. Municipalities indicatedthat updating and change were most neededin the following areas: determining organizations’eligibility, assessing organizations’ use of proceeds,and reviewing organizations’ financial reporting. Inaddition, over 70% of the municipalities surveyedindicated that some sort of regular training wouldbe useful.Many of the charitable organizations servinglocal communities are limited by their small size.As a result, they must rely heavily on volunteers(who might not be knowledgeable about operatinga business) and/or employ only a few employeesto deliver and manage their operations. Therefore,municipalities require sufficient funding toadequately monitor charitable gaming licencesissued to these organizations and ensure that licensingterms and conditions are met. In this regard, wenoted that the revenues that most municipalities,especially the larger ones, received from lotterylicensing did exceed the costs of delivering theirlicensing programs. Several municipalities had used

Charitable Gaming67gaming licence revenues to establish additionalmonitoring activities that we believe other municipalitiescould find useful in administering theirlicensing programs.For example, one municipality (which receivedlicensing fees of $274,000 in the 2003/04 fiscalyear) established an ongoing program of engaginga public accountant, at a cost of about $70,000 peryear, to conduct financial reviews with respect toall licences issued to the charitable organizationswithin its jurisdiction. The public accountant routinelyfound significant deficiencies in the charitableorganizations’ lottery-related financial records.As a result of these reviews, since 1997 inappropriateand ineligible expenses of over $3 millionwere identified. The municipality informed us thatorganizations were required to correct any deficienciesbefore being granted future licences. In otherexamples, municipalities supplemented the inspectionsand investigations activities carried out by theCommission with their own by using bylaw enforcementofficers or by hiring additional local police.We believe that by taking a more proactive rolein working with municipalities to disseminate bestpractices and to co-ordinate training and qualityassurance, the Commission could better fulfill itsresponsibility of ensuring fair gaming that meetsregulatory requirements.RECOMMENDATIONTo fulfill its legislated responsibilities andensure that charitable gaming in Ontario iseffectively regulated, the Commission shouldwork with municipalities to establish appropriateoversight and support for municipal licensingactivities that includes:•ensuring that the respective roles of themunicipal councils and the Commission areclearly articulated and accepted to eliminateany gaps or duplication in regulating charitablegaming in Ontario;• obtaining sufficient, relevant informationfrom municipalities to allow meaningfulassessment of the effectiveness of licensingimplementing procedures for sharing infor-activities province-wide;•mation and promoting best practices; and•conducting ongoing assessments of the trainingand policies that it provides to municipalitiesand addressing any needs identified.COMMISSION RESPONSEThe Commission is guided by its interpretationof Order-in-Council 2688/93, as amended, in itsrelationship with municipalities. This interpretationis one that respects municipal councils’autonomy and decision-making. The Commissionhas taken several steps to improve its supportfor municipal licensing activities, including:• establishing strategic working groups forthe bingo and break-open ticket sectors ofthe charitable gaming market (the strategicworking groups include representation frommunicipalities through the Association ofMunicipal Managers, Clerks and Treasurersof Ontario [AMCTO]);•releasing a revised Lottery Licensing PolicyManual in May 2005 that included allchanges in policy to early 2005 (a seriesof seminars have been scheduled in co-operation with AMCTO for municipal licensingofficers);•providing, through Commission staff attendingin the municipality, ongoing training ontopics specified by individual municipalitiesor groups of municipalities; and•providing ongoing assistance by telephoneon a day-to-day basis.The Commission believes that the regulationof charitable gaming should allow the industryto be competitive and raise necessary fundsfor charitable and religious organizations. Also,Chapter 3 • VFM Section 3.03

682005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03regulation must ensure that the industry is operatedwith honesty, integrity, in the public interest,and in a responsible manner. To this end,the Commission released a consultation paperon the modernization of charitable gaming inMay 2005. The results of that consultation willlead to consideration of further changes in theregulatory structure and the making of recommendationsto the government with respect tothe role of municipal councils and their accountabilityfor the licensing activity.In regard to the Auditor General’s findings,the Commission acknowledges that limitedinformation is available on municipal licensingactivities. The Commission will work with municipalitiesand the AMCTO to explore areas forgreater co-operation and information-sharing.This will also include further improving anytraining and support municipalities may require.COMMISSION-DELIVERED REGULATORYACTIVITIESRegistrationsAs part of the process of registering suppliers andgaming assistants, the Commission investigatesapplicants’ character, financial history, and competence.It can deny, suspend, or revoke a registrationif there are reasonable grounds to believe that theapplicant will not be responsible in conducting itsbusiness and will not act in accordance with law orwith integrity, honesty, or in the public interest.For the 2003/04 fiscal year, the Commissionreceived registration fees totalling about $2.8 millionfrom registrations issued to about 9,600 gamingequipment and services suppliers (two printmanufacturers, and about 125 bingo halls, 50break-open ticket agents, 5,700 break-open ticketsellers, and over 3,600 gaming assistants).Gaming suppliers are required to post a registrationcertificate at their establishments, and aphoto ID issued by the Commission is to be wornby gaming assistants while working at gamingestablishments.Controls over Registration ProcessThe Commission has established several key controlsover the registration process. For example,Ontario Provincial Police officers assigned to theCommission annually conduct investigations ofregistrants that may include checking their financial,criminal, and legal status, and contacting references.In addition, each registration has termsand conditions attached (such as requirements forproper accounting and security), with provisionsthat permit the Commission to verify compliance.However, we noted that the Commission was notadequately ensuring that the established requirementswere being met. For instance:•Registered large businesses, including mostbingo operators, break-open ticket agents, andticket manufacturers, are required under theterms and conditions of registration to provideannual financial statements reviewed by alicensed public accountant. However, we notedthat gaming registration officers often acceptedfinancial information that had not beenreviewed.•The Commission did not have a process in placefor periodically verifying whether registrantsadhered to the stated terms and conditions ofregistration. For instance, the terms and conditionsof registration for bingo operators, breakopenticket agents, and ticket manufacturersindicate that adequate controls are to be put inplace over accounting records and sales, and forpreventing fraud and safeguarding assets. However,registrants are not requested to periodicallysubmit—at the time of either initial registrationor renewal—compliance reports reviewed by alicensed public accountant confirming that the

Charitable Gaming69terms and conditions of registration were met;nor were there any inspections of ticket manufacturersand agents to ascertain whether theseinternal controls were in place.•The registration process for gaming assistantsdid not include a check to verify the picture ofthe applicant, nor were references checked. Asa result, a risk exists that photo IDs could begranted to gaming assistants who were not properlyassessed for registration. We noted that asimilar concern was reported by the AuditorGeneral of Alberta in 2003/04, specifically withrespect to the Alberta Gaming and Liquor Commission’sgaming-worker-registration process.In addition, the registration process did not considertwo significant areas:•There was no policy established to help identifywhich situations or relationships constitute aconflict of interest that would require resolution.For example, we noted an instance in whichgaming registration officers knew about but didnot question ownership relationships between aprint manufacturer, a break-open ticket agent,and a bingo operator. Besides representing apotential conflict of interest, these relationshipscould make it easier for businesses to undertakeillegal activities that are difficult to detect.•The provincial tax status of business applicantsis not verified as part of the registration process,although doing so would further assist the Commissionin assessing an applicant’s financial statusand lawful behaviour. We noted four caseswhere companies were recently registered withthe Commission even though their tax statuswas not in good standing and amounts as highas $15,000 were owed to the province.We noted that these two areas are required to beconsidered in other programs. For example, beforeengaging most goods and services suppliers, provincialministries are required to assess any potentialconflict-of-interest situations and to verify that thesupplier’s tax status is in good standing. In addition,under the Liquor Licence Act, the Commissionmay refuse to grant a licence if a conflict-of-interestrelationship exists between a liquor manufacturerand a person or business that promotes or servesalcoholic beverages. We were informed by the Commissionthat changes to the Gaming Control Act,1992 might be required before such controls couldbe implemented.RECOMMENDATIONTo help ensure that registrations of charitablegaming equipment and services suppliers andgaming assistants are granted only to those thatmeet high standards of honesty and integrity,the Commission should:•enforce the requirement that registrants submitannual financial statements reviewed bya licensed public accountant;•implement procedures for periodically verifyingthat registrants have complied with theterms and conditions of registration; and• verify that the information provided byprospective registrants is legitimate andaccurate.In addition, the Commission should establishpolicies and procedures for ensuring thatconflict-of-interest situations are appropriatelydealt with. It should also consider the benefitsof requiring verification that, where applicable,prospective registrants’ provincial tax status is ingood standing.COMMISSION RESPONSEThe Commission believes it is essential to maintainhigh standards of honesty and integrity inthe regulation of the charitable gaming industry.The Commission will continue to build onthese standards, and the recommendations of theAuditor General will be considered in the contextof the modernization of charitable gamingand the Commission’s information technologyChapter 3 • VFM Section 3.03

702005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03plans. Additional policies will be developed andprocedures implemented where appropriate withrespect to the specific recommendations.The Commission does review conflicts ofinterests between its registrants but will ensurethat its policies in this regard are properlydocumented.Verification of RegistrationCharitable organizations applying for a licencemust record on their applications the registrationnumbers of any gaming suppliers they planon using for their lottery event. For licences issuedby the Commission, gaming registration officerswho issue licences can verify the registration statusof these suppliers by accessing the Commission’sregistration database.For municipally issued licences, the Commissionhad not made clear to municipalities theneed to verify the registration of gaming suppliersused by charitable organizations. In our discussionswith and survey of municipalities, over halfof the municipalities indicated that it was not theirresponsibility to check whether a supplier’s registrationwas valid or up to date, and almost 30%indicated that they did not verify the registration ofsuppliers used by organizations that applied for alicence.The municipalities that did verify registrationhad asked organizations to submit copies of theirsuppliers’ registration certificates along with theirlicence applications. The Commission’s registrationdatabase, which would be more up to date andaccurate, was not accessible by municipalities. Toobtain more up-to-date registration informationabout a gaming supplier, municipalities would haveto contact the Commission on a case-by-case basis.RECOMMENDATIONThe Commission should clearly communicateto municipalities the requirement to verify thatcharitable organizations seeking licences areusing properly registered charitable gamingsuppliers. It should also provide municipalitieswith up-to-date information—possibly throughaccess to its registration database—for use inverifying the gaming suppliers’ registration.COMMISSION RESPONSEThe Lottery Licensing Policy Manual sets out theprocedures to be used in making licensing decisions.The Commission agrees that municipalitiesshould have access to relevant informationon the registration database to verify gamingsuppliers’ registration. Such access to thedatabase by municipalities would be dependentupon having the appropriate resources todevelop an information technology system.The Commission will consult with municipalitieson the need to verify registration as partof the licensing process. This will include identifyingbest practices and any additional supportsthat can be provided by the Commission tomunicipalities to help accomplish the verificationof registration in a cost-effective manner.Licensing ActivitiesLicensing PracticesThe Commission’s gaming registration officers arerequired to review applications from charitable organizationsto ensure that eligibility requirementsare met before issuing a licence; they are also requiredto follow up after lottery events to ensurethat the terms and conditions of the licence—includingany reporting requirements—are met. We

Charitable Gaming71identified the following areas where improvementsare required in the Commission’s licensing practices:• There was often no evidence that an organization’seligibility was assessed before awardingor renewing a licence. Our audit noted that in anumber of cases there were no core files on thelicensed organizations. A core file contains allthe background information on the organizationthat would be used in determining its eligibility,including its incorporation papers, a descriptionof its charitable programs and services, informationon its financial status, the names of itsboard of directors, and financial reports filed.Where a core file was available, it was often outdatedand did not reflect recent changes in theorganizations’ environment, such as the namesof key contacts.•There was inadequate effort to verify the organization’suse of net proceeds from the lotteryevent to ensure that these funds were used forapproved charitable purposes. Almost twothirdsof the organizations whose reports weexamined did not provide information on howthe proceeds were spent. When details on theuse of proceeds were provided, in about onethirdof the cases we examined the organizationhad not demonstrated it spent the proceeds asrequired by the organization’s charitable mandateor within required expense limits.•For about two-thirds of the files we examined,we noted that the Commission had not obtainedfinancial statements and compliance reportsfrom the charitable organizations as requiredunder its policy. When financial statements fororganizations receiving over $50,000 annuallywere received, the statements did not have therequired review conducted by a licensed publicaccountant.Even though the required financial informationfollowing lottery events was not provided to gamingregistration officers, new licences were stillissued to these organizations for subsequent lotterieswithout evidence of any follow-up on the missingdocuments.RECOMMENDATIONTo help ensure that licences are granted onlyto legitimate charities, the Commission shouldmore critically evaluate the eligibility of charitableorganizations. In addition, to ensurethat proceeds from lottery events are used forapproved charitable purposes, it should:•reports on lottery events; and•obtain and properly assess the requiredissue renewal licences only if an organizationhas met the reporting requirements forall previous lottery events.COMMISSION RESPONSEWhile the current process for reviewing licenceapplications from charities is quite thorough,the Commission recognizes improvements canbe made in providing more training, revised policies,and improved documentation standards.In addition, the Commission will considerthe Auditor General’s recommendations as partof the modernization of charitable gaming. Inthe long run, new technology is required to conductreviews in an efficient manner. A new lotterylicensing system is being developed in aphased approach.Bingo Sponsor AssociationsCharitable organizations with municipal licencesfor bingo events at large bingo halls often chooseto form a bingo sponsor association to enable themto apply jointly for the provincial licences requiredto also hold bingo events with prizes totallinggreater than $5,500. Representing as many as 50charitable organizations, the bingo sponsor associationdistributes the proceeds from provinciallylicensed events to each charitable organization inChapter 3 • VFM Section 3.03

722005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03the association. According to the Commission, proceedsfrom provincially licensed bingo events wereestimated at $119 million for 2003.The Commission had no oversight proceduresin place to provide any assurance that the net proceedsraised by bingo sponsor associations were distributedto the individual charities and ultimatelyused for approved charitable purposes. Rather,the Commission informed us that it expected themunicipalities that have the bingo halls in theirjurisdiction to verify the use of proceeds that charitableorganizations received from provinciallylicensed events in conjunction with their responsibilityfor verifying the organizations’ use of proceedsfrom municipally licensed events.However, we found that municipalities were notinformed of the Commission’s expectations. Oursurvey of municipalities revealed that over halfthe municipalities that had bingo hall(s) in theirarea indicated that they did not verify the charitableorganizations’ use of proceeds from provinciallylicensed events. Among the municipalitiesthat did verify the use of such proceeds, we notedthat several had actually revised the Commissionissuedreporting forms to better ensure charitableorganizations’ complete reporting of the use of theproceeds.RECOMMENDATIONTo help ensure that proceeds from provinciallylicensed bingo events are used for approvedcharitable purposes, the Commission shouldwork with municipalities to establish proceduresfor verifying the charitable organizations’ useof proceeds distributed through bingo sponsorassociations.COMMISSION RESPONSEThe Lottery Licensing Policy Manual providedto municipalities covers the procedures to beused for ensuring that funds received fromprovincially licensed bingo events are used forcharitable purposes. The Commission will takesteps to remind municipalities, during trainingsessions starting in September 2005, of theirresponsibility to ensure that these funds areverified along with other net proceeds receivedrelating to municipally issued licences.Controls over Break-open TicketsFor 2003, the Commission estimates that the grosswager on break-open tickets in Ontario was$360 million. Net profits to charitable organizationswere about $46 million after prize payouts,licensing fees paid to either the Commission ormunicipalities, and payments to break-open ticketmanufacturers, agents, and sellers. There has beena substantial decline in sales of such tickets since1997, when the gross wager was estimated at$1.2 billion and organizations retained net profitsof about $120 million.In 1997, Management Board of Cabinet approvalwas given to the then–Gaming Control Commissionto implement new controls over the productionof break-open tickets and their distribution tocharitable organizations. At the time, there wereconcerns regarding fraudulent activities, includingticket tampering, unreported sales, and thepotential for printing and selling more tickets thanallowed for by a licence. Regulating break-opentickets sales in Ontario was problematic due to thenumerous manufacturers and ticket agents in themarketplace, many of which were located outsidethe province, and the lack of controls over the productionand distribution of these tickets.New controls planned for in 1997 included havingthe Commission establish service managementcontracts with separate suppliers to deliver:•a production system in which tickets would bebar-coded to facilitate tracking and auditing;and

Charitable Gaming73• a central ordering system for all charitableorganizations, and a secure warehousing anddistribution system.Approval was also received to establish a teamof Commission staff to negotiate and manage contractswith, monitor the performance of, and auditthe functions contracted to these suppliers.The funding provided to the Commission by theManagement Board of Cabinet to implement thenew controls was $1.25 million in each of the firsttwo years, $1.1 million in the third year, and$0.6 million annually thereafter for the ongoingcost of six permanent staff.In November 1997, the then–Gaming ControlCommission implemented the first of the new controlsenvisioned. Two manufacturers, both locatedin Ontario and competitively selected, commencedan exclusive arrangement to print break-open ticketsfor the Ontario market. Contracts and registrationrequirements for these manufacturers requirethat adequate controls be put in place, particularlyfor accounting records, sales, preventing fraud, andsafeguarding assets.However, we noted that the remaining key controlsauthorized and funded by the ManagementBoard of Cabinet were not implemented:•No central ordering, warehousing, and distributionsystem was established. Agents andsome charitable organizations purchase ticketsdirectly from manufacturers.•No dedicated team of permanent staff wasestablished to negotiate and manage contractswith the private suppliers, and to monitor theperformance and audit the functions contractedto the private sector.•The Commission had not established proceduresfor monitoring break-open ticket production andsales. Many of the weaknesses in these areas arecovered in other sections of this report, includingthe failure to obtain compliance reports andto conduct regular inspections of internal controlprocedures in place at the two print manufacturersand at the approximately 50 ticketagents.When tickets are sold directly to a charitableorganization, the manufacturers imprint the charitableorganization’s name and licence number oneach ticket. We noted that ticket agents, which supplyalmost 90% of all break-open tickets manufacturedto break-open ticket sellers, are permitted toacquire tickets in bulk without providing manufacturerswith the licence numbers of the charitableorganizations on whose behalf the tickets are beingsupplied. This makes it possible for tickets to besold illegally without a licence.RECOMMENDATIONTo ensure that adequate controls exist over theproduction, distribution, and sale of break-opentickets, the Commission should:•identify and implement key controls authorizedby Management Board of Cabinet overmanufacturers and ticket agents that wouldprovide adequate assurances that they arecomplying with legislative requirements andthe Commission’s terms and conditions ofregistration;•reconsider the need for an independent centraldistribution and warehousing supplierfor break-open tickets; and•establish procedures for periodically verifyingthe accuracy of reported break-openticket sales.COMMISSION RESPONSEThe Commission supports the recommendationto improve controls over break-open tickets andhas already initiated a review of options on howto do so. The options will be considered as partof an overall control strategy for break-openticket sales.Chapter 3 • VFM Section 3.03

742005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03Provincial Administration FeeIn 1997, the Management Board of Cabinet alsoapproved the implementation of a provincialadministration fee of 5% of break-open ticket sales.At the time, the new fee was projected to returnabout $40 million annually to the ConsolidatedRevenue Fund. Manufacturers are required to collectand remit this fee, and to report break-openticket sales to the Commission.Between the fee’s December 1997 implementationand March 31, 2004, manufacturers submittedapproximately $150 million in provincial administrationfees, including about $15 million during the2004/05 fiscal year.In April 1998, internal auditors from the then–Ministry of Consumer and Commercial Relationsreviewed the Commission’s revenue controls. Theirreport noted that the Commission had not askedthe manufacturers for audited financial statementsand reports on their internal controls and had initiatedno inspections aimed at obtaining assuranceson the reliability of the manufacturers’ accountingrecords with respect to collecting, reporting,and remitting the provincial administration fees.According to the report, Commission managementhad agreed to take corrective action, but nochanges were ever implemented in this regard.During our audit, we observed that the Commissioncontinued to rely solely on informationprovided by the manufacturers and had no proceduresin place (such as periodic audits by Commissionstaff, internal auditors, or an independentpublic accountant) to verify that the fees submittedactually represented 5% of total sales.We noted several examples of discrepanciesbetween the manufacturers’ sales reports and thesales information we requested from agents andcharitable organizations. For example, in one casewe found $235,000 in apparently unreported sales,which would have resulted in a loss to the provinceof over $11,000 in the provincial administrationfee. Further assessment of these discrepancieswould be required to substantiate whether the differencesin the information we received were theresult of errors by the manufacturer, the agents, orthe charitable organizations.One cost-effective option would be for the Commissionto ask that the two manufacturers providea report from their auditors confirming the grosssales and related 5% provincial administration fee.A special report of this nature is sanctioned by theCanadian Institute of Chartered Accountants, and,assuming that the two manufacturers each engageexternal auditors to audit their financial statements,providing such a report should result in littleor no additional cost to the manufacturers.RECOMMENDATIONTo ensure that the Commission has adequateassurance that the correct amounts of provincialadministration fees are remitted by breakopenticket manufacturers, the Commissionshould request that the manufacturers provideindependent audit assurance on their reportedsales and fees payable. Alternatively, if this morecost-effective option is considered not feasible,independent audits by Commission staff shouldbe conducted periodically.COMMISSION RESPONSEThe Commission supports the recommendationand in fall 2004 announced changes to the supplyof break-open tickets. Effective May 2005,the market was “opened” to additional manufacturerswho had consented to new terms to registrationthat include certain requirements withrespect to audits that apply to all manufacturers.

Charitable Gaming75Charitable Gaming Inspections andEnforcementBecause inspections are an important means ofassessing a registrant’s compliance with legislativerequirements and with the terms and conditions ofregistration, they play a key role in promoting voluntarycompliance. The visible presence of inspectorsalso helps promote public confidence that gamingstandards are being enforced. While othersources of information, such as public complaints,are important for helping to identify gaming violations,inspections can be proactive in preventingsuch occurrences.Inspecting break-open ticket sellers is theresponsibility of liquor licence inspectors, who aretrained to do the work using a standardized checklist.For the 2004/05 fiscal year, there were approximately600 inspections of break-open ticket sellersthat resulted in over 1,000 warning/caution noticesand four prosecutions. Inspections of bingo facilitiesare conducted by the Ontario Provincial Police(OPP) officers assigned to the Commission. Therewere 36 such inspections in the 2004/05 fiscal year.The OPP also conducted about 80 investigations—either of gaming equipment and services suppliersor of charitable organizations (or their employeesor volunteers)—resulting in six charges laid undereither the Criminal Code or the Gaming Control Act,1992.Items typically checked during an inspectioninclude whether registration and licence certificatesare posted for viewing by the public, whetheradequate security is maintained for tickets or bingopaper, and whether gaming assistants are wearingCommission-issued photo IDs.We found that the Commission did not have formalpolicies in place for managing its charitablegaming inspection activities. As a result, little directionwas available to OPP officers and liquor licenceinspectors on the various aspects of an inspection,such as objectives, priorities and coverage, frequency,actions to take when violations are identified,and follow-up of violations. We identified anumber of areas in the Commission’s inspectionand enforcement activities where improvementscould be made:•Inspections were not based on formal riskassessments. For example, liquor licence inspectorsgenerally conducted inspections of breakopenticket sellers on their own initiative andhad to meet minimal quotas of only two inspectionsper month. A risk-based approach to prioritizingbreak-open ticket sellers for inspectionsshould be considered, since it would take almost10 years at the current rate to inspect the over5,700 sellers.For bingo hall inspections, the Commissionhad not worked with the OPP to develop aconsistent approach. For example, there werelarge variations in the frequency of inspectionsbetween the three regions we visited: the 16bingo operators in one region were targeted forinspection once per year; the eight bingo operatorsin the second region were targeted forinspection once every two years; and the thirdregion, having discontinued several years agoany regular inspections of the 37 bingo operatorsin its area, conducted an inspection onlywhen a complaint was received.•Our analysis of the results of inspections ofbreak-open ticket sellers by liquor licenceinspectors during the 2004/05 fiscal year identifieda non-compliance rate of about 60% of theinspected sellers. Common violations identifiedby liquor licence inspectors included instanceswhere financial records were not being kept,winning tickets were not defaced to preventtheir reuse, and the tickets available for sale didnot correspond to the licence issued. There werevery few prosecutions of violations, probablybecause the infractions were too small to meritthe cost of prosecution. Better education andadditional enforcement measures—such as finesthat can be imposed simply by issuing a ticketChapter 3 • VFM Section 3.03

762005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03during the inspection—may be necessary to promotevoluntary compliance by sellers.•Inspections of bingo operators and break-openticket sellers are limited to physical observationof certain key requirements, such as whethera licence is posted. Inspections do not includereviewing accounting records to ensure that allsales and ticket inventories were accounted forand that sellers’ commissions were within prescribedmaximums.•No inspection programs or audits are establishedfor certain key gaming suppliers—namely, thetwo bingo paper and break-open ticket printmanufacturers that serve all of Ontario; andthe approximately 50 break-open ticket agents,which supply about 90% of all tickets from thesemanufacturers to sellers on behalf of charitableorganizations.In addition, municipalities play a key role inmonitoring local charitable organizations throughthe licensing process and may either formally orinformally monitor the local gaming equipmentand services suppliers used by these organizations.For example, we noted that a number of municipalitiesindependently initiated and conducted regularinspections of bingo operators and break-openticket sellers. However, the Commission did nothave a policy of providing municipalities with feedbackon the results of inspections and investigationsthat it performed in their jurisdiction. Half ofthe municipalities we surveyed indicated that theywere not informed of the results of the inspectionsand investigations conducted by the liquor licenceinspectors or the OPP. Such information wouldhelp municipalities in making decisions regardingthe issuing of a licence, including whether ornot to impose additional terms and conditions theyfeel are necessary, and in monitoring local gamingequipment and services suppliers. The Commissionalso did not seek information on the results of theinspections carried out by municipalities, althoughthese results could be useful in planning its owninspection efforts.RECOMMENDATIONTo be more effective in ensuring the integrityof charitable gaming, the Commission shoulddevelop and implement a formal strategy andpolicies for its inspection activities that includea risk-based approach to target high-risk gamingequipment and services suppliers.The Commission should also investigate theextent to which better education and additionalenforcement measures are needed to achieve ahigh level of voluntary compliance with legislativerequirements and with the terms and conditionsof registration.In addition, to improve inspection andenforcement activities at both the provincialand municipal levels, the Commission shouldwork with municipalities on sharing informationabout the results of inspections andinvestigations.COMMISSION RESPONSEThe inspections and enforcement organizationalstructure was reviewed during the winter of2004/05. A new organizational structure wasput in place in June 2005 to address issues withrespect to the Commission’s entire mandate. Aspart of the implementation of the new organizationalstructure, changes will be made inenforcement and inspection strategy. The Commissionwill continue to build on its risk-basedenforcement and inspection strategy, not onlywithin charitable gaming but also within thecontext of its overall mandate, which includesliquor enforcement and commercial gaming.The Auditor General’s recommendations will beconsidered as part of the implementation of thenew organizational structure and developmentof enforcement and inspection strategy.

Charitable Gaming77Information Technology ProjectThe Commission uses two separate computer systemsfor its licensing and registration systems. Ithas concluded that the systems are old and in needof replacement to ensure a stable, open, efficient,and integrated environment. Since 2003 the Commissionhas been performing the planning work foran integrated licensing and registration system.In January 2005, the Commission initiateda project to replace the lottery licensing system,which was considered a higher-risk system due toits age and use of older technology. The Commissionis required to adhere to the Management Boardof Cabinet’s Management of Information TechnologyDirective, which requires that formal projectmanagement processes be followed, including documentedjustification for the plan, detailed projectplans, efficient organization of resources, projectapprovals, progress reporting, and post-projectevaluation.Project PlanningWe found that there was no business case establishedfor the project that would meet the requirementsof the Directive. Specifically, the project documentswe reviewed did not address:•total one-time costs, including staff costs, associatedwith planning, designing, acquiring, andimplementing the project;•with maintenance of the new system;•ongoing costs over a four-year period associatedrisk assessment, which would explain theproject’s degree of exposure to disruption orreduction in services to the public and to costoverruns; and•project benefits quantified in monetary and nonmonetaryterms.Following our fieldwork, the Commission indicatedthat it had prepared a business case thatestimated the project’s total costs to be about$610,000. The primary estimated costs were forCommission staff time totalling $313,000 and forconsulting fees of $286,000, the latter of whichhad already been incurred. The system will bedeveloped in-house using the Commission’s staffand using existing hardware. However, the businesscase did not include the costs incurred in planningfor an integrated licensing and registration systembefore January 2005 or any ongoing maintenanceor other costs beyond the expected September 2006implementation date of the licensing system.Without an adequate business case that includesobjectives, costs, time estimates, and an analysis ofbuy-versus-build alternatives, it is difficult for seniormanagement to make informed decisions. Thiswas emphasized by the recent Report of Ontario’sSpecial Task Force on the Management of Large-Scale Information and Information TechnologyProjects. The report stated that “IT projects thathave gone off-track often had ill-defined businessplans.”Project ManagementWe identified several concerns regarding theongoing management of the project:•Project documentation was not up to date. Theproject charter, which authorizes the projectscope, approach, deliverables, timelines, andindividual team member responsibilities, estimatedthat the system would go live in December2005. However, the project timetables havesince changed this date to September 2006. Notwithstandingthat and related changes, weeklyprogress reports made to senior Commissionmanagement indicated that project scope, costs,schedule, and changes were all on target. However,there were no indications in the weeklyreports as to what the target completion datesor costs were for each phase of the implementation—informationthat would allow seniormanagement to properly assess the project’sprogress.Chapter 3 • VFM Section 3.03

782005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03• Contrary to the Directive’s requirements, therewas no internal auditor involved in the project.Internal audit’s involvement during the variousstages of the project would be useful for ensuringthat key controls over project managementand system design were established and adheredto.In addition, the Commission’s use of a consultanton this project did not conform to establishedgovernment policies and practices and to the ManagementBoard of Cabinet’s Procurement Directivefor Consulting Services. We noted the following:•The costs of a consultant to complete this projectwere originally estimated at $135,000. Theselection of the consultant was based on aninternal vendor-of-record arrangement establishedby the Commission in October 2003. Wenoted that only one contract—for a fixed price of$60,000—had been established for this assignment;that contract was signed on March 18,2005, between the Commission and the consultant.However, the consultant was paid a totalof $286,000 from invoices dated February 16,2005 to March 24, 2005. Thus, in addition to theconsultant doing work before a contract was inplace, the consultant was paid over four timesthe contracted amount.•According to the Commission, the consultantstill had unfinished work at the time of the lastinvoice: for example, two key reports on projectdesign were not delivered until April 28 andMay 18, 2005. However, senior Commissionmanagement informed us that no further paymentsto the consultant following its March 24,2005 invoice would be necessary, which wouldindicate that the consultant was fully paid as ofMarch 24, 2005 before key deliverables werereceived, contrary to payment practices requiredin the Directive. In addition, the consultant estimatedthe cost of its involvement in the designstage of the project, which hadn’t been started,to be a further $150,000 to ensure that the proposedproject timelines are met. We noted thatthe Commission’s business case did not includethese costs.•According to the vendor-of-record agreementbetween the consultant and the Commission, allinvoices from the consultant were required toprovide a breakdown of names and hourly ratesof the consultant’s employees who performedthe service and details of the work performedin relationship to the hours spent. We observedthat invoices provided to the Commission didnot provide this information, and further detailswere obtained only upon our request duringthe audit. Based on this additional information,we noted that the rates charged by the consultantwere not in accordance with the ratesauthorized in the October 2003 agreement. Forinstance, an hourly rate of $440 was chargedfor one employee when the authorized rate was$375 per hour, resulting in an overpayment of$3,120. Other employees with hourly rates of$180, $210, and $270 could not be matchedwith the agreement. Also, no details of the workperformed in relationship to the hours spentwere made available.RECOMMENDATIONTo ensure value for money and comply with theManagement Board of Cabinet’s directives governinginformation technology projects and theuse of consultants, the Commission should:•provide decision-makers with a comprehensivebusiness case before proceeding withthe development of information technologyprojects;•involve ministry internal auditors in theoversight of projects to verify that key controlsover project management, systemdesign, and the use of consultants are establishedand adhered to;

Charitable Gaming79• require that project documentation be up todate and that reports to senior Commissionmanagement include relevant and accurateinformation on project status; and•ensure that a valid written contract is inplace with consultants before authorizingwork, budgeted amounts are not exceededwithout proper justification and approval,invoices are scrutinized, and payments aremade only after services are rendered.COMMISSION RESPONSEThe decision to replace the lottery licensing systemwas made by senior management after twoyears of study and review. The current lotterylicensing system was no longer supportable, andthere was a substantial risk that it could not beresuscitated if it crashed. Such a situation wouldbe “mission critical,” as lottery licensing wouldbe severely affected. While senior managementwas satisfied that the various documents andanalysis provided a comprehensive assessmentfor the decision on a replacement, it is acknowledgedthat the process did not conform to therequirements of Management Board of Cabinet’sdirectives and that controls need to be strengthenedfor consulting engagements.Audit-resource involvement in informationtechnology projects is based on overall OntarioPublic Service risk. At the time of this particularinformation technology project, the limitedinternal audit resources were focused onprojects that were deemed to be of higher risk.Notwithstanding, senior management will inviteinternal audit at appropriate points in the overallproject and will ensure that, in future, a processthat follows directive requirements will beused for all information technology projects anduse of consultants.Measuring and Reporting on ProgramEffectivenessThe Commission is required to provide an annualresults-based plan that reports on performancefrom the previous year and outlines plans for thecoming years. An annual report is also to be providedto the Minister for tabling in the LegislativeAssembly. The annual report should contain informationon the achievement of performance targetsand on action to be taken, along with an analysis ofthe agency’s operational and financial performance.Such reports are intended to inform legislatorsand the public about the extent to which programsand services are meeting program objectives andproviding value to the public. These annual plansand reports not only serve as a vehicle for focusingattention on results and for driving change but alsofoster openness and accountability.The Commission’s 2003/04 Annual Report containedtwo performance measures: one coveringconsumer protection and the other on customersatisfaction. Neither of these measures was specificto charitable gaming, nor were they presentedin a manner that would allow for any meaningfulassessment of the Commission’s performance.The Annual Report also reported on the numberof registrations and licences issued. This informationallows assessment of how the Commission’sresources were applied but does not provide anindication of the outcomes of its registration andlicensing activities, including the extent to whichthe Commission had obtained compliance by theindustry to charitable gaming legislation and theCommission’s regulatory policies.More meaningful performance information onthe Commission’s activities could have included thefollowing:•results of the Commission’s inspection andenforcement activities, including the numberand results of inspections, investigations, complaints,licences and registrations suspended orrevoked, and any disciplinary action taken;Chapter 3 • VFM Section 3.03

802005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.03• trend information and benchmarking to otherjurisdictions—that is, a comparison of the currentyear’s performance with prior years’ andother jurisdictions’ performance;•information on the extent to which service levels—suchas the number of licences and registrationsprocessed within established timeframes—met a standard (which the Commissionwould need to establish); and•charitable gaming fees collected by the Commissionin relationship to the costs of its enforcementactivities, a measurement that would allowfor assessing the Commission’s capacity to fundits regulatory activities in relationship to the feescollected with respect to such activities.We noted that several other jurisdictions haveincluded information in their annual reports on theextent and results of their regulatory activities.In addition, the Annual Report contained noinformation on the success of the municipalities’regulatory activities with respect to charitable gaming.Regular reporting by each municipality to theCommission was very limited and was used by theCommission only for estimating the total licencesissued by municipalities.RECOMMENDATIONTo enable the Commission to report to legislatorsand the public on its effectiveness inregulating charitable gaming, the Commissionshould develop more comprehensive indicatorsfor measuring and publicly reporting on its performance.The Commission should also consultwith municipalities to regularly obtain meaningfulinformation that would allow the Commissionto also include municipalities’ contributionto regulating charitable gaming activities in itsresults-based plans and annual reports.COMMISSION RESPONSEThe Commission will consider new measuresas part of its review of charitable gaming andthe proposed modernization of the regulatorystructure.

Chapter 3Section3.04Ministry of Children and Youth ServicesChild Care ActivityBackgroundThe Ministry of Children and Youth Services administersthe Child Care Activity (Activity) under theauthority of the Day Nurseries Act. The Ministrydevelops policies and procedures for licensed childcare and subsidizes the cost of a portion of thatchild care to enhance the availability of affordable,high-quality care for children up to the age of 12years. This care is intended to allow parents to workor to undertake training or education leading toemployment. Access to subsidized child-care spacesis not an entitlement and is therefore limited by theavailability of subsidized child-care spaces, which isdetermined by available funding.The following are some of the Activity’s mainresponsibilities:•inspecting, licensing, and monitoring child-careoperators that care for more than five children topromote quality child-care services and ensurethe health and safety of the children in care;•subsidizing child-care costs for children of parentsin need, either directly to parents throughfee subsidies or indirectly through wage subsidiesprovided to child-care agencies that are intendedto enhance caregiver wages and benefits;•providing additional financial support to purchasethe services of resource teachers for thecare of children with special needs; andFigure 1: Child-care Activity Expenditures, 2004/05($ million)Source of data: Ministry of Children and Youth Servicesexpenditures fundedby federal/provincial"Multilateral Framework"(58.2)Ontario WorksChild Care(33.3)special-needsresourcing(45.5)wage subsidies (127.6)• providing funding for community-basedresource centres that provide such things as parenteducation, drop-in, and playground programsand toy and equipment lending libraries.The most recent information available from theMinistry indicates Ontario has approximately 3,900licensed child-care centres serving about 200,000children.For the 2004/05 fiscal year, ministry child-careexpenditures totalled $575.4 million, which wasallocated as shown in Figure 1.municipaladministrationcosts(18.6) Other (10.8)fee subsidies(281.4)Chapter 3 • VFM Section 3.0481

822005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04Figure 2: Child-care Activity Expenditures, 1998/99–2004/05 ($ million)Source of data: Ministry of Children and Youth Services6005805605405205004804601998/991999/2000Since the time of our last audit, which was conductedin 1999, the Ministry’s expenditures forthe Activity have decreased (see Figure 2), butthis decrease is mostly attributable to a change infunding made in 2000, wherein a greater share ofthe costs were assumed by municipalities. Priorto 2000, the Ministry’s regional offices directlyentered into annual service contracts and fundingagreements with 186 fee-subsidy managers (primarilymunicipalities or designated non-profit corporations)to administer the delivery of child-careservices. The Ministry funded 100% of all the childcareprogram costs, with the exception of the feesubsidy (discussed later), which was cost shared80:20 between the Ministry and fee-subsidy managers,respectively.2000/012001/022002/032003/04In 2000, this funding process was changed andmost of the Child Care Activity began to be administeredby 47 consolidated municipal service managers(CMSMs). CMSMs were established to helpdeliver provincially funded social services—likechild care—and consist of either a designated2004/05municipality (commonly in southern Ontario) ora district social services board (more commonly inparts of northern Ontario or rural areas with nomunicipal government). These CMSMs manage andco-ordinate funding and programs in their respectivejurisdictions. The CMSMs are required to submitservice plans for approval to one of the nineministry regional offices and are accountable to theMinistry for the use of ministry funds. CMSMs arealso expected to work with local service providersto establish local practices within the ministry policyframework.The total Activity costs for child-care (ratherthan just the fee-subsidy portion) are now costshared 80:20 between the Ministry and CMSMs.Administration costs continue to be shared 50:50between the Ministry and CMSMs.Other developments since our last audit of thisActivity include the two new funding agreementsentered into with the federal government to meetits commitment to a national child-care program.The first, signed in March 2003, is known as the“Multilateral Framework,” and the second, a bilateralagreement in principle signed in May 2005, isreferred to as an agreement for “Moving Forwardon Early Learning and Child Care.” The total fundingcommitments made under these agreements,to be paid by the federal government for child-careexpenditures in Ontario over the next five years, areoutlined in Figure 3.These new funding initiatives are geared tochildren under the age of six and are to be guidedby the federal government’s “QUAD” principlesfor child care (QUAD stands for quality, universalinclusiveness, accessibility, and development).Audit Objective and ScopeOur audit objective was to assess whether the Ministry’spolicies and procedures were adequate toensure that:•quality child-care services are provided in compliancewith legislative requirements and withthe Ministry’s goal of fostering early learningand childhood development; and

Child Care Activity83Figure 3: Projected Federal Funding for Child Care in Ontario, 2005/06–2009/10Source of data: Federal–provincial agreements “Multilateral Framework” and “Moving Forward on Early Learning and Child Care”new funding commitment under 2003 MultilateralFramework2005/06 2006/07 2007/08 2008/09 2009/10($ million)87.4 116.8 136.6 136.9 137.2new funding commitment under 2005 bilateral agreement 271.9 253.2 448.9 449.8 450.8Total 359.3 370.0 585.5 586.7 588.0• transfer payments to CMSMs are reasonable andadequately controlled.With respect to the second part of our objective,the focus of our audit was on fee- and wage-subsidyexpenditures, as they represented almost 80% oftotal activity costs.The scope of our audit included a review of asample of relevant ministry files and of the administrativepolicies and procedures in place. Weconducted work at the Ministry’s corporate officeand in three of its nine regional offices. The threeregional offices we visited represent almost 60%of total activity expenditures. As the Activity isnow almost entirely administered by CMSMs, wevisited a number of CMSMs and child-care centresto gain a better understanding of their operations.We also obtained information from the CMSMswe did not visit through a questionnaire we sentthem.We also engaged two child-care academicexperts to assist us in our assessment of the operationsof the Activity.Prior to the commencement of our audit, weidentified the audit criteria that would be used toaddress our audit objective. These were reviewedand agreed to by senior ministry management.Our audit was performed in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountants,and accordingly included such tests and otherprocedures as we considered necessary in thecircumstances.We did not rely on the Ministry’s ComprehensiveAudit and Investigation Branch to reduce the extentof our work because they had not conducted anyrecent work in the areas our audit focused on.SummaryIf the Ministry is to ensure that licensed child-carecentres are providing children with adequate earlyopportunities for learning and for physical andsocial development, it needs to better define andcommunicate program expectations to the centresand systematically monitor and assess their implementation.This will be all the more essential if theMinistry is to reap the benefits of the substantialnew funding commitments recently announced bythe federal government. Some of our observationsincluded:•A 2004 report by the Organisation for EconomicCo-operation and Development (OECD) concludedthat most Canadian provinces lackedthe child-care curriculum frameworks neededto support quality programs and the kinds ofexperiences that enhance children’s social, language,and cognitive development. In this regard,Ontario has not yet developed adequate guidanceto help child-care centres deliver consistent andcomprehensive developmental programs.•The Day Nurseries Act and ministry-developedinformation materials, such as the Day NurseriesChapter 3 • VFM Section 3.04

842005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04Manual that is distributed to all child-care operators,provide little specific direction to thoseindividuals providing child care. What directionis provided is generally vague, subject to broadinterpretation, and sometimes missing criticalupdates on important matters.•Our review of the tools used by ministry staff toassess program delivery identified a number ofareas where these staff are required to exercisea significant degree of discretion and interpretation.If all ministry staff responsible for licensingand monitoring program delivery had an earlychildhood education background or equivalentexperience, this approach might be suitable.However, many licensing staff do not have thisbackground and would benefit from additionalguidance.•The Ministry uses a detailed licensing checklistduring its annual inspections of child-care facilitiesto help assess a facility’s compliance withprogram requirements as well as the quality ofcare provided to the children. While we foundthat the licensing checklists we reviewed didaddress health and safety issues, they did notadequately assess the quality of care or developmentalopportunities provided. Finally, very littledocumentation exists from these inspectionsto indicate what work was performed and thebasis on which conclusions were reached for thevarious areas covered in the licensing checklist.Notwithstanding, we noted an improvement inthe timeliness of licensing inspections since our1999 audit.Other issues noted with respect to servicesincluded funding inequities that contributed tocomparatively low salaries in some centres, difficultiesin staff recruitment and retention, and highcaregiver turnover. Since the quality of child-careprograms is largely determined by the interactionbetween individual children and their caregivers,this further raises the risk that child-care servicesprovided are not of a consistently high qualityacross the province.We also concluded with respect to fundingthat the Ministry’s policies and procedures didnot ensure that transfer payments to CMSMs werereasonable and adequately controlled. Many ofour audit observations and recommendations onfunding issues in this report are similar to thosereported in 1999 and 1995. Although the Ministryagreed to take action in previous years to implementour recommendations to correct observeddeficiencies, sufficient action has not been taken. Asa result we again found that:•Fee-subsidy funding provided to CMSMs wasnot based on an appropriate assessment of sufficientlydetailed financial and operational informationto support the significant variations inthe cost of care for similar services, reflectedin fee-subsidy purchase-of-service agreementsbetween programs and CMSMs. For example,the cost of caring for a preschool child(30 months to 5 years) ranged from a low of$17.50 to a high of $75 per day.•Applications for child-care fee subsidies werenot appropriately and consistently reviewed toensure that only eligible families receive subsidizedchild care and that the subsidy is in the correctamount. Furthermore, the Ministry had noinformation on waiting lists for subsidized childcarespaces, so it was not aware of the numberof children waiting for a space. Information providedby CMSMs suggests that many childrenare waiting, and we were told the wait times canrange from six months to two years.•Wage subsidies were not equitably distributedto all child-care centres, and the wage subsidiesprovided to staff did not meet all of theMinistry’s funding requirements. For instance,in one case, a child-care employee received$18,000 in wage subsidies during 2003, almostdouble the allowable maximum of $9,533.

Child Care Activity85• Significant variances between expected andactual services provided and costs incurred wereoften not assessed, and, where necessary, followedup on a timely basis to determine theirpossible impact on future funding requirements.• The Ministry did not require sufficiently detailedaudited statements to allow for the identificationof child-care-related expenditures and forthe identification and recovery of all ministryfundedsurpluses.Detailed Audit ObservationsPROGRAM QUALITYExtensive research since the 1960s has demonstratedthe importance of young children havingaccess to systematic programs that fostertheir development in all areas—physical, socialemotional,and cognitive—so that they make steadyprogress and achieve appropriate developmentaloutcomes in preparation for the school system andformal learning, which begins in Grade 1. Consistentwith this research, in 2004, the Ministryrecognized the need to move beyond the foundationestablished in the Day Nurseries Act and initiatedBest Start to strengthen early development,learning, and care services to help Ontario’s childrenarrive in Grade 1 ready to learn and excel.Best Start is a long-term strategy that the Ministryexpects will take at least 10 years to fully implement.The Ministry’s new funding framework withthe federal government also commits it to worktowards a high-quality, universally inclusive, accessiblechild-care system that supports healthy developmentand early learning for young children.Curriculum DevelopmentWe noted that there was very little direction on programmingand no specific requirements for a curriculumframework to ensure that children’s developmentis consistently and comprehensively promotedamong child-care centres.In this regard, a 2004 report by the Organisationfor Economic Co-operation and Development(OECD) concluded that most Canadian provinceslacked the child-care curriculum frameworksnecessary to support quality programs and thekinds of experiences that enhance children’s social,language, and cognitive development. We notedthat other jurisdictions have developed curriculumdirection or a framework for their child-care programs.For example, Quebec’s child-care standardsinclude requirements for an educational programthat is considered a key element in quality childcare. This framework includes goals for children’sdevelopment and principles to guide implementation.As well, in Finland, child-care centres use anational curriculum framework developed by itsresearch agency. The curriculum guides the organizationand content of that country’s child-careprograms.In the absence of a more detailed curriculumcomponent, the risk is that child-care centres maynot have the skills, time, or resources to individuallydevelop and deliver quality programs specificallydesigned to equip young children with theskills needed for formal schooling.Direction to CaregiversThe Ministry communicates its goals for childcare by providing direction to CMSMs and childcarecentres through the Day Nurseries Act andrelated regulations, as well as through a ministrydevelopedDay Nurseries Manual, which isdistributed to all child-care operators. The Ministryalso has Internal Directives and Guidelines tohelp its licensing staff assess child-care centres’compliance with the Act and regulations.Our review of these items indicated thatthey provide guidance on many structural andChapter 3 • VFM Section 3.04

862005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04operational aspects, such as the indoor and outdoorphysical environment, safety requirements, healthand nutrition standards, group size, child-to-staffratios, and staff qualifications. However, we foundthat in many areas, the information contained inthe regulations, the manual, and the internal guidelinesrequired that individuals exercise a relativelyhigh degree of discretion with little or no guidanceon how to exercise that discretion. Following aresome examples of the direction contained in thesedocuments:•Every operator of a child-care centre shallensure that there are written policies and procedureswith respect to staff training and developmentfor employees.•Play equipment and furnishings, in the opinionof the ministry program advisor, are to be of atype suitable for the program and the ages anddevelopmental levels of the children enrolled.•Play equipment should be, in the opinion of theministry program advisor, sufficient in numbersto allow for rotation.•There should be a program of activities that isvaried and flexible and that includes activitiesappropriate for the developmental levels of thechildren enrolled, including group and individualactivities, activities for gross and fine motorskills, language and cognitive activities, socialand emotional development, and active andquiet play.All of the above descriptors are open to a broadrange of interpretations. Therefore they do notfacilitate the implementation of a program that isconsistent with the Ministry’s stated philosophy andgoals for child care. In this regard, we noted thatone of the three regional offices we visited providedmore specific guidance on how to meet ministryrequirements.We believe that child-care centres would benefitfrom more detailed guidance, particularly in thearea of learning programs. If the Ministry were todevelop easy-to-use and pedagogically sound programs,staff at the centres would be more likely toensure a consistently high level of service for thechildren in their care.We also noted that both the Day NurseriesManual distributed to child-care operators andthe Ministry’s Internal Directives and Guidelineshave not been updated since 2000. As a result, neithernew program requirements nor informationrequirements arising from the federal government’sHealth Alerts issued since 2000 have been incorporatedinto either document. Examples of criticalinformation that is missing include:•a regulation under the Ministry of the Environment’sSafe Drinking Water Act, 2002 requiringthat child-care centres flush their plumbing systemsweekly (this is intended to rid water andsupply pipes of possible harmful lead deposits);and•a Canada Health Alert issued in August 2003warning that infants and young children shouldnever sleep on mattresses not specificallydesigned for them.RECOMMENDATIONTo encourage consistent quality in the deliveryof child care in Ontario and to meet the Ministry’sobjectives of providing children with thebest possible start in life, the Ministry shoulddevelop a child-care curriculum frameworkand implement more detailed and helpful guidanceto assist child-care staff in providing consistentlyhigh quality developmental learningopportunities.MINISTRY RESPONSEChild-care licensing requirements under the DayNurseries Act, including program and staffingrequirements, provide a basic foundation thatsupports healthy child development. The BestStart initiative begun in 2004 will build on thisfoundation to establish a high-quality, accessible

Child Care Activity87child-care system that will enhance the likelihoodof success for children once they reachschool.An Expert Panel on Early Learning establishedin May 2005 will develop an integratedearly learning framework and recommend anearly learning program for all preschoolersby March 2006. It will also recommend a singleintegrated learning program for childrenbetween two and a half and five years old byDecember 2006. These recommendations willform the basis of guidance to operators andwill help facilitate the provision of high-qualitydevelopmental opportunities for children.Child-care Staff Qualifications and TrainingThe quality of child-care services delivered islargely determined by the qualifications and experienceof child-care staff. In that regard, researchstudies have consistently reported a significant correlationbetween caregiver staff with higher educationlevels and the delivery of higher-quality programsand better outcomes for children.In Ontario, each child-care centre’s supervisorand at least one caregiver per age group of childrenin care must have a recognized early childhood education(ECE) qualification—normally a two-yearcommunity-college-level diploma—or equivalentacademic qualifications and, in the case of supervisors,two years’ experience working in a child-carecentre. Other Canadian jurisdictions, such as Quebec,require two-thirds of all staff in licensed centresto have an ECE college diploma or ECE universitydegree.The Director at each ministry regional office isrequired to assess and approve the qualificationsof each centre’s supervisor in writing, and a copyof that letter is to be placed in the licensing file forthat centre. In our review of a sample of licensingfiles, we found that about 10% did not contain therequired letter.Furthermore, although the Ministry requiresthat each centre have written policies and proceduresfor staff training and development, it has notestablished any minimum requirements for thetraining and development that is to be provided. Wenoted that British Columbia, Prince Edward Island,and Newfoundland have professional developmentrequirements for ECE staff working in licensedchild-care centres.We also noted other factors affecting the qualityof caregiver staff, namely funding inequities (discussedin more detail under Fee Subsidy and WageSubsidy) that contributed to comparatively lowsalaries in some centres, difficulties in staff recruitmentand retention, and high caregiver turnover.In this regard, it was noted by one CMSM that thereplacement of trained early childhood educatorsby untrained staff was on the increase.RECOMMENDATIONTo help ensure that child-care services providedin Ontario are of high quality, the Ministryshould:•assess, approve, and appropriately documentthat all child-care centre supervisors havethe prerequisite early childhood educationqualifications and work experience;•consider the advisability of establishing minimumeducational requirements and/or workexperience for any other caregiver staff withoutearly childhood education or equivalentqualifications; and•develop guidance for the ongoing professionaldevelopment of child-care centre staff.MINISTRY RESPONSEWe agree that the quality of child care is key ifwe are to achieve a system of early learning andchild care that gives children the best chance atChapter 3 • VFM Section 3.04

882005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04future success. The existing Day Nurseries Actrequires that each group of children have onestaff member with a recognized early childhoodeducation qualification or equivalent. Thismeans a minimum of almost half of the staff in acentre would be qualified.The Ministry’s regional offices have beendirected to review their procedures for theDirector’s approval of centre supervisors and toaddress those situations where appropriate documentationhas not been placed on file. As well,this requirement will be added to the licensingchecklist.The Best Start initiative is addressing issuessurrounding staff qualifications and professionaldevelopment for child-care staff through theExpert Panel on Quality and Human Resourcesestablished in May 2005.In addition, the Ministry is moving forwardon establishing a College of Early ChildhoodEducators to set high professional standards andsupport quality care.Licensing and InspectionsThe Day Nurseries Act requires that the Ministrylicense all child-care centres and private-homechild-care agencies caring for more than five childrenunder the age of 10 years. The licence must beissued before operations begin and annually thereafter.Prior to issuing or renewing a licence, theMinistry conducts a formal licensing inspection.The inspection essentially consists of a site visit andthe completion of a ministry-developed checklistthat requires a review of, for example, the physicalpremises, staff-to-child ratios, nutrition practices,and centre policies and procedures. We wereadvised that the Ministry also uses this checklist toassess the quality of services provided.Our review of the annual licensing process andof completed licensing checklists indicated that theprocess did not effectively assess the quality of theservices provided. Specifically:•Although the 39-page checklist included 116items to be verified for compliance, we notedthat it took, on average, only 4.5 hours to completethe entire licensing inspection, whichincludes filling out the checklist.•In many cases the only information noted onthe checklist consisted of a checkmark in oneof three columns: yes, no, or n/a. No criteria orguidance was provided for assessing each itemon the checklist. In most cases, we were unableto determine what, if any, work was performedin arriving at that decision. We also noted thatin some cases, items in the checklist were eithernot completed or the documentation was contradictory,with more than one column beingchecked with no explanation. At one regionaloffice, we found no documented evidence ofsupervisory staff having reviewed and approvedthe completed checklists.•While we noted an improvement in the timelinessof licensing inspections, we also notedthat most inspections were conducted within afew weeks of, either before or after, the expirydate of the previous year’s licence. As a result,the timing of the inspections was predictableand therefore the conditions at the time of theinspection may not have been indicative of programdelivery throughout the year.•Ministry staff responsible for the licensing functionare not required to have, and in many casesdo not have, formal early childhood education(ECE) qualifications. As a result, we questionwhether they have the technical knowledge toconduct licensing inspections, especially giventhe lack of ministry criteria or guidance, asnoted earlier. We noted that some other Canadianprovinces/territories, such as New Brunswick,the Northwest Territories, and the Yukon,require licensing staff to have an ECE degree ordiploma. In addition, all of the licensing staff we

Child Care Activity89talked to expressed the need for corporate trainingon current issues and best practices in childcare.•The current licensing checklist had not beenupdated since April 2000, so new requirementshad not been incorporated, as mentioned earlier.RECOMMENDATIONTo improve the effectiveness of the annuallicensing inspection and help assess the qualityof the services provided by licensed child-carecentres, the Ministry should ensure that:•less predictable;•the timing of annual licensing inspections isthe nature and extent of the work conductedduring the annual licensing inspections issufficient to assess the quality of services,and this work is adequately documented; and• the annual licensing inspections are conductedby qualified staff possessing eithera formal early childhood education degreeor diploma or equivalent qualifications andexperience.MINISTRY RESPONSEAction to be taken to support licensing includes:• updating the licensing checklist to includefurther assessment details; and• updating the licensing manuals to supportthe checklist and provide additional directionon compliance assessment and documentationrequirements.Assessment of quality in child-care programs,beyond the basic elements alreadyincluded in licensing, will be addressed throughthe Best Start initiative. Recommendations fromthe Best Start panels are expected by December2006.Training on best practices for licensing staffwas provided in January 2004. Further trainingrelated to the implementation of the Best Startinitiative will be conducted shortly. The Ministrysupports a generic approach to licensing-staffqualifications that identifies core skill requirementsfor the position. Regions provide opportunitiesfor mentoring and ongoing support.Informal mechanisms are also in place acrossthe province to share best practices for siteinspections and documentation of results.Serious OccurrencesThe Day Nurseries Act requires that all licensedchild-care providers report to the Ministry, within24 hours, any serious occurrences. Serious occurrencesinclude the injury or abuse of children incare, such as cuts and bruising, the restraining ofa child, and emotional and verbal abuse. A writtenfollow-up report detailing the corrective action tobe taken must also be sent to and reviewed by theMinistry within seven working days.Our review of serious-occurrence files at theregional offices we visited found the following:•One-third of the serious-occurrence incidentswere reported after the 24-hour reporting deadlinefollowing an incident. On average, incidentswere reported about seven days after the reportingdeadline.•For almost half of the files reviewed, the serious-occurrence follow-up reports were submittedafter the required seven-working-days deadline.On average, the reports were submitted 88 daysafter the incident occurred. In the case of oneregional office, about 30% of the reports weresubmitted 200 or more days after the incident.As a result, there is no assurance that the necessarycorrective action is taken on a timely basis.Chapter 3 • VFM Section 3.04

902005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04RECOMMENDATIONIn accordance with its own policy, the Ministryshould ensure that:•all serious occurrences at child-care centresare reported within the required 24-hourdeadline; and•serious-occurrence follow-up reports arereceived and reviewed and, where applicable,the corrective action to be taken isapproved on a timely basis.MINISTRY RESPONSEOperators have the primary responsibility forinitially reporting serious occurrences to theMinistry and for providing follow-up reports.The Ministry will continue to work closelywith operators to meet the requirements of itsserious-occurrence policy.Regional offices have been directed to reviewtheir present practices to improve their abilityto identify and track serious-occurrencefiles not meeting ministry-established timelinesand to monitor follow-up activity. They are toreport back in fall 2005 on the areas they areaddressing and steps being taken for improvement.Regional offices have also been directedto initiate spot checks with operators to monitoroperator consistency in reporting serious occurrencesto the Ministry.The Ministry, in partnership with operators, isalso piloting an automated approach to seriousoccurrencereporting that would provide accurateand timely data on the status of all seriousoccurrences.FUNDINGFee SubsidyFee subsidies are provided primarily for the careof children whose parents are in need. A parent inneed is defined as:•a person eligible for income support under theOntario Disability Support Program, the FamilyBenefits Act, or the Ontario Works Act; or•a person who, for reasons of financial hardship,inability to obtain regular employment, or lackof a principal family provider, illness, disabilityor old age, does not have the financial resourcesto provide child-care services or private-homechild care to their child or children, as determinedin accordance with ministry guidelines.Once a parent is deemed to be eligible for the feesubsidy, the parent may choose to place their children)in any centre in their area that has an availablesubsidized space (the availability of spaces isdiscussed in more detail later under Waiting Lists).Eligibility for subsidized child care is based onan applicant’s family composition, monthly income,budgetary needs, and liquid assets, as described inthe Ministry’s Guideline for the Determination ofAvailable Income. When applying this guideline,CMSMs are allowed to exercise discretion in establishingmaximum allowable limits for deductibleexpenditures that are affected by local conditions.For example, a CMSM may set a higher deductiblefor rental costs because rental costs in its regionmay be higher than elsewhere.In our three previous audits of the Child CareActivity (see Annual Reports from 1989, 1995, and1999), we noted a number of concerns with theexercise of discretion in determining allowableexpenditure limits when assessing fee-subsidy eligibility.Although the Ministry generally agreedwith our previous findings and recommendationsand stated that it would take the necessary correctiveaction to ensure greater consistency acrossthe province, we still found significant differences

Child Care Activity91in discretionary expenditure limits that we do notbelieve are justified by local conditions. Examplesfrom our current review of eligibility files and oursurvey results included the following:•debt repayment ranged from $100 to $750.•Maximum allowable monthly deductions forMaximum allowable monthly deductions fordiapers ranged from a low of $40 to a high of$150.•Maximum allowable deductions for actual drugcosts incurred if no drug plan was availableranged from a low of $125 to a high of $250.•Additional miscellaneous deductions, which areapplied in the majority of cases, ranged from10% to 25% of net income, with maximum limitsranging from $300 to $800, and, in a fewcases, 25% of net income with no maximum dollarlimit.Allowing significant differences in deductibleexpenses means that parents in similar circumstanceswill be treated differently depending onwhere in Ontario they live.We also found that information with respectto income and liquid assets was in some cases notcorrectly assessed, with the result that the fee subsidyprovided was higher than it should have been.Although the amounts were small individually, collectivelythey could add up to a significant amount.Subsequent to our 1999 audit of the Child CareActivity, the Ministry adopted a policy in 2000that required ministry regional offices to annuallyreview 5% of the eligibility files at their CMSMs.The reviews are intended to ensure that only eligibleapplicants receive the fee subsidy and that thefee subsidy has been correctly calculated. Despitethis policy, we found that the regional offices wevisited had not conducted the required file reviewsfor the majority of their CMSMs in the most recenttwo years. One regional office had not conductedany file reviews since the inception of the policy in2000.RECOMMENDATIONTo promote greater consistency and fairness inthe determination of eligibility for the province’schild-care fee subsidy, the Ministry should:• ensure that any variances in allowableexpenditure limits for applicants beingassessed are reasonable and clearly attributableto local conditions; and•conduct the required annual fee-subsidy-filereviews in accordance with the Ministry’spolicy to ensure that only eligible applicantsare being subsidized and that the subsidyhas been correctly calculated.MINISTRY RESPONSEThe Ministry is developing a new model fordetermining eligibility for fee subsidies thatis based on income rather than a needs test.Assessment of eligibility for the fee subsidyunder the income test will be fair, transparent,equitable, and consistent across the province,and it should significantly reduce disparities.In the interim, regional offices have beendirected to review the policies of consolidatedmunicipal service managers by early fall to confirmthat variances in expenditure limits arewithin established ministry guidelines.Regional offices have also been directed toinclude a minimum of 5% of the fee-subsidyfiles in their program review for 2006.Waiting ListsChildren whose parents are assessed as eligible for afee-subsidized child-care space, but for whom a subsidizedspace is not available at the time of assessment,may be placed on a waiting list. Some waitinglists are maintained by and for individual childcarecentres, and others are maintained collectivelyby the CMSM for all the centres in its jurisdiction.Chapter 3 • VFM Section 3.04

922005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04There is no standard approach to maintaining waitinglists, and no waiting-list information is providedto the Ministry’s regional offices. Therefore,the Ministry is not aware of the number of childrenwaiting for a subsidized child-care space, or howmany are waiting in each area.Our review of waiting-list information at theCMSMs indicated that a large number of childrenwere waiting for a subsidized child-care space. Forexample, in two of the largest CMSMs that we visited,4,400 and 4,000 children were waiting fora subsidized child-care space, which represented43% and 12% of all children who were in licensedchild care in those areas at that time. CMSM staffindicated to us that it was not uncommon to experiencewait times of between six months and twoyears before getting a subsidized space.In our review of one regional office’s files, wealso noted that one CMSM received $2.24 millionin new funding in 2004/05, $541,000 of which wasdesignated to create 230 new subsidized spaceseven though that jurisdiction had no waiting list forspaces. The funding allocation was reviewed andapproved by the regional office.We believe waiting-list information, once collectedand analyzed, would be useful additionalinformation to help the Ministry identify where theneed is greatest and assist it in more effectively distributingnot only existing ministry funding but alsothe substantial new funding to be received from thefederal government.RECOMMENDATIONThe Ministry should collect information on thenumber of children waiting for subsidized childcarespaces in each jurisdiction in order to moreeffectively assess service pressures and to help itmore fairly distribute both ministry funding andthe significant additional funding expected fromthe federal government.MINISTRY RESPONSEUnder the Day Nurseries Act, consolidatedmunicipal service managers (CMSMs) are designatedas child-care delivery agents responsiblefor local planning and managing within allocatedresources, which includes developingstrategies to meet the local need for child care.Local need is determined through a variety ofapproaches, including waiting lists and demographics.As CMSMs increase their expertise,the local planning process is becoming moreand more sophisticated.Prior to 2004, the ministry allocation processwas largely historically based, with initialallocations determined by a variety of factors,including municipal willingness to cost share,local capacity to support service expansion, andlocal waiting lists.Factors such as the number of low-incomefamilies, the child population, a low level ofparental education, the number of families forwhom English is a second language, the populationdensity, and the rate of population growthare more effective indicators than waiting lists,and the Ministry has allocated all new child-carefunds on this basis since 2003/04.Wage SubsidyThe wage-subsidy program was introduced in 1987to improve the salaries and benefits of child-careworkers and to make licensed care more affordablefor all parents. The program provides funding toservice providers to enhance caregiver wages andbenefits, which in turn enhances staff stability.Allocation of FundingFunding for wage-subsidy grants consists of threedistinct components introduced between 1987 and1992, as follows:

Child Care Activity93• Direct Operating Grants (since 1987): Whenintroduced, these grants were based on anagency’s licensed capacity and the age of thechildren it served. Non-profit agencies wereeligible to receive 100% of the calculated grant,while for-profit agencies were eligible to receive50% of the amount calculated.•Wage Enhancement Grants (since 1991): Whenintroduced, these grants were determined basedon the number of permanent full- and part-timeagency employees and were available only tonon-profit agencies.•Home Provider Enhancement Grants (since 1992):These grants were introduced to provide additionalcompensation to home-based child-careproviders working through non-profit agencies.During the 1993/94 fiscal year, the governmentcapped its funding for wage-subsidy grants, andsince that time it has based its distribution of thesegrants on the funding allocated at that time. So, forthe most part, agencies that were receiving grantsat that time continue to receive them now, andagencies that were not receiving them at that timedo not receive them now.Agencies that do receive a wage-subsidy grantmust ensure that each employee receives a reasonableportion of the total grant. Since February2000, distributions must not exceed $9,533 foreach full-time-equivalent position. Agencies arerequired to annually submit to their CMSM a WageSubsidy Utilization Statement that compares totalwage-subsidy allocations against actual expenditures.Where grants provided are greater than$20,000, the agency must also provide a SpecialPurpose Report and audited financial statementto the CMSM to verify that the grant was used forthe purposes intended. Failure to comply with anyof the funding conditions may result in a claim forrecovery of the grant and ineligibility to receivefuture wage-subsidy grants.In our 1999 Annual Report, we identified anumber of concerns with respect to wage-subsidygrants, and despite the Ministry’s commitments toact on our recommendations at that time, duringthis audit we found similar issues to those noted in1999. Specifically, we noted that the wage-subsidyprogram continued to be highly inequitable becauseagencies that received wage-subsidy funding in1993/94, when the subsidy was capped, continuedto receive the same amount of funding without anyassessment of their need for it. At the same time,agencies that either did not exist or did not receivewage-subsidy funding in 1993/94 were denied anyfunding to subsidize the wages of their child-careworkers. As a result, older centres that do receivewage-subsidy grants are able to offer higher wagesand therefore attract more qualified staff.We also found that two of the three largeCMSMs we visited did not annually receive andreview the wage-subsidy-grant calculations thatagencies are required to submit. Instead, theseCMSMs continued to pay each agency the samegrant amount every year. This can result in fundingthat is further unrelated to need. For instance,some agencies are likely to be caring for children inage groups that are different from the groups theycared for in 1993/94. Others may have downsizedtheir programs in terms of licensed capacity or fulltime-equivalentpositions. In such cases, agenciesshould have their grants recalculated and, wherewarranted, have their grants reduced, while othersthat have expanded their programs may be deservingof an increase in their grant.RECOMMENDATIONTo help ensure the equitable distribution ofwage-subsidy funding among child-care providersin Ontario, the Ministry should reviewthe objectives and design of the wage-subsidyprogram so that funding allocations are basedon assessed needs rather than on historicalallocations.Chapter 3 • VFM Section 3.04

942005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04MINISTRY RESPONSEThe following steps have been taken to addressthe Auditor General’s findings:•communication to consolidated municipalservice managers (CMSMs) outlining theMinistry’s monitoring expectations, includingyearly calculations of wage-subsidyamounts by centre and reallocation as appropriateand the maintenance of a list of wagesubsidypressures; and•revision of the child-care service programrequirements to highlight these expectationsfor CMSMs.The Ministry recognizes that improvingwages in the child-care sector is a critical factorin maintaining a quality system. The Best Startinitiative will continue to address this issue byproviding additional funding for wage subsidiesthat can result in increased wages for child-careworkers in the system.Monitoring of Subsidy FundingIn our 1999 Annual Report, we had concerns withrespect to the monitoring of wage-subsidy funding.At that time, the Ministry indicated thatCMSMs would be required to have child-care serviceproviders reconcile wage-subsidy allocationsagainst actual expenditures and obtain independentconfirmation of the information provided. Theyalso indicated that CMSMs would be required toconduct random-sample reviews at least annuallyof the use of funds. During the current audit, wefound that this control process was not operatingsatisfactorily. Specifically:•Although grant recipients must submit anannual Wage Subsidy Utilization Statement totheir CMSM, the statements we reviewed lackedsufficient detail to assess whether the grantswere spent in accordance with the Ministry’sconditions for funding.• Although agencies that receive more than$20,000 are required to submit an audited SpecialPurpose Report indicating how the wagesubsidygrants were spent, in practice, in mostcases these reports either were not received bythe CMSM or were not audited.•Although CMSMs are required to submit areport to the ministry regional office certifyingthat all required agency Special Purpose Reportswere received, in practice, this was not beingdone.Our own review of wage-subsidy files found anumber of instances of non-compliance with thefunding requirements. Specifically:•In one case, a child-care centre employeereceived $18,000 in wage subsidy during2003—almost double the allowed maximum of$9,533.•In another case, an employee making a basesalary of $49,678 received a wage subsidy of$4,278, while another employee in the samecentre who worked the same number of hoursand had a base salary of $18,818 did not receiveany wage subsidy.In the absence of more detailed information,reviews of wage-subsidy allocations, and auditedSpecial Purpose Reports, there is no assurance thatfunding conditions for wage subsidies are beingcomplied with, including the requirements thateach employee receive a reasonable portion of thewage-subsidy grant and that no employee receivemore than the maximum allowable grant of $9,533per year.RECOMMENDATIONTo assess that wage-subsidy funds for child-careworkers are spent in accordance with programrequirements, the Ministry should implementadequate oversight procedures.

Child Care Activity95Submission and Approval of BudgetsThe Ministry’s corporate office provides an annualfunding allocation for child-care program expendituresto each of the nine regional offices. We wereadvised that the allocations were generally determinedbased on prior years’ expenditures in eachregion.MINISTRY RESPONSEThe following steps have been taken to addressthe Auditor General’s findings:•communication to consolidated municipalservice managers (CMSMs) regardingthe Ministry’s accountability expectations,including Special Purpose Reports fromagencies, a list of the number of full-dayequivalentchildren by age group as part ofthe annual wage-subsidy recalculation, andsystematic file reviews by the CMSM;•revisions to the child-care service programrequirements to highlight these expectationsfor CMSMs; and•direction to ministry regional offices toinclude a minimum of 5% of the wage-subsidyfiles in their program review for 2006.Regional offices in turn enter into annual servicecontracts with their respective CMSMs basedon a budget submission package that each CMSMmust submit to its regional office by March 31. Thissubmission package pertains to the January-to-December period of the same year and should bereviewed and approved by June 30 of that year.The CMSMs, in turn, negotiate and enter intopurchase-of-service agreements with the child-carecentres that provide services or directly providesome of the child-care services themselves.Our review of these processes indicated that theMinistry did not have the information it needed toassess whether the amounts ultimately approvedand paid to each CMSM and then to individualagencies providing child-care services were basedon need. Our concerns included the following:•The Ministry is not party to the negotiationsbetween CMSMs and child-care providers, orto the resultant agreements, nor does it receiveany information with respect to the amountspaid to and the services provided by individualagencies.•Budget requests from CMSMs to ministryregional offices lacked the information neededto make informed funding decisions. For example,while requests generally provided informationon the total number of children to beserved, they did not provide information on theage groupings, the number of low-income orESL families, or the number of children on waitinglists. Such information can have a significantimpact on costs.In fact, our review of detailed cost and serviceinformation at the CMSMs that we visited,as well as other information obtained by meansof a questionnaire sent to other CMSMs, confirmedthat child-care costs not only varied significantlybetween age groupings but also variedsignificantly between different child-care centresfor the same age grouping (see Figure 4).• There was no evidence that the Ministryassessed budget submissions from CMSMs todetermine whether the funding requested wasreasonable and commensurate with the value ofthe services to be provided.Figure 4: Range of Child-care Costs by Age CategorySource of data: Selected consolidated municipal service managersLowest Highestper-diem per-diemAge Category Cost ($) Cost ($)infant (0–18 months) 24 63toddler (18–30 months) 20 75preschool (30 months to 5 years) 17.5 75school age (6+ years) 8 60Chapter 3 • VFM Section 3.04

962005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04• In many of the cases we reviewed, the CMSMbudgets submitted were not reviewed andapproved by the regional office until long afterthe June 30 deadline and, in some cases, afterthe calendar year-end. In these cases, CMSMscould be allocating funding to child-care agencieswithout confirmation of their own budgetsand funding allocations; and where a change inallocation might occur, the CMSM would havelittle or no time to adjust for the increase ordecrease in funding.RECOMMENDATIONTo ensure that agencies providing child-careservices receive funding based on the relativeneed for subsidized child care in each municipality,the Ministry should:•require that consolidated municipal servicemanagers (CMSMs) report information thatis sufficiently detailed and relevant to theMinistry’s funding decisions;•critically assess CMSMs’ budget requests toensure that approved funding amounts arecommensurate with the value of the servicesto be provided by the delivery agencies; and• review and approve budget requests on amore timely basis.MINISTRY RESPONSERevised child-care service managementrequirements will be distributed to the Ministry’sregional offices and to CMSMs beginningin the summer of 2005.Consistent with the designation of CMSMs asdelivery agents under the Day Nurseries Act, theMinistry believes that the combination of thechild-care service plan and the budget submissionprepared by the CMSMs provides informationat an appropriate level of detail for the Ministryto approve budgets at the system level.The Ministry recognizes that the fee-subsidysystem is very dynamic and the mix of children,fee-subsidy costs, and the location of fee subsidiescan fluctuate significantly from quarter toquarter. This often requires that a CMSM adjustthe planning targets that were initially established.This must be done within approved fundinglevels.The Ministry establishes time frames withinthe government business cycle. These ministrytime frames will be revised to better accommodatethe government business cycle and thefunding approval processes for CMSMs. All servicecontracts allow funding to continue beyondthe contract dates and require service levels tobe maintained until a new service contract hasbeen signed.The Ministry has formed an advisory group thatincludes consolidated municipal service managers(CMSMs) to review the child-care servicedata elements requested by the Ministry by themiddle of October 2005 to make sure that theycontinue to remain relevant and useful to boththe Ministry and the CMSMs. Strategies willalso be established to enhance the expertise ofboth municipal and ministry staff to analyze andmake more effective use of the data requested inservice planning and resource allocation.Quarterly ReportingTo monitor in-year performance against agreedupontargets, CMSMs are required to submit quarterlyyear-to-date reports that include budgetedversus actual expenditures and service data, suchas the number of families and children served. Thefirst three quarterly reports are due 50 days afterthe end of the relevant quarter, and the fourthquarterly report is due 65 days after year-end. Aspart of the quarterly reporting process, the Ministryrequires the CMSMs to highlight, fully explain,

Child Care Activity97and describe an appropriate course of action forall budget-to-actual variances greater than 10% or$10,000 for financial data, and 5% for service data.For about half of the quarterly reports wereviewed, we found that the CMSMs submittedthem past the due dates, with the delay rangingfrom about one month to five and a half monthsafter the due date. In addition, we found a numberof reports where variances between actual andbudgeted amounts were greater than 10% or$10,000 for financial data, and 5% for servicedata, with no explanation for the variances or withexplanations that were insufficiently detailed. Forexample, in one CMSM’s quarterly report, a yearto-datecumulative total of $619,100 for “childcareinformal care” appeared; but the followingquarterly report showed the same line item witha cumulative total of $347,804, a decrease of 44%from the original total. No documented explanationwas provided, nor was there any evidenceof a review or follow-up by the Ministry for thisdecrease in the cumulative total.Finally, our review of files at ministry regionaloffices found that descriptions of the action to betaken to address identified variances were usuallyvery general statements that did not providedetails as to exactly what action would be taken.For instance, some files indicated the following:“continue to monitor” and “will continue to exceedprovincial funding level.” These, in our view, donot constitute adequate descriptions of action to betaken to address budget-to-actual variances.RECOMMENDATIONTo facilitate the assessment of performanceagainst agreed-upon targets for funding providedto consolidated municipal service managers(CMSMs) for the provision of child-careservices, the Ministry should ensure that:•quarterly reports by CMSMs are receivedand reviewed by the required due date; and• all significant variances between what wasbudgeted and what was spent have beensatisfactorily explained and any requiredcorrective action identified.MINISTRY RESPONSERegions have been directed to apply the existingsanctions policy where consolidated municipalservice managers (CMSMs) are late in submittingdocumentation such as quarterly reports.The sanctions policy outlines an incrementalprocess that regional offices will use to acquireoverdue documentation from CMSMs.The Ministry recognizes the need for a moreconsistent use of existing tools for identifying,analyzing, and following up on variances in thequarterly reports prepared by regional offices.Therefore, for 2005/06, the Ministry’s businesspractices package includes a standardized electronicformat requiring an analysis of the varianceand creation of an action plan to addressthe variance. Budget training on the new packagebegan in March 2005.The Ministry’s governance and accountabilityframework includes a transfer-payment businesscycle checklist of the activities to be completedto establish service system management expectationsand priorities, set budgets, negotiate servicecontracts, and monitor performance.Annual Program Expenditure ReconciliationAll CMSMs must prepare and submit to the Ministryan Annual Program Expenditure Reconciliation(APER), together with an audited financialstatement, no later than four months after the fiscalyear-end. The APER should reconcile a recipient’sapproved budget with actual expendituresand identify ministry-funded program surplusesor deficits. As per ministry policy, recovery ofChapter 3 • VFM Section 3.04

982005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.04identified surplus funding should be underway nolater than 12 months after the calendar year-endin which it arose and must be completed within 24months.Our review of a sample of APERs found thatalmost two-thirds were submitted past the duedate, with the lateness ranging from one month toover seven months after the due date. In addition,we identified concerns that were similar to those weidentified in 1999, specifically with respect to thelimited effectiveness of the process. For instance,for almost all of the APERs we reviewed during thecurrent audit, the accompanying audited consolidatedfinancial statements lacked either sufficientdetail or the note disclosure necessary to identifyinappropriate or ineligible expenditures and to permitthe reconciliation of the audited financial statementswith the APER-reported actual expenditures.RECOMMENDATIONTo more effectively identify funding surplusesand inappropriate or ineligible expenditures,the Ministry should ensure that the auditedfinancial statements accompanying the AnnualProgram Expenditure Reconciliations (APERs)are sufficiently detailed to permit the identificationof specific child-care–related expendituresand the reconciliation of the financial statementto the APER-reported actual expenditures.MINISTRY RESPONSEThe Ministry will take the audit recommendationunder consideration in reviewing the existingAPER requirements to determine whetherthe APERs and audited financial statements aresufficiently detailed. Regional offices will continueto work with consolidated municipal servicemanagers to meet established deadlines aswell as the requirements for independent verificationof expenditures.MANAGEMENT INFORMATION SYSTEMAll child-care expenditure and service informationis maintained in the Ministry’s Service ManagementInformation System (SMIS). On a quarterly basis,regional office staff enter information received fromCMSMs into the SMIS. Regional office Directorsmust confirm in writing to the Ministry’s corporateoffice that the information entered into the systemis complete and accurate.The information available in the SMIS is onlyin total-summary form—for instance, the totalnumber of full-day-equivalent fee-subsidy childrenserved; the total costs for these services; and thetotal wage subsidies paid. Such summary totalsdo not reflect the age category of children servedor the related service costs for those categories, oreven the number of centres receiving wage-subsidyfunding. The Ministry does not collect such detaileddata. Information on the number of children caredfor with the related per-diem costs per age categoryand on the amount of wage-subsidy fundingprovided to each agency would enable the Ministryto make more informed funding decisions, toassess identified variances between the actual andbudgeted services or costs, and to assess CMSMs’performance.RECOMMENDATIONThe Ministry should ensure that the informationcaptured in its Service Management InformationSystem (SMIS) for child-care services is sufficientlydetailed to enable it to make informedfunding decisions and to subsequently identifysignificant actual-to-budget variances.MINISTRY RESPONSEThe Service Management Information Systemallows for year-to-year comparisons on a systembasis to identify trends and support planningprovincially and regionally, rather than support

Child Care Activity99in-year management of funds, which primarilyoccurs at the regional level based on quarterlyreports and variance explanations submittedby the consolidated municipal service manager(CMSM).CMSMs use the Ontario Child Care ManagementSystem (OCCMS) to manage the childcaresystem at the individual-CMSM level. TheOCCMS contains detailed information on feesubsidies, wage subsidies, and other elements ofthe service system. In partnership with the Ministry,upgrades to the OCCMS occur on a regularbasis. Work is underway on an OCCMS upgradethat will link each CMSM with the Ministry,enabling the Ministry to directly access childcaresystem data. This linkage will be in place byJune 2006.Chapter 3 • VFM Section 3.04

Chapter 3Section3.05Ministry of TransportationDriver and Vehicle PrivateIssuing NetworkChapter 3 • VFM Section 3.05BackgroundThe Ministry of Transportation (Ministry) has amandate to provide Ontarians with a safe, efficient,and integrated transportation system. Its RoadUser Safety Division works to improve road safetyand mobility, through the promotion and regulationof safe driving behaviour, and customer serviceand the accessibility of ministry products and services,including those relating to driver and vehiclelicensing. These products and services are availablethrough a variety of channels, including the Internet,driver examination centres, ServiceOntariokiosks, mail, and phone. However, the most significantof these service delivery channels are theprivately operated issuer offices, which are locatedin communities throughout the province and arecollectively known as the Private Issuing Network(PIN).The PIN processes almost 19 million transactionsannually, including approximately 80% of Ontario’svehicle registration transactions and 40% of itsdriver-licensing transactions. Essentially, the PINhandles the full range of renewal and replacementtransactions for licences, validation stickers, andplates, and processes applications for such productsas Disabled Person Parking Permits. Services relat-ing to obtaining an original driver’s licence, such asvision and road tests, are provided by driver examinationcentres. In the 2004/05 fiscal year, the PINcollected over $766 million in revenue for driverand vehicle products and services. PIN operatorsreceive commissions for processing transactions—in 2004/05, over $42 million in commissions werepaid to them.In addition, the PIN collects retail sales taxfor the Ministry of Finance on the sale of usedvehicles (collecting about $130 million in 2004/05)and defaulted parking fines for the Ministry of theAttorney General (collecting about $42 million in2004/05).There are currently some 280 PIN offices,employing approximately 1,200 people. The Ministryestimates that 98% of all Ontario residents livewithin 40 km of one of these offices, which varysignificantly in both size and business volume, asshown in Figure 1. The terminals referred to arecomputer terminals from which PIN offices connectto ministry systems and process transactions. Whilethe majority of offices are stand-alone businesses,35% operate in conjunction with another business,such as a hardware store.100

Driver and Vehicle Private Issuing Network101Figure 1: Breakdown of Types of PIN OfficesSource of data: Ministry of TransportationSize of Office # % Total Offices % Total Transactionssmall (i.e., offices of 1–2 terminals in mostly rural/remote locations) 168 60 20mid-sized (i.e., offices of 3–5 terminals in mostly urban locations) 76 27 39large (i.e., offices of 6+ terminals in mostly large urban locations) 36 13 41Total 280 100 100Audit Objective and ScopeThe objective of our audit of the Ministry’s managementof its Private Issuing Network (PIN) was toassess whether adequate policies and procedureswere in place to:•ensure that driver- and vehicle-licensing productsand services were provided with due regardfor economy and efficiency and in compliancewith legislation and ministry policy; and•measure and report on the effectiveness of networkservices.We identified criteria that would be used to concludeon our audit objective. These were discussedwith and agreed to by senior management of theMinistry. Our audit fieldwork included examiningdocumentation, analyzing information, interviewingstaff at the Ministry’s head and regional offices,and visiting six PIN offices. We surveyed all remainingPIN offices, achieving a response rate to our surveyof nearly 65%. In addition to the valuable inputprovided directly by issuers, we gathered informationfrom meeting with the president and the pastpresident of the Ontario Motor Vehicle Licence IssuersAssociation.Our audit was conducted in accordance withprofessional standards for assurance engagements,encompassing value for money and compliance,established by the Canadian Institute of CharteredAccountants, and accordingly included suchprocedures as we considered necessary in the circumstances.We also reviewed the relevant recentreports and activities of the Ministry’s InternalAudit Services Branch. Although these reports andactivities did not affect our audit scope, a numberof the issues identified by the Branch were helpfulin shaping our subsequent audit work.SummaryThe Ministry and the government view the PrivateIssuing Network (PIN) as a strategic asset of significantvalue for delivering front-line government services.With no PIN compensation increases in eightyears, the PIN delivery model has been relativelycost efficient. However, due to the lack of increasein compensation as well as other factors, relationsbetween the Ministry and the PIN have been deterioratingover the last several years, with the resultthat the two parties are now more adversaries thanpartners. Opportunities for any future use of thePIN, including the possibility of expanding its rangeof services to improve front-line service to Ontariocitizens in non-driver–related areas, may be lost if abetter working relationship is not established.With respect to relations between the Ministryand the PIN and the quality of services delivered tothe public, we found the following.•Issuer compensation has not been increasedsince 1997. The annual stipend, one componentof this compensation, falls short of ensuring thefinancial viability of smaller offices, and manylow-volume issuers appear to be struggling fortheir financial survival.Chapter 3 • VFM Section 3.05

1022005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05• Policies and procedures developed by the Ministrywere not applied consistently across thePIN, primarily because of the different contractualrelationships in place between the Ministryand private issuers. Of some 280 issuers, 246were operating under an older contract that,unlike the newer one, has no fixed term, doesnot specify remedial action if performance fallsbelow acceptable standards, does not requireissuers to pay for stock lost even if adequatesafeguards are not in place, does not avoid conflictsof interest by allowing issuers to be colocatedwith automobile dealerships, and doesnot require police record checks on new staffprior to accessing confidential data on the Ministry’sLicensing and Control System.•A third of customers completing comment cardsissued by PIN offices were generally dissatisfiedwith the service provided, and the Ministry wasnot summarizing this information to identifythe more pervasive issues requiring correctiveaction. Major complaints included lengthy waittimes and staff not being courteous and helpful.Lengthy wait times could be partially addressedby providing more terminals to some PIN offices.Transaction volumes at 54 offices may justify anadditional terminal, while 39 offices may havemore terminals than they require.•Only about 50% of calls to the Ministry’scall centre, which helps issuers process transactions,were being answered within two minutes,whereas the ministry target was for 80%of calls to be answered in that time. Call-centreoperators were also not available to take callsapproximately 40% of the time. In addition,although we noted that call volumes had nearlydoubled since 1996, there was no process forglobally training issuers on the most commoncall problems to reduce reliance on the callcentre.•Less than one-fifth of 1% of all plate-renewaltransactions, which are completed by mostOntario drivers annually, were processed viathe Internet in 2004. The government had estimatedthat, by 2006, 45%–77% of all such transactionswould be conducted over the Internet.In addition, because Internet applications werenot integrated with the Ministry’s licensing systems,these transactions actually cost more forthe Ministry to process than if they had been processedby issuers.With respect to the adequacy of controls overissuer offices and the Ministry’s monitoring of compliancewith legislation and ministry policy, wefound the following.•The Ministry has not met its own monitoringstandard of conducting a full audit of each issuerannually. While 159 full audits were completedin 2001, the number dropped to only three in2002 and only one in 2003. Although there wasslight improvement in 2004, with 19 full auditscompleted, this still represents a coverage ofonly 7% of the total population of 280 issuingoffices. Seven offices have never been audited.• The lack of audit coverage, as well as weaknessesin system or supervisory controls,meant that many serious risks were not beingadequately managed. For example:•When electronically processing transactions,issuers are able to adjust fees and makeunjustified data entries (for example, makingminor changes to address informationor generating multiple driver and vehicletransactions) in order to generate additionalcommissions.•When manually processing transactions, issuersare able to enter incorrect amounts ofrevenue and commissions. For nearly onethirdof the manually processed transactionswe sampled, issuers’ commissions had beenentered incorrectly (overstated in mostcases).•There have been incidents of misuse of customercredit-card information, as well as

Driver and Vehicle Private Issuing Network103fraudulent driver’s licences being created byaltering existing driver’s licence photos, datesof birth, names, and addresses.•Items of stock, such as licence plates, stickers,temporary driver’s licences, and permits,have been lost and could be used forillegal purposes. Over the past four years,over 56,000 high-risk stock items have beenreported either missing or stolen.We also noted that the Ministry does not haveadequate procedures in place to ensure that:••all drivers in the province are insured; anddrivers who apply for a Disabled Person ParkingPermit are entitled to one.OVERALL MINISTRY RESPONSEThe Ministry values the work of the Office ofthe Auditor General and appreciates the AuditorGeneral’s recommendations.Senior staff of the Ministry have met withstaff of the Office of the Auditor General on severaloccasions and have agreed on four priorityareas relating to the Private Issuing Network:• developing a strategy for compensation,with consideration for both large and smalloffices;•customer satisfaction;••implementing effective methods to measureimproving internal controls; andintroducing measures to improve the workingrelationship between the Ministry andthe Private Issuing Network.We are taking action on all of the Auditor’srecommendations.Road safety, quality customer service, effectivestewardship of government revenues, andthe protection of personal information are toppriorities for this Ministry.The Ministry appreciates the vital and longstandingrole private issuers continue to play inthe delivery of driver- and-vehicle licensing servicesacross Ontario.Detailed Audit ObservationsWhen the Ministry delivers products and servicessuch as driver’s licence and vehicle renewals, itstrives to ensure that consistently high levels of serviceare provided to the public and that its productsand services are provided in compliance with regulations,while at the same time ensuring that allappropriate revenues are collected by the PIN andpromptly remitted to the government. The Ministryhas developed policies and procedures related tothese three objectives and monitors PIN operationsfor adherence to them.QUALITY OF SERVICESystemic ConcernsCompensationA major impediment to the provision of consistent,high-quality service to the public is issuers’ dissatisfactionwith their compensation. This issue particularlyaffects the smaller issuers in remote locations,and ministry staff have indicated that it is increasinglydifficult to find new operators when smallofficeoperators retire or quit.In 1987, the Ministry implemented its currentapproach to compensating issuers, which consistsof two components: a time-based commission foreach transaction processed and an annual stipend.Commissions are the primary source of compensationand are designed to pay issuers based on thecomplexity and effort required to process each typeof transaction.Chapter 3 • VFM Section 3.05

1042005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05The commission value for each transaction isdetermined by multiplying an estimated benchmarkprocessing time by a compensation rate. When significantchanges in procedures occur, the Ministryreviews and updates the time benchmark. The compensationrate, which was last increased in 1997,is currently set at $0.5575 per minute for all transactions.The lack of an increase in this commissionrate over the last eight years is the single biggestsource of issuer dissatisfaction. For the purposes ofcomparison, we note that in Quebec, the compensationrate paid to issuers is $0.846 per minute, or52% higher than in Ontario.The Ministry maintains that, with the greatlyincreased opportunities to earn higher commissionsas a result of the many more transactions issuershave been processing in recent years, increasing thecommission rate has not been required. However,the issuers contend that staffing and other costshave increased commensurately with the increasedprocessing volumes and that the simpler transactions,which are the most profitable, are increasinglybeing done through alternative channels suchas ServiceOntario kiosks. The PIN is thus left to handlea greater percentage of the more complicatedtransactions that often require extensive customerinteraction or calls to the ministry hotline service.The issuers’ view is that the time-based commissioncompensates issuers only for the time it takesto process a problem-free transaction and does nottake into consideration the interaction time spentwith customers needing additional advice andassistance, who are becoming increasingly common.The operator of ServiceOntario’s kiosks is alsopaid a higher transaction fee for processing thesame driver and vehicle transactions that issuersprocess. Although the Ministry has recently negotiateda lower fee structure with the kiosk serviceprovider, our review substantiated that a discrepancyin the amount paid still exists for the majorityof the eight ministry transactions that kiosks currentlyprocess. For instance, the Ministry pays thekiosk service provider a transaction fee of $2.45 foreach address change processed but pays issuers acommission of only $1.32 (46% less) for the sametransaction. Similarly, for vehicle licence renewals,the Ministry again pays the kiosk service provider a$2.45 transaction fee but pays issuers a fee of only$1.82 (26% less).The annual stipend, the second component ofissuer compensation, is a fixed annual payment toissuers of $2,057. It too was last increased in 1997.Ministry documentation indicates that the stipendis intended to:• provide low-volume issuers with a fixed minimumincome in addition to their commissions;• compensate issuers for a portion of fixed costsincurred regardless of business volumes;• improve the financial viability of issuing officesthat are often operated in conjunction withanother business; and•help reduce the high turnover of lower-volumeoffices and thereby stabilize the PIN.Although the compensation formula is identicalfor all issuers, issuers handle significantly differentbusiness volumes and accordingly earn incomesthat vary widely. Figure 2 summarizes the compensationpaid to most issuers in 2004 (besides thiscompensation, some offices earn income from a colocatedbusiness—that is, a businesses with whichthey share their premises).As Figure 2 illustrates, the commissions paid toan individual issuing office in 2004 ranged fromabout $3,600 (at an office with one terminal) toover $660,000 (at an office with six terminals).In fact, 88 issuers earned less than $50,000 incommissions in 2004, which, combined with the$2,057 stipend, had to cover office expenses. Theseexpenses include staff salaries and wages (if any),rent, utilities, supplies, and other costs, all of whichhave continued to rise since the commission ratewas last set eight years ago. Although we cannotaccess confidential issuer net profitability figuresto confirm our analysis, Figure 2 and anecdotal

Driver and Vehicle Private Issuing Network105Figure 2: Compensation and Revenues for Issuer Offices According to Number of Terminals, 2004Source of data: Ministry of TransportationNumber of Terminals1 2 3–5 6–9 TotalTotal number of offices 111 47 72 39 269 1Commission ($ 000)office with lowest annual commission 3.6 36.6 76.0 130.7office with highest annual commission 70.7 132.0 396.1 660.3average commission/terminal 30.8 42.8 51.4 60.0average commission/office 30.8 85.6 208.5 395.5Total commission 2 ($ 000) 3,417.3 4,021.3 15,010.6 15,425.6 37,874.8 1Stipendper office ($) 2,057.0 2,057.0 2,057.0 2,057.0% of total compensation 6.3 2.4 1.0 0.5Total average compensation/office ($ 000) 32.8 87.6 210.5 397.6Revenue ($ million)average/office 0.6 1.6 3.9 7.3Total revenue 3 66.2 75.3 277.3 284.9 703.7 11. Only those offices for which a full year’s worth of data was available were used in this analysis.2. Commission amounts are based on the 2004 calendar year.3. Revenue amounts are based on the 2003/04 fiscal year.evidence suggest that many small issuers, particularlythose that are not co-located with anotherbusiness and therefore have no other source of revenue,are struggling for their financial survival.Seventy-nine of the 158 small (one- or two-terminal)offices face this challenge of relying exclusively onministry compensation.Since closing low-volume offices would in mostcases run counter to the Ministry’s customer serviceobjectives, new compensation arrangements maybe necessary to ensure network stability. One areathat we consider worthy of review is the use of theannual stipend. Figure 2 illustrates that the stipendis an insignificant component of total compensationfor the larger offices but can be a vital subsidyfor smaller ones. Given this, in our view the Ministryshould consider moving from a fixed stipendper office to a variable stipend dependent on suchfactors as office size, the need for financial support,and the desire to maintain a presence in a geographicarea. Applying these factors could eliminatethe stipend for larger offices, allowing more stipendmonies to go to smaller offices. For such offices, anincreased annual stipend could provide low-volumeissuers with enough income to adequately supplementthe much lower commissions they earn. In thisregard, we note that in Quebec, each issuer is guaranteeda minimum revenue of $21,500 annually.Just as the operators of PIN offices have concernsabout their compensation from the Ministry,so too do PIN office staff have issues with theirwages from the operators, which are quite low.Issuers that we visited and some that respondedto our survey indicated that they can afford to paytheir staff no more than $10–$12 per hour. In comparison,at the single ministry-run issuing office,ministry employees earn on average over $20 perhour for doing the same work as PIN employees.Associated with these low wages is the fact thatmany offices suffer from high turnover and difficultiesin hiring quality staff. Worst hit are the centraland southwestern regions, where larger officesChapter 3 • VFM Section 3.05

1062005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05require more staff and living costs are highest. Thisproblem is heightened by the fact that trainingstaff is becoming increasingly time-consuming astransactions become more complex, expectationsregarding privacy and security procedures rise, andreviewing the documentation supporting a transaction(such as customer identification papers)becomes increasingly important and lengthy.Two recent reports by ministry parliamentaryassistants—one dated August 2003 and the otherSeptember 2004—also concluded that the PIN wasnot being fairly compensated and recommendedincreases in both the commission rate and theannual stipend.RECOMMENDATIONIn order to ensure that the Private Issuing Networkremains stable and customer service levelsare maintained, the Ministry should, as partof the process of negotiating a new provincewideagreement with private issuers, conduct areview of its compensation arrangements.MINISTRY RESPONSEWe agree that the issuers need to be fairly compensatedfor the important work they do.The Ministry will be implementing a pilotproject that will encourage market-driven compensationfor driver-licensing and vehicle registrationservices. The Ministry will then discussthe results with the Private Issuing Networkand initiate a comprehensive review of issuercompensation.The Ministry is also looking at alternativestrategies for issuers to improve revenue opportunities,including the implementation of aminimum compensation guarantee for issuingoffices that are located in remote, underservicedcommunities and whose annual commissionsare below $10,000, to ensure their continuingpresence there; and allowing issuers operatingunder the 2001 Private Issuer Agreement to participatein advertising programs and engage inthe sale of selected consumer products.Contractual AgreementsAnother major impediment to the provision of consistent,high-quality service to the public is the lackof a single, standardized relationship between theMinistry and its private issuers that establishes theirrespective responsibilities. This has been notedboth by our Office in past audits and by the Ministry’sInternal Audit branch. As a result, a numberof practices and performance requirements varythroughout the PIN, and many significant requirementsare not being fully met.There are two fundamentally different contractualagreements currently in place between theMinistry and its issuing offices: a Memorandum ofAgreement, which dates from 1982 and governs246 private issuers, and a Private Issuer Agreement,which dates from 2001 and governs the remainingoffices (numbering 34 at the time of our audit).By the Ministry’s own admission, the 1982memorandum no longer adequately reflects thecurrent roles, responsibilities, and performanceexpectations of both the Ministry and private issuers,in part because of two major changes that haveoccurred over the last 15 years. First, the numbersof both drivers and registered vehicles in Ontariohave grown substantially, increasing the volume oftransactions that issuers process. Second, the PINnow processes more types of transactions, many ofwhich were previously undertaken by ministry-runissuing offices. For example:•The PIN became responsible for new types oftransactions with the introduction of the graduatedlicensing system in 1994 and the DriveClean program in 1999.•In 1998, 17 types of transactions previously

Driver and Vehicle Private Issuing Network107Figure 3: Key Differences Between the 2001 and 1982 AgreementsPrepared by the Office of the Auditor General of Ontario2001 Private Issuer Agreement (governing 34 offices) 1982 Memorandum of Agreement (governing 246 offices)Agreement runs for a fixed five-year term, with provisions forrenewing for another five years.Ministry can terminate contract without cause after giving 60days’ notice.Issuer must give 120 days’ notice before resigning.Agreement may be assigned to a third party.Issuer must carry liability insurance of $2,000,000 or morefor any damages arising on the premises.Issuer must comply with the Freedom of Information andProtection of Privacy Act, the French Language Services Act,and the Ontarians with Disabilities Act (Acts).Agreement has no fixed term and expires only on theresignation, retirement, or death of the issuer.Termination without cause has legal risks.Issuer must give only 60 days’ notice before resigning.Agreement is not transferable.Issuer must carry liability insurance of only $500,000 or morefor any damages arising on the premises.Issuers’ compliance with the Acts is not required.Figure 4: Contractual Concerns and ImplicationsPrepared by the Office of the Auditor General of OntarioConcernUnlike 2001 agreement, 1982 memorandum does not Ministrycontain:• provisions for remedial action when performance fallsbelow acceptable standards;• penalties for not following policies and procedures; and• dispute-resolution mechanisms.Under 1982 memorandum, contract termination is onlyremedy for lack of compliance or poor service.Unlike 2001 agreement, 1982 memorandum does notrequire that issuers obtain police record checks of staff.1982 memorandum does not require participation inPerformance Management Program, which establishesissuer performance expectations, benchmark standards,responsibilities, and operating procedures (78 issuerscurrently not participating in program).1982 memorandum does not require that issuers pay forlost stock (e.g., plate stickers, licences, and permits) (2001agreement requires payment if proper safeguarding practicesnot followed).Unlike 2001 agreement, 1982 memorandum does notrestrict issuers from manufacturing, selling, or leasing motorvehicles.Implicationhas difficulties taking corrective action when issuersnot performing adequately (we noted two issuers with poorcustomer-service records not complying with ministry directives,despite reminders; some complaints date back to 1991).According to Ministry, termination has significant legal riskssince 1982 memorandum has no fixed term.Ministry has less assurance that only appropriate individualshave access to confidential driver data.Issuers not participating in program:• undergo less rigorous audit process (lacking annualcustomer survey, scorecard summarizing audit results, andcorrective-action plan); and• do not require that staff sign non-disclosure agreements tohelp ensure confidentiality of consumer information.Offices have less incentive to properly safeguard stock, whichmay go missing, be stolen, and be used for fraudulent or illegalpurposes.Car dealership operated by issuer has unfair competitiveadvantage over other dealerships that use the issuer to processtheir vehicle transactions, since joint dealership/issuer hasaccess to competitors’ selling prices (we noted six such cases).Chapter 3 • VFM Section 3.05

1082005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05processed only by ministry-operated offices weretransferred to the PIN, including the issuing ofreplacement driver’s licences, the early renewalof driver’s licences, and the issuing of driverinstructor’slicences.•In early 2002, all remaining routine driver- andvehicle-licensing products and services began tobe provided by the PIN (there is currently onlyone ministry-run issuing office remaining todeliver such products and services).The Private Issuer Agreement was introduced inNovember 2001 to better reflect the growing roleof private issuers in delivering ministry servicesand to better define expected levels of service tothe public. The new agreement outlines mandatorystandards, policies, and procedures for issuingoffices. The Ministry originally intended to migrateexisting issuers to this new agreement but has beenunsuccessful in doing so. At the time of our audit,only the 34 issuing offices established after theagreement was introduced had entered into thenew agreement. We note in this regard that nearlyall of the issuers that we visited that were operatingunder the 1982 memorandum, as well as some thatresponded to our survey, indicated that they wouldnot voluntarily migrate to the new agreementbecause they considered it too one-sided in favourof the Ministry.Figure 3 highlights some of the key differencesbetween the 2001 agreement and the 1982memorandum.Having a vast majority of offices operatingunder a less stringent agreement creates a numberof issues with respect to the quality of service provided.Figure 4 shows some of our concerns in thisregard.If levels of service across the province are to beconsistently high, the contractual standards underwhich each office operates must also be uniformand consistently high throughout the PIN.RECOMMENDATIONTo ensure that policies, procedures, and thepublic’s service expectations for processingdriver and vehicle transactions are applied consistentlyand effectively across the province,the Ministry should work with private issuersto develop a new agreement acceptable to bothparties. The new agreement should be reflectiveof the current roles, responsibilities, and expectationsof both the Ministry and private issuers.MINISTRY RESPONSEWe appreciate the importance of a consistentcontract across the issuing network and areworking towards a common contract for all issuers.However, our current contractual obligationsmake it difficult to unilaterally require allissuers to migrate to one type of contract withoutadequate notice.As noted in the Auditor General’s report,the Private Issuer Agreement implemented inNovember 2001 improves accountability andstrengthens performance measures. As of June2005, there were 40 private issuers operatingunder this agreement and five who were in theprocess of transitioning from the 1982 Memorandumof Agreement to the 2001 Private IssuerAgreement.The benefits of the current Private IssuerAgreement include the following:• issuer may assign the agreement to a thirdparty;• issuer may operate more than one issuingoffice;• issuer is permitted to conduct businessthrough a partnership or corporation; and• issuer is permitted to participate in advertisingprograms and sell selected consumerproducts.

Driver and Vehicle Private Issuing Network109The Ministry is working with the OntarioMotor Vehicle Licence Issuers Association toreview and promote transition to the PrivateIssuer Agreement. If necessary, the Ministrywill investigate options of either enhancing thisagreement or moving towards a completely newcontract containing new features.As discussed in a later section, the government iscurrently developing a strategy to expand its use ofthe PIN as a way of increasing and improving frontlineservices to Ontario’s citizens. However, the currentstate of the relationship does not bode well forany future attempt to expand the PIN’s role. Opportunitiesmay be lost if a better working relationshipbetween the Ministry and its PIN business partnersis not established.Ministry–Issuer RelationsWhen we surveyed the PIN on how operationscould be improved, a number of issuers voiced concernsabout their relationship with the Ministry.Complaints were expressed about a lack of effectivecommunication between the PIN and the Ministryon issues such as compensation, the Ministry’s settingof policies and procedures without PIN input,and the Ministry’s general unresponsiveness to issuers.Here are a few examples of the types of commentswe received.You have a very unhappy PIN—we could bean outstanding service delivery network if wewere paid properly and given some respectfor the work that we do.Treat us as the capable business people thatwe are instead of the master–slave relationshipthat we now have.Over 12 years later the issues remain thesame. The issuers are not being heard ortaken seriously.I feel the Ministry of Transportation regardsthe PIN with much disdain.The Ministry’s refusal to address the key concernsof issuers is poisoning relations andhampering any efforts to work toward positivechanges with the Private Issuing Network.RECOMMENDATIONTo ensure an effective long-term partnershipwith the Private Issuing Network (PIN), particularlygiven the PIN’s potential role in enhancingfront-line government services, the Ministryshould develop a formal strategy to improve thispartnership.MINISTRY RESPONSEThe Ministry is committed to strengtheningits partnership with the Ontario Motor VehicleLicence Issuers Association and the PIN throughenhanced dialogue and business improvements.The Ministry has recently taken steps in thisregard by establishing two joint committeeswith the Ontario Motor Vehicle Licence IssuersAssociation—one that examines operationalissues that impact issuers’ daily operations andanother that examines strategic, long-term businessinitiatives designed to improve the PrivateIssuing Network.The Ministry is currently developing trainingsessions to be delivered to the PIN commencingwinter 2005/06, focusing on strengtheningbusiness integrity and customer fraud awareness.The Ministry will also continue to consideradditional training opportunities for the PIN.These initiatives are two examples that demonstratethe Ministry’s commitment to ensuring aneffective relationship with the PIN.Chapter 3 • VFM Section 3.05

1102005 Annual Report of the Office of the Auditor General of OntarioFigure 5: Transactions per Terminal Throughout the PINSource of data: Ministry of Transportation45,00040,00035,000Chapter 3 • VFM Section 3.05Number of Annual Transactions per Terminal30,00025,00020,00015,00010,0005,0000Customer ConcernsOverall, a third of customers completing cardsissued by PIN offices in 2004 were generally dissatisfiedwith the service provided. Staff not being courteousand helpful was a major complaint, and theMinistry received many negative comments relatingto customer wait times. Two-thirds of these customersreported waiting more than 20 minutes for service,and one-third waited more than 30 minutes.Two key factors in successfully managing waittimes are the number of customer service staffavailable and the number of computer terminalsavailable. Many issuers indicated that they wouldlike additional terminals to improve service, but,since the government pays for the terminals andtheir upkeep, the Ministry is reluctant to provideministry benchmark for transactions per terminalaverage transactions per terminalrange of PIN offices' annual transactions per terminal1 2 3 4 5 6 7 8 9Number of Terminals per Office111 47 26 16 30 25 7 5 2Number of Officesthem unless business volumes clearly justify theiruse. It uses a standard of 25,000 annual transactionsper terminal as one key factor in assessingwhether more terminals are needed.Figure 5 summarizes PIN business volumes relativeto the number of terminals at offices. The barsin Figure 5 capture the range in the number ofannual transactions a single terminal processes ineach different size of office (where the categoriesfor size of office are based on the number of terminalsper office).Further information would be helpful in gaininga full understanding of business activity at PINoffices—for example, how is transaction volumedistributed throughout the year? Are there significantworkload peaks at certain times? In the

Driver and Vehicle Private Issuing Network111absence of such detailed information or any otherformal written analysis, we proceeded to use thedata we had on annual transaction volume to assessthe need for computer resources in the PIN.We identified, for each size of office, both thenumber of offices where the business volume significantlyexceeded the ministry standard and thenumber of offices where it fell significantly shortof the standard. We determined that, throughoutthe PIN, 54 offices had terminals processing a sufficientlyhigh number of transactions to possiblywarrant the provision of an additional terminal.Similarly, throughout the PIN, 39 offices had terminalsprocessing a sufficiently low number oftransactions to possibly warrant reallocation of aterminal to another office. Based on informationprovided by the Ministry that a four-terminal officecosts approximately $30,000 annually to maintain,we estimated that if all the additions and reallocationsof terminals we recommended weremade, the Ministry’s annual costs would increase byapproximately $110,000. However, this could havea very positive impact on service needs at the busieroffices.Since the 71 ServiceOntario kiosks locatedthroughout the province are another channel forserving customers who need to make driver- andvehicle-licensing transactions, we reviewed theirtransaction volumes to determine whether theywere being optimally used. We noted that the volumeof transactions processed per kiosk in the2003/04 fiscal year ranged from 1,387 to 34,204,with an average volume per kiosk of 16,530. Ouranalysis suggested that 18 of the kiosks wereunderutilized, with a volume of less than 10,000transactions. The Ministry might consider whetherto maintain the location of low-volume kiosks,depending on whether alternative sources of servicesexist in the area, or move them to high-volumelocations that would better serve the public.RECOMMENDATIONTo help it improve service to the public in a costeffectivemanner, the Ministry should:•consider giving additional terminals to thoseprivate issuing offices whose transaction volumesare significantly higher than the Ministry’sstandard;•consider redistributing terminals fromoffices whose transaction volumes are significantlybelow the Ministry’s standard; and•evaluate the usage of ServiceOntario kiosksto determine if kiosks that are least usedwould be better located in higher-trafficareas.MINISTRY RESPONSEThe Ministry agrees with the Auditor Generalthat the public should receive service in themost cost-effective manner possible.The Ministry is developing a standardbusiness process to be used by Issuing OfficeAdministrators when assessing whether to add,remove, or redistribute terminals as required tomeet customer demand. Expected implementationof this process is mid-2006.The Ministry reviews transaction volumes atissuing offices following a two-step process toassess customer service demand. First, the Ministryexamines the operating capacity of eachissuing office to determine whether an additionaloffice or strategic allocation of terminalsis warranted. There are no specific benchmarks,as each issuing office is reviewed independently.The Ministry’s analysis is based on its knowledgeof the issuing office, the types of transactionstypically conducted there, and the efficiency ofthe issuer.If the initial analysis suggests that a newissuing office may be required in that area (inlieu of allocating additional terminals), theChapter 3 • VFM Section 3.05

1122005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05Ministry conducts a more detailed businessdemandanalysis (BDA). The BDA looks atthe demographics of the area, historical businessgrowth/decline (for example, the numberof motor vehicle dealers), current businessviability for a new issuing office, and potentialimpacts on the public and other issuers inthe surrounding area. The BDA is intended toconfirm that a real need exists for continued ornew/additional services.In early 2005, the Ministry relocated twoServiceOntario kiosks to locations with highercustomer populations and will relocate five morekiosks into new ServiceOntario Centres (tentativelybeginning September 6, 2005). The Ministrywill continue to monitor the kiosk networkfor both performance and customer service.The Internet as a Service AlternativePromotion of the ServiceAt present there are six types of ministry transactionsthat can be processed over the Internet aswell as at PIN offices: vehicle and driver addresschanges, vehicle plate renewals, requests for usedvehicleinformation packages, and requests fordriver and vehicle abstracts (three-year statementsof one’s driving record and vehicle histories, respectively).For customers with access to a computerconnected to the Internet, these transactions canbe conveniently completed with no need to travelanywhere.However, we noted that the Ministry does notpromote this Internet channel. For example, thevehicle-plate-renewal application form, sent annuallyto millions of Ontario residents, makes nomention of the possibility of renewing the plateselectronically. It does, however, specifically promotekiosks as an alternative to the standardapproach of going to an issuer office for plate tags.In addition, although the form does not overtlypromote service by mail, it does provide a mailingaddress that customers can use to renew theirplates. The lack of promotion of the Internet channelis not in keeping with the government’s overallcommitment to world leadership in the provision ofelectronic services for Ontarians.This lack of promotion may contribute to thefact that only about 250,000 driver- and vehicle-licensing transactions are processed over theInternet annually. In the 2003/04 fiscal year, thisincluded only 10,892 plate-renewal transactions(less than one-fifth of 1% of the total of these transactions),which are completed by most Ontariodrivers annually. Although this represents anincrease from the 4,257 renewals processed for theperiod from November 2000 to January 2002 thatwe discussed in our 2002 report on electronic servicedelivery, the government originally projectedthat 45%–77% of such transactions would be completedelectronically by 2006.One possible reason for the lack of promotionof the Internet channel may be that the Ministry’sInternet capability has not been integrated with itsdriver- and vehicle-licensing systems. Accordingly,once the Ministry receives an Internet application,all subsequent processing is manual, including there-entering of the application data into the driversystem by ministry staff. This meant that, for the2003/04 fiscal year, providing Internet service costthe Ministry approximately $500,000, or about$2 per transaction. If the PIN had processed thesesame transactions, the Ministry would have paidcommissions of approximately $365,000.System Changes to Accommodate InternetTransactionsThe process whereby the Ministry’s Internet andlicensing systems are to be integrated has beenongoing since fall 2001, when the governmentselected a private-sector firm to develop, for 24government transactions, “end-to-end” Internetcapability (that is, capability from user input all

Driver and Vehicle Private Issuing Network113the way through to government databases). Notwithstandingthe fact that 20 of these transactionswere for the Ministry of Transportation, the firmwas selected by the Ministry of Consumer and BusinessServices (MCBS), since it was MCBS, throughits ServiceOntario arm, that was responsible fordeveloping and managing in-person, telephone,and Internet service to individuals and businesseson behalf of the government.The integrated Internet capability was to be upand running within about a year. However, we wereinformed that the firm was dismissed for breach ofcontract in 2003, before work was completed andbefore any payments to the firm were made. As aresult, Internet transactions continue to be processedmanually.The Ministry estimates that developing a fullyend-to-end Internet capability for 18 types of itstransactions would cost approximately $3 millionover four years, with additional ongoing costsapproximating $190,000 annually. Currently, thePIN processes approximately 5.5 million of thesetransactions annually, at a cost of approximately$11 million in commissions each year. Using theMinistry’s cost estimates, if 28% of these transactionswere processed over the Internet, the Ministrywould fully recoup its investment in one year.Thus, the Internet alternative, in addition to providingenhanced service to customers, could savethe government a significant amount of money,depending on the percentage of customers whowould eventually utilize it.We note that a draft Memorandum of Understandingbetween the Ministry and MCBS called forthe two ministries to work together on the developmentand implementation of end-to-end transactionsto be made available over the Internet forvehicle registration renewals, the used-vehicle informationpackage, and personalized licence plates byMarch 2006.An issue to consider when planning forincreased and improved Internet service is the revenueloss the PIN would undoubtedly suffer as aresult. Although this is not in our view a valid reasonto withhold such a significant service-levelimprovement from Ontarians, the government recognizesthe value of the PIN in providing a physicalfront-line network for direct personal contact withOntarians and thus the need to keep it viable andthriving. Strategies that the Ministry has been consideringto accomplish this include:•expanding the types of transactions the PINprocesses to include, for example, the issuingof health cards or outdoors cards (cards used toprotect/control various fish and wildlife naturalresources, required by people wishing to gohunting or fishing) (nearly all the issuers thatwe visited and those that responded to our surveyindicated that they would be willing to processsuch additional transactions to enhance theirexisting business); and•transferring the PIN to the government’s Service-Ontario arm.RECOMMENDATIONTo help ensure that its services are deliveredcost effectively and that the public receives suchservices in as convenient a manner as possible,the Ministry should:•fully integrate its Internet service with itsdriver- and vehicle-licensing system andexpand and promote its use; and•develop strategies for ensuring that the PrivateIssuing Network remains viable as Internetusage increases.MINISTRY RESPONSEWe agree with the Auditor General that the publicdeserves services that are convenient andcost effective.The Ministry supports the broader Service-Ontario strategy to provide citizens andbusinesses with access to high-quality,Chapter 3 • VFM Section 3.05

1142005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05multi-channel delivery of government productsand services. The Ministry is continuing to workwith ServiceOntario to explore opportunities toincrease access to government products and servicesthrough the Internet.Given the existence of the Internet as a servicealternative, the Ministry is developing strategiesfor ensuring that the Private Issuing Networkremains viable, including implementing aminimum compensation guarantee for issuingoffices that are located in remote, underservedcommunities and whose annual commissionsare below $10,000, to ensure their continuingpresence there; and allowing issuers operatingunder the 2001 Private Issuer Agreement to participatein advertising programs and engage inthe sale of selected consumer products.Call CentreThe Ministry operates a call centre to aid issuers inthe processing of driver and vehicle transactions.Certain transactions actually require call-centreintervention to complete the transaction process.Approximately 75% of the calls received by the callcentre relate to the processing of driver and vehicletransactions, and many of these are policy andprocedural clarifications. The remaining calls pertainto backlogs and technical issues related to theLicensing and Control System. The centre employs32 operators, and the annual cost of running it isapproximately $2 million.Even though annual call-centre volumes havenearly doubled since 1996, from 112,000 calls inthat year to 215,000 calls in 2004, the Ministrydoes not have a process for training PIN staff on themost common call problems to reduce reliance onthe call centre.Many issuers, in response to our survey, statedthat, although the response time of the call centrehas improved significantly in recent years, they stilloften wait up to 30 minutes for a response. Oftenissuers have to ask their customers to wait whilethey themselves await a call-centre response. In ourreview of the call centre, we noted the following.• Only 51% of calls answered were being answeredwithin two minutes—the ministry target is 80%.• The abandonment rate (that is, the rate at whichcallers hang up before being served) was 11%—the ministry target is 5%.•For the period from January 2004 to November2004, we estimated that call-centre operatorswere not available to take calls approximately40% of the time, in that they were not logged onto the system. Four operators were not loggedon to the system for over 60% of their availabletime.Private issuers also complained that they do notalways receive consistent answers from call-centrestaff. We noted that call-centre staff have neverbeen formally trained and are expected to learn onthe job. In 2004, the Ministry did develop a policies-and-procedures manual specifically for the trainingof new operators; however, at the time of ourreview, training on the manual had yet to be initiated.The manual is currently being used simply asa reference source.RECOMMENDATIONTo help the Private Issuing Network provide betterservice to customers, the Ministry should:• help reduce the extent to which issuersrely on the call centre by tracking the mostcommon concerns or questions raised anddeveloping procedures to train issuers onthese matters; and•ensure that, when the call centre is used,call-centre operators are properly trainedand consistently available to take calls.

Driver and Vehicle Private Issuing Network115MINISTRY RESPONSEThe Ministry agrees with the need to help thePrivate Issuing Network provide better serviceto customers.The Ministry has developed a process bywhich private issuers or their office supervisorsmay escalate concerns regarding service fromthe call centre. This process will allow thecall centre and Ministry to track, identify, andresolve issues of importance to individual privateissuers and highlight areas that the Ministryneeds to strengthen to provide better service tothe network as a whole.To promote better customer service, the Ministrywill integrate the lessons learned into anorientation and training plan to be implementedin fall 2005. The Ministry is furthering its use oftechnology to track call-centre calls by subjectto identify areas where procedures or informationneed to be clarified or focused training isrequired. Monitoring will take place to assessthe impact of such clarifications and training inreducing reliance on the call centre and ensuringmore consistent application of policies andprocedures throughout the province.The Ministry will continue to monitor thestatistics on operator service to ensure thatthe time available to take calls is maximizedand that other service-level targets, such asanswering 80% of calls within two minutes, areachieved.COMPLIANCE WITH REGULATIONS ANDREQUIREMENTSAudit ActivityPrivate issuers are monitored for compliance withgovernment regulations and requirements throughperiodic audits. These audits are conducted bothFigure 6: Audit Coverage, 2000–04Source of data: Ministry of TransportationYear Full Audits Completed Coverage (%)2000 71 252001 159 572002 3 12003 1 0.42004 19 7centrally by Business Review Analysts in the Ministry’sPerformance Management Office and on-siteby ministry field-office staff known as Issuing OfficeAdministrators. The audits focus on ensuring thatappropriate documentation is on file for all transactions,customer identities are properly verified,completed documents are accurate, transactionsare processed correctly, commissions are calculatedaccurately, cash and revenue are managed appropriately,and valuable stock is appropriately securedand managed.For those offices participating in the PerformanceManagement Program, the Ministry’s BusinessServices Branch also administers an annual surveyto gauge customers’ satisfaction with the issuer’sservice delivery. In addition, the Ministry ratesoffices on their performance in a number of businessareas as well as on their overall performance.As a final step, an action plan is created or updatedbased on all the information captured during theaudit cycle.We had the following concerns with respect tothe audit process.•The Ministry’s standard is to complete a fullaudit for each of the 280 issuers at least annually.However, as detailed in Figure 6, the Ministry’saudit coverage over the last five years hasnot met this standard; in fact, audit coverage hasdropped dramatically in recent years.•Although the Ministry has done a number ofpartial audits in recent years, 60 offices, representingabout 20% of the PIN and collectingapproximately $150 million in revenue annually,have not been subject to any type of auditChapter 3 • VFM Section 3.05

1162005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05activity for three or more years. Seven officeshave never been audited.•Under ministry policy, new issuers must be subjectto an on-site audit within six months ofopening their office. Such an audit is importantfor ensuring that new issuers properly understandand have appropriately implemented allministry policies and procedures. However, wefound that these on-site audits had not takenplace within this time frame for almost 80%of the 29 new offices opened over the last fouryears. For two offices the audits were conductedover two years after the offices first opened.The Ministry’s low audit coverage is due toa number of factors, each of which is discussedbelow.•Four groups within the Ministry are involveddirectly or indirectly in PIN monitoring. Thesegroups are the regional Issuing Office Administrators,the Performance Management Office,the Business Services Branch, and the Microfilmand Records Unit. The participation of allfour groups is needed to complete a full auditfor an office in the Performance ManagementProgram. We found that these four areas withinthe Ministry have not been able to effectivelyco-ordinate their activities. For example, at thetime of our audit, requests for the retrieval ofmicrofilmed documents at the Microfilm andRecords Unit had not been filled for nearly 48weeks. Nearly 75% of the requests were fordocuments needed by the Performance ManagementOffice to conduct its audit work. Failure toretrieve these documents in turn caused delaysin the on-site audit visits of the regional IssuingOffice Administrators, which typically follow thePerformance Management Office audit work.•In March 2002, the Licensing and Control Systemwas down for nearly 10 weeks as a result ofthe Ontario Public Service labour disruption.During this time, PIN staff were paid on a perdiembasis to manually process approximately2 million driver- and vehicle-licensing transactionsat an additional cost to the Ministry ofover $7 million. Once the labour disruption wasover and the system was back up and running,both PIN and ministry staff needed to enterthe manually processed transactions into thesystem. This took more than a year and a halfand, because many of these transactions wereentered out of their original sequence, resultedin approximately 240,000 further errors, whichhad to be resolved. All of the Ministry’s auditresources were diverted to this exercise.•The Ministry estimates that it takes on averagebetween four and five days for all work tobe completed during an on-site audit visit toan issuing office. The visit can take considerablylonger when it involves travelling to aremote office or when audit findings are complex.At the time of our audit, there were only10 Issuing Office Administrators responsible formonitoring the province’s 280 issuers. In oneregion, one administrator was responsible forover 50 offices. We note that these staff haveother duties in addition to their audit role, suchas co-ordinating the opening and closing ofoffices in their region, training new issuers, andresponding to inquiries from both issuers andthe public.We note that at the time of our audit, in recognitionof the need to improve its monitoring practices,the Ministry, with the aid of Internal Audit, haddeveloped and was considering the implementationof a new audit process and audit program with thefollowing features:•a revamped function for the Performance ManagementOffice, giving the Office more of anoversight role than an audit role, whereby theOffice would co-ordinate, create risk profiles,identify system-wide issues and required remedialaction, train Issuing Office Administrators,and report to management on a quarterly basis;• risk-based audit selection; and

Driver and Vehicle Private Issuing Network117• added discretion for the auditor to increase samplesizes when warranted.RECOMMENDATIONMinistry will audit each office to establish a performancebaseline and pursue a risk-based auditstrategy.To ensure that the Ministry adequately monitorsthe Private Issuing Network (PIN) for effectivecontrols over such items as cash and stock andover such processes as revenue collection and toensure that service is maintained without disruption,the Ministry should:•conducts annually; and•increase the number of complete audits itbetter co-ordinate the activities of the fourgroups involved in PIN monitoring.MINISTRY RESPONSEThe Ministry recognizes the importance ofadequately monitoring the Private IssuingNetwork.The Ministry is committed to enhancingits audit and oversight presence. Since March2005, 21 head-office and 49 on-site audits havebeen completed. In just five months, we havecompleted a total of 11 full audits—a significantimprovement compared to a total of 20 fullaudits completed over the past two years. Sevenof these 11 full audits were of offices with highertransaction volumes. The Ministry is also developinga plan to audit higher-risk offices locatedin the Greater Toronto Area and larger urbancentres in an effort to deter and detect fraudulentactivity within the Private Issuing Network.The Ministry has successfully completed thepilot of a redesigned and enhanced audit methodology,which will be implemented over thewinter of 2005/06 and will consolidate the oversightand auditing functions into one office andbetter utilize field staff. There will be a shift ofresources from head office to the field, resultingin 11 field audit staff being added to the existingfield complement. Under this structure, theRisk ManagementControls on Information SystemOne area that regular audits should address is noncompliantuse of the Licensing and Control System.Non-compliant use includes sharing system passwordsamong issuer staff, which is prohibited byministry policy, and, more seriously, manipulatingthe system to produce false records.We noted in our visits to a sample of issuingoffices that system passwords were being sharedamong staff. The risk of this activity is evidenced ina July 2004 report investigating a case of fraud. Inthis case, an employee who fraudulently chargedover $2,000 on customer credit cards could not beidentified because system passwords were sharedamong staff. The Ministry reimbursed customersfor 25 fraudulent transactions charged to theircredit cards and later recovered the funds from theissuing office.In another case in January 2004, an employeeat an issuing office was caught changing the photos,dates of birth, names, and addresses on currentdriver’s licences. Bogus transactions were enteredinto the Licensing and Control System, and outsideparties were mailed fraudulent licences incorporatingthe altered data. In February 2004, anothertwo cases of fraudulent licences created at thesame office came to the attention of ministry staff.Charges have been laid with respect to these cases.A ministry analysis of the event concluded that itis easy for staff to manipulate the current systemto produce such false documents. At the time ofour audit, the Ministry was developing an exceptionreport that would flag transactions involvingmultiple changes to driver records for subsequentfollow-up.Chapter 3 • VFM Section 3.05

1182005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05Controls on StockIssuers keep licence plates, plate stickers, temporarydriver’s licenses, vehicle permits, trip permits,and temporary Disabled Person Parking Permits asstock at their offices. All stock is ordered, inventoriedin the Licensing and Control System, and allocatedto PIN offices by ministry stock procurementand allocation officers. Each PIN office is allocatedabout a three-month supply of controlled stockitems. In allocating stock, officers consider not onlythe requests for stock received from issuers but alsoprevious shipments and issuer usage patterns. Allocatedstock is shipped directly to issuers.While ministry policy requires that issuingoffices adequately safeguard this stock, we noted awide variation in stock-safeguarding practices bothduring our visits to a sample of issuing offices andin the answers to our issuer survey. For example,some offices kept stock in separate, locked roomsaway from the general work area; others kept theirstock in the general work area, but in locked cabinets;yet others did not lock up stock at all.We noted that, over the past four years, over49,000 high-risk stock items have been reportedmissing, and over 7,000 have been reported stolen.Seventy percent of the missing stock was fromsix offices, and 75% of the stolen stock was fromanother three offices. At the time of our audit, theMinistry had neither investigated these stock discrepanciesnor made attempts to recover on losses.Lost or stolen stock could be used for fraudulent orillegal purposes. In this regard, we note that InternalAudit, in its March 2004 report on stock management,concluded that “the Ministry is unable toreliably account for stock, making charge-backs toissuers difficult to support.”Controls on Revenue Collection andCommissionsPrivate issuers are required to deposit funds to theprovince’s account at least daily and wheneverthey have accumulated $15,000 in cash. For eachoffice, the Ministry matches bank deposits daily tothe business transactions recorded in the Licensingand Control System through an automated reconciliationprocess. Cases of unmatched items areresolved by the Ministry through such means asbank inquiries, further review of the Licensing andControl System, review of supporting documents,or audits. At the time of our audit, we noted over750 unmatched deposit items going back four yearsfor amounts totalling $2.7 million. Some of theseunmatched items were from offices that were nolonger active. Debit- and credit-card transactionsare also reconciled daily to the business transactionsin the Licensing and Control System, and,while the dollar value of the unmatched items wasnot significant, we noted over 1,000 unmatcheditems.The Ministry has identified the following waysin which issuers can, when processing transactions,prevent appropriate revenue amounts from flowingto the Ministry and inappropriately increase theircompensation.•When customers pay in cash for driver’s licencerenewals or replacements, issuers may collect acorrect fee, record a fee adjustment for a loweramount in the system, and keep the difference.•Issuers may charge commissions for unrequestedand unjustifiable address changes—for example,changing “123 Anywhere St.” to “123 AnywhereStreet.”•Issuers may break down a transaction requestfrom a customer into separate parts in order tocharge commission for each. For example, if, ina driver’s-licence-renewal transaction, the driver’saddress also needs to be changed, the issuermay process and charge for two transactions—the renewal and the address change—instead ofone.At the time of our audit, only for the latter activityhad the Ministry developed an exception report,which logs multiple transactions for single driversor vehicles. We found that this report was of

Driver and Vehicle Private Issuing Network119limited usefulness, however. There are no flags forthe first two types of data manipulation. Such flagscould include, for example, exception reports producedfor all adjustments to regular fees and forall address changes where the postal code has notchanged.We also noted that, as of December 31, 2004,22,651 NSF (not-sufficient-funds) cheques, foramounts totalling $10.4 million, were still outstanding.We were specifically concerned that,because the Ministry’s vehicle registration systemis not cross-referenced with the driver-licensingsystem, an individual whose cheque for a vehiclelicensingtransaction was NSF can still make driverlicensingtransactions and vice versa.We do acknowledge in this regard that a newministry policy dating from January 2005 prohibitsprivate issuers from accepting personal cheques—only certified cheques or business cheques preprintedwith the name of the business are acceptable.Other Compliance IssuesCertain types of transactions that are not processedelectronically by the Licensing and Control Systemmust be processed manually by issuing officesand are accordingly called “special handling” transactions.In the 2003/04 fiscal year, the PIN collected$59.7 million in revenue from these transactions,and the Ministry paid $965,000 in relatedcommissions. Audits are to monitor, in particular,that staff do not understate revenue and overchargecommissions on these transactions. For nearly athird of the special handling transactions that wetested, we noted that issuers had not charged thecorrect commission—in most cases, higher commissionswere charged than were earned.Another area that regular audits could addressis proper document management. For example, wenoted the following in our visits to issuing offices.•Ontario Motor Vehicle Industry Council certificatesand dealer authorization letters were notcurrent. Maintaining current dealer informationhelps prevent fraudulent vehicle transfersby individuals who misrepresent themselves asmotor vehicle dealers and hence avoid the retailsales tax payments.•Ministry forms were often not properly completed.For example, the customer’s name or signaturewas often missing, the vehicle insuranceinformation was sometimes not recorded, andthere was sometimes no evidence of any identificationbeing reviewed. In a few cases, whileidentification was noted as being reviewed, thereview was not done in accordance with ministryguidelines.RECOMMENDATIONTo reduce the risk of staff and customers of thePrivate Issuing Network engaging in improper,non-compliant, and/or fraudulent activitieswith respect to driver and vehicle products andservices, the Ministry should:•produce and follow up on exception reportspertaining to the Licensing and ControlSystem;••enhance its controls over stock;follow up on a timely basis on discrepanciesidentified when reconciling issuer revenuewith deposits; and•expedite the recovery of funds from NSFcheques and consider cross-referencing itsvehicle registration system with its driverlicensingsystem.MINISTRY RESPONSEThe Ministry agrees that the control and protectionof personal information, revenue, and stockis of the utmost importance.As of March 2005, the Licensing and ControlSystem began producing a number of newexception reports (which call attention to, forexample, driver fee adjustments, including theChapter 3 • VFM Section 3.05

1202005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05reason for the adjustment keyed in by the operator;multiple data element changes to a singlerecord; and unauthorized access to information).The Ministry will work on further enhancingthese reports (completion anticipated forDecember 2005) to allow for the timely identificationof non-compliant or fraudulent activities.The Ministry recognizes the importance ofaccounting for all stock provided to the PrivateIssuing Network, and it is reviewing optionsand resource requirements to ensure that thesestock items are properly secured. The Ministryhas focused its efforts identifying and correctingover 500,000 stock discrepancies that arosebetween May and December 2003. The Ministryis developing a risk-based audit framework, tobe implemented in winter 2005/06, to moreeffectively address financial, stock, and Licensingand Control System–related issues withinthe Private Issuing Network. In addition, thereare a number of tools the Ministry has providedprivate issuers to assist them with stockreconciliation.Since the Auditor General’s 2001 audit of theRoad Safety Program, the Ministry has implementedan automated daily reconciliation program,which has significantly improved thetimeliness of revenue reconciliation. As ofMay 31, 2005, over 700,000 deposit transactionsrepresenting $4 billion in revenue hadgone through this system, and only approximately1,000 remain unreconciled. The Ministrywill ensure satisfactory resolution of theunreconciled items by December 31, 2005.On January 1, 2005, the Ministry stoppedaccepting in-person personal cheques. Sincethen, the number of NSF cheques has droppedsubstantially. With a view to eradicating allfuture NSF cheques, the Ministry is reviewingits policy of accepting cheques from businessesand via the mail and will continue its efforts tocollect all outstanding debts. This review will becompleted in the fall/winter of 2005/06.In order to mitigate the risk of fraudulentactivities, the Ministry is currently working withthe Ontario Motor Vehicle Licence Issuers Associationto develop face-to-face training sessionsfor issuers, focusing on strengthening businessintegrity and customer fraud awareness, stockinventory management, protection of databaseand system integrity, and recognition of fraudulentdocuments. Expected implementation iswinter 2005/06.Selection of New Private IssuersWhen the private sector first began deliveringdriver- and vehicle-licensing products, private issuerswere retained by direct assignment (that is,without tendering or an alternative competitiveprocess). In 1986, the government moved to a competitivetender process that included advertisedrequests for proposals and a standardized evaluationprocess. The Ministry further refined this processin November 2001.The selection process is generally initiated uponthe resignation, retirement, or death of a PIN operator.The annual turnover rate in the PIN is currentlyabout 5%, or 15 private issuing offices eachyear. It typically takes approximately 27 weeks toselect a new issuer and an additional 12 weeks toprepare a new office for opening.In order to minimize service disruption, the Ministryappoints interim issuers during the selectionprocess. In reviewing the 36 selections that hadbeen completed since November 2001, we notedthat, even factoring in the use of interim issuers,it took an average of four months to re-introduceservice for an issuing office that had closed. In fivecases the disruption in service lasted from six to11 months, and in one case the service disruptionlasted 22 months.

Driver and Vehicle Private Issuing Network121The first step in the selection process is abusiness-demand analysis to verify the continuingneed for a replacement office or determine the needfor a new office and its required size. The Ministrythen issues a request for proposal via the province’selectronic tendering system. Proposals received aresubject to a three-stage evaluation. The first twostages cover such things as an applicant criminalreference check, a review of other references, aconflict-of-interest declaration, and an assessment ofthe applicant’s financial, management, operations,administration, and customer service skills. Themost heavily weighted part of the evaluation (75%)occurs at stage three. This involves an in-personpresentation by and interview with the applicant,during which the Ministry further assesses the applicant’sskills, discusses his or her proposed businessplan, and poses problem-solving questions on variousaspects of managing an issuing office.Although ministry policy stipulates that anapplicant must pass stage two of the evaluationprocess to be considered for stage three, we notedseveral cases where applicants, particularly thosefrom northern offices, failed at stage two but werestill advanced to stage three. We further noted thatmany of these applicants went on to win the issuercontract. The Ministry advised us that it has had totailor its procurement process, while still adheringto government procurement practices, for officesin the north due to its inability to attract qualifiedapplicants for these typically smaller offices.We also noted that stage three’s interview,worth 45% of the evaluation’s total marks, was ofquestionable value in those cases where applicantswere familiar with the questions, having answeredthem previously when submitting proposals to runother issuing offices. This gave such applicants anunfair advantage over others. We found two casesof applicants who were familiar with the stagethreeinterview questions from previously submittingproposals and whose stage-three interviewmarks on the repeated questions made the differencebetween their final evaluation standing andthat of the next closest applicant.RECOMMENDATIONTo ensure that only competent and qualified biddersselected via a fair and equitable competitiveprocess are awarded contracts to manageissuing offices, the Ministry should:•review its policies and procedures to ensurethat they can be applied in a consistent andeffective manner; and•ensure that the in-person presentation andinterview portion of the selection processdoes not give repeat applicants an unfairadvantage.The Ministry should also expedite theappointment of interim issuers and selection ofnew issuers to minimize disruptions to customerservice.MINISTRY RESPONSEThe Ministry agrees with the Auditor that theprocurement of private issuers needs to be fair,open, and transparent. It is committed to a processthat follows the standard procurementdirectives and guidelines that apply to the entireOntario Public Service.The Ministry has completed a review of howbest to establish interim service, given that eachinterim office is unique and requires differentstrategies to facilitate customer service continuity.In order to minimize customer servicedisruption while adhering to government procurementrequirements, effective May 2004 theMinistry initiated an expedited selection processto identify an interim service provider to operateuntil the Ministry selects a new service provider.The Ministry may also redirect customersto neighbouring offices, if appropriate, insteadof selecting an interim service provider.Chapter 3 • VFM Section 3.05

1222005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05The Ministry is currently reviewing its entireprocurement process to identify ways that it canbe streamlined and made more efficient. TheMinistry will review all components of the evaluationmodel to mitigate the risk of repeat applicantshaving an unfair advantage over first-timeapplicants (by, for example, ensuring that thesame questions are not repeated in subsequentinterviews).Respondents to smaller-issuing-officeopportunities (one-to-two-terminal offices) aretypically sole proprietors who may not haveexposure to government procurement processes.For this reason, in June 2005, the Ministrydeveloped a simpler request-for-proposals processfor smaller-issuing-office opportunities inorder to facilitate responses to such requests forproposals. The Ministry will continue to implementits private-issuer procurement process instrict compliance with government procurementrequirements.Through a new procurement process, theMinistry implemented a pilot project in August2005 that will encourage market-driven compensationfor the delivery of driver- and vehiclelicensingservices. The new procurement processis skills-based and does not advantage existingissuers or repeat applicants. Proponents arerequired to submit a detailed business plan andoutline the compensation they expect to receivefor delivering driver and vehicle services. Theopportunities included in this procurement havebeen widely advertised.process in the Performance Management Programincludes, in addition to a desk audit and on-siteaudit visits, an annual customer survey, a scorecardsummarizing audit results, and a ministry actionplan to address areas needing improvement.Customer SurveyIn our review of the customer survey component ofthe Performance Management Program, we notedthat the Ministry sent approximately 450,000 surveys—coveringthe period from October 2004 toFebruary 2005—to issuing offices. The Ministryasked the offices to distribute the survey to a sampleof customers who completed specific transactions.The Ministry expected that about 10%,or 45,000, of the distributed surveys would bereturned, thus achieving the Ministry’s goal ofobtaining a statistically representative sample ofcompleted surveys for each site and region and forthe province as a whole. As of March 2005, thislevel of response had been received for only 88 ofthe 267 offices.In leaving the distribution of the surveys up tothe issuing offices, the Ministry had no assurancethat the results are truly representative of the sampletargeted—that is, that individuals in the samplepopulation had equal chances of being surveyed. Inthis regard, we noted that a number of the issuerswhom we visited and who responded to our surveyindicated that—not surprisingly—they would nothand out a survey to a customer who appeared tobe in a dissatisfied state. Issuing Office Administratorswhom we interviewed also expressed concernsover the selection of respondents for the survey.PERFORMANCE MEASUREMENTThe Ministry has initiated several means for gatheringinformation to measure the performance of thePrivate Issuing Network. These include audit activityand, for 182 offices, the Performance ManagementProgram. As mentioned previously, the auditComment CardsAnother source of performance information iswritten customer feedback on customer commentcards available at each PIN office. Over the lastfour years, the Ministry has received an average of

Driver and Vehicle Private Issuing Network1231,800 comment cards per year from private-issuercustomers.The Ministry tracks comment cards by datereceived, nature of the comment, action takenby ministry staff on any complaints, and the timetaken to resolve complaints. Reports detailing commentsreceived are to be sent monthly to the Ministry’sregional offices to support their oversight ofPIN offices. However, we noted that by early 2005the last such report had been sent in August 2004.We also noted that the reports could be improvedby including summary information of the customercomments received. Such information could identifythe most recurrent issues, which the Ministrycould address through training or follow-up communicationsacross either the entire PIN or the particularregions or offices where certain problemsare most acute.RECOMMENDATIONTo improve both its current methods of assessingissuer performance and public satisfactionwith services received, the Ministry should:•consider a different method of administeringcustomer surveys that would ensure that allcustomers have an equal opportunity to participate;and•summarize customer comments regularly toidentify the most common concerns, sharethis information throughout the entire PrivateIssuing Network, and develop strategiesto address these concerns.MINISTRY RESPONSEWe are committed to improving the quality ofour services and to measuring customer satisfactionwith respect to those services. The Ministrywill pursue alternative methods for measuringsatisfaction by October 2005.In co-operation with the Ontario MotorVehicle Licence Issuers Association, the Ministrywill begin sharing comment-card data, customerservice trends, and best practices withthe Private Issuing Network on a quarterly basis,effective September 2005. The Ministry will alsowork with the Ontario Motor Vehicle LicenceIssuers Association to develop a number of customerservice measures, such as measuring thenumber of complaints annually with a view toreducing them each year. These measures willbe developed by December 2005.In June 2005, the Ministry began enhancedmonthly reporting on customer-comment-carddata and will use these data to develop strategiesto address customer concerns.OTHER MATTERVehicle InsuranceAutomobile insurance is mandatory in Ontario.Accordingly, when renewing their vehicle licencesdrivers are required to provide the name of theirinsurance company and their policy number. However,neither the issuing office nor the Ministry verifiesthe information provided. We sampled over 70recent new-vehicle registrations and renewals andattempted to verify the insurance information provided,with the following results.• In one case, the insurance company did notexist.••the policy number provided.• In two cases, the policy had been cancelledshortly after the person renewed the licence.•In three cases, the policy number was not valid.In one case, the vehicle was not registered underIn seven cases, the vehicle was insured, but thewrong policy number had been provided.Based on these results, we are concerned thatthere may be a significant number of drivers operatingmotor vehicles in the province without validinsurance. In this regard, we noted that in its annualChapter 3 • VFM Section 3.05

1242005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.05road safety reports, the Ministry has reported thatbetween 1993 and 2003 there have been over48,000 uninsured vehicles involved in collisionsin Ontario. Nearly 22,000 of these vehicles wereinvolved in collisions resulting in injuries, and over500 were involved in fatal collisions.We also noted that, commencing April 4, 2005,the Ministry no longer requires the PIN to retain theapplication forms that contain this insurance information.This document is now only viewed by theissuing office and then returned to the driver. Underthis new procedure, it may be more difficult to verifyinsurance validity at the time of the transaction.Disabled Person Parking PermitsThe Ministry issues Disabled Person Parking Permitsto eligible applicants who are unable to walkunassisted without serious difficulty or danger totheir health or safety. This condition must be certifiedby a medical practitioner. The Ministry processesapproximately 75,000 new applications and36,000 renewals annually. At the time of our audit,approximately 520,000 permits were in use. Wenoted from ministry documents that, over a recentone-year period, over 1,600 permits were seizedby the Toronto Police Service, and charges werefiled for their misuse. The program for issuing andrenewing permits is currently under review.During our audit, we noted that the Ministrydid not adequately review the application formsreceived under this program. For example, less than1% of the Disabled Person Parking Permit applicationswere verified with the physicians noted on theapplication. Instead, the Ministry performs a morelimited review on 25% of applications by ensuringthat the doctor noted is listed on the College ofPhysicians and Surgeons of Ontario’s public Internetsite. Since any individual can go to this samesite and see the full list of registered physicians, inour view this Ministry procedure does not provideany assurance that the medical practitioner actuallysupported and signed the application.RECOMMENDATIONTo improve both road safety and the effectivenessof its driver and vehicle transactions, theMinistry should develop strategies for verifyingboth:•applications; and•insurance information on licence-renewalmedical information on Disabled PersonParking Permit applications.MINISTRY RESPONSEThe Ministry takes the issue of uninsuredvehicles very seriously.The upcoming Uninsured Vehicles Project isexpected to, among other things, facilitate theverification of insurance information. Specifically,under the project, when a vehicle permitis renewed, the Ministry will automaticallycheck online against the Insurance Bureau ofCanada’s database to verify vehicle insurance.The Ministry agrees with the need toimprove the application process for issuing parkingpermits for persons with disabilities and willinitiate discussions with the medical communityon developing strategies to improve verificationof medical information on Disabled Person ParkingPermit applications.The Ministry is also taking other steps tolimit misuse, including limiting medical practitionersto only certifying application withintheir scope of practice and introducing a moresecure, tamper-resistant permit document toaddress counterfeiting and misuse.Other changes the Ministry will introduce infall 2005 include:•improvements to the current eligibilitycriteria to ensure that only persons with

Driver and Vehicle Private Issuing Network125measurable and observable mobility impairmentsreceive a permit;•improved business processes to expediteprocessing of applications and to enhancedata management; and•a new program name, “Accessible ParkingPermit,” consistent with government-widedirection for modernizing terminology relatingto persons with disabilities.Chapter 3 • VFM Section 3.05

Chapter 3Section3.06Ministry of TransportationDriver LicensingChapter 3 • VFM Section 3.06BackgroundThe Ministry of Transportation (Ministry) has amandate to provide Ontarians with a safe, efficient,and integrated transportation system. Its Road UserSafety Division works to improve road safety andmobility, through the promotion and regulation ofsafe driving behaviour; and customer service andthe accessibility of ministry products and services,including those relating to driver licensing. Duringthe 2004/05 fiscal year, the Ministry spent$173 million on its Road User Safety Program,while its licensing and registration activities generatedapproximately $950 million in governmentrevenues.In Ontario, there are approximately 8.5 millionlicensed drivers, and that number is increasingby an estimated 300,000 drivers annually. Over4.7 million driver’s licences are issued or renewedevery year. The Ministry’s driver-safety–relatedresponsibilities include setting road safety standardsand monitoring and enforcing compliancewith these standards; working to reduce unsafedriving behaviour, such as impaired or aggressivedriving; licensing drivers; and maintaining driverinformation.To carry out its responsibilities, the Ministry hascontracted with some 280 private issuing officesthat provide driver’s licence and vehicle licencerenewal and related services. In September 2003,the Ministry entered into an agreement with aprivate-sector company to conduct driver examinations,which include vision, knowledge, and roadtests. As of the end of our audit, this company wasoperating 55 permanent and 37 temporary driverexamination centres throughout the province.The Ministry relies heavily on computer informationsystems to help it manage its responsibilitiesand serve its customers. The Ministry’s DriverLicence System (Driver System), a legacy systemthat is over 30 years old, is used to maintain personalinformation and operating records on allOntario drivers. In 2000, the Ministry commenceda five-year project to upgrade key components ofthe hardware and infrastructure supporting thisDriver System that were considered obsolete. Upto the time of our audit, the Ministry had spent$108 million on this project, and we were informedthat 80% of the originally planned work had beencompleted. In 2004 the Management Board of Cabinetreduced the budget for this project. The Ministryreduced the scope of the project and wound upother outstanding work.126

Driver Licensing127Audit Objective and ScopeThe objective of our audit was to assess whether theMinistry had adequate systems and procedures inplace to:•licensed to drive in Ontario; and•ensure that only legitimate and safe drivers wereprotect the integrity and confidentiality of drivers’personal information.We identified audit criteria that would be usedto address our audit objective. These were reviewedand accepted by senior ministry management. Ouraudit included examining documentation, analyzinginformation, interviewing ministry staff, andvisiting five driver examination centres and five privateissuing offices. In addition to our interviewsand fieldwork, we employed a number of computerassistedaudit techniques to analyze driver’s licencedata and driver operating records.Our audit was conducted in accordance withstandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountants,and accordingly included such tests and otherprocedures as we considered necessary in the circumstances.We also reviewed the relevant recentreports and activities of the Ministry’s InternalAudit Services Branch. A number of issues that hadbeen identified by the Branch were helpful in determiningour audit work.SummaryWe concluded that the Ministry needs to strengthenits systems and procedures if it is to ensure thatonly legitimate and safe drivers are licensed todrive in Ontario. The difficulties of maintaining avery old and complex computer information systemand improving its ability to meet users’ needs haveundoubtedly contributed to the Ministry’s challengesin this regard. We noted that:•Some of the identification documents acceptedwhen someone applies for a new driver’s licencewere of questionable reliability. For instance,such items as membership cards for wholesalewarehouse clubs and employee or student cardswithout photos were accepted as one of the tworequired identification documents. Guidelinesprovided to front-line staff for validating identificationdocuments were also found to have significantgaps.•Procedures for identifying potentially fraudulentdriver’s licences need to be improved. We identifieda number of individuals who appeared tobe maintaining duplicate driver’s licences on theMinistry’s system.•While a number of information-sharing arrangementsare in place, licences from a number ofjurisdictions were exchanged without transferringthe driver’s conviction record from or validatingthe driver’s status in the other jurisdiction.In 2004, the Ministry exchanged 30,000 outof-provincelicences (45% of all such licences itexchanged) without such record transfers. Thereis also a risk that Ontario residents who fail multipleroad tests in Ontario can obtain licencesthrough the out-of-province licence exchangeagreements without proof that they have completeda successful road test, since other jurisdictionsmay have issued a licence with full drivingprivileges on presentation of an Ontario noviceclasslicence. For instance, one driver failedthe Ontario road test 15 times but received anOntario driver’s licence by subsequently presentinga licence from another jurisdiction.•The Administrative Driver’s Licence SuspensionProgram (involving a 90-day immediate suspension)and the Ignition Interlock Program (inwhich a blood alcohol testing device is installedin the vehicle) appear to have been successful inChapter 3 • VFM Section 3.06

1282005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06contributing to improved road safety as it relatesto drinking and driving.•The Driver System and ministry proceduresdid not ensure that all high-risk drivers wereappropriately dealt with in a timely manner.For example, the Ministry was not complyingwith its own policy of following up on driversinvolved in three or more collisions within atwo-year period. As well, little was being doneto deal with drivers who continued to drive witha suspended licence or whose licence was suspendedmultiple times. Over 25,500 drivers hadtheir licence suspended at least three times inthe 1995–2004 period, with one driver’s licencehaving been suspended 18 times.•Delays in scheduling demerit-point interviewsresulted in the cancellation of over 14,000interviews in 2002 and 2003, with the associateddemerit points eventually expiring withoutbeing addressed. In addition, the use of thestrongest sanction—immediate suspension—hasbeen very infrequent and has dropped dramatically(from 1.2% in 2001 to 0.1% in 2004). Aswell, the rates of remedial actions arising fromthese interviews—such as requiring the driverto take a defensive-driving course or imposinga deferred suspension—varied significantly byregion and between ministry counsellors.•We found that the highest increase in the atfaultcollision rates for seniors occurred as individualsmoved from the 70–74 age group to the75–79 age group. However, the Senior DriverRenewal Program does not begin until driversreach the age of 80, even though most otherCanadian provinces use 75 as their age criterion.The number of drivers over 75 years of age hasdoubled in the last 10 years.•Driving-related criminal records for youngoffenders were maintained manually and wereerror-prone. For example, in our sample of 40former young offenders who should by law havebeen given lifetime suspensions based on theirdriving records, the suspension had not beenimposed for seven (17.5%) of them.We also concluded that improvements wereneeded to protect the integrity and confidentialityof drivers’ personal information:•Although the Ministry relies on the driver recordsmaintained in its Driver System to trigger disciplinaryaction when required, procedures forensuring that all driving-related convictions wereattributed to the responsible driver were insufficient.We noted extensive delays in following upon cases in which a conviction notice could notbe matched to a driver record. Efforts made toresolve these cases were often inadequate, andunresolved files were destroyed without properapproval.•Since our audit of road user safety in 2001, theMinistry has improved its timeliness in processingmedical reports and is now meeting itsrelated performance benchmark.•Security administration processes to limit thenumber of privileged users, protect data transmission,and monitor system access were noteffectively implemented.•The Driver System did not always calculatedemerit points accurately; accordingly, driversuspensions were not generated automaticallyas intended. Manual intervention was regularlyneeded to overcome this system malfunction,and this led to errors in updating driver records.• The driver examination service provider wasnot complying with ministry security requirementswhen hiring staff who have access to confidentialdriver records, and the Ministry hadnot developed adequate policies and proceduresto deal with prospective and existing employeeswith criminal records. We noted instanceswhere staff had criminal records yet no actionwas taken, and, in 25% of the new-hire files wereviewed, the required criminal check had notbeen done.

Driver Licensing129OVERALL MINISTRY RESPONSEThe Ministry values the work of the Office of theAuditor General and is taking action on all ofthe Auditor’s recommendations.Road safety, quality customer service, effectivestewardship of government revenues, andthe protection of personal information are toppriorities for this Ministry. Ensuring the integrityof the Ontario driver’s licence is also a keypriority for this Ministry.The Ministry is committed to improving itsbusiness processes and making better use oftechnology to detect and deter attempts at identitytheft.Detailed Audit ObservationsDRIVER’S LICENCE APPLICATIONIn order to legally drive in Ontario, residents whoare 16 years of age or over, as well as any newcomersto Ontario, must first obtain a driver’s licencefrom the Ministry. These driver’s licence applicationscan be processed at any of the driver examinationcentres located throughout the province.Applicants must pay the applicable licence fee andprovide proof of their personal identity and date ofbirth.An Ontario driver’s licence has become a widelyaccepted piece of identification. For example, itis often used to obtain a Canadian passport, anOntario Health Insurance Plan card, or a mortgageor line of credit from a financial institution. It isalso commonly used as the required photo identificationfor boarding aircraft on domestic flights.Accordingly, proper authentication of an applicant’sidentity before issuing a driver’s licence is essentialfor security purposes and to minimize fraudulentactivities.Identification DocumentsThe American Association of Motor Vehicle Administrators(AAMVA), an organization of U.S. stateand Canadian provincial officials who administerand enforce motor vehicle laws, has developedsuggested minimum standards for North Americanjurisdictions to promote identification security,interoperability, and reciprocity. As part ofthis work, AAMVA has established the “CanadianAcceptable Verifiable List” of 13 identification documentsthat are considered reliable and verifiable.Included on this list are such documents as internationalpassports, citizenship cards, certificates ofIndian status, driver’s licences from other jurisdictions,birth certificates, marriage certificates, andpermanent resident cards. The Canadian Council ofMotor Transport Administrators (CCMTA) endorsesAAMVA’s Canadian Acceptable Verifiable List andassociated procedures. Ontario is a member of bothAAMVA and CCMTA.In order to authenticate the personal identity ofindividuals applying for a driver’s licence, the Ministryhas developed a list of acceptable documents toassist driver examination centres. We compared theMinistry’s list of acceptable identification documentsto AAMVA’s recommended list and to the accepteddocuments used by a number of other Canadianjurisdictions. In addition to accepting all the types ofidentification documents recommended by AAMVA,the Ministry also accepted 18 additional typesof documents. As illustrated in Figure 1, Ontarioaccepted far more types of identification documentsthan any other Canadian jurisdiction we looked at.The list of documents accepted by Ontario includessuch items as employee or student cards withoutphotos and membership cards from wholesale warehousesor hobby clubs. Our concern with these latterforms of identification is that they may not be readilyauthenticated or reliable. The Ministry’s InternalAudit Services Branch has also raised this concern.In addition to the list of acceptable identificationdocuments, the Ministry and the driverChapter 3 • VFM Section 3.06

1302005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06Figure 1: Number of Identification Types Accepted byDifferent JurisdictionsPrepared by the Office of the Auditor General of OntarioAAMVARecommendedIdentificationAdditionalIdentificationJurisdiction Types Accepted Types AcceptedAlberta 6 10British Columbia 6 11Manitoba 8 8Nova Scotia 7 6Ontario 13 18Quebec 11 1Saskatchewan 9 12examination service provider also provide driverexamination centres with guidelines for reviewingand authenticating these documents. However,while the guidelines covered driver’s licences andseveral identification cards issued by Canadian,American, and some international jurisdictions,there were a number of significant gaps. For example,no guidance was available for authenticatingdriver’s licences from the People’s Republic ofChina, India, Iran, and Sri Lanka, all of which currentlyrank among the top 10 countries of originfor people immigrating into Canada. Moreover, noauthentication guides or resources were availablefor reviewing a number of other common identificationdocuments accepted by the Ministry, suchas birth certificates from other jurisdictions. Suchguidelines could include photographs of both sidesof a sample of these documents and a descriptionof security features that staff could look for whenreviewing such documents for authenticity.As well, we found that the Ministry had no proceduresfor liaising with other provincial governmentoffices or other levels of government to obtainlists of documents (such as birth certificates orpassports) known to be lost, stolen, or fraudulent,so that such lists could be made available to thedriver examination centres or the private issuingoffices.Duplicate Driver’s LicencesThe Ministry performs a “contender check” on alldriver’s licence applicants in an attempt to minimizethe risk of issuing a duplicate driver’s licence.This check involves searching the Driver System forany records that match the applicant’s name, dateof birth, and sex. However, since applicants’ namesoften vary, sometimes significantly, on differentidentification documents, and the system does nothave the capability to ensure that all names areentered in a standardized format, this check cannotbe completely relied on.We analyzed a sample of driver records—usingexpanded search criteria that included drivers’addresses as well as their names and dates of birth—and identified 280 pairs of potential duplicates. Wesubsequently compared the photos and signatures ofthese drivers and determined that 13 pairs appearedto be duplicates. The Ministry was following up onthese cases at the time we completed our audit. Fortwo of these cases, we noted that if the convictionand demerit points shown on the separate recordshad been combined, disciplinary action would havebeen taken against the drivers.RECOMMENDATIONTo better ensure that the personal identity ofevery driver’s licence applicant is authentic, theMinistry should:•review the list of acceptable identificationdocuments and consider removing documentsthat are of questionable reliability;•develop additional guidance to assist in thevalidation of identification documents commonlypresented by driver’s licence applicants;and•expand the scope of the contender check tominimize the risk of issuing duplicate driver’slicences.

Driver Licensing131MINISTRY RESPONSEBy fall/winter 2005/06, the Ministry will beginusing a more limited, standardized list of identificationdocuments that can be used for a firstdriver’s licence registration. These identificationrequirements will be consistent with thoseestablished by the American Association ofMotor Vehicle Administrators.To ensure that identification documents usedto obtain a driver’s licence are authentic, theMinistry is actively investigating technologicalsolutions that will confirm the authenticity ofimportant source documents before a driver’slicence is issued, including verification from theissuing authorities.The Ministry will complete a review of thecurrent contender check policy and proceduresby fall 2006, with the goal of identifying potentialadditional improvements to deter identitytheft.Out-of-province Licence ExchangeNew residents of Ontario who have a valid out-ofprovincedriver’s licence may drive for a maximumof 60 days in Ontario. To continue to drive after thisperiod, these drivers must obtain an Ontario driver’slicence. To facilitate this process, Ontario hasentered into reciprocal agreements with all Canadianand U.S. jurisdictions, and with several otherinternational jurisdictions, to exchange their drivers’licences for an Ontario licence with full drivingprivileges, provided that the driver has at least twoyears of driving experience within the last threeyears. There is no requirement for a knowledge orroad test. On average, the Ministry exchanges over70,000 out-of-province licences annually.Ontario does have a process for recognizing thedriving experience of drivers from jurisdictionswith which it has no reciprocal agreement. However,such applicants must still complete Ontario’svision, knowledge, and road tests before a fullyprivileged driver’s licence is issued to them.Figure 2 outlines the jurisdictions with whichOntario has reciprocal agreements and summarizesadditional procedures (discussed further below) forverifying the status and driving history of driverscoming from some of those jurisdictions.Before granting a licence exchange for driversfrom other provinces and territories and frommost U.S. states, driver examination centres makean inquiry through a network known as the InterprovincialRecord Exchange (IRE) to verify thecurrent status of the applicant’s licence in the jurisdictionthat issued it. If the applicant’s licence issuspended or invalid, either the licence exchangeapplication is rejected or additional support isrequired before an exchange is approved. However,many foreign jurisdictions are not connected to theIRE; hence, the Ministry cannot determine whetherthe licence of a driver from such a jurisdiction issuspended or even valid at the time of the exchangeapplication. For people coming from these jurisdictions,the issuance of an Ontario driver’s licenceis approved based solely on the applicant’s havingpresented an out-of-province driver’s licence thathas not expired. Our analysis indicated that approximately8,000 (11%) of the licences exchanged in2004 fell into this category.Twelve North American jurisdictions have alsoentered into a “Non-resident Violators Agreement”with Ontario. Under such an agreement, therecords for all driving-related criminal convictionswithin the past 10 years, and for eight other typesof driving offences committed by the driver withinthe past two years, are transferred from the originaljurisdiction and form part of these drivers’ Ontariodriving records. These eight types of offences areconsidered the more serious violations of Ontario’sHighway Traffic Act, such as failure to remain atthe scene of an accident, careless driving, racing,exceeding the speed limit by 50 kilometres per hourChapter 3 • VFM Section 3.06

1322005 Annual Report of the Office of the Auditor General of OntarioFigure 2: Out-of-province Licence Exchange Agreements and ProceduresSource of data: Ministry of TransportationChapter 3 • VFM Section 3.06or more, failure to obey a stop sign or signal light,and failure to stop for a school bus. However, forall other reciprocal jurisdictions, there is no suchtransferral mechanism in place: drivers from thosejurisdictions start with a “clean slate” in Ontario.Our data analysis indicated that almost 30,000(45%) of the out-of-province licences exchanged in2004 were done on this basis.ReciprocalAgreementOntario has also entered into a Memorandum ofUnderstanding (MOU) on licence exchanges withboth the United Kingdom and France. Under thesememoranda, Ontario is required to notify the homejurisdiction of exchange applications and to obtainverification from them of the validity of the driver’slicence presented. However, we noted that althoughthese agreements were signed in early 2004 andover 6,000 driver’s licences from these jurisdictionshad been exchanged by the end of January 2005,Inter-provincialRecord ExchangeNon-residentViolators Agreementother Canadian jurisdictions Except:• British Columbia• Nunavut TerritoryUnited States Except:• Arizona• District of Columbia• Illinois• New Jersey• VermontAustriaIn place only with:• Michigan• New Yorkthe Ministry had not yet requested the verificationsas per these agreements.MOU withRequirement forValidity ChecksFrance GermanyJapanKoreaSwitzerlandUnited Kingdom Canadian Forces–Europe = Existence of agreement or record exchange with OntarioIn addition, there is growing concern thatOntario residents who fail multiple road tests inOntario may be able to circumvent Ontario’s graduatedlicensing system by taking a “shortcut” path inanother jurisdiction. Under the graduated licensingsystem, new drivers must pass a vision test, aknowledge test, and two road tests, and must haveat least 20 months of driving experience, beforebecoming fully licensed. Our analysis indicatedthat from 1998 through 2004, over 2,100 driverswho failed their road test in Ontario subsequentlyobtained a full Ontario licence by exchanging alicence obtained in another jurisdiction within twoto four years. Among this group of drivers, 367(17%) had failed the road test in Ontario at leastthree times, and one had failed 15 times. Service

Driver Licensing133provider staff raised concerns that many jurisdictions,because they do not have graduated licensingsystems, may be inadvertently providing licenceswith full driving privileges on presentation of anovice-class Ontario licence, which can be obtainedwithout a road test. Most commonly these applicantshad obtained a licence in Quebec, Alberta, orMichigan. The Ministry had no evidence that individualsoriginally possessing a novice-class Ontariolicence ever took or passed a road test in theseother jurisdictions.We also noted that despite a ministry policyrequiring driver examination centre managementto review all out-of-province licence exchangesbefore they are approved and processed, this managementreview was being done only for jurisdictionsoutside North America at one of the fivecentres we visited, and was being done inconsistentlyat two of the others. This lack of properauthorization increases the risk of licences’ beingexchanged improperly.RECOMMENDATIONTo ensure that only authorized and capabledrivers with out-of-province licences obtain anOntario driver’s licence, the Ministry should:•comply with existing exchange agreementsand expand the scope of its out-of-provincelicence exchange program to include thesharing of serious conviction records withmore jurisdictions;•consider requesting proof of successful roadtest completion before approving a licenceexchange for applicants who have failedmultiple road tests in Ontario; and•ensure that driver examination centre managementcomplies with ministry policy andreviews all out-of-province licence exchangeapplications before an Ontario driver’slicense is issued.MINISTRY RESPONSEThe Ministry shares the Auditor General’s concernabout the need to safeguard the integrityof the out-of-province driver’s licenceexchange process. The Ministry has a soundlicence exchange system and has taken actionto improve the security of its driver’s licence,and further improvements to the driver’s licencecard will be made in the next 18 months.In collaboration with other jurisdictions, theMinistry will explore the feasibility of exchangingserious conviction information where suchinformation is not already exchanged. In fall2005, the Ministry will begin exploring the feasibilityof requiring a certified driver’s licenceabstract for all out-of-province exchanges.The Ministry is currently reviewing the issueof verifying existing exchanged U.K. and Francelicences and expects to begin addressing thisissue in late 2005. If the Ministry is advised thatan exchanged licence is suspended, the Ontariolicence will be revoked.All future reciprocity agreements with jurisdictionsoutside of Canada and the United States,as well as those already signed with France andthe United Kingdom, require that the Ministryverify the validity of the driver’s licence presentedfor exchange. Verification will take placeafter the issuance of an Ontario licence. If theexchanged licence is found to be suspended orfraudulent, the Ontario licence will be cancelled.Ontario’s current policy with respect toexchanging out-of-province licences for individualswho have previously failed Ontario roadtests addresses the concern that drivers may becircumventing Ontario’s graduated licensingsystem. Novice drivers surrendering a licencewith less than 24 months’ experience from areciprocating jurisdiction will be issued a noviceclasslicence. The driver will be expected topass Ontario’s G2 exit test to qualify for a fullChapter 3 • VFM Section 3.06

1342005 Annual Report of the Office of the Auditor General of OntarioG licence. Currently, most Canadian and manyU.S. jurisdictions have a graduated driver’slicence program. Current exchange agreementsensure that only equivalent classes of licencewill be exchanged. Ontario recognizes the outof-provincelicence as proof of successful completionof written and road tests.Current policy requires that driver examinationcentre supervisors approve all out-ofprovinceand out-of-country driver licenceexchanges. Clarification of this policy will besent to the driver examination centres’ serviceprovider in September 2005.2004/05 Management Board submissions or in its2005/06 Business Plan submission. Revised measuresaimed at more effectively measuring the Ministry’sdirect contribution to improving road safetywere still in draft form at the end of our audit.RECOMMENDATIONTo help improve the Ministry’s ability to assessthe effectiveness of its road user safety efforts,the Ministry should expand and enhance its performancemeasures for road user safety.MINISTRY RESPONSEChapter 3 • VFM Section 3.06ROAD USER SAFETYIn 2000, along with all other Canadian provincesand territories, Ontario endorsed Road SafetyVision 2010, a national initiative of the CanadianCouncil of Motor Transport Administrators aimedat making Canada’s roads the safest in the world.This initiative targets a 30% reduction in the averageannual number of deaths and serious injuriesresulting from traffic collisions for the years 2008through 2010 as compared to 1996 through 2001.Since 2000, the Ministry has proclaimed Ontarioone of the safest jurisdictions in North America,with a driving-related fatality rate that has beendeclining since 1996. However, we noted that thefatality rate has been used by the Ministry as itssole safety performance measure for several years,and that other factors, such as seat belt usage andimproved vehicle safety features (for example,air bags), also reduce the risk of fatalities. In thisregard, we noted that in early 2004 the ManagementBoard of Cabinet directed the Ministry toimprove its performance measures—includingthose for road user safety—and to submit revisedmeasures to the Management Board for review byfall 2004. However, we noted that the Ministry didnot address this directive either in its subsequentThe Ministry is committed to improving its abilityto measure the effectiveness of its road usersafety programs.In 2004, the Ministry developed a numberof internal performance measures to assess theeffectiveness of its road user safety efforts. Someof these internal measures include:•of age in fatal collisions;•and seriously injured in collisions; and•involvement of senior drivers over 80 yearsyoung drivers/riders (16–19 years) killedfatalities and injuries due to improper useand non-use of occupant protection systems(e.g., seat belts and car seats).Early results suggest that these measuresdemonstrate the effectiveness of the programstargeted.New regulations took effect on September 1,2005 that extend the requirement to use childcar seats, including booster seats, for young children;restrict the number of teenage passengersthat a teenage driver can carry when driving;and further protect children getting on and off aschool bus. Bill 169, introduced on February 21,2005, will, if passed, increase penalties for speedingand provide enhanced protection for childrenand other pedestrians at crosswalks, as well asfor construction workers.

Driver Licensing135All of these initiatives are expected todecrease fatalities and lead to positive resultsfor the Ministry’s performance measures. TheMinistry continues to look at its performancemeasures and is exploring additional road usersafety measures.Demerit-point SystemThe demerit-point system provides the Ministrywith an intervention tool to improve driver performanceand behaviour. Drivers who are convictedof certain offences under the Highway Traffic Acthave demerit points added to their driver records.The points remain on the driver’s record for twoyears, after which they are removed. If a driveraccumulates a designated number of demerit pointswithin a two-year period, the Ministry’s policy is totake various actions, as shown in Figure 3.Demerit-point Interview Scheduling DelaysDuring our 2001 audit of the Road User SafetyProgram, we noted that the Ministry had a backlogof scheduled demerit-point interviews, withapproximately one-third of the interviews beingcancelled due to this backlog. In our current audit,we noted that this situation had not improved. For2002 and 2003, approximately 14,000 interviewswere never scheduled within the two-year demeritpointperiod: accordingly, the related demeritpoints expired and were removed from the drivers’records. As of December 2004, we noted that therewere over 7,000 demerit-point interviews outstanding,and over 3,000 (48%) of them were outstandingbeyond the ministry target of three months.Failure to take advantage of the opportunity to useintervention measures reduces the effectiveness ofthis program in improving driving behaviour.Action Resulting from Demerit-point InterviewsDriver improvement counsellors have the authorityto immediately suspend a driver’s licence or imposevarious types of remedial action as a result of ademerit-point interview. Examples of such actionsinclude a strong warning letter, a deferred suspension(whereby the driver’s licence will be automaticallysuspended if the driver is convicted of anotheroffence within a given time period), and requiringthe driver to attend a defensive-driving course.Although there is no policy with respect to howoften interviews should lead to some type of action,as indicated in Figure 4, the rate of taking actionhas averaged about 10% over the last four years.In addition, our analysis indicated that the use ofthe strongest sanction—immediate licence suspension—wasinfrequent and had declined dramatically:as Figure 4 shows, the rate dropped from1.2% in 2001 to 0.1% in 2004. According to theMinistry, the immediate-suspension sanction isbeing used less often because the Ministry believesother less severe remedial actions to be more effectivein improving driver behaviour. However, theMinistry has not done any formal analysis—comparingsubsequent driving records to the type ofaction taken—to support this view.Figure 4 also indicates that while the decreaseduse of the immediate-suspension sanction wascounterbalanced by increased use of remedialFigure 3: Demerit-point Levels Requiring MinistryActionSource of data: Ministry of TransportationDemerit PointsNovice Full-licensedMinistry Action Drivers Driversdriver is issued a warning letter 2 6driver is required to attendan interview with a driverimprovement counsellordriver’s licence is suspended6 9for 30 days — 15for 60 days 9 —Chapter 3 • VFM Section 3.06

1362005 Annual Report of the Office of the Auditor General of OntarioFigure 4: Action Resulting from Demerit-point Interviews, 2001–2004Source of data: Ministry of TransportationImmediateSuspension2001 2002 2003 2004RemedialActionImmediateSuspensionRemedialActionImmediateSuspensionRemedialActionImmediateSuspensionRemedialActionRegion (%) (%) (%) (%) (%) (%) (%) (%)Central 0.9 20.5 1.7 20.8 0.4 6.2 0.1 4.2Eastern 1.3 1.2 0.7 1.8 0.1 3.2 0.2 9.5Northern 4.9 14.7 3.5 22.7 0.9 24.1 0.5 20.3Southwestern 0.5 9.6 0.6 11.3 0.2 12.7 0.1 16.8Total 1.2 10.2 1.2 11.9 0.2 9.1 0.1 9.4Chapter 3 • VFM Section 3.06actions in three of the Ministry’s four regions,this counterbalancing did not occur in the CentralRegion, where the use of all types of remedialaction dropped significantly from 2001 to 2004.This region had the lowest rate of remedial actiontaken in 2004.In addition to varying across regions, the rateof imposing remedial action varied significantly byindividual counsellor. While overall some form ofremedial action was imposed for 9.3% of the interviewsconducted in 2003 and 9.5% of those conductedin 2004, 38% of the counsellors imposedremedial action in less than 5% of their 2003 and2004 demerit-point interviews. One counsellorimposed remedial action in only 16 (0.6%) of the2,872 interviews conducted from 2002 through2004.We also noted that the Driver System did nothave the capability of maintaining detailed recordsof remedial actions imposed or completed as partof a driver’s record, nor could the system automaticallygenerate a suspension for those drivers whohad been given deferred suspensions and wereconvicted again within the period specified by thecounsellor. Although such drivers were flagged inthe system, Ministry staff had to manually monitoreach case and take appropriate action whenrequired.Even though the Ministry often recommendsdefensive-driving and driver improvement coursesas a remedial action, it does not maintain a list ofrecognized courses. As well, the Ministry has notreviewed or set standards for the duration of driverimprovement courses or established standard content/curriculumfor either the defensive-driving orthe driver improvement course.Use of QuestionnaireThe Ministry uses driver questionnaires as analternative to driver improvement interviews whendriver improvement counsellors are not availableon the scheduled interview day (for example, dueto illness) and for out-of-province drivers. Ministrystaff review the completed questionnaires to determinewhether to schedule (or reschedule) a driverimprovement interview. However, we noted thatthe Ministry also used questionnaires to clear interviewbacklogs. The use of this alternative reducedthe likelihood of a suspension or other remedialaction being imposed, as we noted that 99.9% ofthe 1,180 questionnaires processed in 2004 resultedin no further action being taken.We also found follow-up procedures on outstandingquestionnaires to be insufficient. In particular,we noted that of the 2,500 questionnaires theCentral region had distributed in 2004 and January2005, 17% had not been returned within the Ministry’stargeted turnaround time, and the regionaloffice had not followed up on these drivers.

Driver Licensing137RECOMMENDATIONTo help achieve its objective of promoting safedriver behaviour, the Ministry should:•ensure that it appropriately and promptlyassesses drivers who have accumulatedexcessive demerit points;•provide guidelines and training to driverimprovement counsellors that wouldimprove consistency in the assessment ofdrivers who have accumulated excessivedemerit points and monitor counsellors intheir implementation of the guidelines;• measure the effectiveness of replacingimmediate suspensions with less severeremedial action imposed by driver improvementcounsellors;•enhance the Driver System to maintaindetailed remedial-action records and automaticallysuspend drivers when required;• analyze the effectiveness of availabledefensive-driving and driver improvementcourses and provide counsellors with a list ofacceptable ones; and•minimize the use of questionnaires, and followup on outstanding questionnaires in atimely manner.MINISTRY RESPONSEThe Ministry is committed to promoting safedriving behaviour. The demerit-point system is akey strategy for meeting that objective.Although there were 3,000 interviews scheduledbeyond the Ministry’s target of 90 days atthe time of the audit, this number has now beenreduced to 1,077. Regions will continue to worktowards achievement of the 90-day target byconducting group demerit-point interviews andby redeploying additional resources. The Ministryis committed to reducing the waiting listfor demerit-point interviews to an acceptablelevel by fall 2005.An assessment of core competencies relatedto the position of driver improvement counsellorswill be completed by summer 2006. Theresults of this assessment will form a baselinefor consistency. In addition, the Ministry willconsider such remedial actions as:•training;• business process improvements;•guidelines for use by counsellors; and•additional driver improvement counsellorthe implementation of driver assessmentprocesses and tools for monitoring consistencyin the application of the driver assessmentguidelines by counsellors.By January 2006, the Ministry will beginanalyzing the effectiveness of imposing remedialactions versus immediate suspensions, with aview to having interim results by March 2007.The Ministry will explore the feasibility ofautomating remedial actions. In the meantime,it will look into providing relevant staff withaccess to records of remedial actions imposed orcompleted by March 2006.By summer 2006, the Ministry will developstandards for defensive-driving and driverimprovement courses. The Ministry expects tohave a listing of approved courses posted on itswebsite by summer 2007.The Ministry recognizes the value of inpersoninterviews. In April 2005, Central Regionimplemented a procedure to follow-up on outstandinginterview questionnaires so that driversare immediately sent a notice to attend aninterview or group interview, depending on thenature of offences. The other regions are alsonow following this practice. Questionnaireswill only be used for out-of-province driverswhere an interview cannot take place and asan alternative to an interview when the driverChapter 3 • VFM Section 3.06

1382005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06improvement counsellors are unavailable due tounplanned absences.High-risk DriversThe Canadian Council of Motor Transport Administratorsidentifies high-risk drivers as those whohave been involved in three or more traffic convictions,driving-related criminal convictions, orvehicle collisions within a two-year period. TheMinistry has various programs to deal with suchdrivers.In recent years the Ministry has established tworoad user safety programs that target drinking drivers:the Administrative Driver’s Licence SuspensionProgram (ADLS) and the Ignition Interlock Program.Under the ADLS, a driver who is stopped bypolice and either refuses to submit to a breathalyzertest or registers a blood alcohol level over the legallimit of 80 milligrams of alcohol per 100 millilitresof blood is immediately suspended for a 90-dayperiod. Under the Ignition Interlock Program, driversconvicted of certain Criminal Code drinkingand-driving–relatedoffences are required to installan ignition-locking device in their vehicle as a conditionof licence reinstatement. These drivers mustuse the device to test their blood alcohol level eachtime they intend to drive, and, if the device registersa blood alcohol level of greater than 20 milligramsper 100 millilitres of blood, the vehicle cannotbe started.We analyzed the rates of drinking-and-driving–related collisions and convictions before and after theintroduction of these programs and noted that theserates have been declining. Accordingly, it appearsthat these programs have been successful in contributingto improved road safety.Ministry policy defines a collision repeater as alicensed driver involved in three or more collisionswithin a two-year period, with some indication ofimproper driver action in at least two of the collisions,including the most recent one. According toministry policy, anyone who meets this definitionmust undergo a re-examination (consisting of avision test, a knowledge test, and a road test) andan interview with a driver improvement counsellor.By analyzing the records of drivers who were foundby the police to have been at fault in collisions(whether or not they were actually convicted of anoffence in connection with the collision), we found900 who met these criteria in 2003 and 2004. However,the actual practice being followed was to onlytake remedial action on drivers who were convictedof an offence connected with the collisions in question.Only 51 of the 900 drivers fell into that category;hence, the vast majority of collision repeaterswere not being re-examined as required byministry policy.We also found that the Ministry did not havesufficient initiatives or programs for dealing withdrivers who continued to drive while under suspensionor who had multiple suspensions.Under the Highway Traffic Act, when a driveris convicted of a driving-related offence under theCriminal Code of Canada, that person’s licencemust be suspended for a prescribed period—oneyear for a first conviction, three years for a secondconviction, a lifetime suspension (with the possibilityof applying for reinstatement after 10 years)for three convictions, and a permanent suspensionfor four or more convictions. Such Criminal Codeconvictions include causing death by criminal negligencewhile operating a motor vehicle, impaireddriving with blood alcohol measured at over 80milligrams per 100 millilitres of blood, and dangerousoperation of a motor vehicle.Between October 1998 and December 2004, theMinistry issued lifetime suspensions to over 3,200drivers. However, our analysis found that at least537 (16%) of them continued to drive, as we notedsubsequent incidents where they were stopped bypolice on Ontario’s roads. Further, 328 (10%) weresubsequently convicted of additional driving-related

Driver Licensing139Criminal Code offences. We note that the Ministrydoes have a program for impounding vehiclesdriven by suspended drivers with driving-relatedCriminal Code convictions—however, since thedriver of a vehicle is not necessarily the owner ofthe vehicle, this penalty does not always target theappropriate party. In this regard, Manitoba has initiateda program whereby local police are informedof such drivers so that they can be more closelymonitored.Our analysis also showed that a large number ofdrivers pose a safety risk on Ontario’s roads in thatthey have had their licences suspended repeatedlybecause of accumulated demerit points. Duringthe 1995–2004 period, we noted that of the over197,500 drivers whose licences were suspended fordriving-related offences under the Highway TrafficAct, approximately 14,900 of these drivers had hadtheir licence suspended at least three times. Oneindividual’s licence had been suspended 18 times.The Ministry did not have any additional programtargeting these high-risk drivers beyond the standardsuspension period and payment of the licencereinstatement fee.RECOMMENDATIONTo help reduce the risk of motor vehicle collisions,the Ministry should:•as per ministry policy, identify and reexamineall drivers who, in the past twoyears, have had three or more collisions, ofwhich at least two, including the last one,involve improper driver behaviour; and•identify and consider, in consultation withstakeholders in the enforcement community,additional remedial action or sanctionsfor high-risk drivers not currently targetedunder a ministry program, such as individualswho drive while under suspension orwho are suspended multiple times.MINISTRY RESPONSEThe Ministry has refined its policy and relieson court convictions as the best determinant ofimproper driving behaviour and for identifyingdrivers who are most likely to be a threat toother road users.The problem with drivers driving whileunder suspension is not confined to Ontario butis North America–wide. The Ministry is activelyinvolved in research and is working in partnershipwith other North American jurisdictions toaddress this serious issue.The Ministry is supporting MADD Canada’sfollow-up research study on the involvement ofsuspended drivers in collisions. This study willbe underway by fall 2005.The Ministry is participating as a member ofa working group of the American Associationof Motor Vehicle Administrators on suspended/revoked licences. This working group is examiningthe level and nature of involvement of suspendeddrivers/drivers with revoked licencesin motor vehicle collisions and is expected toreport its initial research findings by fall 2006.The working group will then consider possiblecountermeasures for dealing with such driverswho continue to drive.The introduction of Access EnforcementSolutions (AES) in February 2004 has greatlyimproved the safety of both Ontario’s lawenforcement community and the public. Bylinking the Ontario Provincial Police and selectmunicipal police agencies directly to ministrydatabases, AES provides fast access to comprehensiveinformation on any Ontario driver orvehicle. Now, enforcement officers can quicklyidentify suspended drivers, stolen vehicles, andmore, allowing them to remove more unsafedrivers and unsafe and stolen vehicles from theroad.Chapter 3 • VFM Section 3.06

1402005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06Senior DriversAccording to Statistics Canada, Ontario’s populationof seniors of age 75 or older increased by41%—from 501,700 to 707,500—between 1993and 2003. The number of Ontario drivers over 75years of age has been growing even more dramatically,from 211,000 in 1993 to 427,000 in 2003—a102% increase.Licence Renewal for SeniorsUntil 1996, the Ministry’s Senior Driver RenewalProgram required all seniors aged 80 and over whowished to continue driving to retake their road testevery two years. In 1996, the Ministry eliminatedthis road-test requirement. Under the current program,all senior drivers must take biannual visionand knowledge tests and attend a 90-minute groupeducation session, but only seniors who have beenconvicted of a driving-related offence in the previoustwo years are required to take a road test. In2004, this amounted to less than 5% of Ontario’ssenior drivers.In our 2001 Annual Report, we recommendedthat the Ministry assess the effectiveness of thisnew program in identifying and appropriately dealingwith potentially unsafe drivers. The Ministryhas since analyzed the rate of seniors’ involvementin collisions where death or injury has occurred,and has found that the rate has been declining sincethe program was introduced.However, we noted that most other Canadianjurisdictions start their senior drivers’ programwhen a driver reaches age 75. We therefore analyzeddriver records from 2000 through 2003 todetermine if there was evidence that driver performancedeteriorated before age 80. Our analysisfocused on collisions where drivers were foundto be at fault. As Figure 5 illustrates, senior drivershave the lowest rate of at-fault collisions when theyare in the 65–69 age group. From that point on,the at-fault collision rate increases. The most substantialincrease in the at-fault collision rate occursas seniors move from the 70–74 age group to the75–79 age group, with the rate for the latter groupbeing 12% higher than that for the former. This factsupports the practice of most other provinces ofchoosing 75 as the most appropriate age for beginninga senior-driver program aimed at mitigatingroad safety risks.As mentioned earlier, in order to renew theirlicence, every two years, drivers aged 80 and overmust attend a 90-minute group education sessionaimed at improving their awareness of potentialtraffic hazards and helping them drive more defensively.However, we found that the training materialsprovided at this session were out of date: theyhad not been revised since the program began in1996. In this regard, we noted that the Ministryhad hired a consulting firm in 2003 to update thesematerials, attempt to make them more seniorfriendly,and incorporate enhanced features suchas take-home pamphlets and improved visual presentations.Although ministry staff were trained bymid-2004 on these new materials, at the time ofour audit they had not been incorporated into thegroup education sessions because of budgetaryissues.Figure 5: Average Annual “At-fault” Collision Rate per10,000 Active Drivers, 2001–2003Source of data: Ministry of Transportation18017016015014013012011010065–69 70–74 75–79 80–84 85+Age Group

Driver Licensing141Medical RequirementRecent research has established a close relationshipbetween certain types of medical conditions andcollision involvement. For instance, studies havefound that older drivers with heart disease, lungdisease, or diabetes are twice as likely, and thosewith cognitive impairments are eight times as likely,to be involved in an at-fault collision as those withoutthese conditions. While we noted that otherjurisdictions (such as British Columbia, Alberta,and Quebec) require, as part of their senior renewalprogram, a medical assessment for early signals ofsuch conditions or other health problems that mayaffect a senior’s driving capability, the Ontario programdoes not.RECOMMENDATIONTo help ensure that only safe drivers retain theirdriving privileges, the Ministry should reassessthe age and medical requirements for renewalof senior drivers’ licences, taking into considerationthe practices of other provinces, and updateits group education session materials.MINISTRY RESPONSEThe Ministry is actively working to find betterways of identifying senior drivers who are atrisk, while allowing safe drivers of all ages tocontinue driving.Ontario’s Senior Driver Renewal Program isa success. Group education sessions were introducedin 1996. The average fatal-collision ratefor drivers aged 80 and over declined by 28.8%in the periods from 1988 to 1995 and 1997 to1999. More recent data indicate that by 2002,the rate was 40% lower than the average ratefrom 1988 to 1995.There are currently no validated, evidencebasedtests available enabling doctors to testcognitive abilities that indicate at-risk drivingperformance among seniors. Accordingly,Ontario’s Senior Driver Renewal Program servesas one element in a slate of programs designedto detect and remove higher-risk drivers fromthe road. This slate of programs includes thedemerit-point program, mandatory and discretionaryreporting of medical conditions, and thecollision program for drivers over 70 years ofage.In addition, Ontario is part of a nationaleffort (CanDRIVE) to develop a screening toolthat will allow doctors and other health professionalsto identify older persons with healthrelatedconditions that make them unsafe todrive. At the same time, the tool will be assessedto see if people other than health professionals,such as licensing staff, can use it to screen atriskolder drivers for referral.Group education session materials wereupdated and have been in use since July 2005.Young OffendersFor ministry purposes, a young offender is definedas a person under the age of 18 who is convicted ofa driving-related offence under the Criminal Codeof Canada. Federal legislation restricts access tocriminal records related to young offenders in orderto protect their identity.To help keep these records confidential, the Ministrymaintains all young offenders’ driver recordsin manual files. We found that this practice contributedto a high rate of processing errors, particularlywhen staff must later access both these manualrecords and the electronically based records, whichare initiated once these drivers reach age 18, inorder to determine a course of action with respectto a particular driver. For instance:•From a sample of 40 former young offenderswith three or more driving-related CriminalCode convictions recorded in either the manualfiles or the electronic system, we found that atChapter 3 • VFM Section 3.06

1422005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06least seven (17.5%) should have been given alifetime driving suspension under the HighwayTraffic Act, but had not.•In another sample of 15 young offenders’ manualrecords, we found that 10 (67%) of theserecords had date-related errors that either led toan inappropriate suspension being entered intothe Driver System, or, conversely, could delaythe commencement of appropriate disciplinaryaction.RECOMMENDATIONTo ensure that the required legislative sanctionsare applied consistently to all drivers, the Ministryshould develop an automated databasethat maintains complete young-offender driverrecords.MINISTRY RESPONSEThe Ministry agrees that all legislative sanctionsshould be applied to the appropriate driver.In spring 2006, the Ministry will establish anautomated system for both storage and trackingof young-offender files.DRIVER’S LICENCE CARDSDue to the widespread acceptance of the driver’slicence as a form of identification and the potentialimpact of using a fraudulent licence, maintainingthe security of driver’s licence cards is criticalto safeguarding the personal information storedon the card and to minimizing the risk of havingthe card fraudulently reproduced. As stated by theAmerican Association of Motor Vehicle Administrators(AAMVA), “The driver’s licence is one of themost commonly used, and most commonly counterfeited,forms of identification in North America.”In this regard, AAMVA has developed standards,specifications, and recommendations designed toenhance driver’s licence administration and identificationsecurity. Although the Ontario driver’slicence meets all of AAMVA’s minimum standards,and the Ministry has enhanced its security featuresby including ultraviolet ink, additional microtextprinting, and holographic images on all newlicences issued since December 2004, a numberof additional security features recommended byAAMVA have yet to be incorporated into Ontario’slicences. These include the use of laser printing andenhanced bar-code technology that would makeit more difficult to create forged or counterfeitlicences.We understand that the Ministry is currentlyin the process of redesigning Ontario’s driver’slicences and plans to incorporate some of thesemore-advanced security features during thisexercise.RECOMMENDATIONTo safeguard the driver’s licence cards and thepersonal information stored within them, theMinistry should consider including additionaltechnological security features as part of itslicence card redesign project.MINISTRY RESPONSEIdentity theft is a worldwide problem. TheMinistry recently introduced legislation that,if passed, would make it an offence to possessor display an imitation driver’s licence andwould increase fines for possessing or displayinga fictitious, imitation, altered, or fraudulentlyobtained driver’s licence from $5,000 to$50,000.By the end of 2006, the Ministry expectsto have an improved driver’s licence in placethat uses modern, state-of-the-art productionand has security features that exceed the Driver’sLicence/Identification Security Frameworkestablished by the American Association of

Driver Licensing143Motor Vehicle Administrators. This frameworkidentifies numerous security features, includinga fine-line background, 2-D bar code, microand rainbow printing, secondary photo and signatureimages, ultraviolet features, and more.Ontario is in the process of identifying the featuresand combination of features that will beneeded. These features will be included in arequest for proposals that is to be issued in late2005.DRIVER RECORDSThe Ministry maintains records for each licenseddriver in Ontario. This driver record, which isstored in the Driver System, includes both personalinformation (such as the driver’s name, dateof birth, and address) and the driver’s operatingrecord (which consists of a history of the driver’slicensing transactions—such as applications,renewals, and information changes—and an “incidenthistory” that lists reported motor vehicle collisions,convictions, or licence suspensions). Thecompleteness, accuracy, and validity of this recordis important in ensuring that the Ministry makesappropriate licensing decisions with respect to eachdriver and takes disciplinary action when required.Personal InformationMinistry policy requires that the personal datamaintained for each driver include a full givenname and a residential address. However, we foundthat the Driver System did not have the capabilityto ensure that this policy was complied with. Frontcounterstaff were therefore able to, and oftendid, process transactions without ensuring that allrequired information was obtained and enteredinto the driver’s record. Our computer data extractiontesting indicated that full given names had notbeen provided for over 9,600 drivers, and 4,200records did not include a valid or complete residentialaddress. As well, we noted that proof of residencywas not required when applying for a licenceor when drivers requested an address change.When a licensed driver dies, the person’s next ofkin may return the driver’s licence card to the Ministryor otherwise inform it of the driver’s death.However, if the Ministry is not so informed, anactive driver record continues to be maintained. Inthis regard, we noted that the Ministry of Healthand Long-Term Care receives regular updates ofregistered deaths from the Ontario Registrar General,and uses these updates to cancel deceasedpersons’ eligibility under the Ontario Health InsurancePlan. Since the information is available andalready being shared, it should be relatively simpleand inexpensive for the Ministry of Transportationto obtain such updates.Operating RecordsThe Ministry relies heavily on drivers’ operatingrecords to evaluate driver behaviour and to initiateremedial action when appropriate. However,backlogs and delays in entering incidents into theserecords affect the timeliness and appropriateness ofthese ministry actions.When a driver is convicted of a motor vehicle–related offence, the Ministry of the Attorney Generaltransfers this conviction record to the Ministryof Transportation so that the driver’s operatingrecord can be updated. While this update is for themost part automated, we noted that there wereover 7,100 transferred conviction records for whichthe drivers’ records had not been updated becauseof difficulties matching the information transferredwith the Ministry of Transportation’s driverrecords. It should be noted that all of these convictions,when input, would trigger additions to thedriver’s demerit-point balance—and therefore possiblewarning letters, driver improvement interviews,or suspensions as per ministry regulations.Chapter 3 • VFM Section 3.06

1442005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06We noted an even larger backlog in the processingof minor convictions, such as exceeding the speedlimit by less than 15 kilometres per hour: over57,000 such convictions had not yet been attributedto the responsible driver. Inadequate effortswere being made to resolve these unmatched cases,such that many convictions were never entered intothe driver’s record. We also noted that unmatchedconvictionfiles were being destroyed withoutproper authorization or documentation.The Driver System maintains records for allcollisions, convictions, and suspensions for eachdriver, accumulates his or her demerit points, andautomatically suspends drivers when they reachthe appropriate thresholds. However, we foundthat the system incorrectly calculated drivers’demerit points and accordingly failed to suspendlicences appropriately in certain situations. Theseincluded court-ordered suspensions, convictionsrelated to driving while under suspension, and situationsinvolving multiple convictions for the sameincident. We also noted some instances where,conversely, drivers had been inappropriately suspended.In some of these situations, the Ministrymanually intervened to make corrections, while inother situations, the Ministry was not aware of theerrors until we brought them to its attention.Licensing ServicesThe private issuing offices provide licensing servicesand process transactions on the Ministry’sbehalf. These transactions include driver’s licencerenewals, licence replacements, and changes todriver information. Subsequent to processing,transaction documentation is forwarded to theMinistry for microfilming, after which the originaldocuments are destroyed. Our review of theseprocesses indicated that the Ministry needed toimprove its procedures to ensure that all processedtransactions are valid, complete, and accurate.Private issuing offices are not required to reconciledaily transactions with supporting documents,and, given the volume of transactions processed,the Ministry does not check documents received toensure that all transactions processed were valid.We reviewed transactions processed by the privateissuing offices we visited and found discrepanciesfor eight of the 19 business days we reviewed.These discrepancies included missing supportingdocuments or lack of evidence that the applicanthad presented proper identification.Medical ReportsA driver’s licence can be suspended if the drivercannot meet a minimum standard of medical fitnessfor operating a motor vehicle. Medical practitionersand optometrists are required to report to theMinistry any individual who, in their opinion, has acondition that could make him or her a dangerousdriver. In this regard, we noted improvement sinceour last audit in 2001 in the timeliness with whichthe Ministry processes medical reports received,with the Ministry now meeting its performancebenchmark.After reviewing medical reports received or conditionsreported by drivers, the Ministry comes toa determination of whether the driver is capableof continuing to drive or should instead have his orher driver’s licence suspended. Information concerningeach case—including the diagnosis andthe result of the assessment by the Ministry’s medicalreview staff—is entered into the computerizedMedical Review System. However, because this systemhas no automatic interface with the Driver System,all of these decisions must then be re-enteredinto the Driver System. This duplicate effort needsto be done for approximately 116,000 medicalresults annually, which impairs the efficiency ofthe medical review program and raises the risk ofprocessing errors.

Driver Licensing145When drivers renew their licences and indicatethat they have medical condition(s) that mayaffect their driving ability, private issuing officesare required to forward all related documentsseparately to the Ministry’s medical review office.However, four of the five private issuing offices wevisited were in some cases not separately forwardingthese documents. In such cases, the Ministrywould be unaware of the medical condition, andaccordingly would be unable to conduct a reviewand take any required action.RECOMMENDATIONTo ensure the accuracy and completeness ofdrivers’ personal information and operatingrecords, the Ministry should:•improve the validation procedures of theDriver System to ensure that completenames and addresses are on file for all driversin accordance with ministry policy;•co-ordinate with the Ontario Registrar Generalto obtain regular updates on deceasedpersons so that their driver’s licences can becancelled on a timely basis;•review the process for attributing convictionsto the responsible drivers to ensure thatall convictions are recorded in driver recordson a timely basis;•review the Driver System’s computerizeddemerit-point calculation process to ensurethat drivers are suspended according toregulation;•consider implementing a reconciliation processto ensure that appropriate documentationis on file to support all driver-licensingtransactions;•assess the feasibility of an automatic systeminterface to update driver records based onmedical review results; and•ensure that private issuing offices properlysubmit all documents required for assessingdrivers’ medical conditions.MINISTRY RESPONSEThe Ministry recognizes the importance ofmaintaining database integrity in terms of theaccuracy of drivers’ identity information anddriving history and agrees that improvementsare needed to protect the integrity and confidentialityof personal information.The Ministry updated its validation proceduresin 2002 to ensure that driver’s licencerecord information includes a full registrantname and address. While the Ministry appreciatesthe Auditor General’s concerns, the Ministrybelieves that records with incompleteinformation will be brought up to date at thetime of renewal. The Ministry will closely monitoradherence to this process and is committedto taking additional action on this issue, ifrequired.The Ministry shares the Auditor General’sconcern about the need to obtain informationabout deceased persons. In fall 2005, the Ministryexpects to be able to obtain death informationfrom the Ministry of Government Servicessuch that when a licensed driver dies, the Ministry’sdriver’s licence database will automaticallybe updated and the licence will be cancelled.The Ministry of the Attorney General providesthe Ministry with conviction informationthrough the Integrated Court Offences Network.The Ministry is responsible for recording convictionson drivers’ records; errors in the incomingdata may prevent the recording of some convictionsin a timely manner while staff attempt toresolve the errors. The Ministry is working withthe Ministry of the Attorney General, the police,and the courts to ensure the accuracy of the dataat the outset. As a first step, in July 2005, theMinistry introduced the automation of convictionsassociated with commercial vehicles andwill endeavour to have further system enhancementsdeveloped over the winter of 2005/06.Chapter 3 • VFM Section 3.06

1462005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.06The Ministry has reviewed the driver recordsdatabase. Driver records have been corrected,and programming changes are underway. TheMinistry will continue monitoring the databaseto ensure that programming problems areresolved and additional errors do not occur. It isanticipated that all programming problems willbe resolved by December 2005.The Ministry will develop a reconciliationprocess for the private issuers and the driverexamination service provider to ensure thatnecessary documents have been obtained andviewed with transactions processed for eachday. The development of this new policy will becompleted by June 2006.The Ministry is presently working to create,by December 2005, an interface betweenthe medical imaging system and the driver systemto validate that driver records have beenupdated with suspension/reinstatement informationbefore a file is closed.A new risk-based audit process for the privateissuing network (PIN) will be implementedduring winter 2005/06. It will enable the Ministryto better monitor PIN compliance with policiesand procedures, including those that relateto the submission of documentation to supportdriver-licensing transactions and the assessmentof a driver’s medical condition. In addition,the Ministry’s new oversight and audit office,expected to be in place by the end of this fiscalyear, will have an opportunity to identify andshare best practices and areas of improvementwith the network.Protection of Driver RecordsDriver Examination Centre PersonnelAs part of the Ministry’s agreement with the privateservice provider that operates the driver examinationcentres, background checks must be obtainedon all employees who deliver driver examinationservices. The service provider is also required tonotify the Ministry immediately if the results ofthese checks indicate that an employee or a prospectiveemployee has a criminal record.We reviewed the personnel files for 100 driverexamination centre employees and found thatthe required background checks had not beencompleted for 25 of them, thereby exposing theMinistry to undue risk. We further noted that the75 completed background checks indicated thatfour employees had criminal records, but theseresults appeared to have been ignored. Managementat both the Ministry and the driver examinationservice provider indicated that they wereunaware of these criminal records until we broughtthem to their attention.We also noted four cases from 2003 where theservice provider had properly notified the Ministryof employees who were found to have criminalrecords, but at the time of our audit the Ministryhad not provided guidance to the driver examinationservice provider as to what action should betaken with respect to these and any future prospectiveemployees with criminal records.Security of the Driver SystemThe Driver System consists of a large mainframesystem and several client-server–based applications.The main purpose of this system is to createand maintain driving records for all Ontario drivers.System users include the driver examinationcentres, private issuing offices, and ministry andother government employees (such as the OntarioProvincial Police). Due to the scale and complexityof the Driver System, we focused our securityreview on the security administration proceduresfor the mainframe system and the securityof the government’s network. We concluded thatthere were several areas where security could beimproved:

Driver Licensing147• Duties and responsibilities were not alwayssegregated adequately. Some individuals wereassigned multiple job functions that grantedthem incompatible system rights, therebyincreasing the risk of inappropriate use of driverinformation.•The Ministry used GONET, the Government ofOntario’s wide-area network, to transmit driverinformation in unencrypted clear text. This practiceexposes confidential driver records to potentialunauthorized access and tampering.• System access and user profiles were notadequately monitored, increasing the risk thatunauthorized individuals could gain inappropriateaccess to the system and thus to driver information.We found that:•an excessive number of individuals hadbeen assigned system security administratorprivileges;•were not being reviewed regularly;•removed from the system promptly;•system access and security violation reportsdormant user accounts were not beinguser accounts with generic user names (thatis, with no specific individual being accountablefor their use) had been created;•user profiles, which control system access,were not being updated in a timely manner;and•end-user system access controls were notbeing properly maintained.RECOMMENDATIONTo help ensure that confidential informationin the Driver System is adequately protectedagainst unauthorized access and data tampering,the Ministry should:•establish guidelines and procedures toensure that the driver examination serviceprovider conducts appropriate securitychecks before hiring staff who will haveaccess to confidential driver records;•explore cryptography and other approachesto securing confidential data transmittedover the wide-area network;•restrict and segregate security administrationduties so that individuals are notassigned excessive system rights; and•implement regular system access reviewsand more rigorous controls over useraccounts and profiles.MINISTRY RESPONSEThe Ministry acknowledges the need to betterprotect its driver records against unauthorizedaccess and data tampering.The agreement between the Ministry and thedriver examination service provider stipulatesthat criminal-record and security checks mustbe completed for employees. Upon learningof the Auditor General’s findings, the Ministryimmediately requested the driver examinationservice provider to undertake a comprehensivereview of all employee records. The service providerhas confirmed that a complete file reviewfor all employees is underway and that discrepancieswill be resolved by December 2005.The Ministry will implement cyclicalcriminal-record and security-check proceduresby the end of 2005 that will require the driverexamination service provider to certify everythree months that all required security-checkand criminal-record information for all newemployees is complete and on file.The Ministry is conducting a request for information(RFI) to determine the most cost-effectivesolution that balances optimal encryption, protection,and cost. Both short- and long-term solutionswill be determined, including timelines anddeliverables following the assessment of the RFIresponses.Chapter 3 • VFM Section 3.06

1482005 Annual Report of the Office of the Auditor General of OntarioThe Ministry will review system access rightsand, where possible, segregate the duties andresponsibilities of security administrators fromsystem users by December 2005.The Ministry recognizes the need for morerigorous controls over user accounts and profiles.Security violation reports have been reformattedto facilitate improved monitoring, and the Ministrywill begin auditing this report and takingnecessary steps to identify and address abuse byDecember 2005.Chapter 3 • VFM Section 3.06

Chapter 3Section3.07Ministry of EducationEnglish as a SecondLanguage and EnglishLiteracy DevelopmentBackgroundSince 2000, Ontario has received an average ofapproximately 128,000 immigrants each year.About 57,000 of them speak little or no English orFrench, and as illustrated in Figure 1, about 17,000of them are of school age.Most immigrants to Ontario settle in the GreaterToronto Area or other large urban centres. Asa result, 10 of the province’s 60 English schoolboards account for 86% of the grants provided bythe Ministry of Education (Ministry) for Englishas a Second Language (ESL) and English LiteracyDevelopment (ELD), as illustrated in Figure 2.Ministry curriculum documents describe ESLstudents as those who enter Ontario schools withlittle or no previous knowledge of English but whohave received schooling in their home countriesand have age-appropriate literacy skills in their firstlanguage. ESL students in junior grades may also beCanadian-born children with limited proficiency inEnglish because they are from homes and/or neighbourhoodswhere English is not widely used.The curriculum documents describe ELD studentsas those who not only have little knowledgeof English but also enter Ontario schools with significantgaps in their education because they havehad only limited access to schooling in their homecountries. Unlike their ESL counterparts, ELD studentsdo not have age-appropriate literacy skills intheir first language.The Ministry’s overall goals for ESL/ELD programsare to assist students in developing the Englishliteracy skills they require to achieve successat school, in postsecondary education, and in theworkplace on an equal basis with their peers whosefirst language is English. While school boards areresponsible for designing and implementing theprograms and services needed to achieve thesegoals, the Ministry is ultimately accountable for thequality of the education system.ESL and ELD grants to school boards have risenfrom $154 million to $225 million over the last fiveyears, as illustrated in Figure 3.The Ministry provides school boards with specificfunding for ESL/ELD services but does notrequire them to actually spend the grants on deliveringESL/ELD services. Boards have the right toreallocate the funds to other programs.Chapter 3 • VFM Section 3.07149

1502005 Annual Report of the Office of the Auditor General of OntarioFigure 1: Non-English/French-speaking Immigrants (Permanent Residents) to Ontario, 2000–04Source of data: Citizenship and Immigration CanadaAge 2000 2001 2002 2003 2004 5-year Average0–4 years 7,965 9,741 8,993 7,471 7,447 8,3235–13 years (school age) 12,581 13,507 12,609 10,039 9,583 11,66414–19 years (school age) 5,728 6,060 5,705 4,803 4,569 5,373over 19 years 31,185 36,509 34,200 30,788 24,671 31,471Total 57,459 65,817 61,507 53,101 46,270 56,831Chapter 3 • VFM Section 3.07Audit Objective and ScopeThe objective of our audit of English-as-a-Second-Language (ESL) and English-Literacy-Development(ELD) grants to school boards was to assesswhether the Ministry had adequate proceduresin place to:•ensure that students whose first language is notEnglish are provided with the programs andservices they require in a cost-effective manner;and•measure and report on the effectiveness of ESL/ELD programs and, where necessary, ensure thatappropriate corrective action is implemented.Our audit was conducted in accordance withprofessional standards for assurance engagements,encompassing value for money and compliance,established by the Canadian Institute of CharteredAccountants, and accordingly included such testsand procedures as we considered necessary in thecircumstances. The criteria used to conclude on ouraudit objective were agreed to by senior Ministrymanagement.Most of our work was conducted at the Dufferin-Peel Catholic District School Board, the TorontoDistrict School Board, and the York Region DistrictSchool Board. We interviewed appropriate ministrystaff, and the ESL co-ordinator or vice-principal ateach of the three boards. At the school level, weinterviewed principals, ESL teachers, classroomteachers, and secondary-school ESL students. Wealso examined a sample of Ontario Student Records(Records) of students who immigrated to Canadafrom non-English-speaking countries in orderto assess the adequacy of service and performanceinformation maintained by schools for eachstudent.In addition, we researched practices in otherjurisdictions, spoke with participants at a conferenceof Ontario ESL teachers and co-ordinators,and met with faculty members at two universitieswho have expertise in this area.Figure 2: ESL and ELD Grants by English-languageSchool Board, 2004/05Source of data: Ministry of EducationDistrictSchool BoardESL/ELDGrant($ million)ESL Grant forCdn-bornStudents($ million)Total($ million)Toronto 79.0 9.0 88.0Peel 30.3 2.0 32.3Toronto Catholic 15.4 3.8 19.2York Region 11.9 1.1 13.0Dufferin-PeelCatholic10.7 1.6 12.3Ottawa-Carleton 7.2 1.0 8.2Hamilton-Wentworth5.2 0.7 5.9Waterloo Region 4.7 0.8 5.5Thames Valley 4.7 0.7 5.4Greater EssexCounty3.6 0.4 4.0other boards 26.3 4.8 31.1Total 199.0 25.9 224.9

English as a Second Language and English Literacy Development151Figure 3: ESL and ELD Grants to English-language School Boards, 2000/01–2004/05Source of data: Ministry of Education2000/01 2001/02 2002/03 2003/04 2004/05ESL/ELD grants ($ million) 132 152 159 163 199ESL grants for Canadian-born students ($ million) 22 22 22 23 26Total ($ million) 154 174 181 186 225# of ESL/ELD students funded 72,684 80,949 87,124 84,875 103,667# of Canadian-born ESL students funded 1 137,985 137,985 137,985 137,985 137,9851. This number is based on the 1996 Census.The Ministry’s Internal Audit Services Branchhad not done any recent work that allowed us toreduce the scope of our work.SummaryWe found that while the Ministry provides schoolboards with approximately $225 million a year ofEnglish-as-a-Second-Language (ESL) and English-Literacy-Development (ELD) grants, it had noinformation about whether students whose firstlanguage is not English were achieving appropriateproficiency in English. In addition, the Ministry hadno information on how much school boards wereactually spending on ESL/ELD programs. Informationwe received from one board indicated thatmore than half of its ESL/ELD funding was spent onother areas.This lack of oversight of ESL/ELD programdelivery resulted in some concerns similar to thoseraised in our 1993 audit report on CurriculumDevelopment. Specifically, the considerable discretionthat school boards and in some cases individualschools have with respect to ESL/ELD programsincreases the risks of students with similar needsbeing provided with different levels of assistancedepending on which school or board is deliveringthe program. In addition, the lack of a centrally coordinatedprocess to develop ongoing training programsfor teachers and various instructional aidsresults in under-investment in these areas and maylead to some duplication of effort by school boards.In particular, we found that:•The Ministry had not established a measurableEnglish-proficiency standard that ESL/ELD studentsshould attain before ESL/ELD services arediscontinued. Some teachers we interviewedwere concerned that services to ESL/ELD studentswere discontinued prematurely due tobudget considerations.•There was a lack of tools to help teachers toproperly assess the starting point and progressof students in achieving English proficiency andto determine whether additional assistance wasneeded.•Although the Ministry has recommended thatteachers modify the standard curriculum expectationsfor, and provide accommodations (forexample, extra time on tests) to, ESL/ELD students,it did not provide much guidance onhow to adapt the standard curriculum expectationsfor students who are learning English. Thelack of guidance has resulted in inconsistentpractices.•Neither report cards nor student records hadsufficient information about modifications tostandard expectations or accommodations providedto ESL/ELD students. As a result, parents,principals, and school boards were not in a positionto evaluate the appropriateness of the modificationsand accommodations or their impacton marks.Chapter 3 • VFM Section 3.07

1522005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.07• The Ministry was not ensuring that the ESL/ELDfunding policy targeted students most in need ofassistance, which may have resulted in inequitablefunding allocations among school boards.In 2004, the government established theLiteracy and Numeracy Secretariat (Secretariat),stating that “every Ontario student needs to read,write, do math and comprehend at a high level byage 12.” The Secretariat specifically identified ESLstudents as a group that continues to struggle. In itsMay 2005 strategy document, the Secretariat statesthat its key purposes include strengthening thefocus on literacy and numeracy, and sharing successfulpractices among schools and districts. Eachof these directly relates to the concerns noted duringour audit.Detailed Audit ObservationsTEACHER TRAINING ANDINSTRUCTIONAL AIDSTo become an English-as-a-Second-Language (ESL)specialist, Ontario teachers must complete a threepartprogram accredited by the Ontario Collegeof Teachers that enables them to “develop a deepunderstanding of second language acquisition theoriesand classroom teaching methodology.” Teachersare considered to be certified ESL teachers if,at a minimum, they have completed Part I of thethree-part program. ESL specialists we interviewedsaid that all ESL teachers should complete the specialistprogram.ESL teachers at the elementary-school level typicallywork with students who are at the early stagesof learning English by withdrawing them from theirregular class for part of the day for instruction. Atthe schools we visited, students were usually withdrawnfrom classes where language-intensive subjects,such as history, were being taught. Studentswere left in their regular classes for subjects suchas mathematics. At the boards we visited, studentswho started school with little knowledge of Englishwere usually fully integrated after receiving threeyears of ESL/ELD services.Aids available to teachers include a resourceguide for ESL/ELD programs for students ingrades 1 through 8, published by the Ministry in2001. While the resource guide does not set outspecific courses, it does provide school boards andteachers with suggestions regarding the deliveryof ESL/ELD programs. The resource guide alsodescribes four stages of second-language acquisitionand literacy development, summarized inFigure 4.For the secondary-school level, the Ministrypublished in 1999 a curriculum document settingout five ESL courses and four ELD courses for studentsat varying levels of proficiency in English. TheFigure 4: Stages of Second-language Acquisition and Literacy DevelopmentSource of data: Ministry of EducationStage ESL ELD1 English is used for survival purposes. Standard Canadian English has begun to be usedappropriately.2 English is used in supported and familiar activities andcontexts.Standard Canadian English is used in supported andfamiliar activities and contexts.3 English is used independently in most contexts. Standard Canadian English is used accurately andcorrectly in most contexts.4 English is used with a proficiency approaching that of firstlanguagespeakers of English.Grade-appropriate reading and writing skills aredemonstrated.

English as a Second Language and English Literacy Development153fifth ESL and fourth ELD courses are intended toprepare students for grade 11 English. Students cansubstitute ESL/ELD courses for up to three of thefour compulsory credits in English. The remainingcredit must be grade 11 or 12 English.These ministry documents note that studentsusually take five to seven years to become fluent inEnglish. Thus, most students who have been fullyintegrated after receiving three years of ESL/ELDinstruction would still benefit from specializedinstructional strategies and techniques. However,there are no minimum ESL/ELD training requirementsfor regular classroom teachers with a significantnumber of ESL students. We were told that as aresult, many ESL/ELD students have teachers wholack the training required to implement appropriateinstructional techniques and strategies.Classroom teachers we interviewed said that theyneeded practical training that focused, for example,on appropriate modifications to curriculum expectationsfor students at the various stages of proficiencyin English and on the level of difficulty of homeworkthat should be assigned, taking into account the parents’inability to help in many cases.Teachers also said that there was a need forexemplars (examples of graded assignments forstudents at various English-proficiency levels) toassist them in assessing ESL/ELD students’ work.Although the Ministry developed exemplars forthe regular curriculum and for the ESL and ELDsecondary-school courses, it had not done so forESL/ELD students who are working towards modifiedexpectations.With respect to instructional aids, teachers atthe boards we visited told us that ESL/ELD studentswould benefit from an increased numberof age-appropriate, high-interest, low-vocabularybooks (sometimes referred to as picture books) sothat they could improve their English proficiencythrough pleasure reading. They also mentionedthat it would be helpful to have bilingual dictionariesin more languages, as well as age-appropriatevisual dictionaries that use pictures and diagramsto explain the meaning of words.The Ministry’s resource guide states that “allareas of a student’s English-language developmentcan be enhanced through the use of interactive softwareprograms (such as word-processing programswith capabilities for checking grammar and spelling,graphics programs, desktop publishing simulations,and interactive problem-solving games).”Similarly, the December 2004 Report of the Ministry’sExpert Panel on Literacy in grades 4 to 6recommended the use of “translation programs,electronic dictionaries, and other technologicaltools that can help students acquire access to thelanguage of academic texts and build bridges fromone language to another.” Educators at the boardswe visited advised us that they did not make extensiveuse of such software and did not have theresources to evaluate software products and otherinstructional aids.Educators also indicated that schools have commonneeds with respect to both ESL/ELD trainingfor classroom teachers and instructional aids.One of the boards we visited had independentlydeveloped some training courses and exemplarsfor use by its teachers. However, rather than havingeach board develop these items independently,it would be more economical for the Ministry to doso on behalf of all school boards. Formal ministryinvolvement could also help ensure that trainingcourses and instructional aids were of high qualityand developed on a timely basis. Similarly, ministryinvolvement in evaluating available software productsand other instructional aids would be morecost effective than separate evaluations undertakenindependently by individual boards.RECOMMENDATIONTo help ensure that English-as-a-Second-Language (ESL) and English-Literacy-Development (ELD) students benefit fromChapter 3 • VFM Section 3.07

1542005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.07appropriate instructional practices and aids, theMinistry should:•work with school boards to determine andprovide the minimum training that teachersrequire to work effectively in schools withsignificant numbers of ESL/ELD students;and•co-ordinate the evaluation of, and wherenecessary the development of, coursesfor teachers, and instructional aids suchas exemplars and ESL/ELD educationalsoftware.MINISTRY RESPONSEThe Ministry agrees that all students benefitfrom appropriate instructional practice andsupport.The Ministry is currently developing a comprehensiveK-12 policy for students who arelearning English. The Ministry is also in theprocess of creating resource materials and professionaldevelopment programs that will supportteachers and schools in their work withthese students.MONITORING STUDENT PROGRESSThe Ministry’s curriculum documents do not set outmeasurable objectives for ESL/ELD programs. Theyalso lack English-proficiency standards for each agethat, if achieved, would provide reliable evidencethat ESL/ELD students have met specific objectives.The approach used in a 2003 Alberta study ofgrade 10 ESL students could be considered for settingstandards and measuring student progress inachieving them. Specifically, this approach included:• a method for measuring reading comprehensionthrough tests, which enabled researchersto examine ESL students at a clearly definedstarting point relative to their English-speakingage peers and measure their subsequentprogress;•a measurable objective, which was to help ESLstudents who started grade 10 at the 15th percentilein English reading comprehension reachthe 65th percentile, the point at which theywould be deemed capable of managing postsecondaryeducation; and•a defined period of time to achieve thisobjective—five semesters.As discussed in the sections that follow, standardsand related assessment tools would help educatorsmake appropriate decisions about when todiscontinue services to ESL/ELD students, monitorthe progress of students in acquiring English, andmore objectively report on student performance.Initial AssessmentsThe first assessment of most school-age immigrantstudents takes place at registration with a schoolboard. The three boards we visited had establishedreception centres for assessing immigrant students.However, at one board, the centres assessed only secondarystudents. Students of elementary-school agein that board were registered at their local school.The reception centres we visited assessed Englishproficiency using tools developed by an Ontarioassociation of ESL educators. However, we notedthat, except for mathematics, the centres did littlework on assessing students’ academic standingbeyond determining the number of years of schoolingreceived before immigrating to Canada. Also,there was no attempt to determine first-languageliteracy levels. As a result, schools do not have aclear starting point from which to monitor studentprogress and thereupon determine whether an individualstudent’s poor performance is primarily theresult of language difficulties or a weak academicfoundation. Educators we spoke to about this issuestated that better information about students ontheir entry into the school system would be helpful.

English as a Second Language and English Literacy Development155RECOMMENDATIONThe Ministry should determine whether thebenefits of teachers having a clear starting pointfrom which to monitor progress are sufficientto justify the cost of more thoroughly assessingthe first-language literacy and academic standingof new English-as-a-Second-Language andEnglish-Literacy-Development students.MINISTRY RESPONSEThe Ministry acknowledges the recommendationand has initiated a research programdesigned to determine additional ways toimprove successful outcomes for students whoare learning English, to fill some of the existinggaps in Canadian-based research on ESL/ELDprograms, and to involve educators in ongoingresearch initiatives.The Ministry initiated a formal consultationin May 2005 about the needs of studentswho are learning English. The Ministry will continueto work with educational partners to identifyand review effective procedures for initialassessment of students’ first-language skills,language proficiency in English, and academicbackground.Ongoing AssessmentsBoth of the Ministry’s ESL/ELD curriculum documentsstate that each student’s progress in acquiringEnglish should be carefully monitored byteachers until the student has demonstrated a levelof proficiency in English similar to that of his or herEnglish-speaking peers. This would enable teachersto offer program changes to students, and provideadditional supports as needed. Educators weinterviewed agreed that a student’s progress is thechange from one assessment to the next, and monitoringprogress is an evaluation of the adequacyof this change. Therefore, adequate monitoring ofan ESL/ELD student’s progress in acquiring Englishwould involve:1. measuring the student’s English proficiency relativeto his or her age peers whose first languageis English at least annually;2. quantifying the amount of progress the studentmade between assessments; and3. assessing whether the amount of progress madeis adequate in the circumstances, documentingthis assessment, and making changes to the student’sprogram where necessary.To perform parts 1 and 2, teachers need toolsfor measuring the English proficiency of their ESL/ELD students on a periodic basis. Part 3 requiresbenchmarks for the various ages and proficiencylevels at which students start a term or semester,against which teachers can compare each student’sprogress. Progress at or above the benchmarkwould indicate that a student is making adequateprogress, while progress below the benchmarkwould indicate that additional assistance may berequired. An expert in ESL/ELD education whomwe interviewed suggested that a useful benchmarkmight be the amount of progress achieved at theend of an assessment period by 60% of ESL/ELDstudents who all entered Ontario’s school system atthe same age and proficiency level.However, the Ministry has not developed thenecessary assessment tools and benchmarks toenable teachers to measure the progress of ESL/ELD students in acquiring English. Instead, it hasbeen left to individual school boards to determinehow, or even whether, to measure English proficiencyand to determine what constitutes adequateprogress over an assessment period. None of theboards we visited provided teachers with toolsdesigned to measure the amount of progress studentsmade between assessments. Therefore, theinformation required to monitor the progress ofESL/ELD students in acquiring English was, inessence, not available. Teachers we interviewedChapter 3 • VFM Section 3.07

1562005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.07stated that monitoring was informal, but thataction would be taken where students were at riskof failing courses due to language problems.RECOMMENDATIONTo help ensure that decisions about the typesand amount of services and supports providedto English-as-a-Second-Language and English-Literacy-Development students are based onproper monitoring of their progress, the Ministryshould develop tools that teachers can useto periodically measure students’ English proficiencyand benchmarks against which they cancompare each student’s progress.MINISTRY RESPONSEThe Ministry is committed to maintaining a highqualityeducation system that ensures success forall students, including students who are still inthe process of acquiring English proficiency.The Ministry will work with educational partnersto identify and review effective proceduresfor ongoing assessment of students’ acquisitionof English and their academic progress.Documenting Monitoring ActivitiesSchools keep student information in Ontario StudentRecords (Records), which are permanent officialrecords maintained at the student’s currentschool. A student’s Record is sent along with thestudent when a student transfers to another school.The Ministry requires that Records contain basicregistration information, report cards, Ontario StudentTranscripts (where applicable), and additionalinformation “conducive to the improvement of theinstruction of the student.” Such additional informationcould include the results of teachers’ monitoringof the progress of ESL/ELD students in, forexample, acquiring English and integrating socially.In our sample of Records for ESL/ELD studentsattending the schools we visited, we found littleinformation on student progress in acquiring Englishand no information on secondary students’social integration. Consequently, these Recordswould be of little use to next year’s teachers indetermining whether the student would benefitfrom program changes or additional supports.Some Records we examined contained trackingsheets designed to provide a general assessmentof students’ English proficiency. However, asthese forms were not required to be used, they werenot routinely completed. Moreover, they were notdesigned to enable teachers to quantify students’progress from one assessment to the next.With respect to ESL/ELD students’ socialintegration, we noted that, while the Ministry’ssecondary-school curriculum document states thatschools should monitor social integration, it doesnot provide examples of what the Ministry expectsin this regard or of the benefits to students of socialactivities. Social interaction with Canadian-bornpeers not only assists ESL/ELD students in learningEnglish, but also may help prepare them for successin the workplace. Immigrant managers and professionalsparticipating in a 2004 Conference Board ofCanada study reported that a “lack of knowledge ofCanadian norms and values had been a barrier torealizing their full potential.”RECOMMENDATIONTo help ensure that Ontario Student Records(Records) contain the information required toenable the next year’s teachers to assess theneeds of English-as-a-Second-Language (ESL)and English-Literacy-Development (ELD)students so that the appropriate level of assistancecan be provided, the Ministry should:•require that schools file summaries of monitoringactivities regarding the progress ofESL/ELD students in acquiring English in theRecords; and

English as a Second Language and English Literacy Development157• clarify what it expects in the monitoring ofstudents’ social integration.MINISTRY RESPONSEAccountability for monitoring and recordingstudent progress for all students is a ministrypriority. The new policy framework for studentswho are learning English will clearly articulatethe Ministry’s expectations for monitoring theprogress of these students.The Ministry will consult with educationalpartners to determine the most effective waysof monitoring/tracking the progress of studentswho are learning English.When to Discontinue ServicesA key issue for this type of program is identifyingthe point at which students no longer require services.The schools we visited generally reduced supportsfor elementary students after they reachedStage Three, defined (see Figure 4) as the use ofEnglish “independently in most contexts.” For studentswho started school at Stage One (the use ofEnglish “for survival purposes”), service was typicallyprovided for two or three years. However,a 2002 study of the long-term academic achievementof ESL students in the United States statedthat “students with no proficiency in English mustNOT be placed in short-term programs of only oneto three years … [T]he minimum length of time ittakes to reach grade-level performance in [the] secondlanguage is four years.”The study’s conclusion was consistent with theviews expressed by some educators we interviewedthat decisions to reduce or eliminate support afterstudents reach Stage Three were often based onresource limitations rather than sound pedagogy.Although teachers told us that services would beresumed in cases of very poor academic performance,this practice does not address the needs ofstudents performing below their potential due tomarginal English skills, who would benefit fromcontinued service.Other jurisdictions have recognized the needfor a more rigorous basis for determining when toend service. For example, New York State requiresits school boards to provide ESL services until studentsachieve a level of English proficiency definedby the state and measured annually by its English asa Second Language Achievement Tests. In October2003, the Alberta Commission on Learning recommendedthat the province “create provincial proficiencystandards for assessing [ESL] students …and provide funding until students reach the standard.”The Alberta government responded that itsupported this recommendation, and reported inOctober 2004 that “Alberta Learning [Alberta’sMinistry of Education] … is developing provincialproficiency standards and assessment tools forESL … students.”ESL co-ordinators we interviewed agreedwith the need for a proficiency standard to supportservice decisions made for ESL/ELD students.However, concerns were raised that in the absenceof additional resources, a requirement to continueproviding services to students until they met thestandard would simply spread existing resourcesover more students.RECOMMENDATIONTo help ensure that services to English-asa-Second-Language(ESL) and English-Literacy-Development (ELD) students are notdiscontinued prematurely, the Ministry shouldestablish measurable English-proficiencystandards that ESL/ELD students must attainbefore boards can discontinue ESL/ELD servicesto them.Chapter 3 • VFM Section 3.07

1582005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.07MINISTRY RESPONSEThe Ministry is in the process of developing apolicy that will clarify expectations regardingthe kinds of support required to meet the varyingneeds of students who are learning English.Reporting on Student PerformanceThe Ministry’s curriculum documents state thatprograms should be adapted to allow students inthe early stages of learning English, or those atearly stages of development in English literacy, tosucceed. Adaptations include modifying (reducing)the curriculum’s learning expectations for subjectsand courses, and providing students with accommodations,such as extra time on tests or permissionto use bilingual dictionaries.The Ontario Curriculum Grades 1–8: English asa Second Language and English Literacy Development—AResource Guide, 2001 states that reportcards should disclose whether ESL/ELD studentsare working towards modified expectations. Theresource guide also notes that “it is important toensure that parents of ESL and ELD students understandon what basis a particular mark has beengiven, and how it relates both to the student’s abilityto use English and to his or her proficiency inthe subject area.” However, the accommodationsthat students received, and the nature and extent ofmodifications to the standard curriculum expectations,were not disclosed in report cards at any ofthe elementary schools we visited.The Ministry’s grades 9–12 ESL and ELD curriculumdocument states that report cards shouldclearly indicate whether ESL/ELD students’ learningexpectations have been modified and whataccommodations they received. However, thereport cards we reviewed did not disclose whetheraccommodations were provided or whether learningexpectations had been modified. With respect tomodifications, most of the secondary-school teachersand principals we interviewed said that theydid not modify curriculum expectations, except inthe case of special-needs students. However, someteachers told us that curriculum expectations aremodified for ESL/ELD students in congregatedclasses—classes composed entirely of early-stageESL/ELD students. Others told us that they weremore generous in marking the work of ESL/ELDstudents. This was not disclosed in report cards orin the Records we reviewed.As a result, information essential to an accuratepicture of how ESL/ELD students are performingrelative to their peers whose first language is Englishis missing from both report cards and Records.Consequently, the appropriateness of the modificationsand accommodations provided to each studentcannot be evaluated by the board, principals,or parents. Also, since the level of modificationsand accommodations provided to students dependssolely on the judgment of individual teachers, theymay vary significantly for students with similarproficiencies in English in different schools or evenwithin the same school.The accuracy of assessments of ESL studentswas questioned in a 1993 study conducted by anOntario school board. It found “strong evidenceto suggest that teacher ratings of ESL students areinflated.” The study also noted that “it is speculatedthat teachers tend to overrate ESL students for tworeasons: (1) they are generous in their perceptionsof ESL students and want to give them the benefitof any doubt; and (2) they have not developed sufficientempirical or ‘intuitive’ norms for ESL studentachievement, based on the age and lengthof residence of those students.” Similarly, a studyconducted at an Alberta secondary school in 2003found that many teachers were inclined to give ESLstudents in English classes “good will marks.”Our interviews of educators yielded differingviews about the benefits of accurately reportingESL/ELD students’ proficiency in English and their

English as a Second Language and English Literacy Development159overall performance. Those who opposed the ideawere concerned that doing so would underminethe confidence of their students. However, the 2003Alberta study mentioned earlier described inaccuratereporting as a “benevolent conspiracy … [that]ultimately produced devastating consequences asreflected in the examination results and subsequentfailure in students’ pursuit of postsecondary studies.”A 2004 study of the academic achievement ofESL students at a large Ontario university foundthat the performance of ESL students was belowwhat their secondary-school marks would havepredicted, suggesting that those secondary-schoolgrades did not accurately reflect their achievement.The study noted that “at a very global level, thefindings also suggest that in general, ESL students,independent of birth place and length of time inCanada, do not achieve grades comparable to thoseof Canadian born speakers of English, even thoughthey may have entered the university with similarhigh school marks.”We also understand that many Ontario universitiesare unwilling to rely solely on ESL students’marks in their English credits for admission purposes.Instead, they require students who have beenin Canada for less than three years to pass the Testof English as a Foreign Language, even where theyhave already passed grade 12 English.Inaccurate assessments and inflated gradingof a student’s actual performance can have otherdrawbacks. For instance, students who would benefitfrom after-school and summer programs mightchoose not to participate, mistakenly believing thattheir marks represent an accurate picture of theirperformance.RECOMMENDATIONthe extent, if any, to which curriculum expectationshave been modified and the types ofaccommodations students received.MINISTRY RESPONSEThe Ministry acknowledges this recommendation,and the policy under development forstudents who are learning English will providedirection to school boards about documentingand reporting adaptations made to a student’sprogram.ASSESSING PROGRAM PERFORMANCEAssessing the performance of any program involvesmeasuring the extent to which intended outcomeswere achieved and determining whether the costsincurred were reasonable. As discussed in the sectionsthat follow, neither the Ministry nor theschool boards we visited had established processesfor collecting the information on costs, services provided,and student outcomes required to assess theresults achieved by their ESL/ELD programs.The boards we visited also had no informationabout the effectiveness of the various servicesoffered with respect to outcomes, such as graduationrates, or about the relative cost effectivenessof each type of service. As a result, these boardshad no basis for determining which service alternativesproduce the best student outcomes at the mostreasonable cost and therefore no ability to determinebest practices that could be shared with otherschool boards, including practices that help studentslearn English more quickly.Chapter 3 • VFM Section 3.07To help ensure that the progress of Englishas-a-Second-Languageand English-Literacy-Development students is properly reported,the Ministry should work with school boards toensure that report cards include information onLearning English More QuicklyBoth the Ministry’s secondary-school curriculumdocument and a 2002 U.S. study note that time isa factor for students who arrive at later elementarygrades or secondary school. The curriculum

1602005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.07document states that “students who arrive as beginninglearners of English during their secondaryschoolyears may not have enough time to catch upwith their peers by the end of Grade 12.” The U.S.study found that for students whose academic performanceis at grade level in their first languagewhen they arrive, learning enough English to dograde-level work again “is equivalent to interruptingtheir schooling for one or two years.” Asa result, they “have to make more gains than theaverage native-English speaker makes every yearfor several years in a row to eventually catch up tograde level, a very difficult task to accomplish.”Some schools we visited that received largenumbers of students with no knowledge of Englishtook steps to help these students progress morequickly by increasing the amount of instruction providedby teachers with ESL training. For example:•Two elementary schools provided more instructionby ESL teachers in withdrawal classes duringstudents’ initial months before placing themin regular classes for most subjects. One schoolhad full-day withdrawal classes for students ingrades 7 and 8, while the other had half-daywithdrawal classes for all grades.•Several secondary schools had congregatedclasses in various subjects for early-stage ESLstudents with instruction by ESL teachers. Oneboard had a small (275 students) secondaryschool composed entirely of early-stage ESL students,and all teachers at this school were certifiedESL teachers. Students could enrol in theschool for up to three semesters.However, the impact of these and other servicealternatives on English-acquisition times had notbeen evaluated by either the boards we visited orthe Ministry. As a result, it is not clear which practicesachieve the best results for similar types ofstudents.Ministry MonitoringThe Ministry did not collect from school boardsthe information required to determine whether theESL/ELD programs for which it provides $225 milliona year in grants were meeting its goals.For example, the Ministry had not compared theoutcomes for students who received ESL/ELD servicesin elementary or secondary school to that ofEnglish-as-a-first-language students. Relevant comparisonsinclude the percentage of students whograduated, and who subsequently earned a collegediploma or university degree, or successfully completedan apprenticeship program.Researchers who examined the dropout rate ofESL students who started grade 9 between 1989and 1997 at an Alberta secondary school foundthat the rate was much higher than that of studentswhose first language is English. The researcherstracked the students according to their placementin the ESL program as beginner, intermediate, oradvanced, upon entry into secondary school. Theyreported that the dropout rate ranged from over90% for students at the beginner stage of Englishproficiency to about 50% for those at the advancedstage, with an overall average of 74%. The educatorswe interviewed felt that Ontario’s rates wouldbe significantly lower than these, but a majorityagreed that the dropout rate for ESL studentswould be higher than that of English-as-a-firstlanguagestudents.We did not find any research comparing thegraduation rates of ESL/ELD students who areaccepted by colleges and universities to those ofEnglish-as-a-first-language students. However, afollow-up on the previously mentioned 2004 studyat a large Ontario university found that “even ifthey were born in Canada or immigrated at an earlyage, the university grades of ESL students are lowerthan those of native-born speakers of English afteradjustments have been made for factors such as levelsof prior achievement, social class, and faculty ofenrolment.”

English as a Second Language and English Literacy Development161Information on the performance of ESL/ELDprograms at each school board would enable theMinistry to identify the practices underlying casesof sustained high/poor performance and work withschool boards to promote best—and, where necessary,correct poor—practices. It would also enablethe Ministry to determine whether additional servicesshould be provided to ESL/ELD studentsand, if so, evaluate them through pilot testing. Forexample, the value of summer programs and ESLservices in kindergarten could be examined.We noted that the Literacy and Numeracy Secretariatstated in its May 2005 strategy documentthat “the opportunity to develop a high level ofliteracy is contained within a narrow window ofa child’s life. Children who, by the age of eight,have not learned fundamental literacy may strugglethroughout the rest of their schooling. They aretherefore placed at an increased risk of not completingtheir education successfully.”RECOMMENDATIONTo help ensure that the Ministry and schoolboards can identify which English-as-a-Second-Language (ESL) and English-Literacy-Development (ELD) services and supports arethe most effective and economical in meetingstudent needs, the Ministry should:•require that school boards collect and reportthe information necessary to relate studentprogress and outcomes to the type, amount,and cost of the ESL/ELD services and supportsthey received;•co-ordinate and facilitate efforts to identifyand promote best practices, and evaluate theneed for, and benefits of, additional servicesand supports; and•monitor the outcomes for ESL/ELD students,such as graduation rates and progress aftergraduation.MINISTRY RESPONSEThe Ministry agrees that it is important to trackthe progress of students who are learning Englishin order to ensure that school programs areproviding the required support.The policy being developed will consider(1) providing criteria for identifying Englishlanguagelearners, (2) describing proceduresfor data collection to enable tracking these studentsas a group, and (3) using this informationto identify the most effective programs andapproaches.ENSURING QUALITY PROGRAMDELIVERY BY SCHOOLSMerely establishing policies for the delivery of servicesand supports to ESL/ELD students does notensure that the policies are implemented. Consequently,there is a need to verify that schools aredelivering these services and supports in an appropriatemanner. However, none of the boards wevisited had established quality-assurance processesto examine and report on each school’s delivery ofESL/ELD programs. Such examinations would alsoinclude the accuracy of any program performancedata collected in future.For example, board personnel did not visitschools to verify that students’ progress in acquiringEnglish was properly monitored and that theirreport cards were properly completed. Nor wereefforts made to ensure that ESL/ELD studentsreceived appropriate feedback on their tests andassignments. A ministry document states that information“on areas in need of improvement is morehelpful when the specific category of knowledge orskills is identified and specific suggestions are providedthan when they receive only an overall markor general comments.”Chapter 3 • VFM Section 3.07

1622005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.07When asked about ways in which ESL programsmight be improved, some secondary students weinterviewed mentioned the lack of feedback aboutmistakes in their assignments, and stressed theimportance of understanding their mistakes inorder to avoid such errors in future.None of the principals we interviewed had beenevaluated by their superintendents on their school’sESL/ELD programs. At one board, there was nomention of ESL/ELD programs in the improvementplans of any of the schools we visited, and evenwhere mentioned at the other boards, we saw fewexamples of initiatives where the impact on studentprogress or outcomes could be measured. We notedthat the Literacy and Numeracy Secretariat saidin its May 2005 strategy document that it wouldensure that school boards’ plans specifically addressthe strategies they will use to bring about equity ofoutcomes for designated groups.RECOMMENDATIONTo help ensure that schools appropriatelydeliver services for English-as-a-Second-Language and English-Literacy-Developmentstudents, the Ministry should require thatboards establish quality-assurance processesthat review and assess each school’s compliancewith ministry and board policies.MINISTRY RESPONSEThe Ministry agrees and, building on the May2005 consultation, will work with school-boardleaders to enhance quality-assurance processesrelated to policy for programming and servicesfor students who are learning English.MEETING MID-YEAR AND REFUGEESTUDENT NEEDSWe noted two groups of students whose needs didnot appear to be fully addressed: students whoarrive in Canada late in the school year or semesterand speak very little English; and refugee students,particularly those who have been in refugee campsfor extended periods and have received little or noformal education in their first language.Where students arrive in Canada late in theelementary-school year or secondary-school semester,the school boards we visited generally placethem in ongoing classes, for which they receive nomark or credit due to their late entry. In general,the boards we visited did not have programs to providethese students with intensive training in Englishduring these periods to better prepare them forthe next school year or semester.As illustrated in Figure 5, Ontario receives anaverage of more than 6,000 refugees per year,about 2,500 of whom are of school age.School-age refugees fall into two categories:• those who have missed two or three years ofschooling but have some literacy in their firstlanguage and who, along with their parents, arefamiliar with the concept of school, expectedbehaviours, and urban life; and•those who have little or no formal education.These students come from very high-needsfamilies whom the federal government recentlystarted accepting on humanitarian grounds. Asnoted in a newsletter published by the federallyfunded Settlement Workers in Schools (SWIS)program, this group of refugee students mayhave no school experience, may be unfamiliarwith urban life and amenities, and may exhibitbehaviours based on life in refugee camps.One of the boards we visited had developeda program specifically designed for non-Englishspeakingstudents with gaps in their education andoffered it at selected elementary and secondaryschools. The program was open to students aged

English as a Second Language and English Literacy Development163Figure 5: Refugees (Permanent Residents) Arriving in Ontario, 2000–04Source of data: Citizenship and Immigration CanadaAge 2000 2001 2002 2003 2004 5-year Average0–4 years 591 540 466 400 483 4965–13 years (school age) 1,551 1,451 1,459 1,398 1,637 1,49914–19 years (school age) 844 960 955 985 1,148 978over 19 years 3,271 3,057 3,009 2,905 3,024 3,053Total 6,257 6,008 5,889 5,688 6,292 6,02611 to 16, and they could remain in it for a maximumof three years. The other two boards we visited didnot have ELD programs, saying they had few studentsin this situation.We interviewed a SWIS worker, previouslya teacher, about the adequacy of ELD programswhere they exist. The SWIS worker was of the viewthat existing programs were directed at traditionalcases—students who have missed two or threeyears of schooling—and did not meet the needs ofstudents who have never attended school or missedmany years of schooling. While the federal governmentprovides high-needs families with settlementassistance and a short orientation program, it doesnot have programs to help these students with theireducation.RECOMMENDATIONTo help ensure that English-as-a-Second-Language (ESL) and English-Literacy-Development (ELD) programs address the needsof all ESL/ELD students, the Ministry should:• assess the benefits to students who arrivelate in the school year or semester of programsthat provide intensive training in Englishuntil the beginning of the next term orsemester; and•consider working with Citizenship and ImmigrationCanada to develop more effectiveprograms for high-needs refugee students.MINISTRY RESPONSEThe Ministry acknowledges the importance ofaddressing the needs of students who arriveduring the school year, the needs of refugeestudents, and the needs of students who arrivewith limited prior schooling. The policy forEnglish-language learners will consider how theneeds of these students could be addressed.The Ministry will continue to consult withCitizenship and Immigration Canada as appropriateto develop more effective programs forstudents who are learning English.FUNDING AND ACCOUNTABILITYMinistry funding to school boards for ESL and ELDstudents consists of two components. Although ESL/ELD students arrive with a range of proficienciesin English and previous education, neither grant isbased on an assessment of the needs of individualstudents, with the result that funding for high-needsstudents is the same as for those with low needs.The first component, which covers recent immigrants,currently provides a total of $7,847 per eligiblestudent over four years and is based on thenumber of recent-immigrant students born in countrieswhere English is not a first or standard language.The grant is calculated on a declining scalebased on year of arrival, as illustrated in Figure 6for the 2004/05 school year. Principals are requiredto report the number of eligible students enrolledChapter 3 • VFM Section 3.07

1642005 Annual Report of the Office of the Auditor General of OntarioFigure 6: ESL/ELD Grants for Recent-immigrant Students, 2004/05Source of data: Ministry of EducationYear ofArrivalWeightingFactorBase Amount($)Grant Amountper Pupil ($)Number ofPupilsTotal Grants toSchool Boards2004/05 ($)2004 1.00 3,203 3,203.00 25,722 82,387,5662003 0.70 3,203 2,242.10 22,388 50,196,1352002 0.50 3,203 1,601.50 27,324 43,759,3862001 0.25 3,203 800.75 28,233 22,607,575Total 7,847.35 198,950,662Chapter 3 • VFM Section 3.07at their schools in October, and to keep appropriateimmigration information in Ontario StudentRecords (Records) to support the numbers reportedto the Ministry. The Records we examined had therequired information.The second component, for Canadian-born students,is calculated by the Ministry based on StatisticsCanada data on the number of children aged 5to 19 years within each board’s boundaries whoselanguage spoken most often at home is neither Englishnor French. The grant for the 2004/05 schoolyear was $26 million and was allocated using 1996Statistics Canada Census data.We noted that a Statistics Canada study, based on1994–98 data, found that the Canadian-born childrenof immigrants to Canada “faced significant disadvantagesin the first years of elementary school …[T]heir mathematics and reading skills were about20% lower and their writing skills almost 30% lower[than the skills of their classmates whose parentswere born in Canada]. However, by age 10 or 11,these children were considered to be performing aswell as their classmates in all three subject areas.”The study indicates that the group of Canadianbornstudents who need ESL services are thoseaged 5 to 11 years, rather than the age 5–19 groupused in the Ministry’s formula. If the Ministry, recognizingthat Canadian-born students who arelearning English require more assistance when theyare younger, were to calculate boards’ grants usingthe age 5–11 group instead of the broader groupused in the current formula, the results would likelyindicate that some boards are under-funded whileothers are over-funded for Canadian-born studentswho are learning English.As discussed earlier in this report, almost 2,500of the refugees who come to Ontario each year areof school age. Because they have significant gapsin their education, and in some cases no formaleducation at all, refugee students require more servicesthan students who only need to learn English.However, the Ministry’s funding formula doesnot directly address the heavier needs of refugeestudents.Although the Ministry’s Education FundingTechnical Paper 2004–05 stipulates that ESL/ELDgrants are provided to school boards so that theyhave “resources to meet the needs of … students[who] require extra help to develop proficiencyin the language of instruction,” the Ministry doesnot require that these grants be spent on ESL/ELDprograms. In fact, the Ministry advised us that it isaware that a portion of these grants is often reallocatedto other programs. Because the Ministry doesnot require that boards report spending by program,information on the extent of the reallocationswas not available to us, although one boardprovided us with financial information that indicatedthat less than half of its grant was spent onESL/ELD programs. The Ministry had not assessedthe impact of such reallocations on the adequacy ofservices provided to ESL/ELD students.

English as a Second Language and English Literacy Development165RECOMMENDATIONTo better ensure that both the amount and theallocation of English-as-a-Second-Language(ESL) and English-Literacy-Development (ELD)funding is appropriate and commensurate withstudents’ needs, the Ministry should:•determine whether funding, instead of treatingall students in each board similarly,should take into account the percentage ofhigh-needs students in a board;•review the grant for Canadian-born Englishlanguagelearners to determine whether theage group of students that it targets is appropriate;and•require that school boards report theirexpenditures on ESL/ELD programs and,where significant portions of the ESL/ELDgrants are reallocated to other programs,determine what impact this has had on theESL and ELD students in that board.MINISTRY RESPONSEAccountability is a high priority for the Ministry.The Ministry has already begun a review of thecurrent funding model for immigrant ESL/ELDstudents and Canadian-born ESL students inorder to ensure appropriate allocation of fundingfor ESL/ELD programs.A Working Group on Financial Reportingreviewed the option of program-expenditurereporting. The Ministry is currently consideringthe report of the working group.Chapter 3 • VFM Section 3.07

Chapter 3Section3.08Ministry of Health and Long-Term CareHealth LaboratoryServicesChapter 3 • VFM Section 3.08BackgroundMedical laboratories perform tests and analysis ofpatient samples to assist in the diagnosis, prevention,and treatment of disease. Most laboratories alsoown and operate one or more specimen-collectioncentres to gather the samples. As of March 2005,there were 191 hospital laboratories, 45 privatelaboratories, and 341 specimen-collection centresoperating in Ontario. In addition, the Ministry wasoperating 12 public-health laboratories that testedhuman samples for various communicable diseasesand private well-water samples for bacterialcontamination.The Ministry of Health and Long-Term Care’sLaboratories Branch is responsible for developingand managing all areas of medical laboratory servicesin Ontario (this includes hospital and privatelaboratories, as well as specimen-collection centres)and for operating the province’s public-healthlaboratories. Under the Laboratory and SpecimenCollection Centre Licensing Act, the Ministry licensesand regulates Ontario’s hospital and privatemedical laboratories, including these laboratories’specimen-collection centres. In addition, the Ministryhas a contract with the Ontario Medical Association(OMA) to operate a quality-managementprogram to monitor and improve the proficiencyof licensed laboratories. This quality-managementprogram for laboratory services provides a numberof services, including the evaluation of the qualityof testing performed in all licensed medical laboratoriesin Ontario, as well as laboratory accreditation.The Ministry is also responsible for paymentsfor laboratory services, which are made under theHealth Insurance Act to private laboratories.During the 2003/04 fiscal year, the Ministryspent $1.3 billion on laboratory services. Hospitallaboratory expenditures accounted for $730 million;$541 million was paid to private-sector laboratories,with three companies receiving over 90% of thesepayments; and $3.7 million was paid to the OMA tooperate its quality-management program for laboratoryservices on the Ministry’s behalf.Audit Objective and ScopeThe objective of our audit was to assess whether theMinistry:•had adequate processes in place to ensurethat private-sector and hospital laboratoriesand specimen-collection centres were complyingwith applicable legislation and established166

Health Laboratory Services167policies and procedures, that test results wereappropriately reported, and that private-sectorlaboratories were funded in a cost-effectivemanner; and•had adequate policies and procedures to ensurethat public-health laboratories were reportingwell-water test results on a timely basis.In conducting our audit, we reviewed relevantfiles and administrative policies and procedures,interviewed appropriate ministry staff, reviewedrelevant literature, and researched the delivery oflaboratory services in other jurisdictions. Whileour audit focused on the Ministry, we also metwith representatives of the OMA with regard to itsquality-management program for laboratory services.In addition, we followed up on the status ofrecommendations made in our last audit of privateand hospital laboratories and specimen-collectioncentres, conducted in 1995. We also reviewed and,where warranted, relied on work completed by theMinistry’s Internal Audit Services.At the time of our audit, the Ministry was undertakingan operational review to identify and definecore testing services of its 12 public-health laboratoriesand the mechanisms required for these testingservices; determine the enhancements requiredto ensure that the public-health laboratory systemperforms at an optimum level; and develop a modelfor reconfiguring the public-health laboratory systemas an agency. The Ministry anticipated thatthe review would be completed in August 2005.Given this review, we excluded the operations ofthe public-health laboratories from our audit, withthe exception of the reporting of well-water testingresults.Our audit was conducted in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountantsand accordingly included such tests and other proceduresas we considered necessary in the circumstances,except as explained in the Scope Limitationsection that follows. The criteria used to concludeon our audit objective were discussed with andagreed to by senior ministry management.SCOPE LIMITATIONOn November 1, 2004, sections of the Quality ofCare Information Protection Act, 2004 and relatedregulations came into force that prohibit the disclosureof information prepared for or by a designatedquality-of-care committee unless thecommittee considers the disclosure necessary tomaintain or improve the quality of health care.Similarly, anyone to whom such a committee disclosesinformation may share the information onlyif it is considered necessary to maintain or improvethe quality of health care. We understand that thislegislation was designed to encourage health professionalsto share information to improve patientcare without fear that the information would beused against them.The Quality of Care Information ProtectionAct, 2004 prevails over all other Ontario statutes,including the Auditor General Act, unless specificallyexempted. Because the OMA is designatedas a quality-of-care committee with respect to itsactivities under the Laboratory and Specimen CollectionCentre Licensing Act, during this audit ouraccess to information relating to the OMA’s qualitymanagementprogram for laboratory services waslimited. Specifically, we were prohibited from examiningthe OMA’s quality-management program, orthe Ministry’s monitoring of this program, afterOctober 31, 2004, because the Quality of Care InformationProtection Act, 2004 came into force onNovember 1, 2004. Finally, any issues arising fromthe audit work that we had conducted prior to thescope limitation becoming effective could not be followedup on once the legislation came into force.We were therefore unable to determine whether thequality-management program for laboratory serviceswas functioning as intended.Chapter 3 • VFM Section 3.08

1682005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.08Our concerns with the scope limitation imposedby the Quality of Care Information Protection Act,2004 date back to December 2003, when the Actwas introduced for first reading in the Legislature.We explained the problem and proposed a solutionin a January 15, 2004 letter to the Ministry andagain in a presentation to the Standing Committeeon General Government on January 28, 2004. Norelevant action was taken during the subsequentthree months, so we expressed our concerns yetagain in a letter to the Minister in April 2004. InNovember, the Quality of Care Information ProtectionAct, 2004 passed without any changes havingbeen made with respect to our access to information.We have continued to seek a remedy to thissituation and again communicated our concernsand our proposed remedial action in a letter to theMinister in February 2005 and followed up with aletter to the Ministry in March 2005.SummaryDue to the scope limitation already noted, we wereunable to fully assess whether the Ministry hadadequate processes in place to ensure that privatesectorand hospital laboratories were complyingwith applicable legislation and established policiesand procedures. However, we were able todetermine that, for the most part, the Ministryhad adequate procedures to ensure that specimencollectioncentres were complying.Laboratory testing provides up to 80% of theinformation that physicians use to make medicaldecisions. It is therefore essential that test resultsbe accurate and reliable. Since our 1995 audit ofprivate and hospital laboratories and specimencollectioncentres, the Ministry has increasinglydelegated responsibility to the OMA for assessingthe quality of laboratory services. It is thereforemore important than ever that the Ministry obtainadequate information to assess whether the OMA isfulfilling its responsibilities to the degree needed toensure quality patient care. In this regard, we foundthat the Ministry was obtaining more informationfrom the OMA than when we audited this programin 1995. For instance, the Ministry was now beinginformed when the OMA sent a laboratory a letterof concern or a letter regarding an on-site consultation,and the Ministry generally was receivingreports resulting from on-site consultations. However,it was still not obtaining sufficient and timelyinformation on laboratories that performed poorlyand did not ensure that timely corrective action wasalways being taken. Our specific concerns in thisregard, as well as our other concerns about laboratories,included:•Although laboratories were being notified inadvance that a specimen sample being submittedwas part of the OMA’s quality-managementprogram to test laboratory performance, thenumber of significant errors being made whentesting those samples had increased (significanterrors are those with the potential to cause mistreatmentor misdiagnosis).•The Ministry was not normally notified that alaboratory was producing inaccurate or questionabletest results (that is, significant andlesser errors) for certain types of tests until thelaboratory had been performing poorly on itsexternal quality-assessment tests for betweentwo and four years. In one case, a laboratorythat had been experiencing ongoing problemswith certain tests since 1981 and performedpoorly on related external quality assessmentssince at least 1999 was allowed to continue performingthese tests until 2003.•As noted in our 1995 Audit Report, the Laboratoryand Specimen Collection Centre Licensing Act(Act) allows laboratories in physicians’ offices toconduct simple laboratory procedures, whereasa regulation under the Act effectively allowsphysicians to conduct all laboratory tests. At the

Health Laboratory Services169time of our current audit, this inconsistency wasstill unresolved, as was our concern that laboratoriesin physicians’ offices are not subject to thequality-assurance provisions that other laboratoriesare required to participate in.We also noted that 75% of payments made tolaboratories in physicians’ offices in the 2003/04fiscal year were for tests not defined as simpleprocedures. The Ministry paid $22.6 millionfor these tests. In spring 2005, changes to theAct and related regulations were tabled that, ifpassed, would permit physicians to conduct anytype of laboratory procedure for their patients.They would also continue to be exempt fromparticipating in any ministry or OMA qualitymonitoringactivities. With respect to this lastconcern, ministry staff advised us that no externalquality-assurance process was required asphysicians’ laboratories were under the jurisdictionof the College of Physicians and Surgeonsof Ontario. Our discussion with the Collegeindicated that they do not monitor or regularlyreview physicians’ offices’ laboratories to assessthe testing performed.•No integrated system was in place to make laboratorytest results accessible to all health-careproviders. For example, the results of laboratorytests performed prior to a patient being admittedto hospital were generally not accessibleby the hospital, which could result in duplicatetesting and delays in patient treatment. Accordingto the Ministry, the implementation of theOntario Laboratory Information System in the2005/06 fiscal year will address this issue.•The Ministry had not periodically reviewed orstudied on an overall basis whether laboratorytests that were conducted were appropriate ornecessary, even though other jurisdictions hadnoted concerns in these areas and had foundthat their best-practice guidelines were shown tosignificantly improve laboratory utilization.• The Ministry had not analyzed the underlyingactual costs of providing laboratory services sothat this information could be utilized in negotiatingthe fees to be paid for private laboratoryservices. This is of concern given the province’ssignificant expenditures on private laboratoryservices: an inter-provincial study estimated thatOntario’s per-capita spending on all laboratoryservices in the 2001/02 fiscal year was about$90.41—the second highest in Canada—whilethe Canadian average was $77.49.Furthermore, the Ministry’s policies and proceduresto ensure that well-water testing is completedand results are reported to well owners on a timelybasis should address the following issues:•The report of the results of well-water testingissued to well owners does not clearly state thatwell water that is reported to have no significantevidence of bacterial contamination may stillbe unsafe to drink due to chemical and othercontaminants.•The Ministry’s policy of not testing well-watersamples when the accompanying submissionform is missing any required information, suchas a postal code or phone number, even thoughindividuals can access their results through anautomated telephone service, could potentiallyresult in individuals continuing to drink unsafewater until another sample, with complete information,is submitted for testing.Detailed Audit ObservationsMEDICAL LABORATORIESMonitoring of Private and HospitalLaboratoriesHistorically, the Ministry has monitored medicallaboratories and specimen-collection centresthrough its own licensing and inspection activitiesChapter 3 • VFM Section 3.08

1702005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.08and through a contract with the OMA, which is paidto operate a quality-management program for laboratoryservices. The OMA’s quality-managementprogram includes an accreditation program and anexternal quality-assessment program. All of thesemonitoring activities are established to help theMinistry determine if laboratories and specimencollectioncentres are complying with the Laboratoryand Specimen Collection Centre LicensingAct (Act) and related regulations, which includerequirements for meeting generally accepted standardsof proficiency to help ensure that laboratorytest results are accurate.LicensingPrivate and hospital laboratories and specimencollectioncentres in Ontario must be licensed.Licences are renewed annually upon payment ofspecified fees and receipt of the licence applicationform, which is to include details on a laboratory’sstaff number, staff qualifications, and laboratoryequipment. No new laboratory licences have beenissued in the last 10 years—primarily, we wereinformed, due to ministry funding restrictions.The Ministry reviews the licence applicationform and follows up on any significant changesthat may have an impact on compliance with theAct. Under the Act, a licence may be revoked orits renewal refused if specimen collections or laboratorytests are incompetently carried out, or theowner/operator does not comply with the Act andrelated regulations. We examined the Ministry’slicence renewal process and found that laboratoryand specimen-collection centres were licensed ona timely basis and that, in accordance with the Act,the correct fees were paid to the Ministry.Inspections and AccreditationIn September 2000, the Ministry contracted withthe OMA to create and implement a mandatorymedical laboratory accreditation program thatwould assess and rate licensed laboratories inaccordance with established criteria. The accreditationprogram that was developed is based oninternational standards and includes criteria forassessing laboratories on such matters as organizationstructure, quality-management system, physicalfacilities, equipment, and analytical process.The OMA began phasing in its accreditation programin 2003 and expected it to be fully implementedwithin five years.As of October 31, 2004, 30 of the 236 laboratorieshad been accredited. Laboratories are generallyto be accredited every five years. Once alaboratory is accredited, the Ministry will cease itsregular laboratory inspections. However, we wereinformed that ministry inspectors will continue toinspect all specimen-collection centres and, if necessary,laboratories that are experiencing difficulties.At the time of our audit, the Ministry wasinspecting medical laboratories and specimencollectioncentres that had yet to be accredited bythe OMA’s accreditation program about every 18and 24 months, respectively, to ensure that theseorganizations are in compliance with the Act. Wewere informed that all ministry inspectors weremembers of the College of Medical LaboratoryTechnologists of Ontario. We reviewed a sample ofinspections and found that inspections of specimencollectioncentres were performed consistently andon a timely basis in accordance with the Ministry’sestablished procedures. For laboratories, we notedthat the Ministry’s inspection process was performedon a timely basis but that the inspectionsto ensure compliance with the Act were not alwaysconsistently performed. For example:•Legislation requires that laboratories havean adequate number of qualified staff to testsamples. However, the Ministry has no criteriafor determining what is adequate staffing andinformed us that staffing standards existed foronly one type of laboratory test. While all theinspections we reviewed indicated that staffing

Health Laboratory Services171was adequate, in some cases, a subsequentreview by the OMA’s quality-management programrecommended that the laboratory hireadditional staff to address deficiencies. The Ministryinformed us that the OMA would be reviewingstaffing as part of the accreditation process.• Inspectors did not consistently determine eachlaboratory’s turnaround time from the receiptof a sample to the reporting of the results to aphysician. Some inspectors examined laboratoryrecords to determine turnaround times, whileother inspectors just asked laboratory staff anddid not examine supporting documentation toverify that the verbal responses were accurate.• Inspectors were not required to request andreview the results of the laboratory’s tests fromthe OMA’s quality-management program toobtain information on any higher-risk areas. Wedid note that, while they were not required to doso, at least some inspectors had reviewed theseresults as part of their inspection process.Following an inspection, the laboratory receivesa report listing any deficiencies noted during theinspection. We found that laboratories generallyreported their corrective action to the Ministrywithin ministry-established time frames. In addition,we noted that the deficiencies generally werenot noted on a subsequent inspection.External Quality AssessmentThe Ministry receives an annual report from theOMA on the overall results of the OMA’s qualitymanagementprogram for laboratory services.According to its 2003 report, laboratory testingprovides up to 80% of the information that physiciansuse to make medical decisions; therefore, it isimportant to determine the frequency of laboratorymistakes and the most effective way of minimizingtheir occurrence and impact. In addition, the 2004Canadian Adverse Events Study, by an interjurisdictionalresearch group, found that a significantnumber of adverse events in hospitals (such as injuries,deaths, and prolonged stays) were due to inadequatehealth-care management, which includesdiagnostic errors like laboratory-related errors.The OMA’s quality-management programincludes an External Quality Assessment programthat sends out test specimens to licensed laboratories(for selected tests, which are determined eachyear). The OMA analyzes the results of laboratoryanalysis and provides the laboratory with informationon its performance. In 2004, all licensed laboratoriesperforming the tests that were subject tothe OMA’s quality assessment that year participatedin this program.Test results that do not meet accepted standardsare evaluated by the External Quality Assessmentprogram’s scientific committees, which assesserrors based on their clinical significance. Errorsfall into two categories. “Significant errors” arethose that have the potential to cause mistreatmentor misdiagnosis, while “lesser errors” exceedacceptable limits but are unlikely to impact clinicaldecisions.We noted that the Ministry did not requestor receive the total errors for Ontario’s licensedlaboratories. In fact, the OMA’s annual report tothe Ministry contained only summary informationon all of its quality-management activities, whichincluded laboratories in other jurisdictions as wellas Ontario. Nevertheless, the report indicated thatapproximately 97% of its quality testing related tolicensed laboratories in Ontario. Results from thepast three years are outlined in Figure 1.Although laboratories are notified in advancethat the test sample is part of the OMA’s qualitymanagementprogram (and this is consistent withother jurisdictions), laboratories are expected totest the sample in the same way as patients’ samples.However, we believe that it is reasonable toassume that laboratories would test these sampleswith extra care. We were informed that theOMA considered the advanced warning necessaryfor a number of reasons, including ensuring thatChapter 3 • VFM Section 3.08

1722005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.08its specimen samples did not cause laboratories tounnecessarily alarm public-health officials whenthey identified the results.Notwithstanding the advance notice that laboratoriesare given, the OMA’s annual report notedthat errors still occur, and in 2004 the numberof significant errors increased (see Figure 1). Wewere informed that this increase was due in partto a change in how significant errors were assessedin 2004 for one class of tests. However, evenafter adjusting for this change, significant errorsstill rose by 23% from 2003 to 2004. The OMA’sannual report cited a number of reasons for errors,including a lack of awareness or understandingin the laboratory, problems associated with automatedsystems, a lack of attention to procedures,inadequate handling of samples, and clerical errorsin transcribing results.In cases where errors have occurred, the scientificcommittees request that the laboratoryexplain what caused the problem and what correctiveaction has been taken. Further communicationwith the laboratory or an on-site consultation maytake place if a laboratory’s performance does notimprove. If these and other remedial steps still donot improve a laboratory’s performance, the scientificcommittee may submit a report to the ConjointCommittee, which comprises ministry and OMArepresentatives. The Conjoint Committee can recommendto the Ministry that a laboratory be designatednon-proficient for certain tests, which meansthat the laboratory will no longer be allowed to performthese tests. In 2003, one laboratory was madenon-proficient in a particular class of tests, while nolaboratories were made non-proficient in 2004.The Ministry relies on the OMA’s qualitymanagementprogram to assess whether laboratoriesare providing accurate test results and, wherethey are not, to ensure that appropriate and timelycorrective action occurs. In our 1995 Annual Report,we recommended that the Ministry be advisedas soon as possible of any laboratory that did notFigure 1: Errors Identified by the OMA’s QualityManagement Program, 2002–04Source of data: Quality Management Program — Laboratory Servicesannual reportsmeet accepted standards, as well as of remedialaction being taken by staff of the Laboratory ProficiencyTesting Program—now the OMA’s qualitymanagementprogram for laboratory services.At the time of our current audit, the Ministry didnot receive information on the number of significantand lesser errors that had been identified foreach licensed laboratory in Ontario and was thereforenot aware when or which laboratories performedpoorly. Rather, the Ministry was only beinginformed when the OMA sent the laboratory a letterregarding an on-site consultation or a letter ofconcern. We noted that this generally occurredafter the laboratory had been experiencing problemsfor some time based on assessments by theExternal Quality Assessment program. Our reviewof files noted the following examples:•2002 2003 2004significant errors 519 515 825lesser errors 859 467 310Total errors 1,378 982 1,135labs made non-proficient forcertain tests0 1 0From 2000 to 2001, one private laboratory hadfour significant and seven lesser errors for oneclass of laboratory proficiency tests. Three prioron-site consultations dating as far back as 1981had been held at this laboratory concerning thesame class of tests. A letter of concern was sentin December 2001, and another on-site consultationtook place in April 2002, which indicatedthat the laboratory’s error rate was the highestof all participating laboratories over the past twoyears. An additional on-site consultation washeld, and in April 2003, the laboratory’s licencewas amended to exclude this class of tests, meaningthat the laboratory could no longer performor bill for these tests. The Ministry indicated that

Health Laboratory Services173the OMA’s quality-management program for laboratoryservices had worked with the laboratorythroughout to attempt to improve its performance.We further noted that the same laboratoryalso performed poorly on proficiency testing inother classes of tests from 1998 to 2003 and hadrelated on-site consultations for one of theseclasses of tests in November 2002 and again inApril 2004.•Another laboratory received a letter of concernin 2001 and a letter regarding an on-site consultationin July 2002 due to practices for oneclass of tests that “may lead to erroneous ormisleading reports being issued to the clinicianand potentially compromising patient care.” Offurther concern was that this laboratory was aregional hospital reference laboratory, whichperforms testing on samples for a number ofhospitals and private laboratories in the region.In fact, we found that the Ministry had no evidenceto show that the hospitals and laboratoriesinvolved were informed that they may haverelied on inaccurate test results from the referencelaboratory. In November 2002, the laboratoryin question voluntarily ceased performingcertain tests in this class of tests.An on-site consultation generally results in recommendationsto assist a laboratory in improvingits performance. Laboratories report their correctiveaction to the OMA, which usually conducts afollow-up on-site consultation within one year toone and a half years. We reviewed the follow-up onsiteconsultation reports and noted that the majorityof the laboratories had in fact not addressedall of the original recommendations in full, eventhough they reported that corrective action hadbeen taken.RECOMMENDATIONTo help ensure that laboratories comply withthe Laboratory and Specimen Collection CentreLicensing Act and can be relied upon to produceaccurate test results, the Ministry should:•enhance its oversight of the Ontario MedicalAssociation’s (OMA’s) quality-managementactivities, including obtaining sufficientinformation on the results of the OMA’saccreditation process, as well as significantand lesser errors found in laboratory testresults and evidence that corrective actionhas been taken on a timely basis; and•until such time as it ceases its regular inspections,conduct them consistently.MINISTRY RESPONSEThe Ministry regularly receives copies of lettersof concern and on-site reports from theOntario Medical Association’s (OMA’s) qualitymanagementprogram for laboratory servicesand is kept apprised of quality issues throughthe joint Ministry–OMA Conjoint Committee.According to recent data obtained from theOMA, while the number of significant errorshas increased, in part due to a new method oftracking discrepancies, the percentage of significanterrors assigned after review by the QualityManagement Program—Laboratory Services’scientific committees has remained relativelyconstant (1.1% for all disciplines in 2003 and1.2% in 2004).The Ministry has recently requested theOMA to advise the Ministry on the resolution ofall letters of concern along with the time framesfor resolving the issues (from the identificationof a concern to its resolution). In addition, theMinistry will review its oversight of the qualitymanagementprogram for laboratory services,Chapter 3 • VFM Section 3.08

1742005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.08including ensuring that the Ministry is receivingsufficient information, and will discuss possibleenhancements with the OMA.While individual inspectors have differentinformation collection styles, ministryinspectors perform all aspects of their inspections.The Ministry will review the applicationof the checklists during inspections to ensurethat they are applied consistently.Monitoring of Physicians’ Offices’LaboratoriesAs we noted at the time of our 1995 audit, underthe Laboratory and Specimen Collection CentreLicensing Act (Act), physicians did not require alicence to collect specimens and conduct simplelaboratory procedures for the purpose of diagnosingand treating their own patients (simple proceduresare prescribed by regulation and include,for instance, immunologic pregnancy tests of urineand blood glucose determination). We also noted atthat time that a regulation under the Act exemptedphysicians from the section that referred to simpleprocedures, thereby permitting physiciansto perform all laboratory tests on their patients.At that time, the Ministry agreed that it shoulddetermine what laboratory procedures physicianscould conduct for their own patients and resolvethe inconsistency between the Act and its regulation.However, at the time of our current audit, thisinconsistency still existed.According to ministry records, for the 2003/04fiscal year, the Ministry paid a total of $30.8 millionto over 750 physicians for laboratory tests fortheir patients. Of that amount, $22.6 million (orabout 75%) was paid for laboratory tests that werenot listed as simple procedures. Besides the inconsistencybetween the Act and the regulation thatallowed for these procedures and related billings,senior ministry management informed us that theregulation listing simple procedures was outdatedand that other procedures could be performed inphysicians’ offices. In this regard, in spring 2005,changes to the Act and related regulation weretabled that, if passed, would make the legislationand regulations consistent and permit physicians toconduct any type of laboratory procedure for theirpatients. In addition, physicians would also continueto be exempt from participating in ministryinspections or the OMA’s quality-management programthat other laboratories are subject to for thesame tests.We noted in our 1995 Audit Report that theMinistry’s Laboratory Service Review Committeehad recommended in 1994 that laboratories andspecimen-collection centres in physicians’ offices belicensed to bring them under the quality-assuranceprovisions of inspection and proficiency testing. TheMinistry agreed with this recommendation at thattime, but we noted during our current audit that noaction had been taken in this regard. Ministry staffinformed us that physicians’ offices’ laboratorieswere still not subject to the quality-assurance provisionsbecause they were under the jurisdiction ofthe College of Physicians and Surgeons of Ontario,but the College informed us that it does not monitoror regularly review physicians’ offices’ laboratoriesto assess the quality of testing performed.We noted that in the United States, federal legislationrequires that all physicians’ offices participatein a quality-assurance program if they performmoderate or complex laboratory testing. Given theproposed changes in Ontario to resolve the legislativeinconsistency and permit physicians to conductany laboratory test in their offices, we believe that itis important to patient safety that the quality of thistesting be periodically evaluated.

Health Laboratory Services175Management and Reporting of LaboratoryTestsAt the time of our audit, there was no central systemin place to integrate and store laboratory testresults for a patient, and thereby allow for testresults to be accessible to all health-care providersand laboratory service providers. Rather, privatelaboratories, hospital laboratories, public-healthlaboratories, and other laboratories in Ontario wereusing different reporting systems and differentmethods of tracking and maintaining laboratorydata.RECOMMENDATIONTo help ensure that laboratory tests conductedin physicians’ offices are properly performedand produce accurate results, the Ministryshould assess whether the quality-assuranceprocesses required for other medical laboratoriesshould apply to laboratories operated byphysicians.MINISTRY RESPONSEWhether laboratory tests are appropriate ornecessary is a medical decision based on anauthorized practitioner’s clinical assessment ofthe patient. The Ministry will initiate furtherdiscussions with the College of Physicians andSurgeons of Ontario (CPSO) regarding the provisionswithin the Laboratory and Specimen CollectionCentre Licensing Act and regulations thatrelate to physicians performing tests on theirown patients to determine whether the Act andregulations need to be modified. It is the responsibilityof the CPSO to monitor the physician’sscope of practice. The Ministry will follow upwith the CPSO on this matter.The lack of an integrated system may leadto duplicate testing and delayed treatment forpatients. For example, when a patient has beenadmitted to hospital, the results of any laboratorytests performed prior to their being admitted generallywould not be accessible by the hospital, andduplicate testing may have to be done by the hospital.While some repeat testing is necessary inthe treatment and monitoring of patients, a 2003research study in Eastern Ontario of eight laboratorytests found that potentially redundant duplicatetests constituted up to about 16% of annualexpenditures. The 2003 BC Laboratory ServicesReview noted that studies from other jurisdictionshave found test duplication rates as high as 30%.We also noted that the Ministry did not periodicallyreview or study, on an overall basis, whetherlaboratory tests that were conducted were necessaryor appropriate. In our review of ministry files,we found that one laboratory’s personnel expressedthe concern that certain physicians tended to orderan excessive number of tests or wide-ranging teststhat did not appear necessary. The Ministry indicatedto us that it did not review laboratory testingbecause it was a medical decision.Notwithstanding, many research studies conductedin other jurisdictions have found that testsare often ordered inappropriately. In particular,one international study, which reviewed variousother studies, estimated that 33% of laboratorytests were ordered inappropriately. In addition, itnoted that following best-practice guidelines hasbeen shown to significantly improve laboratoryutilization in some jurisdictions, such as in BritishColumbia. We noted that the Ministry, in conjunctionwith other organizations, such as the OMA, hasissued a few best-practice guidelines for physicians,and the Ministry informed us that another guidelinewas under development. However, the Ministryhas not monitored the adoption or impact ofthese guidelines. We believe that the introductionof additional guidelines, especially for frequentlyperformed tests, combined with education andperiodic monitoring to encourage the adoption ofChapter 3 • VFM Section 3.08

1762005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.08all guidelines, could result in significant savings tothe Ministry.The February 1994 report of the Ministry’sLaboratory Service Review Committee outlined anumber of recommendations, including the establishmentof a centralized interactive database withelectronic communications links for laboratoryservice requesters and providers. The Ministry isnow developing the Ontario Laboratories InformationSystem, which is expected to enable laboratorytest information on individual patients tobe accessed by all health-care and laboratory serviceproviders directly involved with the patient.In addition, the system is expected to build a comprehensiveinformation base to help manage andplan for laboratory service delivery, improve fiscalmanagement of laboratory services, and providetimely utilization data to help develop best-practiceguidelines for laboratory tests. The Ministry anticipatesthat this system will be operational in late2005, will be fully implemented by April 2007, andwill cost about $84 million. We will follow up onthe implementation of this system during our nextaudit of Health Laboratory Services.Payments to Private LaboratoriesIn the early 1990s, the Ministry and the OntarioAssociation of Medical Laboratories negotiated anindustry cap on laboratory funding to control therising costs of private laboratory services. A capwas applied to the entire industry beginning inthe 1993/94 fiscal year based on payments madeto laboratories in the 1992/93 fiscal year. Further,caps on payments to individual laboratories wereimplemented in the 1996/97 fiscal year. Sincethen, negotiated increases have been applied tothe caps to reflect additional costs, resulting from,for instance, an increase in laboratory tests beingordered. In the 2003/04 fiscal year, $541 millionwas paid to private laboratories, with three companiesreceiving over 90% of these payments.According to the 2003 BC Laboratory ServicesReview, the cost of providing laboratory tests hasdeclined dramatically in the past 20 years due toimprovements in laboratory technology. In addition,an inter-provincial comparison included in thereview estimates that Ontario spent $90.41 per capitaon laboratory services in the 2001/02 fiscal year,while the Canadian average was $77.49 per capita.Ontario had the second highest per-capita spendingof all the provinces. For this study, data for hospitals,including those in Ontario, excluded overheadcosts. While there may be some differences in theway jurisdictions reported their costs, Ontario’shigh cost per capita nevertheless highlights theneed to evaluate the underlying cost of laboratoryservices.The Ministry informed us that it did not knowwhen the last comprehensive evaluation of thecost of laboratory services occurred, but stated thatit was at least 10 years ago. Without sufficientlydetailed information on the underlying costs oflaboratory services, which may have significantlydeclined due to technological advances, theMinistry is unable to demonstrate that it is acquiringprivate laboratory services in an economicalmanner.The Ministry pays private laboratories on amonthly basis for tests performed and specimenscollected based on billings submitted to the OntarioHealth Insurance Program (OHIP) and within thelimits dictated by the laboratories’ payment caps.As a condition of payment, each laboratory entersinto a verification agreement with the Ministry,which allows the Ministry to examine laboratoryrecords to ensure that laboratory services wereactually performed, were authorized by a medicalpractitioner, and were billed correctly. The Ministrycan recover any overpayments that occurred beforethe 1996/97 fiscal year. Subsequent to that date,any incorrect billings to OHIP—where a laboratoryhas overbilled for services—can only be recoveredif the amount in error is greater than the difference

Health Laboratory Services177between the total amount billed and the paymentcap.The Ministry has found billing errors, includinglaboratory tests that were billed without evidencethat the test was either requested or performed.However, no recoveries have been made subsequentto the 1996/97 fiscal year, which is consistentwith the verification agreement, because the errorsfound in the ministry reviews have amounted, on ayearly basis, to less than the difference between thelaboratory’s total billings and its payment cap.RECOMMENDATIONTo help ensure that private laboratory servicesare acquired in an economical manner, the Ministryshould periodically determine the actualcost of providing these services and utilize thisinformation when negotiating payments for laboratoryservices.MINISTRY RESPONSEThe Ministry uses a variety of approaches toensure that the funding agreement for privatelaboratory services provides both productivityimprovements and value for money. Theseapproaches include a review of the level of paymentsand an analysis of factors (such as populationgrowth) that contribute to increasedtesting being performed by private laboratories.As well, the cost of performing roughly the sametypes and total overall number of tests in hospitalsis used as a benchmark.The Ministry notes that the estimated Canadianaverage cost per capita as reported is basedon data from several provinces that excludeoverhead expenditures from their costing, whileOntario’s estimate includes overhead for privatelaboratories. This inconsistency in data collectionunderstates the estimated average cost percapita and makes inter-provincial comparisonsdifficult.The Ministry recognizes that an actual costingof laboratory services has not been conductedrecently and would add an additionalelement of certainty to the assessment of theresources required.WELL-WATER TESTINGThe Ministry operates the province’s 12 publichealthlaboratories, which, among other things,test well-water samples submitted by individuals inOntario. In 2004, all of these public-health laboratorieswere accredited by the Standards Council ofCanada based on recommendations resulting fromthe Canadian Association of Environmental AnalyticalLaboratories’ assessments. The accreditationprocess included ensuring that certain technicalrequirements are met. These requirements coversuch areas as quality control, testing and methodvalidation, and management requirements likeorganizational structure and document controls.There are about 500,000 private wells inOntario. Private well owners in Ontario are responsiblefor maintaining the quality of their own water.According to ministry staff, the most commonproblem with well water is contamination frompathogens. Pathogens are organisms that can makepeople sick and include certain forms of bacteria(for example, E. coli), protozoa (tiny parasites),and viruses (for example, Norwalk). Each of theseorganisms can lead to different illnesses, someof which are very serious. Common symptoms ofexposure to pathogens generally include diarrhea,nausea, abdominal cramps, and low-grade fevers.To help ensure that well water is free of pathogens,individuals may submit samples of their wellwater for testing at the Ministry’s public-health laboratories.This testing is provided free of chargeand is usually completed within three days. Allwell-water test results are posted on the Ministry’sinteractive voice response system, which allowsChapter 3 • VFM Section 3.08

1782005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.08individuals to obtain their results by phoning in. Inaddition, individuals may choose to pick up theirtest results report or have it sent to them throughthe mail. According to ministry staff, public-healthofficials phone individuals whose water is foundunsafe to drink. In addition, we were informed thatpublic-health officials determine whether to notifyneighbouring well owners if problems are detectedin a water sample tested.In 2004, the Ministry hired a consultant whosework included determining what it was costing theMinistry for each well-water test. Based on informationin the consultant’s report, we estimated thatthe Ministry spent about $3.7 million testing about290,000 well-water samples, or about $13 per test.Test Results ReportingAs shown in Figure 2, when a public-health laboratorytests well water for pathogens, the results arereported to the submitter as either:• No significant evidence of bacterialcontamination;•May be unsafe to drink; or• Unsafe to drink. Evidence of sewageSignificant evidence of bacterial contamination.contamination.The Ministry only tests well water for bacterialcontamination, and although a well-water samplemay not have evidence of such contaminants, thewater may still be unsafe to drink due to chemicalor other contamination (for instance, nitrates foundin fertilizers). A 1992 study of 1,300 Ontario farmwells that was sponsored by the federal Departmentof Agriculture and Agri-Food Canada in partnershipwith the Ontario ministries of the Environmentand Agriculture and Food indicated that about 15%of the wells tested contained nitrates in concentrationsabove the provincial drinking-water standardsthat existed at that time. In this regard, we notedthat the Ministry’s one-page report to well ownerson the results of a well-water test does not adviseFigure 2: Interpretation Section of Ministry’s Form for Bacteriological Analysis of Citizens’ Drinking Water,Identifying Three Possible ResultsSource of data: Ministry of Health and Long-Term Care

Health Laboratory Services179the well owner that the water was not tested forchemical and other contaminants that may affectwater quality, nor where the well owner can havesuch tests performed. We believe that there is a riskthat individuals may assume that their water is safeto drink, when in fact it may not be. Since the formincludes the category “unsafe to drink,” individualsmay incorrectly assume that the reverse is truewhen notified that their water contains “no significantevidence of bacterial contamination.”RECOMMENDATIONTo help ensure that individuals are aware of allpotential contaminants in their well water, theMinistry should:•indicate that the water was not tested forother contaminants, including chemical contaminants,and therefore may be unsafe todrink even when there is no significant evidenceof bacterial contamination; and•indicate on the test results report where individualscan obtain information on havingtheir water tested for other contaminants.MINISTRY RESPONSEAlthough the Ministry believes that the currentinstructions in the private-water test-collectionkit and the wording of the final test reportclearly state that the tests performed only relateto the presence of bacterial contamination,the Ministry will review the current informationsupplied with the test kit to determine if itis necessary to add an additional statement tothe report advising well owners to consult theirlocal health units if they have concerns aboutpossible chemical contamination of their well.Rejection of Test SamplesTo have their well water tested, individuals mustcomplete a form to accompany the well-watersamples they are submitting. The form includesinstructions on how to collect and submit the watersamples, as well as a section the submitter mustcomplete with basic information such as name andaddress, location of the water’s source, and a daytimetelephone number. The form specifies that allrequired information must be completed in full orthe laboratory will not test the sample.In 2004, the Ministry rejected about 4% or11,900 of the well-water samples submitted becausethe form was not completed in full by the submitter.Water samples would not be tested if, forexample, the form was missing a submitter’s telephonenumber or postal code. Ministry managementinformed us that they were concerned about increasingthe Ministry’s exposure to liability in cases wherethey test well water, find it unsafe to drink, and cannotreadily notify the sample’s submitter. Therefore,the Ministry does not test well-water samples if theform is missing any information.Nevertheless, the Ministry mails notices to submittersthat indicate their water sample cannot betested due to the form missing a postal code, anddoing so involves the Ministry looking up the postalcode in order to send the notice. Furthermore, wewere informed that the Ministry would test a watersample if the submitter indicated on the form thatthey did not have a telephone.Given that submitters can access their results byphone, we question the practice of rejecting sampleswith missing telephone numbers or postal codes.Furthermore, the delays stemming from this practicecould result in people drinking unsafe wateruntil another sample, with complete information, issubmitted for testing. In fact, we noted one incidentwhere a well-water sample was rejected due to amissing postal code, and the subsequent submissionof a new sample revealed that the water containedsignificant evidence of bacterial contamination.Chapter 3 • VFM Section 3.08

1802005 Annual Report of the Office of the Auditor General of OntarioRECOMMENDATIONTo better assist Ontarians in the timely identificationof well water that is unsafe to drink, theMinistry should re-examine its policy of rejectingand not testing water samples due to missingpostal codes and/or telephone numbers.MINISTRY RESPONSEChapter 3 • VFM Section 3.08Ministry staff work to ensure that the importantservices provided for private well-water testingare done accurately and efficiently to protectpublic health. An important component of thetesting and reporting process involves staff havingaccurate information that will allow them toquickly notify submitters of adverse test resultsand to track and follow up with local healthunits and others where needed.To fulfill these obligations, submitters, whoare best placed to know their own personalinformation and private well location, are askedto do their part by following proper water collectionprocedures and completing the waterrequisition form accurately and completely,in accordance with the form’s instructions. Itclearly states that if appropriate sampling proceduresare not followed or if required informationis not completed on the form, the samplewill not be tested.The Ministry has reviewed its policy onacceptance of private well-water samples,including the acceptance of forms with missingor incomplete postal codes and/or telephonenumbers, and concluded that the current policyof not accepting these samples supportspublic health. However, in an effort to raiseawareness of samples that will be rejected, theMinistry will produce an information sheet to beincluded in the Private Citizen Drinking Waterkit outlining the Ministry’s acceptance criteriawith the goal of reducing rejection rates.

Chapter 3Section3.09Ministry of Northern Development and MinesMines and MineralsProgramBackgroundThe vision of the Ministry of Northern Developmentand Mines is of a Northern Ontario economy and aprovincial minerals sector that is healthy, competitive,and sustainable. Through the Ministry’s Minesand Minerals Program/Division, which is responsiblefor the administration of the Mining Act (Act),the Ministry has responsibilities related to all phasesof mining in the province, from exploration to minedevelopment, operation, and closure. The purposeof the Act is to encourage prospecting, claims staking,and exploring for the development of mineralresources. As well, it works to minimize the impactof these activities on public health and safety andthe environment, through rehabilitation of mininglands in Ontario.The province is among the leading mineral producersin the world. The mining industry annuallyextracts metals and non-metals valued at approximately$5.5 billion. In 2003, mineral explorationexpenditures by the private sector were $220 million.Several national and international studies estimatethat each dollar spent on geoscience activities—forexample, the production of geological maps—canultimately generate $2 to $5 in exploration activity.If a mine is developed and begins production, eachdollar spent could ultimately generate more than$100 in benefits to the economy. Ontario miningactivities provide approximately 100,000 direct andindirect jobs.To encourage exploration, the Ministry providesprovince-wide geological maps, on-line access togeoscience information, and geological advisoryservices in field offices throughout the province.Such geological information is used by prospectorsand mining companies to help identify areaswith mineral potential. The Ministry also promotesOntario mining development opportunitiesin domestic and international markets. During the2004/05 fiscal year, to carry out these and otherprogram activities, the Ministry employed approximately200 staff and spent $35.5 million.Audit Objective and ScopeThe objective of our audit was to assess whether theMinistry had adequate procedures in place to:• manage mineral resources to ensure that the miningsector is healthy, competitive, and sustainable;• ensure compliance with related legislation andministry policies; andChapter 3 • VFM Section 3.09181

1822005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09• measure and report on the program’s effectivenessin encouraging the development and useof the province’s mineral resources while minimizingthe impacts of mining activities on publichealth and the environment and limiting thecost to the taxpayer, by ensuring that the industryrehabilitates mining sites.The scope of our audit included discussions withministry staff, a review and analysis of documentationprovided to us by the Ministry, and researchinto the practices and experiences in other jurisdictions.The Ministry’s Internal Audit Services Branchhad not conducted any recent work on the administrationof the Mines and Minerals Program thataffected the scope of our audit.Our audit was performed in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, established bythe Canadian Institute of Chartered Accountants,and accordingly included such tests and other proceduresas we considered necessary in the circumstances.The criteria used to conclude on our auditobjective were discussed with and agreed to byministry management and related to systems, policies,and procedures that the Ministry should havein place.SummaryDue largely to the quality of the maps and advisoryassistance it provides, the Ministry is generally seenby its stakeholders as contributing to the success ofthe mining industry in Ontario. However, the Ministrydid not have adequate procedures in place toensure compliance with legislation and its internalpolicies or to measure and report on its effectiveness.There are a number of operational areas thatthe Ministry can focus on to improve its delivery ofthe Mines and Minerals Program:• To maintain a mining claim in good standing, theholder must perform certain exploration work,referred to as assessment work, and must reportthis to the Ministry. We found that the Ministryreviews most assessment reports for reasonableness,but this process was not sufficient toensure that only allowable exploration expenditureswere approved. As well, the Ministry hadperformed a detailed expenditure verification ononly 31 of 5,200 reports submitted since 1999,and had carried out only one inspection of aclaim site to verify that the work had actuallybeen done. Such verification is necessary, as wenoted cases where claim-holders had falsifiedassessment and expenditure information.•We noted several cases where claims were forfeitedbecause the required assessment work hadnot been carried out to keep the claims in goodstanding, and the same people who had theirclaims forfeited reclaimed the lands as soon asthey became open for staking. A situation wherea claim-holder can in effect indefinitely retainmining rights by continually reclaiming themafter they are forfeited—without performingany assessment work—is contrary to the intentof the Mining Act.•Geological information provided by the Ministryis used by prospectors and mining companiesto select areas in which to conduct explorationwork. Based on input from its clients, the Ministrydetermined that a mapping productivitybenchmark of 20 years, or about 15,000 squarekilometres a year, was a target for areas of highmineral potential to keep geological informationcurrent and relevant. However, due to difficultiesin completing projects on a timely basisand to resourcing and capacity issues, from 2002to 2008 the Ministry had mapped or planned tomap only 8,000 square kilometres annually. Forexample, of the 46 Precambrian projects thatwere to be completed by December 2004, 10were still ongoing and 15 were completed late.

Mines and Minerals Program183In addition, the Ministry did not have a projectmanagement system to periodically report on thestatus of active projects.•Before a company commences mining operationsor undertakes advanced exploration, itmust submit a mine-closure plan to the Ministry.A closure plan commits the owner to rehabilitatethe mine site and return the site to its formerstate without harmful effects on the environment.However, contrary to the Mining Act, asof March 2005, closure plans were not in placefor 18 of the 144 mine sites that were requiredto have them. The Ministry has actively pursuedclosure plans for most of these sites; however,these plans have been outstanding since 1991,when the requirement for closure plans cameinto effect. Without closure plans in place, theMinistry may ultimately be held responsible formine closure and cleanup.•The Ministry does not periodically reviewwhether the closure-cost estimates and financialassurances are still sufficient to properly closeout the mine. For example, the costs originallyestimated in the closure plan for one mine were$551,000 in 1993. The plan was not filed becausethe owner could not provide financial assurance.Nevertheless, the mine owner significantlyunderestimated closure costs. Since the mine isno longer operational and the company is notable to pay closure costs, the Ministry may ultimatelybe responsible for rehabilitating this site, ata cost that is now estimated to be $9 million.•At the time of our audit, the Ministry had identifiedmore than 5,600 abandoned mine sitesdating from the early 1900s. The Ministry hadestimated that 4,000 of these sites were potentiallyhazardous to public health and safety andthat approximately 250 of these sites might posean environmental risk due to the potential forthe leaching of minerals and other contaminantsfrom mine tailings. However, the Ministry didnot have adequate information on the chemicalcontamination that is often the by-product ofmining operations. This information is necessaryto assess the risk of water and soil contaminationaround abandoned sites.Detailed Audit ObservationsA major responsibility of the Ministry is to administerland tenure related to mining, including miningclaims, leases, licences, and patents. Initially, prospectorsstake mining claims that are registered withthe Ministry, thereby obtaining exclusive rightsto explore the land’s mineral potential. Approximately34,000 mining claims are currently active inthe province. If the land has mineral potential andis to be developed, the mining claim must be convertedto a lease. At present, 3,600 mining leaseshave been issued for renewable terms of either 10or 21 years. Up until 1964, mining licences werealso issued to permit mining primarily under waterbodies. There are still 1,100 valid mining licencesthat are perpetual and do not need to be renewed.As well, there are 19,000 patented lands—propertiesthat were originally granted as mining lands,properties that are used for mining purposes now,or properties where the mining rights were severedfrom the surface rights. Finally, when mines close,the Ministry is responsible for ensuring that theproperty is returned, at the mine owner’s expense,to its former use or condition without harmfuleffects to the environment.MINERAL EXPLORATIONStaking Mining ClaimsIn Ontario, properties where the Crown hasretained the mineral rights and Crown lands areavailable to prospectors for mineral exploration.Since 1892, Ontario has employed a process thatinvolves physically surveying and marking locationsChapter 3 • VFM Section 3.09

1842005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09in the field to secure mineral rights for explorationand mining. A licensed prospector must first stake amining claim to gain the exclusive right to prospecton the staked land. A claim can range in size from16 hectares (a 1-unit claim) to 256 hectares (a 16-unit claim). As of March 2005, there were miningclaims in the province for 199,000 units covering3.2 million hectares (32,000 square kilometres).Until recently, many Canadian jurisdictionsfollowed the same process of physically stakingmining claims. However, eight Canadian jurisdictionshave now adopted a partial or full map-basedclaim-staking process for obtaining land for mineralexploration. With map-based selection, prospectorsapply for mineral rights by selecting lands on mapsthat show where the unclaimed rights are available.Jurisdictions that have adopted a map-basedclaim-staking process have found it to be a moreeffective and efficient method of administeringmining claims. In October 2004, the Minister’s MiningAct Advisory Committee also noted a numberof potential benefits of a map-staking system: availabilityto worldwide clients; less dependency onphysical access to the area of staking; lower costs ofacquiring the land, especially in the Far North; significantreduction in boundary disputes and administration;and increased investment opportunities.Disputes regarding boundaries and the validityof a mining claim consume significant ministry staffresources and can take many months to resolve.Some of this effort is avoidable. For example, of the61 disputes in Ontario since 2001, we found that 27,or 44%, could have been avoided if a map-staking systemwere in place. The Ministry informed us that thebenefits of map staking must be considered in conjunctionwith the costs required to implement such asystem and the loss of jobs for those who currentlysurvey and physically stake mining claims. We werealso informed that ministry staff had consideredtesting map staking in Southern Ontario to determineits benefits. At the completion of our audit,the Ministry had not made any further determinationregarding map staking in Ontario.RECOMMENDATIONTo more efficiently and effectively manage themine claim-staking system, the Ministry shouldassess the costs and benefits of a map-basedstaking system and consider implementing sucha system in Ontario.MINISTRY RESPONSEThe Ministry is working on an overall mineraldevelopment strategy for Ontario and, as part ofthis process, will evaluate the costs and benefitsof a map-based staking system.Mining-claim Assessment WorkIn Ontario, a mining claim gives the claim-holdera right to explore land for minerals. To maintain aclaim in good standing, the holder must performcertain exploration work, referred to as assessmentwork, and must report this to the Ministryfor approval. The claim-holder must perform atleast $400 worth of assessment work annuallyfor each unit (16 hectares) within the claim. Failingto carry out this work could result in forfeitureof the claim. This requirement helps to achieveone of the primary purposes of the Mining Act—toencourage exploration for the development of mineralresources in Ontario, as opposed to prospectorsstaking claims without any further work beingdone.The Ministry has three assessment officerswho review assessment work reports submitted byclaim-holders. Assessment reports include descriptionsof the assessment work done and expenditures,which, if they are eligible, are credited tothe claim as assessment work. Some of the mostcommon expenditures that are acceptable forassessment credits are those that cover the costof geological surveys, exploratory drilling, mineralanalysis, contractors, equipment rental, and

Mines and Minerals Program185supplies. Expenditures that are not eligible for creditsinclude those relating to asset purchases andrepairs, travel incurred outside Ontario, road constructionand maintenance, and the building of anyphysical structures.During 2004, the Ministry received more than1,000 assessment reports, with $65 million inexpenditures submitted for assessment credits.We reviewed the assessment process and notedthat the Ministry assessed most of the reports submittedfor reasonableness by comparing reportedexpenditures to industry standards. The Ministryoften requested additional information, and, if anacceptable response was not received, it reducedthe allowable assessment credits. However, wefound that this process was not sufficient to ensurethat only allowable expenditures were approved forcredit. Specifically, we noted the following:•Under the Mining Act, the Ministry has 90 daysfrom receipt of a work report to reject the costssubmitted or request an expenditure verification;otherwise, the expenditures are deemedto be approved for assessment credits. Wefound that, while most assessment reports werereviewed within the 90-day period, typically 25to 40 reports per year were deemed approvedwithout review. We reviewed a sample of thesereports and found that several files containedunreasonable costs or had insufficient technicaldata provided by the claim-holder to complywith the work-assessment requirements.•Although the Ministry reviews most assessmentwork reports for reasonableness, few files wereselected for detailed expenditure verification,which requires a thorough review of the originalinvoices and other supporting documentation.Based on information provided by the Ministry,of the 5,200 assessment reports receivedsince 1999, only 31 files, or half of 1%, wereselected for detailed expenditure verification.The Ministry selected most of these files becausethe expenditures claimed appeared unreasonable,and, after review, the Ministry disallowed$350,000 of the reported assessment work.Without a process in place for thoroughly verifyinga reasonable sample of claims, the Ministrydoes not have adequate assurance that theexpenditures reported on claim assessmentswere actually incurred.•The Mining Act allows the Ministry to charge aclaim-holder with an offence for making falsestatements on work-assessment reports, and,upon conviction, the claim-holder is liable to afine of not more than $10,000. Until 1997, theMinistry inspected claims and work assessmentsin the field by evaluating work performed relativeto work reported. Since 1999, however, theMinistry has carried out only one inspection andfound that the work outlined in the assessmentreport had not been performed. Although theindividual’s claims were cancelled, the claimholderwas not charged under the Mining Act. Inour sample, we noted two other cases where theclaim-holders had altered laboratory certificatesor geologist reports and submitted these forwork-assessment credits. We were informed thatassessment credits can be reduced in such cases.However, if sanctions are limited to the reductionof credits, the deterrent effect of inspectionsand prosecutions is reduced.•We noted several cases where claims were forfeitedbecause no assessment work had beencarried out to keep the claims in good standing,and the same people who had their claims forfeitedreclaimed the lands when they becameopen for staking. In three cases, the claim-holderreclaimed the same forfeited land twice withoutperforming any assessment work. In suchcases, the claim-holder can retain the claim forsix years before the claim is again forfeited. Asituation where a claim-holder can in effectindefinitely retain mining rights by continuallyreclaiming them after they are forfeited—withoutperforming any assessment work—is contraryto the intent of the Mining Act.Chapter 3 • VFM Section 3.09

1862005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09RECOMMENDATIONTo ensure that holders of mining claims areactively prospecting and exploring land for thedevelopment of mineral resources, the Ministrydevelop procedures to ensure that all assess-should:•ment files are reviewed for reasonableness;• review the adequacy of the number of filesselected for detailed expenditure verificationand consider implementing a random selectionprocess;•assess whether the current level of inspectionsand prosecutions provides an effectivedeterrent to filing false information to retainmining rights; and•consider disqualifying holders of forfeitedclaims from re-staking the same land untilan appropriate period of time has passed.MINISTRY RESPONSEWhile most assessment reports are reviewedwithin the required 90-day period, we willreview our processes and develop procedures toensure that all reports are reviewed for reasonablenesswithin the 90-day requirement.As noted by the Auditor General, the Ministryoften requests additional expenditureverification information, which is reviewed forassessment credits. If the requested informationis not received or the review determines that thework is unreasonable, the Ministry will grantassessment credits based on industry standards.The development of industry standards forexploration work and staff’s proactive approachwith clients on work-report submissions haveresulted in fewer submissions that appear problematic.Nevertheless, the Ministry will developa process for detailed expenditure verification,which will include, for example, the selection ofrandom or targeted files, to supplement its normalexpense verification process.The Ministry has designed a range of deterrentmeasures to help prevent falsification ofassessment information and expenditure reporting.These measures include the reduction and/or loss of assessment credits, the revocation orsuspension of a prospector’s licence, and, insome cases, the loss of the stakeholder’s miningclaim. These measures have been found to bevery effective. However, the Ministry will reviewits current level of inspections and prosecutionsto ensure effectiveness in deterring the filing offalse information.The Ministry will conduct a review of thenumber of claims being re-staked withoutassessment work being done to determine thescope of the problem, measure the risk of thisissue, and develop a business case for follow-up.Ontario Geological SurveyThe Ontario Geological Survey (OGS), a branchin the Mines and Minerals Division, has 130 staffwho are responsible for collecting, interpreting,and disseminating geological, geochemical, andgeophysical data. The OGS uses this information toprovide consultation and advisory services to assistthe industry in mineral exploration and development.Approximately 25 OGS staff produce sitespecificmaps to support mineral exploration byidentifying areas of high mineral potential.With current mineral reserves being depletedfaster than new deposits are being discovered,there is a need for reliable and timely geologicalinformation to enable the industry to meet thechallenge of finding new mineral deposits. A consultantwho evaluated the OGS in 2003 noted thatthe development of high-quality geological datahas the greatest positive impact on enhancing economicperformance in the mining industry. The

Mines and Minerals Program187economics of the mining industry are currently veryfavourable, as international demand for mineralsand commodity prices are high and are expectedto remain so for at least several years. The Ministryrecognizes that without relatively timely geologicalinformation and maps, potential mining explorationinvestments could be diverted to other miningjurisdictions.Geological MappingGeological maps and reports produced bygeological surveys are fundamental informationsources used by prospectors and the mining industryto select mineral exploration targets. The Ministry’sgeological reports and maps of varying scalesare produced from data—collected by direct observation—onthe attributes, characteristics, and relationshipsof rock and sediments. A mining industrysurvey noted that the Ministry’s geological mapsare of good quality and very useful as a startingpoint for exploration.Ministry guidelines suggest that, to map allareas of significant mineral potential in a timelymanner, a 20-year mapping cycle is required and anestimated 15,000 square kilometres would need tobe mapped annually. However, the Ministry did nothave an overall mapping plan in place demonstratingthat mapping 15,000 square kilometres annuallywould be sufficient to complete the mappingof all areas of significant mineral potential over thenext 20 years.We found that from 2002 to 2004, the Ministryhad annually mapped approximately 8,000 squarekilometres of land. The Ministry’s mapping targetfor the next three years, ending in 2007/08, is also8,000 square kilometres annually. Based on currentand planned levels of activity, the Ministry willnot map all areas of significant mineral potentialduring the next 20 years. The Ministry informedus that it did not have the resources to map 15,000square kilometres annually without compromisingthe quality of its maps and geological data. TheMinistry needs to assess its current performance inproviding high-quality geological maps on a timelybasis and thoroughly assess the costs and benefitsof an enhanced mapping program.Project SelectionThe geological mapping selection process beginswith the submission of proposals originating fromindustry stakeholders and ministry staff. A proposalis evaluated according to selection criteria—itssuitability with respect to ministry priorities, thefeasibility and appropriateness of the study area,the potential for economic investment in mineralexploration, and the availability of staff with theskills necessary to complete the project. Onceproject proposals are selected, they are ranked inorder of priority and added to the annual workplan.In response to a recommendation from our 1987audit of the Mines and Minerals Program, the Ministrycommitted to the development and implementationof a formal system for project selection, withimproved information for managers. During ourcurrent audit, we reviewed the Ministry’s projectselectionand priority-setting process and wereadvised that projects were evaluated against selectioncriteria, but we noted that documentation outliningthe rationale for selection or rejection of aproject was not maintained.After evaluating project proposals, the Ministryproduces a ranking of accepted projects, butwe found that the highest-ranking projects werenot always the ones undertaken. Again, there wasinsufficient documentation to explain why this wasthe case. The Ministry informed us that becauseof limited staff resources with the required skills,some projects could not be carried out. For example,over the past two years, 72 project proposals wereapproved, but, due to limited resources, 33 of theprojects could not be undertaken.Chapter 3 • VFM Section 3.09

1882005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09Project ManagementSubsequent to our 1987 audit of the Mines andMinerals Program, to prevent delays in completingprojects, the Ministry committed to preparing periodicreports on the status of all work in progress.Such reports were to help monitor the mappingprocess by highlighting project delays, reasons forany delays, and the steps that would be taken to getprojects back on schedule. However, we found thatthe Ministry did not have an overall project managementsystem in place and was still not preparingperiodic reports on the status of its mappingprojects.We were advised that project monitoring wascarried out as part of the individual geologist’sannual performance appraisal. Consequently, toassess the status of mapping projects, we requestedthat the Ministry prepare and provide us with informationon the current status of projects for thepast three years, up to December 2004. From thisinformation, we noted that many projects were notbeing completed on a timely basis.The list of projects for the Precambrian GeoscienceSection included all those projects thatwere ongoing or completed in the past three years.This section is responsible for the geological mappingof the bedrock and mineral resources of thePrecambrian Shield. Of the projects listed, 46 werescheduled to be completed by December 2004. Atthe time of our audit, 10 of these projects were stillongoing and were, on average, 24 months behindthe scheduled completion dates. In addition, forthe 36 projects that were completed by December2004, 15 were completed late. We could notdetermine the full extent of the delay because thenecessary information was not readily available.However, we were able to calculate that, excludingthe project with the longest delay—which wasnine years—the average publication date was 16months after the scheduled completion date. Wewere informed that raw data and other componentsof a project may be released prior to project completion.The Ministry also noted that the reasonsfor the delays included shifting priorities, problemsencountered by a partner leading the project, andhaving to wait for peer reviews.We also reviewed the status of projects initiatedby the Sedimentary Geoscience Section. This sectionis responsible for mapping more recent geologicalareas of high mineral potential. The sectionlisted a number of projects that were ongoingor completed in the past three years. Seventy-five of these projects were to be completed byDecember 31, 2004. We noted that over 90% ofthese projects were completed on time, and only sixprojects were overdue or completed late. The averagedelay for the overdue and late projects was ninemonths.RECOMMENDATIONTo ensure that the Ontario Geological Surveyprovides, in a timely manner, the geologicalmaps that are essential to encouraging mineralexploration in the province, the Ministry should:• assess the costs and benefits of a programthat would achieve the mapping of all areasof significant mineral potential within therecommended 20-year cycle and, based onthis review, develop an overall mappingplan;•enhance its process for project evaluationand selection to include appropriate documentationand assessment of the availabilityof the financial and staff resources necessaryto complete the projects; and•develop a project management system tobetter monitor the status of projects, helpensure that projects are completed on atimely basis, and enable timely action whereprojects are falling significantly behind.

Mines and Minerals Program189MINISTRY RESPONSEThe Ontario Geological Survey (OGS) agreesto assess the costs and benefits of geosciencemapping programs that would achieve the mappingof all areas of significant mineral potentialwithin a 20-year cycle. However, given that theimplementation and success of such programsare resource and capacity dependent, the 20-year mapping cycle will remain a benchmarkrather than an absolute target.Current OGS operational plans have threeto-five-yearmapping plans for areas based onclient priorities and recommendations fromthe OGS Advisory Board. These work plans arereviewed annually by the OGS Advisory Boardto ensure that client and stakeholder needs arebeing met.The spring 2005 Ontario Budget included athree-year, $15-million initiative to undertakegeological mapping in the Far North to supplementOGS mapping activities. Criteria forensuring that mapping projects take place inpriority areas are being developed by the Ministrywith First Nations and mineral industryinput. Resource limitations always impact onthe Ministry’s ability to undertake more comprehensivemapping of Ontario’s geological base,but increased resources, such as those providedthrough add-on programs like the Far Northinitiative, will allow for an increase in the areabeing mapped.The OGS agrees that project selection decisionsshould be more rigorously documentedwithin the existing project evaluation and selectionsystem. The specialized skills and financialresources that are required to undertake aproject are part of the project evaluation system.However, as noted by the Auditor General, someprojects are routinely conducted through partnershipswith other groups and agencies, includingthe federal government and academia, aswell as through private-sector/municipal collaborations,where the Ministry does not haveultimate control over timelines. Nevertheless,the Ministry will review the existing projectevaluation system to identify procedures forimproving documentation and controls.With the current project managementinformation system, targets and deliverablesare reviewed through the staff performancedevelopment planning process. The Ministrywill review the existing system to identify measuresto improve overall project documentationand controls.Investment MarketingThe Ministry’s Information and Marketing ServicesSection administers trade and investment activitiesand is responsible for promoting mineral developmentopportunities in Ontario. The Ministry hasonly two staff dedicated to marketing activities, andit funds operating expenditures of $50,000 a yearin addition to $100,000 provided by the Ministry ofEconomic Development and Trade.The Ministry’s draft investment marketing strategynotes that the mining and exploration sectorsare flourishing international industries wherepolitical and geographic boundaries are no longerimpediments to investment opportunities. Thestrategy further states that this has created a competitivesituation, with jurisdictions throughout theworld undertaking aggressive marketing campaignsto attract an increased share of the global mininginvestment pool. In addition, the Ontario GeologicalSurvey Advisory Board, made up of industryrepresentatives, confirmed that there is considerableopportunity for the Ministry to take a moreaggressive approach to marketing Ontario miningopportunities internationally, with an emphasis onattracting new sources of mining investment andChapter 3 • VFM Section 3.09

1902005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09encouraging international mining companies toexplore in Ontario.We determined that the Ministry’s marketingefforts were substantially limited to participationin a number of investment attraction events, suchas domestic trade shows, symposiums, and conferences.The Ministry’s draft investment marketingstrategy proposed participation in internationaltrade missions and a print media advertising campaign.However, we were informed that, due to fiscalconstraints, the Ministry had not carried outthese and other elements of its marketing strategy.The Ministry has relied on the efforts of the Ministryof Economic Development and Trade to promoteOntario’s mining prospects internationally.The Resident Geologist Section of the OntarioGeological Survey has a number of local officesthroughout Ontario that monitor and facilitateexploration for mineral resources by providingexpert geological consultation and advisory services.This section maintains a database of investmentleads that includes the method of contact,work generated from the lead, and the mineralcommodity of interest. We were advised that informationon investment leads is not always followedup on, and, due to time and resource constraints,the database does not contain complete informationon the investments generated. Such informationwould be useful in assessing the effectivenessof the Ministry’s efforts to promote domestic andforeign investment in Ontario’s mining industry.The Ministry’s draft investment marketingstrategy outlines a number of potential initiativesand the costs associated with each. However, theplan outlines the expected benefits in very generalterms. A key to achieving success with its marketingeffort is to ensure that there is an adequate analysisof potential investment opportunities and a thoroughevaluation of marketing initiatives includingactual successes and demonstrated benefits. Withoutadequate feedback on strategies that successfullymarket Ontario as a good place to invest, it isdifficult for the Ministry to develop a focused marketingplan to attract investment into Ontario’s miningindustry.RECOMMENDATIONTo enhance the province’s attractiveness as amining investment jurisdiction and help facilitatedomestic and foreign investment in themining industry, the Ministry should:•review the marketing strategies employedin other jurisdictions to help determine thepotential costs and benefits of an expandedmarketing program for Ontario;•assess the feasibility of enhancing its investmentleads database to help improve itsinvestment marketing efforts; and•develop an investment marketing plan thatincludes a full analysis of the costs andexpected benefits of the proposed initiatives.MINISTRY RESPONSEThe Ministry agrees that cross-jurisdictionalbenchmarking and a review of marketing strategiesin other jurisdictions would be beneficial indetermining the scope and thrust of the Ministry’smarketing plan. Such a review will be undertakento determine the potential costs and benefits ofan expanded marketing program in Ontario. Inaddition, as part of a multi-sectoral marketingapproach, the Ministry is working closely withthe Go-North Investment team, a new initiative tomarket the North’s inherent strengths, announcedby the Ontario government in its spring 2005Ontario Budget.The Ministry supports the recommendationto assess the feasibility of enhancing its investmentdatabase. Currently, the database is usedby the Ontario Geological Survey to documentmineral-sector investment attraction. The databasewill be reviewed to enhance the investmentinformation available.

Mines and Minerals Program191The Ministry analyzed the costs associatedwith its international and domestic investmentmarketing plans in its investment marketingstrategy. Implementation and delivery of theseplans will be dependent on the resources available.The Ministry will continue to improve itsmethodologies and procedures for monitoringand documenting both the short- and long-termimpacts of its marketing initiatives.Investment Incentive ProgramsOver the past several years, the Ministry has introduceda number of programs to promote mineralinvestment and development opportunities inOntario. These programs are designed to expandand improve Ontario’s geoscience infrastructure byuncovering new mineral exploration targets andhelping mining companies develop advanced technologiesfor mineral exploration. We reviewed twoof these programs—Operation Treasure Hunt andthe Ontario Mineral Exploration TechnologiesProgram.Operation Treasure Hunt was established in1999 to provide additional funding to the OntarioGeological Survey to perform geophysical andgeochemical surveys. This additional work wasexpected to produce geological data and informationto help identify new targets that wouldattract mineral investment and stimulate mineralexploration in Ontario. The Ministry spent a totalof $29 million on Operation Treasure Hunt. In2002, after the program ended, the Ministry commissioneda survey of prospectors, explorationgeologists, and exploration managers. The resultsindicated that the mining industry was generallysatisfied with the program, and anecdotal evidencesuggests that there was an increase in mineralexploration. However, there was no assessment ofhow successful the program had been in increasingmineral investment and exploration in Ontario.The Ontario Mineral Exploration TechnologiesProgram was initiated in 2000, ran for fouryears, and was administered jointly by the Ministryand Laurentian University. The program providedfunding to develop new technologies andmethods to enhance the efficiency of exploration.The ultimate goal was to attract new explorationinvestment to help maintain Ontario’s status as afavourable mining jurisdiction. The Ministry spenta total of $8 million on the program. The Ministryestablished performance measures for the program,including the percentage of funds leveraged on programinvestments, the number of technical productsdisseminated to the public, and the number oforganizations that used the information or technologydeveloped. However, these performance measuresdo not assess the program’s ultimate goal ofattracting new exploration investment to Ontario.The Ministry needs to better monitor the long-termimpact of such programs to assess the success ofthe program and provide useful information for possiblefuture initiatives.RECOMMENDATIONTo help achieve the full benefits of its investmentincentive programs, the Ministry shouldensure that the success of each program inachieving its goals is evaluated so that thisinformation will be available in planning futureincentive initiatives.MINISTRY RESPONSEMechanisms for measuring the impact of investmentincentive programs, such as OperationTreasure Hunt (OTH) and the Ontario MineralExploration Technologies (OMET) program,have been employed. In the case of OTH,an external assessment with respect to investmentimpacts was conducted, and in the caseof OMET, targeted evaluation is currentlyChapter 3 • VFM Section 3.09

1922005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09underway with the support of the programdirector from Laurentian University.Monitoring of investment attraction will beundertaken with respect to the new three-year,$15-million Far North Geological MappingInitiative that was announced in the spring 2005Ontario Budget.ENVIRONMENTAL PROTECTIONOntario’s Living LegacyIn 1999, the government announced Ontario’s LivingLegacy, which was a land-use strategy to helpensure the long-term health of the province’s naturalresources. Ontario’s Living Legacy, a responsibilityof the Ministry of Natural Resources, created 378new provincial parks and protected areas totalling2.4 million hectares. However, many of the resultingprotected areas overlapped pre-existing mininglands (claims, leases, and licences). These overlappingareas were designated as forest reservesto allow mining activity and access to the lands tocontinue. The intention was that, following exploration,mining, and rehabilitation, portions of landdesignated as forest reserves would be added to theadjoining or surrounding protected areas.When Ontario’s Living Legacy was approved,85,000 hectares of staked mining land, designatedas forest reserves, were within or adjacent to newlyprotected areas. Between 1999 and 2002, twothirdsof these staked mining claims lapsed and willnot be made available for future claims staking. Forthe remaining lands, the Ministry, along with theMinistry of Natural Resources and key stakeholdergroups, began working on a disentanglement process.The key stakeholders were asked by the ministriesto propose solutions, and, in July 2003,recommendations were made to resolve the statusof most of the remaining mine lands. As of the timeof our audit, those recommendations had not beenimplemented.Based on the most recent information available,there were 66 areas of mining lands, covering29,000 hectares, being reviewed; they contain634 claims and 179 leases. The Ministry informedus that there are currently no mines operating onany of these lands. However, it has been six yearssince the protected areas and forest reserves wereestablished. Without a resolution regarding thestatus of mining rights within these areas, therecould be a negative impact on the economic stabilityof the areas. Such uncertainty is a strong deterrentto exploration investment. In addition, theMinistry is faced with lawsuits and notices of claimtotalling $4.6 million because of lost economicopportunity by persons holding mining rightswithin or adjacent to the newly protected areas.Some of the protected areas contained criticalhabitat for fish, wildlife, and other vulnerable naturalresources, such as species at risk of extinction.Neither the Ministry nor the Ministry of NaturalResources is monitoring the mining lands withinand adjacent to these protected areas to ensure thatany exploration or future mining activities have littleor no impact on the natural resources that arebeing protected. Any environmental damage wouldbe contrary to the purpose of Ontario’s Living Legacyand the Mining Act, which requires that miningactivities be carried out in such a manner as to minimizethe impacts on the environment.RECOMMENDATIONTo help balance the economic benefits of miningactivities with the protection of the environment,the Ministry should:•resolve the status of the remaining mininglands designated as forest reserves withinand adjacent to protected areas; and•work with the Ministry of Natural Resourcesto ensure that any mining activities within

Mines and Minerals Program193designated areas take into consideration theprotection of any known environmentallysensitive natural resource.MINISTRY RESPONSEThe status of the remaining lands designated asforest reserves within Ontario’s Living Legacy(OLL) has been resolved, pending final publicinput as part of the site regulation process onthe proposed solutions for the remaining 66 OLLsites. The Ministry of Natural Resources administersthe OLL site regulation process, and it iscontinuing to work through this process.The protection of the natural environment onCrown land and forest reserves is governed bynumerous pieces of provincial and federal legislation,such as the Public Lands Act, the Lakesand Rivers Improvement Act, the Fisheries Act, theNavigable Waters Protection Act, and the MiningAct. The responsible provincial and federal regulatoryministries and agencies carry out monitoringand enforcement. The Ministry’s involvementand responsibilities are triggered at the advancedexploration stage of the mining sequence, andmeasures will be in place through the Mining Actto address and mitigate any issues or concernsraised with respect to protecting the naturalenvironment within forest reserves.Rehabilitation of Operating MinesThe Mining Act requires that all mines be rehabilitatedso that the site is restored to its former conditionor is made suitable for a use that the Ministrysees fit. Mining activities can cause significantimpacts on the environment, potentially affectinggroundwater and surface water, aquatic life, vegetation,soil, air quality, wildlife, and human health.To mitigate these environmental risks and reducethe financial burden on the public to clean up suchsites, the Ministry is responsible for ensuring thatmine sites in Ontario are developed, operated, andclosed in accordance with sound environmental practices.To help accomplish this, the Ministry reviewsmine-closure plans, monitors and inspects rehabilitationwork, and obtains financial assurance to coverthe related closure costs.Mine-closure PlansBefore a company commences mining operations orundertakes advanced exploration, it must submita closure plan to the Ministry. Regulation 240/00under the Mining Act outlines a comprehensive listof information that is required in a closure plan,including details on the progressive rehabilitationmeasures that are to be taken throughout the life ofthe project as well as at closure. This information isto be certified by the mine owner’s noting that theclosure plan complies with the Mining Act and thatthe owner relied on qualified professionals in preparingthe closure plan. An owner who has filed acertified closure plan is bound by the Mining Act tocomply with the plan. Subsequently, the Ministrycan monitor mining activity for compliance withthe plan.Based on information provided by the Ministry,there were 144 mines for which a closure planshould have been in place. As of January 2005,the Ministry had received and filed 126 closureplans. The Ministry’s review process for closureplans begins with a basic screening to ensure thatthere are no obvious deficiencies and that sufficientfinancial assurance has been received. The plan isthen posted on the Environmental Bill of Rightsregistry to obtain the public’s input. The plan is alsowidely distributed for input to several organizations,including other Ontario ministries and thelocal municipality. The Ministry then performs amore detailed review of the plan to verify that allthe required components of the plan are included.Finally, all input is reviewed and a decision is madeChapter 3 • VFM Section 3.09

1942005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09to file the plan or return the plan for revision orrefiling.As of March 2005, contrary to the Mining Act,closure plans were not in place for 18 mine sites.Sixteen of these mines are no longer in operation.A closure plan had been received for 12 of thesemines, but the plans were returned with a requestfor revisions or for the provision of adequate financialassurance. In four other cases, the Ministryhad negotiated the receipt of closure plans fromnew owners of the mine sites. One mine owner wasnot requested to submit a plan, and another wascharged with and convicted of failure to submit aclosure plan. Although the Ministry has activelypursued closure plans for most of these sites, theseplans have been outstanding since 1991, whenthe requirement came into effect. Without closureplans in place, the Ministry does not have detailedrehabilitation specifications certified by qualifiedprofessionals. Consequently, the Ministry cannotadequately monitor the site for compliance toensure that the site is maintained and rehabilitatedin an environmentally responsible manner.In accordance with the Mining Act, the entireclosure-plan review process must be completed bythe Ministry within 45 days, which is an extremelyshort time frame, given the complex nature of manyclosure plans and the numerous steps required toprocess these plans. We reviewed this process andfound that documentation was inconsistent. Somefiles detailed the assessment of each mandatoryrequirement; however, for most files, documentationof the review process was minimal. The implementationof a standardized review process withsupporting documentation, such as a checklist ofthe requirements, would assist ministry managementin ensuring that all the required steps in thereview process were completed.Rehabilitation Monitoring and InspectionThe Ministry has two mine-rehabilitation inspectorsmonitoring the activities of mining operationsto determine the nature and extent of any existing orpotential mine hazards. They also inspect any workrelated to rehabilitation to ensure that it is completedaccording to the approved closure plans. Allrehabilitation work is to be carried out in accordancewith the standards, procedures, and requirementsof the Mine Rehabilitation Code of Ontarioas detailed in Regulation 240/00 under the MiningAct.We reviewed the Ministry’s monitoring andinspection of ongoing mine-rehabilitation andmine-closure activities. We found that the Ministry’sinspections had identified significant concerns—forexample, physical hazards and theleaching of minerals into the environment. Theseconcerns were communicated to mine ownersfor corrective action; in some cases where problemswere not resolved, additional actions weretaken, including prosecution. However, we noted anumber of areas where the monitoring and inspectionprocess could be improved:•A ministry report indicated that more than 200inspections or site visits had been performedover the past five years. However, we noted thatthe Ministry’s list of the work that had beendone was neither accurate nor complete. Anaccurate list of inspections and site visits is avaluable tool to enable management to monitoroverall inspection activity.•The Ministry informed us that it attempts toinspect every site over a two-to-three-yearperiod. We noted that, based on the informationprovided, almost half the sites had not beeninspected in the past five years.•The Ministry employed an informal risk-basedapproach to selecting mine sites for inspections.A more formal approach would ensure that allsites are inspected at least once over a specifiedtime frame and that inspection efforts aredirected to those sites that pose the greatest riskto public health and safety and the environment.

Mines and Minerals Program195Figure 1: Financial Assurance for Mine-closure Plans, March 2005Source of data: Ministry of Northern Development and Mines# of Plans Having # of Plans Having Fully Total AssuranceType of Financial Assistance Predominantly This Type or Partially This Type ($ 000)corporate financial test 17 17 585,123letter of credit 65 65 122,296sinking fund 8 19 15,360cash 31 38 14,466surety bond 3 3 6,440pledge of assets 1 8 5,993letter of guarantee 1 1 27Total 126 151 749,705• Inspection documentation needs to be improvedto demonstrate to ministry management thatinspections have considered all the requirementsof the Mine Rehabilitation Code. In addition,there was insufficient evidence that all the concernsnoted during inspections were followed upon and resolved.Financial AssuranceSince mining activities can have a significant impacton the environment, companies are required to providethe Ministry with financial assurance to ensurethat if they are unable or unwilling to clean up asite after mining activities cease, sufficient fundsare available to restore the site to a suitable use.There are several different types of financial assuranceallowed by the Mining Act. Figure 1 shows themain type of financial assurance associated witheach of the 126 approved closure plans and thetotal amount provided for by each type.Prior to filing closure plans, the Ministry reviewsthe plans for completeness and verifies that therequired financial assurances have been received.It does not, however, assess or verify projected estimatesof closure costs for which the financial assurancesare made, since doing so for each plan wouldrequire a high level of technical expertise. Regulation240/00 under the Mining Act makes it theresponsibility of the mine owner to certify that theamount of financial assurance provided for in theclosure plan is adequate and sufficient to cover thecost of rehabilitation. No independent corroborationis required. Consequently, the Ministry has littleevidence to substantiate the sufficiency of thefinancial assurances provided. For example, thecosts originally estimated in the closure plan forone mine were $551,000 in 1993. The plan was notfiled because the owner could not provide financialassurance. Nevertheless, the mine owner had significantlyunderestimated closure costs. Since themine is no longer operational and the company isnot able to pay closure costs, the Ministry engageda consultant in 2004 who estimated the closurecosts to be $9 million. The Ministry may ultimatelybe required to rehabilitate this site at the taxpayers’expense.In addition, the Ministry does not have a processfor periodically reviewing the original closurecostestimates during the life of a mine to assesswhether the estimates and financial assurancesare still sufficient to properly close out the mine.We noted that other jurisdictions require that theamount of financial assurance be reviewed annuallyand, if necessary, adjusted to reflect any changes.Without a periodic review of closure costs, financialassurances provided may be inadequate, and thiscould result in a potential liability for the taxpayer.Chapter 3 • VFM Section 3.09

1962005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09We reviewed the various forms of financial assuranceprovided to the Ministry. We found that ministrystaff endeavoured to collect and maintainadequate financial assurances. We also noted that,while there is little risk associated with cash, lettersof credit, surety bonds, and letters of guarantee, theother forms of financial assurances received maybe inadequate to cover rehabilitation costs should acompany be unable or unwilling to fulfill its cleanupresponsibilities. Specifically, we noted the following:• Companies whose bonds are rated Triple B orhigher meet the financial test established in theMining Act and do not have to provide financialassurance. We were informed by the Ministrythat Ontario is the only province in Canadathat accepts the corporate financial test form ofassurance, which constitutes the major portionof total financial assurance provided. This formof financial assurance essentially amounts toself-assurance.A consultant hired by the Ministry in 1996to review self-assurance found that the risksassociated with granting such a privilege to amining company are considerable because theMinistry is effectively assuming the status of anunsecured creditor. Any failure of these miningcompanies could mean a significant liabilityfor the province. Also, it could be difficult toobtain another form of financial assurance oncea company is experiencing financial difficultyand can no longer meet the financial test. Wenoted that one mining company with a Triple-Brating, which was required to provide financialassurance for over $94 million, had been placedon a credit watch by one of the credit rating servicessince September 2004. Its status had notchanged at the completion of our audit. TheMinistry was monitoring the company’s creditrating to ensure that it continued to meet thefinancial test.Experience in other jurisdictions has shownthat mining companies that have gone bankruptcontinued to meet the financial test right up tothe time they filed for bankruptcy protection.Because significant mine-rehabilitation costs arebeing borne by governments after companiesthat offered self-assurance have gone bankrupt,some jurisdictions have eliminated the useof self-assurance. For example, the Bureau ofLand Management in the United States has notaccepted any new corporate self-assurance since2001.•We reviewed the 19 companies that pay financialassurance into a sinking fund (that is, acertain amount of funds are deposited periodically),including the eight companies that payinto a sinking fund as their predominant formof financial assurance. We found that most ofthese companies had paid into the sinking fundas required. However, four companies had gonebankrupt without having paid about $600,000into the fund. Consequently, the Ministry mayhave to assume some of the rehabilitation costsfor the mines involved.•Companies may pledge assets, such as miningequipment, as financial assurance. We notedthat assets had been pledged for eight closureplans, including the mine where assets werethe predominant form of financial assurance.We noted that, for half of these plans, the Ministryobtained an independent appraisal of theassets. However, the Ministry did not verify thatthe companies owned the assets and that theywere not already pledged for some other securityinterest. Nor did the Ministry periodicallydetermine whether the assets still existed andhad sufficient value to cover the closure costs. In2002, the Ministry requested a re-evaluation ofthe assets pledged for one mine and requestedbeing given first-ranking security for theseassets, noting that this is a normal precautionwhere assets are used as collateral. At the timeof our fieldwork, the mine owner had not compliedwith this request.

Mines and Minerals Program197RECOMMENDATIONTo help ensure that all mining lands are rehabilitatedso that each site is restored to either itsformer condition or another suitable use andthat sufficient funds will be available to financethe cleanup, the Ministry should:•mine sites as required by the Mining Act;•ensure that closure plans are in place for allimplement a standardized review process toensure that all the requirements for closureplans are completed;•develop a risk-based approach to its minerehabilitationinspection process, keepaccurate records of all inspections performed,and enhance inspection documentationto demonstrate that all applicableMine Rehabilitation Code requirements havebeen met;•review periodically whether the closure-costestimates and financial assurances are stillsufficient to properly close out the mine; and• evaluate the adequacy of the current formsof self-assurance to mitigate the risk that thetaxpayer will have to pay to clean up minesites.MINISTRY RESPONSEIt has been 10 years since major policy changeswere made that affected the mine-closure planprocess. The Ministry is therefore reviewing theprocess as part of its overall stewardship of mineralresources in the province. In this regard:•The Ministry will pursue all legal avenues toensure that closure plans are in place for allmine sites as required by the Mining Act.• While the Ministry has a review process,we will work to improve standardizationand documentation of the process to ensurethat the requirements for closure plans arecompleted.Abandoned Mines Rehabilitation ProgramOntario has had a long history of mining, with theresult that some of Ontario’s abandoned mine sitesare more than a century old. Ownership of manyof these sites has reverted to the Crown, and theyhave not been closed out in a manner that meetstoday’s environmental standards. To address publicsafety and environmental concerns, the Ministryintroduced the Abandoned Mines RehabilitationProgram in 1999. The program provides fundingfor technical assessments and rehabilitation workto restore these sites. The rehabilitation carried outunder the program will enhance the availability ofgreen space, protect wildlife habitat, and returnpreviously hazardous and polluted lands to reasonableand productive uses. Since 1999, $48 millionhas been spent to rehabilitate abandoned minesites.• The Ministry will improve its existing riskbasedapproach to its mine-rehabilitationinspection process. In addition, we willenhance the documentation for inspectionsperformed.•Closure-cost estimates and financial assuranceswill be reviewed periodically to ensurethat they are still sufficient to properly closeout the mine site.•Ontario is the only jurisdiction using the multipleinvestment-grade bonds rating approach.We agree that the financial tests used in otherjurisdictions have proven to be flawed. We willcontinue our practice of closely monitoringcompanies to ensure conformance with existinglegislative requirements.Abandoned Mines Information SystemThe Ministry’s Abandoned Mines Information Systemcontains basic data on all known abandonedChapter 3 • VFM Section 3.09

1982005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09and inactive mine sites located on both Crown andprivately held lands within the province. Informationstored on each mine site includes site name,location, period that the site was active, minefeatures known to be located on the site, knownhazards and their level of protection, inspectionsperformed, and any remedial action taken. At thetime of our audit, the system had information onmore than 5,600 abandoned mine sites containingover 16,000 mine features, such as mine shafts,buildings, equipment, and tailings (the waste producedby the mining or refining process). The Ministryestimates that 4,000 of these mine sites arepotentially hazardous to public health and safety,and that approximately 250 of these sites may posean environmental risk due to the potential for theleaching of minerals and other contaminants frommine tailings.In 1993 and again in 2000, the Ministry hiredconsultants to perform site assessments for all theknown abandoned mine sites. The main objectivesof these assessments were to provide informationon each site’s location, access, and ownership,along with a description of the physical mine hazardsat each site. However, about half of the 3,800site assessments done in 2000 had still not beenentered into the system. In addition to being incomplete,the system does not contain informationon chemical contamination, which is often a byproductof mining operations. Such information isnecessary to manage abandoned mine sites so as toensure that precautions are taken to prevent contaminationof the environment through a naturalprocess, such as erosion.Prioritizing Abandoned Mines for RehabilitationThe Ministry attempts to rehabilitate abandonedmine sites based on their potential impact on publichealth, public safety, and the environment. Wenoted that the rehabilitation of abandoned mineshas generally been reactive, responding to publiccomplaints or dealing with an emergency whenenvironmental degradation occurs at an abandonedmine. In the early 1990s, the Ministry developed asystem to help set priorities and rank abandonedmine sites according to the greatest need forrehabilitation. The Ministry discontinued this systemin 1996 since it did not produce reliable rankingsof the risks associated with each mine site.To make effective resource allocation and fundingdecisions, management requires current,accurate, and complete information. At the completionof our audit, the Ministry informed us thatit had not had the resources to further developa priority-rating system. We found that becausethe information in the Abandoned Mines InformationSystem was incomplete and there was notan effective risk-based model for the AbandonedMines Rehabilitation Program, it is difficult to identifyand objectively allocate resources to those sitesthat could have the most detrimental effect on theenvironment.Abandoned Mines Rehabilitation StrategyThe Ministry did not have a long-term strategy formanaging, monitoring, and rehabilitating abandonedmine sites, including the estimated cost andthe time required to complete the rehabilitation. In1993 an inter-ministerial committee, made up offive ministries along with the Ontario Mining Association,estimated that the cost of cleaning up allabandoned mine sites would be $300 million.This estimate, now over 10 years old, was onlya preliminary figure, pending further investigationand assessment of the mine sites. The Ministryhas noted that, based on its recent experience inrehabilitating mine sites, the total cost to restoreabandoned mine sites would be substantially higherthan the 1993 estimate.As well, the 1993 estimate of $300 million torehabilitate abandoned mine sites did not includethe costs associated with the cleanup of any chemicalcontamination, which can be considerable.For example, the Ministry estimates that the costs

Mines and Minerals Program199to rehabilitate two abandoned mines alone wouldbe $75 million, with the majority of these fundsspent on dealing with chemical contamination frommine tailings. To determine such costs for all abandonedmine sites would involve hydrology studiesand the testing of the water and soil around abandonedmine sites. Also, an assessment to determinewhether there were any imminent environmentalthreats would be necessary to effectively managethe risks associated with abandoned mines.RECOMMENDATIONTo more effectively manage the rehabilitation ofabandoned mines in the province and to protectpublic health, public safety, and the environment,the Ministry should:•ensure that information on all abandonedmines is entered into the Abandoned Minesassess the potential for chemical contamina-Information System;•tion at each site; and•develop a long-term strategy for managing,monitoring, and rehabilitating abandonedmine sites that includes an updated estimateof the funds required, a priority ranking ofall sites based on risk, and the expected timeframe to complete the rehabilitation, giventhe anticipated level of funding.Ministry’s records include approximately 250sites with associated tailings facilities, indicatingthat some level of mineral processingoccurred at some point during the life of thesesites. Mineral-processing sites have the highestrisk of potential environmental effects. A jointgovernment review of Crown-owned or Crownleasedsites with tailings further indicated thatapproximately 30% of the sites reviewed exhibitedsome degree of off-property water-qualityeffects, none of which were targeted as highpriorityconcerns. The Ministry will conduct ascreening of the balance of the 250 sites andbased on results, sites will be ranked in order ofpriority for cleanup, and a cost estimate will beestablished. A reallocation of a portion of theabandoned mines funding will be necessary tocarry out this assessment.The Ministry is in discussions with the miningindustry, which has indicated a willingness toparticipate in this historic-site cleanup. The governmentrecognizes the importance of addressingabandoned mine rehabilitation and, in July2005, announced an allocation of $10 millionannually. With sustained, stable funding, theMinistry is now able to improve its ranking systemand long-term remediation plans.Chapter 3 • VFM Section 3.09MINISTRY RESPONSEThere are 5,600 known abandoned mine sites.Location data has been corrected and enteredfor all sites as a first priority. Additional informationfrom the most recent site assessmentswill be entered by the end of 2006.While modern mining operations are strictlymonitored by government and industry to mitigateenvironmental and safety issues, at thetime of the audit, the Ministry had identified5,600 abandoned mine sites dating from theearly 1900s. Of these 5,600 known sites, theREVENUE COLLECTIONThe Mining Act provides for the application of miningfees, taxes, rents, and royalties. The Ministersets the fees required to be paid for items such asprospectors’ licences, lease applications, and licencerenewals. The regulations to the Mining Act (Act)outline the rates to be charged for taxes and rents onmining patents, and for leases and licences. Pursuantto the Act, the Ministry also charges royalties forsalt production. In the 2003/04 fiscal year, the Ministrycollected $5.4 million: royalties ($2.2 million),

2002005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.09taxes ($1.8 million), rents ($1.0 million), and miningfees ($0.4 million).We reviewed the Ministry’s revenue collectionefforts and found that royalties and miningfees were collected as required, and there were noappreciable outstanding debts.However, we noted a number of concernsrelated to the invoicing and collection of taxesand rents for patented, leased, and licensed mininglands. The registered holders of these lands arerequired to pay taxes of $4 per hectare for patentedlands, rents of $3 per hectare for leased land, andrents of $5 per hectare for licensed lands. There areapproximately 19,000 patents (400,000 hectares),3,600 leases (212,000 hectares), and 1,100 licences(22,000 hectares). Our specific concerns related totaxes and rents are as follows:•The Ministry does not effectively control andpursue its outstanding accounts receivable balancesto ensure timely collection. At the time ofour fieldwork, there were accounts receivabletotalling $2.2 million, of which $2 million weremore than two years old. The Ministry’s generalpractice is to not undertake any collection effortsfor the first two years that an account is overdue.• In accordance with the Act, the Ministry chargesan interest penalty on the outstanding taxes onpatented mining lands. However, contrary tothe Act, the Ministry does not charge an interestpenalty for outstanding rent on leased andlicensed mining lands. Consequently, we estimatethat the Ministry could have increasedrevenues by approximately $165,000 on theseoutstanding rent balances.•If the payments of rents or taxes are not made,the Ministry has the right under the Act to requirethe forfeiture of patented lands and to terminatemining leases and licences. However, wenoted that the Ministry did not pursue debtors toensure the forfeiture of their mining rights on atimely basis. We noted 2,700 patents, leases, andlicences where the claim-holder’s mining rightswere in arrears for more than two years. Over900 of these patents, leases, and licences hadbeen in arrears for more than 10 years.•The current fee structure has been in place since1997 without any increases to reflect inflation orcomparable fees charged in other jurisdictions.We noted that fees charged by Ontario were generallylower than those charged in other jurisdictions.For example, the annual lease/rent feesin other Canadian jurisdictions ranged from$10 to $37 per hectare, while Ontario charges$3 per hectare. An increase in this one fee to $10could increase annual revenues by more than$1 million.RECOMMENDATIONTo help ensure the receipt of all the funds it isentitled to from the taxes and rents levied oncharge the prescribed interest rate for over-mining lands, the Ministry should:•basis;•due rent on leases and licences;•pursue outstanding accounts on a timelyon a timely basis, initiate procedures torevoke the mining rights of owners that havenot paid the required taxes and rents; and•review the appropriateness of fees chargedfor mining rights.MINISTRY RESPONSEThe Ministry appreciates the Auditor General’srecognition that mining fees and royaltieswere collected as required and that there wereno appreciable outstanding debts. In regard totaxes and rents levied on mining lands, althoughthe Ministry’s current information database andprocesses are extremely complex, the Ministryhas commenced a review to address the largeroutstanding accounts. The Ministry has also commencedan action plan for a project to upgradeand enhance our existing information database

Mines and Minerals Program201and revenue collection system. The Ministrywill examine options with respect to prescribinginterest rates for overdue rent on leases andlicences, and the Ministry will also assess theappropriateness of fees charged for mining rightsin the context of Ontario’s business and competitiveclimate.MEASURING AND REPORTING ONPROGRAM EFFECTIVENESSThe goal of the Mines and Minerals Program is tobuild a provincial minerals sector that is healthy,competitive, and sustainable. In addition, the MiningAct requires that the development of mineralresources be carried out in such a manner as tominimize the impacts of mining activities on publichealth and safety and the environment. However, toassess its performance, the Ministry reported onlytwo measures: Ontario’s global and national rankingfor mineral-sector attractiveness, and Ontario’sshare of Canadian exploration investment (as apercentage of total Canadian exploration expenditures).These were last reported in the Ministry’s2003/04 Business Plan.The Ministry advised us that its 2005/06 resultsbasedplan would include revised performancemeasures. However, we noted that the measureswere essentially the same as those reported in thepast, either publicly or internally. The existing performancemeasures are mainly economic and donot reflect all aspects of the Ministry’s goals andresponsibilities. For instance, there are no performancemeasures for the long-term-sustainability goalor for minimizing the impacts of mining activitieson public health and safety and the environment.With respect to sustainability, the World Commissionon Environment and Development definedsustainable development as “development thatmeets the needs of the present without compromisingthe ability of future generations to meet theirown needs.” To meet this objective, planning forthe development of a mine must consider how tomaintain the quality of the environment, humanwell-being, and economic security. With respect toenvironmental protection, we noted that anotherCanadian jurisdiction requires its mining programto track and report on the achievement of a highstandard of environmental protection for its minesites. If the Ministry were to report in this mannerin these areas, it would be better able to determineif mining operations are maintaining the integrityof ecosystem functions, as well as determine thephysical, chemical, and biological stress imposed bymining operations on the environment.RECOMMENDATIONThe Ministry should develop more comprehensiveindicators for measuring and reporting onthe Mines and Minerals Program’s effectivenessin ensuring that Ontario’s mining sectoris healthy, competitive, and sustainable and inminimizing the impacts of mining activities onpublic health and safety and the environment.MINISTRY RESPONSEAs part of the government’s Performance MeasureImprovement Plan, the Ministry has revisedsome measures and is working on additionaloutcome-based measures that indicate howthe Mines and Minerals activities contribute toachieving the objectives and priorities of theDivision.Chapter 3 • VFM Section 3.09

Chapter 3Section3.10Office of theChief Election OfficerChapter 3 • VFM Section 3.10BackgroundThe Office of the Chief Election Officer, known asElections Ontario, is an independent agency of theprovince’s Legislative Assembly. Under the ElectionAct, the Lieutenant Governor in Council appointsa Chief Election Officer on the recommendation ofthe Legislative Assembly. The responsibilities of theChief Election Officer include:•the organization and conduct of general electionsand by-elections in accordance with theprovisions of the Election Act and the RepresentationAct, 1996; and•the administration of the Election Finances Act,which regulates political contributions, spendinglimits, party/candidate registration, andadvertising.Elections Ontario states that its mission is “toguarantee the democratic voting rights of Ontarioelectors, assist in making the finances of politicalinterest transparent and to ensure efficient, costeffectiveand non-partisan administration of theelectoral process.”In 1998, amendments to the Election Act addeda requirement that the Chief Election Officer establisha permanent register of electors for Ontariothat must be updated for all of Ontario “at leastonce in a calendar year.”As Figure 1 illustrates, total expendituresincurred by Elections Ontario related to the ElectionAct more than doubled in the four years leadingup to and including the 2003 election compared tothe four years leading up to and including the 1999election. Figure 1 also includes expenditures for the2004/05 fiscal year and projected expenditures forthe following three years, according to figures ElectionsOntario supplied to the Ministry of Finance inApril 2005.With the approval of the Board of Internal Economy(an all-party board chaired by the Speaker),Elections Ontario has increased the number of itspermanent staff positions from 19 in 2002 (whichhad been the staff complement for a number ofyears) to 61 currently.This was the first value-for-money audit conductedat the Office of the Chief Election Officersince 1985.Audit Objective and ScopeOur audit objective was to assess whether ElectionsOntario was being managed with due regard202

Office of the Chief Election Officer203Figure 1: Elections Ontario’s Expenditures Under the Election Act, 1996/97–2004/05 (Actual) and 2005/06–2007/08 (Projected)Source of data: Elections Ontario($ million)7570656055504540353025201510501996/97*election year**projected election yearto economy. Our audit focused on the categories ofexpenditures where increases were the most significant—namely,consulting services and travel andhospitality.Our audit criteria were based on the specificpolicies of Elections Ontario and on general governmentpolicies for the prudent management of suchexpenditures.Summaryactual election fees and expensesactual salaries and benefitsprojected election fees and expensesprojected salaries and benefits1997/981998/991999/2000*2000/01As a legislative office, Elections Ontario is independentof government. However, unlike other legislativeoffices, it is not required by its enablinglegislation (the Election Act) to submit a budget2001/022002/032003/04*to, or receive approval from, the Board of InternalEconomy for the vast majority of its expenditures.Furthermore, there is also no requirement for ElectionsOntario to report annually on its activities.The results of our audit work indicated thatmore care is needed in certain areas in the spendingof taxpayer funds. In particular, we noted that ElectionsOntario:•2004/052005/062006/07did not have adequate procedures for acquiringconsulting services, as we noted a number ofinstances where:•open access;•to significant increases in cost; and•the process followed did not ensure fair andassignments were not clearly defined, leadingassignments or their extensions did not havea written contract or agreement;2007/08**Chapter 3 • VFM Section 3.10

2042005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10• had not assessed whether running its own publiccall centre to handle calls from the public wasthe most economical means of providing theservice;•did not adequately consider all options to ensurethat the $4.4 million paid over 49 months tolease computer equipment was cost effective;and•did not always ensure that hospitality and travelexpenses incurred by its employees were reasonableand appropriate.In several other provinces and at the federallevel, chief elections officers report annually totheir respective legislatures, and some include allor most of their expected expenditures in an annualappropriation request. Given this, as well as the factthat Elections Ontario’s annual expenditures haveincreased substantially over the last few years—andwith budgeted expenditures over the next threeyears projected to be approximately $119 million,of which approximately $100 million would notbe submitted to the Board of Internal Economy forapproval—increased legislative oversight of ElectionsOntario through the processes of appropriationsapproval and annual reporting warrantsconsideration.Detailed Audit ObservationsACCOUNTABILITYUnder the Election Act (Act), Elections Ontario isrequired to submit an annual budget to the Boardof Internal Economy regarding permanent staffsalaries and benefits. For other expenses, which areclassified as election fees and expenses under theAct, Elections Ontario is not required to submit anannual budget to the Board or receive approval forthese expenditures. Over the past four years, theseother expenditures have accounted for 92% of ElectionsOntario’s expenditures. Approximately onethirdof this amount is prescribed in a regulationunder the Act, which sets the fees and allowableexpense reimbursements paid to electoral officers.The Chief Election Officer is required to reportannually on the affairs of his or her office in relationto the Election Finances Act. However, there is norequirement for annual reporting on the activitiesor expenditures of Elections Ontario under the ElectionAct, which account for the majority of ElectionsOntario’s operating expenditures.We noted that in certain provinces, the ChiefElectoral Officer is required to include all expendituresof the office when submitting the annualbudget for approval, and some are requiredto report annually on work done by the office.Specifically:•British Columbia requires that its Chief ElectoralOfficer submit an annual budget, including alladministration and election expenses, to a selectall-party standing committee for approval. TheChief Electoral Officer is also required to presentto the Speaker an annual report on the workdone under his or her direction and, after eachelection or plebiscite (that is, each direct vote ofall electors on an important public question), areport on the proceedings, the results, and thecosts.•In Alberta, the Chief Electoral Officer mustannually submit expenditure estimates to astanding committee for approval. The ChiefElectoral Officer is also required, immediatelyfollowing each enumeration, general election, orby-election, to prepare a report to the standingcommittee.•Manitoba requires that its Chief Electoral Officersubmit to its Legislative Assembly ManagementCommission an annual budget that mustinclude, in addition to salaries and benefits forpermanent staff, operating costs including rent,phones, and photocopiers. Not included areelection preparation and other direct electioncosts, which are included in the estimates for

Office of the Chief Election Officer205information purposes only. The Chief ElectoralOfficer is also required to issue to the Speakeran annual report on the work done under thedirection of the Chief Electoral Officer and, aftereach election, a report about the conduct of theelection.•Saskatchewan requires that its Chief ElectoralOfficer submit an annual budget to its Board ofInternal Economy for review. The Board maymake any alterations to the estimate that it considersproper. The budget includes expenses forongoing administration and annual electoralrelatedactivities, such as expenses relating totravel and business, ongoing contractual services,and capital assets. Direct expenses for ageneral election or a by-election are not includedin the budget. The Chief Electoral Officer is alsorequired to submit an annual report describinghis or her progress and activities in the previousyear.We also noted that the Office of the Chief ElectoralOfficer of Canada (Elections Canada) annuallypublishes a report on its plans and priorities, whichincludes estimates of its forecasted expenditures forthe upcoming year. After each fiscal year, ElectionsCanada publishes a performance report that discussesits key achievements and progress against itsplans and priorities.We note that the Chief Election Officer, in hisSeptember 2004 report on the October 2003 election(see next section), supported the concept ofmandatory annual reporting, stating that:there must be a clear and open accountabilitystructure that assures citizens and politicalinterest groups that [the Chief Election Officer’s(CEO)] actions are clearly in support ofthe principles of fairness, secrecy, transparencyand accessibility.While reporting to the Assembly on ElectionAct administration when he chooses maybe to the advantage of the Chief ElectionOfficer, the public is not well served.Mandatory annual reporting and theopportunity to give the Advisory Committeeof Registered Political Parties some status asa provider of political counsel to the CEO willprovide a necessary balance of his ability toact and his protection of the public trust.In view of the accountability and transparencyrequirements for, and practices of, electoral officersin certain other Canadian jurisdictions andgiven the significant increase in the expenditures ofElections Ontario (as well as its projected expenditures),the Legislative Assembly and the governmentshould consider requiring that ElectionsOntario submit an annual budget to the Board ofInternal Economy that covers all planned expendituresand that it report annually on its activities andexpenditures.OFFICE RESPONSEIn the interests of achieving a greater degree ofopenness in the administration of the electoralprocess, expenditures associated with the deliveryof the 2003 general election were publishedin the 2004 report Access, Integrity and Participation:Towards Responsive Electoral Processes forOntario. Within the 2004 report, we also madeseveral proposals to legislators for improvedaccountability and transparency, including aproposal for mandatory annual reporting by theChief Election Officer.The statutory report under the ElectionFinances Act for 2004 will be published beforethe end of this calendar year. We will takeadvantage of this opportunity to provide informationon the activities of Elections Ontario tomembers of the Assembly and the public. Whilethe publication vehicles may change in future,we will continue to provide annual reports onthe activities of the Office of the Chief ElectionOfficer. In particular, we intend to ensure thatChapter 3 • VFM Section 3.10

2062005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10estimates of election costs are published beforethe next general election takes place.To date, the obligation to preserve a constantelectoral readiness has precluded the preparationand publication of meaningful expenditureestimates. However, if the legislation currentlybefore the Assembly is passed and a fixed electiondate is established, it will be possible todevelop reasonable estimates of ElectionsOntario’s statutory expenditures on events andactivities for the information of the Assembly inthe new environment.GENERAL ELECTION REPORTINGAlthough not required to do so, in September 2004,the Chief Election Officer issued a report to theSpeaker. The report, titled Access, Integrity and Participation:Towards Responsive Electoral Processes forOntario, was described as “an overview of activitiesconducted by the Office of the Chief Election Officerover the past four years.” It also covered activitiesrelated to the October 2003 election and listed anumber of new approaches that were undertaken inpreparation for that election, including:•electors;•computer equipment;•a new advertising campaign to reach out toequipping returning officers’ home offices witha province-wide “target registration” exercisethat was conducted to improve elector informationin targeted areas, such as high-density residentialbuildings and residential properties withrecent ownership changes; and•new approaches for training administrative staffand field workers.This report also stated that the cost of the electionwas $47.7 million, or $5.99 per eligible voter.However, Elections Ontario did not provide a cleardefinition of “election cost” in the 2004 report oridentify which items were included and excludedfrom the calculation. Specifically, it was notmade clear that the costs of the new approachesdiscussed in the report were not included. Forinstance, the following expenditures were excludedbecause Elections Ontario considers the useful lifeof these investments to be more than one election,or that the activities were required to be conductedwhether or not an election was called:•approximately $13 million spent on the “targetregistration” exercise and on establishing homeoffices for returning officers;•$1 million of the $1.3 million spent on designingand producing the new advertising campaign;and•the $500,000 cost of developing a new approachto training administrative staff and fieldworkers.In the report, Elections Ontario comparedthe costs of the 2003 and 1999 elections. ElectionsOntario indicated to us that direct comparisonsshould be approached with caution because1999 and 2003 represented very different businessenvironments. We agree that direct comparisonsshould be approached with caution. For instance,we found inconsistencies in how Elections Ontariocalculated the costs for the 1999 and 2003 electionsthat would have an impact on the comparisonsmade in the 2004 report. For example, the1999 costs included 24 months of information technologysupport and legal expenses, while the 2003costs included only six months of such expenses.Based on our calculations, if treated consistently,these costs alone would have increased thereported cost of the 2003 election by $1.1 million.RECOMMENDATIONTo help ensure that amounts reported as electioncosts are clearly understood, ElectionsOntario should clarify the basis for calculatingthe expenditures and ensure that comparativefigures are calculated on a consistent basis.

Office of the Chief Election Officer207OFFICE RESPONSEElections Ontario accepts the recommendation.Elections Ontario intended to adopt the2003 electoral event as a baseline for expendituresand operations, against which futureevents could be measured. The significant analysisof the 2003 expenditures that is being undertakenwill provide a framework for consistentpresentation of expenditures in any future publicinformation materials and could supportreporting if a statutory requirement for reportingbecomes a part of the Election Act. ElectionsOntario would value the counsel of theOffice of the Auditor General as it develops theframework.PURCHASING PROCEDURESAcquisition of Consulting ServicesAs Figure 2 indicates, spending by Elections Ontarioon consulting services has increased significantly overthe past several years and totalled about $20 millionover the past four years. Elections Ontario indicatedthat such a significant increase was necessary dueto new statutory responsibilities, Elections Ontario’s“expanded mandate, and the requirement to be ableto produce an electoral event on demand.”Competitiveness and Open and Fair AccessElections Ontario’s purchasing policy states thatservices must be acquired competitively, potentialsuppliers should have fair access, and requestsfor proposals should be open for a minimum of 14days. However, its policy does not require publictenders, regardless of the cost of an assignment. Auseful benchmark for Elections Ontario to considerare the requirements in the Management Board ofCabinet Procurement Directive for Consulting Services(Directive).Figure 2: Elections Ontario’s Expenditures onConsulting Services, 1996/97–2004/05Source of data: Elections Ontario($ million)765432101996/971997/981998/991999/2000Among the Directive’s main principles regardingthe acquisition of consulting services is thatthe process be competitive, open, and transparent.If the estimated ceiling price of consulting servicesexceeds $25,000, the Directive requires that arequest for proposals be issued, proposals undergowritten evaluations, and a written agreement bedrawn up. If the estimated ceiling price is $100,000or more, an open call for tenders must be issuedthrough MERX (a website that lists public tendersissued by the federal and a number of provincialgovernments) or other appropriate media.The Directive also stipulates that access for suppliersis to be open, fair, and consistent. Whenacquiring consulting services, government entitiesmust avoid conflict of interest, must not permit asupplier to gain a monopoly for a particular kind ofwork, and must not continuously rely on a particularoutside organization.2000/012001/022002/032003/04In practice, while Elections Ontario generallyengaged consultants through a request-for-proposalprocess, we found numerous instances where onlya limited number of suppliers were invited to submitproposals. As a result, the number of bidders2004/05was often small, and, at times, the process followedChapter 3 • VFM Section 3.10

2082005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10appeared to be geared to selecting a particular supplier.For example:•In June 2001, Elections Ontario invited sixpotential bidders to submit proposals to fill thecontract position of Manager of Election Officials.Only two of the six bidders were located inToronto, where the job was located. Only threebids were received. The successful bidder, whowas from Toronto, was awarded a one-year contractfor $135,000 with a subsequent one-yearextension. The second-ranked bidder was fromOttawa and incorrectly assumed that the majorityof the work could be completed in Ottawa.The third bidder was from Collingwood.In June 2003, the successful bidder and theOttawa- and Collingwood-based bidders fromJune 2001 were invited to bid on a contract forSpecial Projects Advisor. No other potential supplierswere approached. We questioned whyonly these bidders were invited to bid, particularlysince one of the losing bidders from theprevious competition had already indicated thatthe work location was not suitable. Only the successfulbidder from the June 2001 competitionsubmitted a bid.We were also concerned that the successfulbid incorporated “insider” knowledge of ongoingchanges at Elections Ontario, including anticipatednew responsibilities that were not specifiedin the request for proposals. Specifically, theincumbent’s proposal stated that the positionwould include the responsibilities of the then–Director of Corporate Services, who was leavingthe organization. The successful bidder has beenthe Director of Corporate Services since August2003. From June 2001 to July 2005, paymentsto this consultant have totalled approximately$550,000. We also understand that this individualhas recently signed a three-year employmentcontract with Elections Ontario at an annual salaryof $120,000.In reviewing the invoices from this consultant,we noted that during October, November,and December 2003, billings totalling $10,665were for services related to a municipal election,including a municipal election recount. Wefound no documentation or other support indicatingwhy such billings were paid by ElectionsOntario.We also understand that the incumbent is aretired employee from the Ontario Public Service(OPS) and is collecting a pension from thePublic Service Pension Plan. The Public ServicePension Act stipulates that any former employeereceiving a pension who is re-employed orengaged in any capacity, including through athird-party corporation, shall have his or herpension reduced to the extent that the retiree’scombined incomes from pension and reemploymentdo not exceed the amount earnedjust before retirement. We understand thatwhile the Ontario Pension Board relies on OPSemployers to notify it when they employ retirees,Elections Ontario had not done so in this case.• In June 2002, requests for proposals for aToronto-based Policy Advisor were sent to fivepotential bidders. Only two bids were received,one of which was from the Ottawa supplierinvolved in the bidding for the Manager of ElectionOfficials position discussed earlier. Onceagain, this Ottawa bidder mistakenly assumedthat the majority of the work could be completedin Ottawa. The Ottawa bidder submitted a bidthat was considerably lower ($500 per day) thanthe winning bid ($935 per day), and we presume,in view of the Ottawa bid, that there mayhave been others in the Toronto area who mighthave bid less than $935 per day if given theopportunity. Since July 2000, the winning consultanthad been working on other projects forElections Ontario. One project continued untilthe next provincial election, which occurred in

Office of the Chief Election Officer209October 2003. The consultant issued a report onthis assignment in December 2003.In June 2004, when the Policy Advisor contractwas ending, Elections Ontario invited theincumbent and three potential bidders from theOttawa area to submit proposals for a succeedingcontract. Contrary to Elections Ontario’spolicy, bidders were given only seven days tosubmit their proposals. Only the incumbent andthe previous bidder from Ottawa submitted bids.Elections Ontario asked the bidder from Ottawato adjust its bid to cover travel costs. The bid wasincreased to $850 per day, while the incumbentbid $950 per day. The contract was awarded tothe incumbent. From June 2002 to July 2005,payments to this consultant for duties as PolicyAdvisor have totalled approximately $390,000.• In another case, Elections Ontario sent an invitationalrequest for proposals to six potentialvendors to develop a training program foradministrative and field staff. Only one bid wasreceived. While the initial contract amountwas $156,000, the scope of the project was notclearly defined in the request for proposals, andthe scope and nature of the work changed dramatically,increasing the total cost to $490,000,213% over the original budget. Of this amount,the cost of producing training manuals, whichthe bidder originally set at $24,000, increasedby 484% to $140,000. Elections Ontario wasunable to provide evidence that a sixfoldincrease in the original proposal price for thesemanuals was necessary and reasonable.•In 2003, Elections Ontario sole-sourced twoassignments to a consultant from the UnitedStates. There were no signed contracts. The firstassignment, for $30,000, was to conduct anoperational review during the 2003 election byinterviewing a sample of returning officers andsenior Elections Ontario staff. The consultantwas paid $1,000 per day for 30 consecutive daysfrom September 3, 2003 to October 3, 2003.This assignment was to be done in partnershipwith another consultant, who was paid $100 perhour. However, the other consultant did not startbilling until September 13, 2003, when the statementof work for the assignment was finalized.Elections Ontario then hired the same U.S.-based consultant to manage its already establishedcall centre. The assignment was the resultof an agreement with a municipality, wherebyElections Ontario’s call centre would be abackup call centre for that municipality’s electionfrom November 1 to 10, 2003. However,the municipality ended up not requiring the services,and the call centre was not activated. Themunicipality paid Elections Ontario a standbyfee of $36,000, of which $26,500 was paid tothe consultant, based on 26.5 days at $1,000 perday, from October 15 to November 11. ElectionsOntario also paid $2,800 to cover the consultant’saccommodations for 17 nights. Furthermore,there was no documentation indicatingwhy the services were billed starting on October15 if the backup call centre was to cover only theNovember 1 to 10 period.Assignment Definition and ScopeAnother provision of the Directive that shouldbe considered by Elections Ontario requires thatbefore assistance is sought from suppliers of consultingservices, assignments should be well definedand justified. In addition, clear terms of reference—including objectives, scope, tangible deliverables,timing, and progress reporting—must be established.Also, a firm ceiling price must be tied to tangibledeliverables.In several cases, consulting assignments werenot properly scoped or deliverables were not identifiedbefore the requests for proposals were issued.As a result, Elections Ontario assigned consultantsadditional work after the contract was awarded.No contract ceilings were established for manyassignments. Billing rates were established fromChapter 3 • VFM Section 3.10

2102005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10the requests for proposals, but the quantity of workbilled could not be assessed for reasonableness.In not defining a fixed price for tangible deliverables,Elections Ontario assumed several risks,including consultants not delivering their work ontime and Elections Ontario having to pay any addedcosts resulting from, for example, missed deadlinesand budget overruns. For example:•A consulting firm was awarded a contract inApril 2002 to create an electoral geographydatabase and related business applications. ElectionsOntario awarded the contract based ona fixed-price bid of $260,000 for the databaseproject, per-diem rates for maintenance work,and per-diem rates for future projects. Subsequently,Elections Ontario awarded two additionalprojects to this firm using the originalper-diem rates. The projects totalled $900,000.In total, $2.6 million was paid to the consultantfrom May 2002 to March 2005 for the databaseproject, maintenance work, and other addedprojects.The quantity of work in the additionalprojects and the number of hours billed couldnot be evaluated against any other bidder orthe marketplace to determine whether thehours were reasonable and value for money wasreceived. In addition, the number of hours billedwas extremely high. The invoices for work performedby individual staff members exceeded250 hours—and in some cases 300 hours—permonth for several months. According to theinvoices, one employee worked 350 hours inFebruary 2003 (or an average of 12.5 hours perday for 28 straight days, including weekends)and 275 hours in March 2003, at $120 per hour.Such a large number of hours being billed dailybrings into question whether the services providedby the consultant were of optimal qualityand efficiently performed.We also noted that the contracts for theseadditional projects were not signed until theprojects were nearly completed. For example,one $700,000 project was started in February2003, but the contract was not signed until May2003, when the project was nearly completed.Another contract signed in February 2003 wasfor a project that started in November 2002.We further noted that, while the costs establishedin these contract extensions were basedon project components—such as project managementand production of various maps—theconsultant’s billings listed only the people workingon the project and corresponding charges.There was no reconciliation of the billings to thework components listed in the contract extensionsto make it possible to determine what wasbilled and paid for each deliverable.•In mid-2001, Elections Ontario awarded toa consultant, through a request-for-proposalprocess, a $700,000 contract for systemdevelopment work. From 2002 to early 2003,an additional $900,000 was paid to this consultantfor other related system developmentwork. Based on the significantly increasedproject scope, Elections Ontario should havere-tendered the project to determine therange of amounts competing suppliers wouldhave charged and to ensure that the amountultimately paid was reasonable. We alsonoted that there was no written contract oreven an addendum to the original contractfor the additional $900,000.•Several consultants were awarded contractsbased solely on per-diem rates. No fixed pricewith fixed deliverables was requested as part ofthe tendering process. Without specific deliverables,it is difficult to assess consultant performanceand identify inefficiencies or poorperformance that should not be billable. Forexample, one consultant billed $246,000 forwork conducted from November 2002 to February2004 with no project ceiling or cap on billings.We noted that approximately 40% of that

Office of the Chief Election Officer211consultant’s billings was for work not initiallyidentified in the request for proposals.In all of the above instances, the lack of clearlydefined deliverables and significant increases incost over the originally agreed-upon amounts areindicative of the need for improved processes forengaging and managing consultants.Acquisition of Other ServicesOn March 3, 2003, Elections Ontario invitedfour potential bidders to submit proposals forthe design, development, implementation, andoperation of a pilot voter-tracking solution in fouradvance polls. The suppliers had only seven daysto submit their proposals. The only bid submittedwas dated February 28, 2003, four days before therequest for proposals (RFP) was issued. This supplier,who had only been incorporated on January14, 2003, could not meet the requirements inthe RFP of having prior experience and supplyingthree references. The contract was awarded for$106,000. We also noted that, although this supplierwas paid $53,000 upon signing the contract,no services were needed or provided for a numberof months. We were advised by Elections Ontariothat this advance payment was made in exchangefor a $6,000 reduction in the bid price.In another instance, Elections Ontario did notsign a contract with a supplier who was paid$1.3 million for advertising services provided overa two-year period. We also noted that in 2003, thissupplier, before actually doing any work, was paidthe full billing for the 2003/04 advertising projects,totalling approximately $300,000.RECOMMENDATIONTo help ensure that consulting and other servicesare acquired at the best available price andthat the selection process is competitive, open,and transparent, Elections Ontario should:• issue public tenders when significant servicesare being acquired (at a minimum, thisshould be a requirement for all assignmentsexceeding $100,000); and•ensure that all assignments have a writtenagreement or contract that clearly identifiesthe project deliverables, timelines, and afixed ceiling price.OFFICE RESPONSEElections Ontario accepts and will implementthe recommendation.The current Elections Ontario procurementpolicy generally reflects the principles that theAuditor General has identified and, while notrequiring them, does suggest the use of publictenders for acquisitions in excess of $100,000.However, we accept that the audit has identifiedareas for improvement in Elections Ontario procurementactivity and controls, and the necessarychanges will be implemented.Over the period following the last election,the Elections Ontario purchasing policy hasbeen subjected to a thorough review, which isnow nearing completion. We believe that thenew policy, which has been prepared with referenceto similar policies from a range of organizations,including the Management Board ofCabinet, and which will be implemented inour current structured management and controlenvironment, will ensure the competitive,open, and transparent acquisition of consultingservices.In late 2004, the Office embarked on aprocess that targets registration of the Office’smanagement system with the InternationalOrganization for Standardization (ISO) followingthe next general election. To achieve thisstatus, close attention is being paid to the developmentand enforcement of policies and procedures,including those relating to procurement.Chapter 3 • VFM Section 3.10

2122005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10CALL CENTRESIn March 2002, Elections Ontario established atits office in Toronto a public call centre with 57lines and three supervisor lines to answer inquiriesduring general elections, by-elections, and otherevents; a call centre with 10 agents to handle emailinquiries; and three call centres with a total of 40agents to answer inquiries from internal field staff.Elections Ontario indicated that the initial investmentto set up the call centres was $555,000.There was no evidence that Elections Ontarioconsidered other alternatives before establishingthe call centres, such as partnering with other governmentorganizations or contracting out the work.The public call centre was first used in March2003 during the target registration projectdescribed earlier as an initiative to improve ElectionsOntario’s elector information in targetedareas. Elections Ontario’s projection of call volumeduring this exercise was 430,000 calls; however,the actual number of calls received was only14,800. After the exercise was completed, staff suggestedthat a less aggressive approach to staffingand training should be adopted in the future.Prior to the October 2003 election, ElectionsOntario projected that there would be 240,000 callsfrom the public to the public call centre during the28-day election period. Only 139,000 calls wereactually received.Based on the projection of receiving 240,000calls, Elections Ontario prepared an estimate ofits staffing needs for each day of the 2003 electionperiod. We noted that the projected staffing levelsof 20 to 27 per day for the first 27 days of theelection—which were based on the expected volumeof calls—were significantly lower than the57-staff capacity of the call centre. As a result, wequestioned the underlying analysis supporting theestablishment of a call centre with such a largecapacity in view of Elections Ontario’s own call volumeand staffing projections. Elections Ontariostaff informed us that this number of staff spacesreflected what the call centre’s premises could physicallyaccommodate as opposed to the number ofstaff it would assign to work at the call centre.In April 2002, Elections Ontario had signeda two-year lease for an Intelligent Call Exchange(ICE) electronic system that included 115 agentlicences (57 for the public call centre plus threesupervisor licences and 55 for the other callcentres). The total cost of the lease and licenceswas approximately $430,000. Elections Ontariopaid monthly charges for the 115 leased ICE electronicsystem licences, as well as for 115 phonelines, incoming-call tolls, and mega-link circuits(enabling high-speed, high-volume service in integratingvoice and other data). Based on the informationprovided to us, the total charges relatingto phone services from April 2002 to March 2004were approximately $675,000 ($330,000 in the2002/03 fiscal year and $345,000 in 2003/04).Even though, as stated earlier, the number oflicences actually needed in the public call centreduring the election period averaged 25 or less, 57licences were leased. In addition, while ElectionsOntario leased the ICE licences for 24 months, thecall centres only operated for approximately twomonths—for the target registration project andfor the general election. In March 2004, when thelease for the 115 agent licences and three supervisorlicences expired, Elections Ontario purchased64 licences and related equipment at a costof $200,000 and a monthly maintenance fee of$2,000. We understand that one reason for makingthe purchases at that time was to ensure that thecall centre would be available to provide services,for a fee, to Elections Canada for the 2004 federalelection. In June 2004, an additional nine licenceswere purchased at a cost of $11,500 to meet thedemand for the federal election.In early 2005, Elections Ontario prepared aCall Centre Business Case, indicating that basedon 139,000 calls and total costs of $353,000, thecost per call to the public call centre for the 2003

Office of the Chief Election Officer213election was $2.54. However, these costs didnot include any phone line charges, ICE licencecharges, toll charges, or mega-link costs. Had thesecosts, as well as the costs for equipping and operatingthe call centres, been included and pro-ratedbased on the percentage of total calls made to thepublic call centre, the cost per call would have been$5.55.Elections Ontario leased the ICE licences tomanage call volumes and to obtain performancestatistics relating to, for example, call duration,number of calls per agent, and number of calls inqueue. While over $400,000 was paid for the ICEsystem and licences, the statistics provided by theICE system had not yet been analyzed to determinehow many staff are needed at particular times andhow staff can best be utilized to handle specific callvolumes.RECOMMENDATIONTo help minimize the cost of providing callcentreservices for future elections, Electionsassess other alternatives for meeting call-Ontario should:•centre needs; and•conduct a more thorough analysis of thenumber of staff and related software licencesrequired if Elections Ontario continues tooperate its own call centres.OFFICE RESPONSEElections Ontario accepts the recommendation.In developing its call-centre capacity in2002, Elections Ontario was supporting a newset of communication demands for its businesswith only limited knowledge of the extent ofthe demands, based on the experiences of ourfederal and municipal colleagues. In addition,through a series of pilot projects from late 2002to the present, we have confirmed the value ofthe call centre as an important tool in the managementof the Permanent Register and otheractivities between electoral events.LEASE OF COMPUTER EQUIPMENTIn December 2002, Elections Ontario leased computerequipment to be available for the next provincialelection for a 49-month term at a total cost ofapproximately $4.44 million. The agreement couldbe extended for two additional 12-month periods,or the computers could be purchased for $138,000at the end of the 49-month term. The equipmentthat was leased consisted of:•• 120 laptop computers;• 107 servers; and• 332 printers.1,130 personal computers;Electoral events are delivered through returningofficers appointed for each electoral district. Thereare currently 103 electoral districts in Ontario. Thevast majority of the equipment was to be used bythe 103 returning offices—Elections Ontario determinedthat each of the 103 returning offices wouldhave 10 personal computers (totalling 1,030) withan appropriate number of supporting servers andprinters.The 2003 electoral-event benchmarks arein place, and the demands on the call-centrecapacity from our activities between electionsand in support of our sister agencies are betterunderstood. Elections Ontario will now conducta review of its call-centre licence and staffingstructures and will re-evaluate approaches tothe delivery of call-centre support in the contextof electoral activity.The returning offices utilized this computerequipment for only specific short-term periods:for approximately two months beginning in March2003 for the target registration project and forapproximately six weeks beginning in September2003 for the provincial election. Since that time,Chapter 3 • VFM Section 3.10

2142005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10most of the leased computer equipment, except forsome laptops and some personal computers andservers allocated to head office, has been in storage.Under the lease, Elections Ontario must payto deploy each piece of equipment to a returningoffice. For the March 2003 deployment, 1,339pieces of computer equipment were deployed to103 offices at a cost of $750,000. We noted thatthe full complement of 10 computers per office wasincluded in this deployment, even though ElectionsOntario was expecting to hire only five staffat each office for the registration project. That is,the project required a total of only approximately500 personal computers. This resulted in ElectionsOntario incurring $190,000 in deployment costs forcomputers not used for target registration.We understand that, at the time of the targetregistration project, Elections Ontario was speculatingthat an election might be called soon. Whenit was not, the equipment was warehoused inlocal Canada Post locations. In September 2003,the election was called, and all of the equipmentwas redeployed to the returning offices at a costof $440,000, versus the $750,000 cost that wouldhave been incurred if the equipment had beenreturned to the supplier for storage and futuredeployment. After the election, the computerequipment was returned to the lease provider’swarehouse for storage, with monthly lease costs of$90,600 continuing to be paid each month.We inquired whether a business case wasdeveloped that considered options other than theleasing of equipment. No business case was providedto us. We note that, in another Canadianjurisdiction, the election office has shared the purchasecosts of its computer equipment with a provincialministry that would own the equipment afterthe election was over. We recognize that this jurisdiction’spopulation is significantly smaller thanOntario’s. However, this approach demonstratesthat there may be innovative ways to meet cyclicalbusiness needs of this nature.We were informed that Elections Ontario hadexpected that it would sublease its computers toother users, thus recouping some of the amount itpaid. Elections Ontario did sublease some equipmentto Elections Canada for the 2004 federalelection: 125 computers for six months, 50 computersfor five months, and 55 computers for threemonths. Total revenue generated was $88,000.Currently, a similar number of computers have beenleased to Elections Canada for election readiness.In 2004, the government introduced legislationthat, if passed, would make “election day in thisprovince the first Thursday in October, every fouryears, starting in 2007.” The Premier stated thatthis would also assist Elections Ontario “so it canplan efficiently for upcoming elections.”RECOMMENDATIONElections Ontario should use the time beforethe next election to examine whether there aremore cost-effective means of equipping returningoffices with computer equipment for theone-to-two-month period involved.OFFICE RESPONSEElections Ontario accepts the recommendation.Elections Ontario will prepare a businesscase to identify the most cost-effective meansof equipping returning offices with computerequipment. This analysis will give appropriateconsideration to providing for the time-limitedpreparation, conditioning, application imaging,packing, distribution, set-up, testing, on-site serviceand maintenance, disassembly, and recoveryof the equipment, together with confidentialdata purging. The business case will also takeinto consideration the anticipated timing of thenext election, register maintenance activity,and demands relating to deployment of electionmanagement systems.

Office of the Chief Election Officer215HOSPITALITY, TRAVEL, AND OTHEREXPENSESHospitality and Travel ExpensesElections Ontario does not have its own policiesfor hospitality and travel expenses. We thereforeused the policies in Management Board of Cabinet’sTravel, Meal and Hospitality Expenses Directive(Directive) as a benchmark against which to judgethe reasonableness of hospitality expenses incurredby Elections Ontario. For hospitality, the Directiveincludes the following stipulations:Hospitality is the provision of food, beverages,accommodation, transportation orother amenities at public expense to personswho are not engaged in work for the Ontariogovernment. Hospitality should be extendedin an economical, consistent, and appropriateway when it will facilitate governmentbusiness or is considered desirable as a matterof courtesy.The number of government representativesshould be limited to those necessaryfor the function and should be kept to aminimum.We reviewed a sample of expenditures incurredfor hospitality and noted instances where:•what one would consider reasonable;•the expenditures appeared to be in excess ofthe number of attendees who were employeesor representatives of Elections Ontario appearedexcessive and was not kept to a minimum asrequired by the Directive; and•detailed receipts were not provided.For instance, in March 2005, Elections Ontariohosted a dinner for two elections officials fromanother country. Four representatives from ElectionsOntario, two of whom brought their spouses,attended the dinner. The total cost was $1,162, orapproximately $145 per person. We questioned theneed for six individuals associated with ElectionsOntario to attend a dinner for only two visitorsand whether expenses of $145 per person wereexcessive.With respect to travel and other relatedexpenses, the Management Board of Cabinet’sdirectives require that employees make the mostpractical and economical arrangements for traveland other related activities.We also reviewed a sample of claims andpayments for travel expenses incurred by ElectionsOntario employees and found a number ofinstances where expenditures did not always demonstratedue regard for economy.RECOMMENDATIONTo ensure that the hospitality and travel expendituresincurred by Elections Ontario are reasonableand appropriate, Elections Ontario shouldadopt hospitality and travel expense policiesconsistent with Management Board of Cabinetdirectives and ensure that expenses are in compliancewith such policies.OFFICE RESPONSEElections Ontario accepts the recommendation.Since 2004, Elections Ontario has beendeveloping its own policy framework, whichincludes hospitality expenses, and has put inplace management structures that permit closermonitoring of compliance with all policies. ElectionsOntario believes that the policies, whichare currently nearing completion and whichhave considered the Management Board ofCabinet policy documents, will address the concernsthat the Auditor General has identified.The introduction and implementation of thenew Elections Ontario travel expense policy willprevent future problems in this area.Chapter 3 • VFM Section 3.10

2162005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.10Other ExpensesWe noted during our audit that a number of expenditureswere related to “team-building events” forstaff. We understand that each division at ElectionsOntario is expected to have team-building sessionswith its staff twice a year, allowing spending of up to$100 per person for each event. We found a numberof instances where these events involved sporting orother recreational activities.RECOMMENDATIONTo help ensure that taxpayer funds are usedprudently, Elections Ontario should reconsidersponsoring staff team-building events thatinvolve sporting or recreational activities.OFFICE RESPONSEElections Ontario accepts and will abide by therecommendation.OTHER MATTERSummer HelpIn December 2002, Elections Ontario receivedapproval from the Board of Internal Economy toincrease its staff complement from 19 to 61. Wenoticed during our audit that, especially giventhe significantly increased permanent staff complement,the number of summer students hiredby Elections Ontario in 2004 and 2005 appearedunusually high—particularly since the next electionmay not be held until October 2007. Specifically,22 summer students were hired in 2004 (at arate of $14.26 per hour), and, in 2005, 19 summerstudents (at a rate of $14.54 per hour) and eight coopstudents were hired. We were advised that thehourly rates were based on the rates paid to summerstudents by the Office of the Assembly.In 2004, Elections Ontario posted a job advertisementfor summer student positions on a university’swebsite. However, the 2005 summer positionswere not advertised.We found from our review of available documentationthat at least 10 (that is, over 50%) of the19 students hired for 2005 summer positions wereeither children of or otherwise related to ElectionsOntario employees. In 2004, at least seven of the 22summer students hired by Elections Ontario wereeither children of or otherwise related to ElectionsOntario employees.RECOMMENDATIONTo ensure that staff are being utilized as productivelyas possible, Elections Ontario shouldconduct a formal assessment of workload, especiallyduring the summer months, to confirmthat there are no alternatives to hiring 20 summerstudents. In addition, if students are neededto supplement staff during the summer, ElectionsOntario should ensure that the hiring processfor students is more open and competitive.OFFICE RESPONSEElections Ontario accepts the recommendation.Elections Ontario appreciates that thereshould be a clear justification for hiring summerstudents. All project plans that call for summerstudent employment will be carefully developedand reviewed within the Elections Ontariopolicy-and-planning framework, pay structureswill reflect job responsibilities, and summerprojects will be closely managed to ensure thehighest levels of productivity.The openness and competitiveness of the hiringprocess will be given full consideration inany future summer student hiring activity.

Chapter 3Section3.11Ministry of Government ServicesOffice ofthe Registrar GeneralBackgroundThe Office of the Registrar General (Office) isresponsible for the administration of the Vital StatisticsAct, the Change of Name Act, and the MarriageAct. The Office’s main responsibilities are to registerall births, deaths, marriages, stillbirths, adoptions,and changes of name and to provide certificates andcertified copies of registrations to the public. Eachyear, approximately 300,000 events are registeredand 400,000 certificates and certified copies areissued.A person’s birth certificate is a critical documentrequired by government and businesses to validatethat person’s identity. It is required when applyingfor other vital documents and entitlements, includingsocial insurance numbers, driver’s licences,passports, and health cards. Similarly, death certificatesare needed to settle estates and insuranceclaims, to discontinue government benefits, and toconduct genealogy searches. Marriage certificatesare necessary proof to show marital status. TheOffice charges a fee for the issuance of certificates.Total service fees collected in the 2004/05 fiscalyear amounted to $19.6 million.The Office’s head office is located in ThunderBay, with an administrative office in Toronto. Forthe 2004/05 fiscal year, the Office had operatingexpenditures of $30.3 million. For the same year,the Office’s staff levels fluctuated between 275 and425 staff.Audit Objective and ScopeOur audit objective was to assess whether the Officehas adequate systems and procedures in place toeffectively fulfill its key mandates of maintainingaccurate vital statistics records and providingOntarians with timely, accessible services in anefficient manner. Prior to commencement of theaudit, we identified audit criteria to address ouraudit objective. These criteria were reviewed andaccepted by senior management at the Office of theRegistrar General.The scope of our audit included interviews,inquiries, and discussions with relevant Office staffin Toronto and Thunder Bay. As well, we reviewedfiles and other documentation, the Office’s policiesand procedures, and relevant management andexternal consultants’ reports. We also reviewed thework of the Ministry’s internal auditors. The internalauditors and the Corporate Audit Cluster fromManagement Board Secretariat had also conductedChapter 3 • VFM Section 3.11217

2182005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11reviews of the security measures in place at theOffice. As a result, we were able to rely on them andreduce the scope of our work on security controls,and their relevant concerns were incorporated intoour audit.Our audit was performed in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, established bythe Canadian Institute of Chartered Accountants,and accordingly included such tests and otherprocedures as we considered necessary in thecircumstances.SummaryUntil a few years ago, the Office, with a staff of 140,registered all vital events and provided the publicwith timely and reliable service for all documentrequests. However, due largely to significant andcontinuing problems with the implementation of anew computer system and human resources issues,service levels plummeted, and the turnaround timeto get essential documents went from being aboutthree weeks to several months, even a year or more,despite more than a doubling of staff. At the timeof our audit, the Office indicated that the situationhad improved and the certificate delivery timehad been reduced to between six and eight weeks.However, we found that it often still took monthsto obtain certificates, and some people had not yetreceived documents requested more than a yearbefore.We concluded that significant improvementswere required in a number of key areas. Forinstance:•The Office’s call centres were not effective inhandling the public’s inquiries and complaints—99% of the telephone calls to them either wereblocked with busy signals or were disconnectedbefore callers could reach someone to helpthem.•Prudent business and information technologypractices were not being followed in the acquisition,development, and implementation of anew computer system. As of March 2005, thesystem had cost over $10 million—more than$6 million above the original estimate of$3.75 million. Furthermore, the system wasimplemented before it was ready, with numerousoutstanding work orders and without manyof the necessary capabilities in place. Processingapplications for certificates was still beingdelayed as the result of system downtime andstaff having to bypass automated functions inorder to handle transactions manually.•Staff morale was low and productivity declinedsignificantly because of a poorly planned organizationrestructuring and questionable promotionpractices. Specifically, a new level ofmanagers was appointed, without competitionor job specification. Clerical staff with relativelylittle experience in management were appointedto supervise existing managers to whom theyused to report. None of the existing managerswas given an opportunity to compete for thenew positions.•There were inadequate controls to safeguardregistration information. For example, the Officedid not have off-site storage of the tape backupfor the computer system. The inability to recoverdata posed a high risk in the event of a disaster,such as a fire. In addition, controls restrictingunauthorized access to confidential personalinformation were weak. These weaknessesincluded no firewall protection for registrationdata and inadequate tracking and monitoring ofaccess to the computer systems.In spite of the problems faced by the Office, itwas apparent that staff were dedicated, concernedabout the significant backlogs, and frustrated bythe operational issues that had to be overcome to

Office of the Registrar General219improve service delivery. We were informed that,subsequent to the completion of our fieldwork,staff efforts had resulted in progress being made inimproving service levels.OVERALL MINISTRY RESPONSEThe Ministry recognizes that backlogs in anumber of areas resulted in very significantservice issues for the public throughout 2004.Fieldwork conducted by the Auditor General’sstaff was undertaken prior to the Ministry havingcompleted implementation of its backlogreduction plan, or full implementation of itsservice improvement plan. The service issuesidentified by the Auditor General that weredirectly associated with certificate and registrationbacklogs have been largely resolved.Faced with growing service challenges inearly 2004, the Ministry developed and receivedapproval for a backlog reduction plan basedon the principle of focusing resources first onareas where longer processing times were creatingthe most significant impact on the public—starting with certificate requests. The Ministryachieved the backlog reduction targets thatwere established and is meeting its six-to-eightweekservice standard for certificate applicationand registration processing. Issues raisedby the Auditor General relating to handling ofrequests for additional information from clientswhen certificate applications had not been completedcorrectly, as well as the processing of thatadditional information, were also largely eitherbacklog- or transition-related and have sincebeen resolved. The Ministry, however, acknowledgesthat the processing time for returned correspondenceremains too high and has a planto improve this service by the end of November2005.The handling of customer inquiries and complaintsremains of significant concern to theMinistry, and it fully accepts the need to substantiallyimprove service in this area. Steps arebeing taken to better utilize existing call-centreinfrastructure and answer more calls, includingthe addition of several more operatorsand improved access to the system, which hasalready significantly reduced the number of callersgetting a busy signal. To further improve onthis, the Office of the Registrar General (Office)is accelerating implementation of its new callcentretechnology so that the public can expecta more positive client experience by December2005. In addition, self-serve application statuschecking over the telephone will be available tothe public by March 2006.In parallel with the implementation of itsbacklog reduction plan, the Ministry developed,secured approval for, and is on track with theimplementation of its long-term service improvementplan for the Office. From a service deliveryperspective, key elements of the service improvementplan include making all birth, death, andmarriage certificate applications available online,with a 15-day processing-and-delivery servicestandard, by March 2006. Early successesinclude the implementation of an on-line birthcertificate application for children eight years ofage and under. Electronic registration for births(including integration of birth registration andcertificate applications) and deaths will be progressivelyimplemented, commencing with theintroduction of an Integrated Birth Registration“Smart Form” by February 2006.The service improvement plan also includesinvestments in strengthening the Office’s organizationalcapacity to manage both ongoing operationsand future change. This includes targetedinvestments in strengthening managementcapacity and training, quality assurance, andsecurity.Chapter 3 • VFM Section 3.11

2202005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11Detailed Audit ObservationsREGISTERING VITAL EVENTS ANDISSUING CERTIFICATESThe issuing of a birth, death, or marriage certificatein Ontario is a two-stage process. First, thevital event itself must be registered. For instance,when a birth or death occurs, the appropriate formmust be completed and forwarded to the DivisionRegistrar’s office in the municipality in which theevent occurred. The Division Registrar (a municipaloffice) then forwards the form to the Office so thatthe event can be registered with the province. In thecase of a marriage, the person who performed themarriage must forward the appropriate documentationdirectly to the Office for registration.This first stage must be completed before onecan proceed to the second stage, which is obtaininga certificate. To obtain a certificate, an applicantmust submit a completed application form with therequired fee payment. Individuals may obtain birth,death, and marriage certificates by applying eitherthrough the Office’s head office in Thunder Bay orthrough one of the Ministry’s land registry offices.Recent IssuesFollowing the terrorist attacks in the United Stateson September 11, 2001 (9/11), the issue of identitytheft became a heightened concern. In response,the Office implemented tighter security measuresin October 2001. It also hired about 50 more staffto handle the additional security requirements andwas thus able to maintain timely services to thepublic in the following two years.In November 2003, Ontarians began experiencingdelays in the services provided by the Office.By early 2004, Ontarians who had applied for certificateswere complaining—to the Office, to themedia, and to their Members of Provincial Parliament—thatthey were not receiving their certificatesand, furthermore, that they had not been ableto get through to the Office. The Office respondedby saying that delays were being caused by a significantincrease in demand for services and by thenew security measures.However, our audit indicated that Ontario,like other Canadian jurisdictions, had not experienceda significant increase in the demand for servicesin recent years. In fact, since November 2003,the overall demand for services—including bothregistrations of vital events and applications forcertificates—had remained relatively stable, asdemonstrated in Figure 1.With respect to the impact of the new securitymeasures on the turnaround time for processingcertificates, the Office informed us that evenwith additional staff, it was not able to handlethe increased workload that resulted. While staffinglevels may have contributed to the problem,our audit indicated that two internal issues wereprimarily responsible for the delays in providingcertificates: inefficiencies created by the implementationof a computer system that was not ready tobe implemented and a management reorganizationthat contributed to low morale and reduced productivity.Our specific concerns related to these twoareas are discussed later in this report in the sectionstitled “VISION: A New Computer System” and“Managing Human Resources.”At the time of our audit, the Office indicatedthat since July 2004 it had reduced its inventoryof outstanding certificate applications to 30,000and could deliver a certificate within a six-to-eightweekperiod. However, we noted that this numberof applications represented less than about onethirdof all outstanding certificate applications. Aswell, the stated turnaround time applied only incases where the vital event had been properly processed.As there was a significant backlog in registeringvital events, many applicants would haveplaced undue reliance on getting their certificates

Office of the Registrar General221Figure 1: Incoming Registrations and Certificate Applications, October 2001–December 2004Source of data: Office of the Registrar General120,000Incoming Registrations100,000Certificate Applications80,00060,00040,00020,0000in a timely manner. The following two sections outlinemore specifically the nature of the delays inprocessing both registrations and applications forcertificates.Oct 01Nov 01Delays in RegistrationsIllustrated in Figure 2 are the results of our reviewof the turnaround time for registering vital eventsin Ontario, as taken from the Office’s productionrecords. Until November 2003, the average registrationturnaround time was about two and a halfweeks. After that, the turnaround time increaseduntil, by the end of December 2004, many registrationswere taking almost a year to be fully processed.During that time, the Office’s priority wasto register births, but even for births it often tookFeb 02May 02Jun 02Jul 02Aug 02Sep 02Oct 02Nov 02Dec 02Jan 03Feb 03Mar 03Apr 03May 03Jun 03Jul 03Aug 03Sep 03Oct 03Note: Data are not available for December 2001, January 2002, March 2002, and April 2002.months after the Office received the informationbefore the event was registered. As well, as ofDecember 31, 2004, there were more than 178,000vital events outstanding that were awaiting registration,as shown in Figure 3. By comparison,between September 2001 and November 2003, theOffice had an average outstanding balance of fewerthan 20,000 registrations.Nov 03Dec 03Jan 04Feb 04Mar 04Apr 04May 04Jun 04Jul 04Aug 04Sep 04Oct 04Nov 04Dec 04In addition to the 178,000 unprocessed registrations,there were another 8,000 registrations thatrequired correcting because of errors in the originalregistrations. The errors were usually brought tothe Office’s attention when citizens were sent theregistration data and asked to confirm the accuracyof this information or when applications forcertificates didn’t match the Office’s records. However,the required corrections were not made unlessapplicants followed up and complained. We notedChapter 3 • VFM Section 3.11

2222005 Annual Report of the Office of the Auditor General of OntarioFigure 2: Vital Events Registration Turnaround Time, May 2002–December 2004Source of data: Office of the Registrar General50454035Chapter 3 • VFM Section 3.11Turnaround Time (weeks)302520151050May 02Jun 02one case, for example, where the Office receivedan application for a certificate in September 2003,and staff realized in April 2004 that the applicant’sname was misspelled in the registration recordbecause of a data input error; but the informationwas not corrected until January 2005 and only afterthe applicant complained.Jul 02Aug 02Sep 02Oct 02Nov 02Dec 02Jan 03Feb 03Mar 03Apr 03May 03Jun 03Jul 03Aug 03Sep 03We also found 3,000 cases where applicationsfor certificates had been submitted but the Officehad no record of the registration data having everbeen received. In these cases, the Office should haveinformed applicants that they needed to file a registrationform to register the vital event before thecertificate application could be processed. However,many of these applications were over a year old,and the Office had still not advised the applicants ofthe problem. For example, we found an applicationfor a birth certificate that was submitted in January2004 for which the Office did not have registrationinformation. The Office took no action to inform theapplicant of the problem, even though the applicantsubmitted two more applications in March 2004 andJuly 2004 and paid for the service three times. As ofFebruary 2005—over a year after the initial applicationwas submitted—this individual still had notbeen informed of the reason why their applicationwas not being processed.Oct 03Nov 03Dec 03Jan 04Feb 04Mar 04Apr 04May 04Jun 04Jul 04Aug 04Sep 04Oct 04Nov 04Dec 04

Office of the Registrar General223Figure 3: Vital Events Not Registered, as ofDecember 31, 2004Source of data: Office of the Registrar GeneralOutstandingVital Event Registrationsbirth 43,000death 80,000marriage 50,000other 5,000Total 178,000RECOMMENDATIONTo properly discharge its legislative responsibilitiesin registering vital events, the Office of theRegistrar General should:•take steps to bring all outstanding registrationsup to date and process incoming registrationswhen notification of the vital eventsis received;•correct all errors in the original registrationrecords promptly once they have beenbrought to the Office’s attention; and•inform certificate applicants on a timelybasis in cases when the vital event has notbeen registered and specify what, if any,action is required on their part.OFFICE RESPONSEThe Office supports this recommendation.The Office confirms that it is meeting publishedservice standards for both registrationand certification services.In 2004, the Office did experience longerprocessing times for certificates and registrationservices, and it recognizes that these hada significant impact on its clients. In response,the government approved and funded recoveryplans to eliminate delays in each area based onthe impact on clients. Since spring 2005, theOffice has been meeting service standards forbirth, marriage, and death registrations of sixto eight weeks if documents are complete andaccurate. Throughout 2004 and early 2005,the Office had procedures in place to handlerequests to expedite registrations in urgentsituations (for example, marriage certificatesrequired for immigration purposes or parentsneeding birth certificates for their children inorder to apply for RESPs).Pending registrations have been reducedfrom a high of 178,000 to approximately 50,000,which reflects the six-to-eight-week servicestandard. Work is underway to register births(including integration of birth registration andbirth certificate applications) and deaths electronically,commencing with the implementationof an Integrated Birth Registration “SmartForm” in early 2006. This will not only improvethe convenience and speed of service for clientsbut also further increase the quality of registrations,thereby reducing registration errors madeby the Office.As a result of staff being deployed to eliminatecerficate and registration processingdelays, the Office was not able to correct recordspromptly in 2004. This situation has been rectified,and errors are now corrected promptlywhen brought to the Office’s attention. TheOffice has begun the process of establishing anenhanced quality-service program that, whencomplete, will result in fewer records witherrors and improve service to clients. Additionalregistration data entry edits were implementedin November 2003, in order to reduce the incidenceof errors and reduce the requirement forcorrections.By early November 2005, the Office will benotifying applicants on a timely basis shouldthey request a certificate for an event that hasnot been registered and will continue to sendChapter 3 • VFM Section 3.11

2242005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11out Delayed Registration Forms in cases wherethe vital events occurred more than a year ago.The Office is also implementing a number ofproactive measures to better inform clientsabout the registration and certificate applicationprocess, including providing information toparents of newborns at birthing hospitals andadvising parents using the on-line birth certificateapplication about estimated time frames forregistrations. Work is underway to give parentsof newborns the choice of registering the birthand applying for a certificate at the same timeas part of the Office’s service improvement plan.Integrated birth registration will be phased in,beginning with an electronic “Smart Form” forbirth registration, in early 2006.Delays in CertificatesDuring our audit, the Office stated that it was ableto issue certificates within six to eight weeks basedon an inventory of 30,000 outstanding certificateapplications. We noted that the 30,000 representedless than one-third of over 90,000 applications outstanding.Specifically, this total did not includeover 63,000 applications that the Office had notcompleted processing for a variety of reasons. For47,000 of these applications, the Office indicatedthat it was awaiting reponses from the applicants.Many of these 47,000 files had been outstandingfor more than 300 days. As of the end of December2004, the status of these 47,000 outstanding fileswas as follows:•About 15,000 applicants had been informedthat additional information was required, butwe noted that the Office was slow in contactingthe applicants. In one case, for example, theOffice did not inform an applicant until October2004 that additional information about theirguarantor was required, even though the applicationhad been received and the fee paid a yearearlier, in October 2003. At the completion ofour audit, five months later, the Office was stillawaiting a response from the applicant andhad not done any follow-up on the status of itsrequest.•Another 10,000 applicants the Office had contactedfor more information had responded tothe Office’s request for information, but theOffice had yet to process their applications. Inone case we reviewed, for an application thatwas received in October 2003 without a requiredsignature and phone number, a request for themissing information was sent out in April 2004;and although the applicant responded in thesame month, the application was not reviewedagain until seven months later, in November2004. The printed certificate was returned inJanuary 2005 by the post office indicating thatthe applicant had moved.•The remaining 22,000 outstanding applicationswere labelled as awaiting applicant responses,but the Office could not determine whetherapplicants had ever been informed that moreinformation was required of them. We notedinstances where applicants had been waiting forwell over a year and the Office did not informthem that certain information was missing—even for minor omissions—until we broughtthese 22,000 applications to the Office’s attentionin February 2005. When we raised this issuewith the Office, staff indicated that they had notbeen able to send out electronically generatedrequests for additional information betweenNovember 2003 and June 2004 because thecomputer system had malfunctioned. Somerequests were sent out manually when complaintswere received from applicants in followingup on their applications.After our audit, the Office informed usthat it had reviewed applications where it wasunclear if applicants had been informed thatresponses were required from them. Office staff

Office of the Registrar General225indicated that, as of April 2005, the number ofapplications requiring follow-up action to assesswhether correspondence had been sent out hadbeen reduced from 22,000 to about 16,000.Taking all certificate applications into account,the inventory of unprocessed certificates was muchhigher than the 30,000 reported by the Office. Thesix-to-eight-week promised turnaround time wasmade possible only by excluding more than half theapplications.Because certificates issued by the Office (suchas birth certificates) are required when applyingfor other important documents and forms ofidentification (such as social insurance numbers,health cards, and passports), because of the delaysin processing already discussed, and because ofproblems getting through to the Office to inquireabout the status of their applications (see the “CallCentres” section later in this report), many applicantssubmitted multiple applications and paymentsin order to be sure their applications hadbeen received. These multiple applications led toduplicate work for staff to process and the need tosend out refunds. The Office did not have informationon the extent of multiple applications and payments,but our examination identified a minimumof 18,000 refunds pending at the end of our audit inMarch 2005.RECOMMENDATIONTo provide more timely and effective customerservice, the Office of the Registrar Generalshould:•provide a more reliable estimate to applicantson the turnaround time for birth,death, and marriage certificates;•track incoming applications for certificatesbetter and, if information is missing,promptly advise applicants and follow upwhen the information is not forthcoming;and• promptly process the applications whereadditional information has been provided asrequested.OFFICE RESPONSEThe Office supports this recommendation.In 2004, the Office experienced delays inprocessing times in certificate services and registrationservices, and it recognizes that these hada significant impact on its clients. In response,the Office developed targeted recovery plansto eliminate delays in each area, focusing firston those areas where backlogs resulted in thegreatest inconvenience to clients.The Ministry is achieving its publishedservice standard of six to eight weeks for theprocessing of most properly completed and correctregular birth, death, and marriage certificaterequests where events have been registered.The Office meets these standards for certificateprocessing for over 90% of these applications:emergency, 48 hours; expedited, 10 businessdays; and regular service, six to eight weeks.The Office will continue to work through initiativessuch as the enhanced quality-service planthat was started in August 2005 to increase thepercentages of applications processed withinpublished service standards.The introduction of on-line certificate applicationsis enabling the Office to deliver substantiallyenhanced service. Starting with birthcertificates, which represent 80% of all certificaterequests, the Office introduced an on-lineapplication for children eight years of age andunder in June 2005. This new on-line applicationis already handling over 50% of child applications,or about 25% of all birth certificateapplications. The service standard for processingon-line applications is 15 days, which is currentlybeing achieved over 99% of the time. InNovember 2005, adults and children over ageChapter 3 • VFM Section 3.11

2262005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11nine will be able to apply for a birth certificateon-line. On-line applications will be availablefor other certificate types by March 2006.The Office has reported processing/waittimes for certificates and registrations via theministry website and on its 1-800 system since2004 and will continue to do so.Currently, any necessary correspondence isbeing sent within six to eight weeks for regularapplications (less for emergency, expedited,and on-line applications). The Ministry hastaken steps to reduce the time it takes to processreturned correspondence to six to eight weeksor less by the end of November 2005. On-lineapplications are substantially reducing the needfor additional correspondence by addressingpossible errors at source. Files requiring correspondencehave been reduced to less than 5% foron-line applications (compared to at least 15%for mailed-in applications).The Office tracks all files requiring refunds.Outstanding refunds have been reduced fromapproximately 18,000 to 1,500.HANDLING INQUIRIES ANDCOMPLAINTSCall CentresThe Office has two call centres—one in ThunderBay and one in Toronto—with 38 staff to handlephone and email inquiries in both French and English.The call centres operate between the hours of8:30 a.m. and 5 p.m. from Monday to Friday.We noted that the call centres were not effectivein addressing the needs of callers. Specifically,a report prepared by Bell Canada in June 2004—atthe Office’s request—indicated that 97% of the130,000 calls made each day to the call centreswere blocked by busy signals. Many of these callswould be from the same callers, who were tryingto get through. Our review of office call logs for theyear ended December 31, 2004 indicated that thesituation had not improved since June. Even for thesmall percentage of callers who were able to accessone of the phone lines, we found that:•80% would eventually be disconnected after anextended period of time waiting for the call to beanswered;•4% would get through to an automated answeringqueue and abandon their calls before anoperator could reach them; and•16% would speak to an operator, but wouldoften find out that the Office could not provideinformation about the status of their applicationsif it had not started to work on or had notcompleted the registration.Ultimately, less than one-half of 1% of callersreceived any useful information.MPP Inquiries UnitThe Office has a unit dedicated to handling Memberof Provincial Parliament (MPP) inquiries onbehalf of their constitutents. In response to thelarge number of public complaints to MPPs, in February2004 the Office increased its staff for theMPP inquiries unit from two to 15 to respond to theapproximately 4,000 MPP inquiries that came inmonthly. We noted that:•The MPP unit staff were able to answer inquirieswithin 48 hours of receiving a call through linesspecifically designated for them.•Many requests to the unit were resolved directlyby staff in the unit. In those cases, they wouldprocess the applications by performing the proceduresnecessary to issue the certificate.The MPP unit was effective in handling complaintsmade to MPPs’ offices. However, this practiceessentially established two levels of servicewith respect to handling public inquiries. Thoseapplicants who did not complain to MPPs could seethis practice as being unfair. Clearly, the optimalsolution would be to have the call centres handle allpublic inquiries in a satisfactory manner.

Office of the Registrar General227At the time of our audit, the Office was consideringincreasing the resources of the call centres.However, there were already more than 50staff members working in the call centres and theMPP unit combined to deal with complaints. Thisnumber of staff was needed only because far toomany applicants had not been receiving a satisfactorylevel of service; and even with this number ofstaff, they could not handle the call volume, withthe exception of the calls referred through MPPs’offices.Call-centre staff indicated to us that theyspent much of the day apologizing to callers forunacceptable delays. Methods used in the callcentreindustry to address calls and minimize customercomplaints should be considered. Thesecould include more automated telephone linesinforming the public about the volume of calls, andmessages that indicate the estimated waiting timeaccording to call volume and the estimated turnaroundtime for each type of service.RECOMMENDATIONTo deal more effectively and efficiently withapplicant inquiries and complaints, the Office ofthe Registrar General should:•consider providing automated prerecordedmessages to inform applicants of the delaysand estimated times for delivery of varioustypes of certificates; and•review the current deployment of staff witha view to increasing the efficiency of theOffice’s operations.OFFICE RESPONSEThe Office supports this recommendation.The Office recognizes that the public’sexpectations for access to information via thetelephone channel exceed the current technologyand that call-centre services need tobe improved. The Office, in partnership withServiceOntario, is taking a number of steps toimprove service in both the short and long term:• In October 2005, the Office will strengthenthe capacity of its existing call centre andsimplify/improve recorded messaging inorder to answer more calls and enable morepeople to access general information withoutoperator assistance.•The Office and ServiceOntario will alsobegin implementation of its long-term solution,new telephone technology, to drasticallyreduce the number of callers who get abusy signal and improve access to generalinformation with integrated voice recognition(IVR). Implementation of this long-termsolution is being accelerated, with the benefitof these service improvements expectedto be felt in December 2005. Callers will beable to check the status of their certificateapplications over the phone, without speakingto an operator, by March 2006.In addition to expanding and improving thecapacity of the call centre itself, the Office isimplementing a number of initiatives to bothreduce and divert call volume. On-line selfservicestatus checking, available by December2005, will provide a fast and convenientalternative for the upwards of 75% of callerswho are seeking information on the status oftheir applications. The expansion of on-linecertificate applications is also expected to resultin significant reductions in call volumes asprocessing times are reduced by at least 75%and files requiring additional communication/correspondence with clients are reduced by over60%. Reductions in return correspondence willalso result in fewer calls.As part of the Office’s program review completedin 2004/05, an external consultant recommendedspecific increases in staffing to addresshistoric shortages and to properly support theChapter 3 • VFM Section 3.11

2282005 Annual Report of the Office of the Auditor General of Ontariobusiness. This staffing model is now being implemented.The Office will continue to perform dailymonitoring of productivity and staff deploymentin order to seize opportunities to further improveservice to clients.VISION: A NEW COMPUTER SYSTEMAs indicated earlier, in our view, inefficienciescreated by the hasty implementation of a newcomputer system called VISION (Vital StatisticsInformation Ontario System) for processing certificatesin November 2003 was the main reason forthe decline in staff productivity and the resultinglarge number of outstanding certificate applications.This view is supported by a significant declinein the number of registrations and certificates beingprocessed beginning at the time that VISION wasfirst being implemented, as illustrated in Figure 4.Although the Office had more than doubled thenumber of staff since then to deal with this accumulationof work, it still had not managed to processas many registrations and certificate applications asbefore.We have significant concerns that prudent businessand information technology practices were notfollowed in the procurement, development, andimplementation of the new system, and these concernsare outlined in detail in the following sections.Figure 4: Total Registrations and Certificate Applications Processed, October 2001–December 2004Source of data: Office of the Registrar GeneralChapter 3 • VFM Section 3.11140,000120,000100,000Completed RegistrationsCompleted Certificate ApplicationsFull-time Equivalent (FTE) staff450400350300# of Registrations and Certificates80,00060,00040,00020,0000Oct 01Nov 01Note: Data are not available for December 2001, March 2002, and April 2002.Jan 02Feb 02May 02Jun 02Jul 02Aug 02Sep 02Oct 02Nov 02Dec 02Jan 03Feb 03Mar 03Apr 03May 03Jun 03Jul 03Aug 03Sep 03Oct 03Nov 03Dec 03Jan 04Feb 04Mar 04Apr 04May 04Jun 04Jul 04Aug 04Sep 04Oct 04Nov 04Dec 04250200150100500FTE # of Staff

Office of the Registrar General229System ProcurementIn March 1998, the Office obtained approval fromthe Management Board of Cabinet (MBC) to spendup to $7.8 million to replace its old informationsystem within five years. The business case usedto obtain MBC approval was based on a detailedanalysis of the projected costs for hardware, software,and applications to replace the existing computersystem. Of the approved amount, $4.4 millionwas to be used for one-time acquisition and implementationof the new system and $3.4 million wasfor ongoing maintenance and support. Confirmationof projected costs was done through preliminaryquotations from vendors and discussion withother jurisdictions that were in the process ofreplacing their vital statistics information system(including other Canadian provinces, the UnitedStates, and Australia).The projected operational benefit was a staffsaving of about 48 FTEs (full-time-equivalent staff),about 35% of the Office’s staff, after implementationof the new system. The submission to the MBCindicated that the ongoing quantifiable direct costsavings would grow to $2.9 million per year basedon a detailed analysis of office workforce allocationby activity and function. The new system wouldperform electronic registrations for births, deaths,and marriages and reduce the time needed to registerevents from weeks to days, with higher-qualityregistration data.The business case recommended purchasing “apackage that has been successfully implemented inother vital statistics jurisdictions. This will delivera system that is proven, standards-based, supportable,less costly, and in a more timely fashion.” Thenormal procurement procedure with a request forproposals (RFP) was to be used for the selectionof the package, with customization, to ensure thatcore functionalities and requirements would bemet.In fall 2001, a consultant was engaged by theOffice to survey vendors of vital statistics informationsystem programs. The survey results indicatedthat the cost to purchase such a program wouldbe up to $1.5 million, plus customization costs torevise the software to meet the Office’s specificneeds. However, in December 2001, the Officedecided that it would develop the system internally.In an October 2001 submission to the MBC, theMinistry estimated the cost of building the system tobe less than purchasing an existing system. It statedthat in “evaluating the validity of this estimate, theMinistry recognizes that an RFP or formal negotiationwith a vendor would provide the most validity.However, an RFP process could stretch the procurementprocess to between three and four months.”The Ministry requested that it be given flexibilityin procurement to pick a vendor from the vendorof-record(VOR) listing to deliver the system. VORarrangements are part of a government-wide policyfor the ongoing acquisition of commonly purchasedgoods and services, including IT consulting services,over a specified term and for specified amounts. Inmaking this request, the Ministry recognized that itsproposal involved “exceeding the current ceiling forutilizing the VOR.”The minutes from the MBC’s November 2001meeting noted the approximate cost of $1.5 millionfor the system and directed the Ministry to follownormal procurement procedures. In addition,the MBC directed the Ministry to report on theproject by providing implementation details andmilestones completed and the associated revisedstaff-reduction plan in the Ministry’s 2002/03 BusinessPlan. The Ministry indicated to us that it interpretedthe direction from the MBC as granting itthe flexibility it requested for procurement by VORrather than through a competitive RFP. However,given that government procurement directives statethat ministries can use the VOR for IT projects onlywhen the estimated cost is $500,000 or less (thesystem’s cost was then estimated to be $1.5 million),the normal procurement procedure to follow wouldhave been an open tender through an RFP.Chapter 3 • VFM Section 3.11

2302005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11The only documentation to support the changein approach was an internal presentation made tothe then–Deputy Minister. It stated that despiteincreased costs and substantially expanded businessrequirements since 9/11 relating to securityand fraud detection, the $3.75-million estimateassociated with planning and implementing thenew computer system remained fundamentallysound. However, the $650,000 (of the $4.4 million)that had originally been approved would notbe enough to implement electronic registration.In addition, the Office would be able to achievea staff saving of only 19.5 FTEs, instead of the 48originally envisioned, through automation of frauddetection/prevention measures. The presentationstated further that building the system internallywould:••allow the Office to expand existing capabilities;cost an estimated $4.2 million (with a risk thatthis figure could reach $4.7 million if there wereunexpected circumstances)—buying was nowestimated to have a one-time cost of $4 millionto $6 million (and would require an RFP to confirm);and•allow for implementation in November 2002,whereas buying would allow for a spring 2003implementation at the earliest.The presentation recommended building internallybecause buying risked unknown costs, time,and capability. This view, however, contradicted theoriginal detailed business case submission that purchasinga packaged system would be less costly andmore reliable, and would provide opportunities forthe Office to adopt procedures that had been successfulin other vital statistics jurisdictions.We also noted that the Office did not haveproper analysis and information to support the projectionof time and costs for developing the systeminternally. Furthermore, with the decision to notissue an RFP, the Office did not know what costs,timing, and abilities outside vendors could offer formeeting the Office’s requirements. The Office alsohad not reported back on the project as directedby the MBC with implementation details and milestonescompleted and the associated revised staffreductionplan in the Ministry’s 2002/03 BusinessPlan.Our examination indicated that in December2001, when the decision to build or buy had to bemade, there were good opportunities to benefitfrom the experiences of other jurisdictions. Forinstance, both British Columbia and Manitoba hadalready successfully implemented their vital statisticsinformation system. Manitoba took only about10 months to complete the development, conversion,and implementation of its new system—anexternal package that it purchased and customizedfor its requirements. The system developed andimplemented by B.C. was subsequently purchasedby a number of U.S. states. These states, includingAlaska, Michigan, Ohio, and Pennsylvania (whichadopted only the births component) had all successfullyimplemented the system, with customizations,by the time of our audit.RECOMMENDATIONTo promote better value for money for taxpayerswhen acquiring any major computer system, theOffice of the Registrar General should:•ensure that sound project-planning practicesfor information technology are followedwhen deciding whether to buy the systemor build it internally, giving due considerationto the capacity and experience of staffas well as objectively considering whetherproven solutions exist in the marketplace;• ensure that timelines and project costs foracquiring the system, whether it is builtinternally or bought from outside vendors,are based on a sound and objective analysis;and•ensure that specific Management Board ofCabinet approval is obtained when there

Office of the Registrar General231are significant changes to the originallyapproved business case and approach.OFFICE RESPONSEInformation Technology Projects (July 2005). Thegovernment supports, in principle, the recommendationsset out in the report and has committedto responding in full within 90 days.The Office supports this recommendation.The Ministry’s original 1998 business caseand submission to the Management Board ofCabinet (MBC) indicated an intent to “acquire”a new system. However, with the fundamentalre-scoping of the project in 2001 to focus on theimplementation of enhanced security, the Ministryrevised its approach to one of developingthe system rather than acquiring an “off-theshelf”solution. The decision to build rather thanbuy was based upon an analysis of the Office’slegislated enhanced security requirements (substantiallymore rigorous than those in place atthe time in the other jurisdictions cited in theAuditor General’s report) and the solutionsavailable in the marketplace at the time.In its October 2001 report to the MBC, theMinistry indicated its intent to build versus buythe new system in order to achieve the Office’senhanced security objectives as rapidly as possible.Having informed the MBC of its intention,the Ministry believed that its approach toresourcing the project was fully in compliancewith normal government procurement practices,as directed by the MBC.It is recognized that large-scale informationand information technology projects are complexin nature and that the Office, like manyorganizations, faced challenges, particularly inregard to fully understanding the scope of thetask and the complexity, risk, and accompanyingdegree of business transformation affectingthe initial estimation and management of thisproject. These types of challenges were notedin the Report of Ontario’s Special Task Force onthe Management of Large-Scale Information andSystem DevelopmentOur audit showed that the Office was too optimisticin attempting to develop a system internally in ashort time using its existing resources and did notfollow accepted system development methodologyin developing the new VISION system.Defining of Roles, Business Requirements, andSystem DesignA critical first step in the development of a systemproject is to obtain approval through a project charterat the planning phase. The charter is to be basedon a thorough assessment of user requirements andis usually produced prior to commencing a projectin order to establish and confirm each party’s commitmentto meeting specific timelines, providing theresources needed, and being accountable for meetingall project deliverables. We were provided witha draft copy of the charter but were informed that asigned copy had never existed. Also, the draft charterindicated that the respective roles of the Office’susers, the project team, and the technical staff wereto be defined in a service-level agreement. We wereinformed that no such agreement existed.Development of a clear understanding of businessrequirements is critical to the success of anycomputer development project. Accordingly, the firstdeliverable identified in the unsigned project charterwas to be the definition of requirements by March2002 and the completion of system design by May2002. Our discussion with users and project developmentstaff indicated that both groups had significantconcerns with the business requirements definitionand the system design processes. Specifically:Chapter 3 • VFM Section 3.11

2322005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11• The communication of business requirementswas largely informal, either verbal or throughan exchange of emails, and was done withouta formal document that laid out in detail whatthe users of the system required before proceedingto the design phase. Staff indicated thatthroughout the entire project, business requirementswere often communicated to developerswith only two weeks to complete the requiredprogramming.•Without a clear definition of and sign-off onbusiness requirements, even basic requirementswere open to interpretation by users and theproject design team.•Pressure to complete the project frequentlyoverrode the needs of the users. For instance,because of time pressures, project staff wereforced to move into the design phase beforerequirements were finalized and approved. Thisled the project team to make assumptions aboutthe requirements that later had to be revised at asignificant cost in time and resources.Testing Standards and MethodologyOur review identified a number of weaknesses inthe quality-assurance process that was designedto ensure that the system was adequately testedbefore implementation. Specifically:•System-testing activities were done on an ad hocbasis without a proper testing plan and cases,standard testing tools, and quality-assurancechecklists.•Testing staff often indicated that they were notsure what was expected of them because theywere not involved in the original requirementsdevelopment. According to testers, this resultedin things being “lost in translation” in terms ofexpected results.•Testing staff indicated that they did not haveenough time to complete their testing prior tothe system being implemented. For example, thesecurity architecture was not tested because thenecessary master reference table was not availablebefore implementation.•For those areas where they were able to completetesting just prior to implementation, mosttests failed. However, the system was implementeddespite the expressed concerns of thetesting staff.•Significant work orders that should have beenaddressed were often ignored in the developmentphase. In fact, new program code was built oncode that was known to have problems—a situationthat made it even more costly in time andresources to fix problems after implementation.System ImplementationVISION was implemented on November 22, 2003,but according to the line managers (users), systemtesters, system staff, and developers weinterviewed, the system was not ready. Many functions—changeof name, stillbirth, parentage, andamendments—were either partly working or notworking. Other problems included the system’sinability to print correspondence, process creditcardpayments, process refunds, and determine correctpayments.We also noted that there were more than 300work orders outstanding at the time of implementation.Of these, 28 were identified as critical. Anadditional 800 work orders were created after thesystem was implemented: 200 were identified byproduction staff and the other 600 by testers. Intotal, approximately 1,600 work orders had beenrequested, and as of March 31, 2005, about 380 ofthese had still not been dealt with: 128 of these hadbeen identified as critical.To ensure that operations are not disrupted, it isprudent to require a parallel run of both the old andnew systems for a short time to support implementationof the new system. We noted that, despitethe fact that numerous critical work orders had notbeen dealt with, the old system was not maintained

Office of the Registrar General233while VISION was implemented: we were informedthat this was because there were not enough staff torun both.Staff who processed certificates at the Officecomplained that the new system was very unstableand had frequent downtimes due to system crashes.We noted recent downtimes during our audit thatshowed that the system had still not stabilized:November 2004 – 590 minutesDecember 2004 – 1,480 minutesJanuary 2005 – 1,666 minutesFebruary 2005 – 2,660 minutesThe Office indicated that VISION was down inFebruary mainly due to problems with the configurationbetween its server application and itsoperating system. Our review of the downtime logfor February 2005 indicated that the system wasdown 52 times on 14 different days, which clearlyimpeded the staff’s ability to perform the mainfunctions of their job.During our audit, we witnessed first-hand, overa period of one week, the system being shut downfor two full days and, on the three other days, staffhaving to wait for hours for the system to startworking again in the late afternoon. Our review ofproduction records showed that registration productionwas down by two-thirds and certificateproduction by one-fifth, when compared to the previousweek.As the system was hurried into production withmany outstanding work orders and without allthe functionalities, user staff had to correct thoseproblems at various times by working around themmanually.Our audit found that instead of VISION beingimplemented, as planned, in November 2002 ata one-time cost of $3.75 million, the system wasimplemented a year later, it was implementedbefore it was ready, and as of the end of our audit,it had cost over $10.2 million. In March 2005, at thecompletion of our fieldwork, the system still hadclose to 380 work orders outstanding. Furthermore,instead of being able to reduce staff by 19.5 FTEs asoriginally proposed, the Office had to hire significantlymore staff to process transactions manuallybecause of the problems being experienced withthe new system. As of March 2005, the Office had astaffing level of 326 FTEs, compared to 175 FTEs inOctober 2003.In summary, we identified concerns with thesupporting business case, the definition of businessrequirements, the accountability for systemdevelopment, and the conducting of testing. Mostof these concerns were also identified in the recentReport of Ontario’s Special Task Force on the Managementof Large-Scale Information and InformationTechnology Projects as being common challengesfacing government ministries.RECOMMENDATIONTo ensure the delivery of timely service to thepublic and to help achieve the original objectivesof the project in making the Office of theRegistrar General more effective and efficient,the Ministry should:•establish accountability for development andimplementation of the project to make surethat the roles of respective stakeholders areclearly understood and fulfilled; and•expedite efforts to fix all critical outstandingwork orders to ensure that the system functionsproperly and provides a stable environmentfor staff to work with.OFFICE RESPONSEDue to the overriding need to implementenhanced security in a tight time frame, theMinistry recognizes that some aspects of projectdocumentation were less formal than best practiceswould recommend. Subsequent phases ofthe project have been planned to ensure thatall documentation requirements and best practicesare followed. The Office will ensure that allChapter 3 • VFM Section 3.11

2342005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11major systems initiatives have properly preparedand approved project charters, service-levelagreements, and memoranda of understanding.It is recognized that large-scale informationand information technology projects are complexin nature and that the Office, like manyorganizations, faced challenges, particularly inregard to fully understanding the scope of thetask and the complexity, risk, and accompanyingdegree of business transformation affectingthe initial estimation and management of thisproject. These types of challenges were notedin the Report of Ontario’s Special Task Force onthe Management of Large-Scale Information andInformation Technology Projects (July 2005). Thegovernment supports, in principle, the recommendationsset out in the report and has committedto responding in full within 90 days.Work orders deemed critical will continueto be implemented on a priority basis. Lowprioritywork orders will be addressed as appropriatebased on business need. The Office wasregistering events and was successfully andsecurely processing certificate requests fromDay 1 of implementation. Over 1.25 millionregistrations and certificate applications havesubsequently been securely processed throughthe new system. While the Office did requireadditional production staff to address backlogs,by September 2005, a similar number ofstaff were processing registrations and certificateapplications compared to fall 2003, despitethe implementation of substantially increasedsecurity measures (which had been clearlyestablished as the primary objective of the newsystem) and increased certificate applicationvolumes. In August 2005, downtime relatedto the new VISION system was 0.3%. The newsystem and processes form the foundation forservice improvements such as the successful onlinecertificate service for children eight yearsof age and under. A third-party review of theOffice’s information technology system will beconducted to validate that the system successfullymeets its business requirements.MANAGING HUMAN RESOURCESOur review indicated that a poorly planned and carriedout organization restructuring that took placein October 2003 contributed to low morale and aresulting decline in staff productivity.The work at the Office is performed in anassembly-line type of processing. Clerical staffinvolved in registration or in the production of certificatesare known as team representatives, and theskill sets required to process both registrations andcertificates are similar and relatively interchangeable.Team representatives’ responsibilities includeopening and batching mail; scanning in registrationdocuments or certificate applications received;entering data for registration or certificate applicationsreceived; verifying the accuracy of registrationdata input or matching certificate application datawith registration records to ensure that only personseligible to receive certificates are issued them; andsending out printed registration confirmations orcertificates.The Office traditionally had a relatively stableworkforce, with minimum turnover. For instance,many of the team managers, who were responsiblefor overseeing the work of team representatives,had been with the Office for more than 10 years.Each team manager was responsible for managingand providing guidance to a team of about 10 teamrepresentatives.However, in October 2003, the Office created anew level of management above the existing teammanagers. Our review of the process of implementingthis change identified a number of questionablepractices. As an example of what we discovered,Figure 5 outlines the effect of the organizational

Office of the Registrar General235Figure 5: Production Staff, Thunder Bay, October 2003Source of data: Office of the Registrar GeneralDeputyRegistrar GeneralAssistant DeputyRegistrar General(Acting)ManagerRegistration(Acting)New level ofmanagementManagerRecord & ExceptionHandling (Acting)New level ofmanagementManagerService Delivery(Acting)TeamManagerMPP Unit(Acting)ManagerCall CentreManagerCall Centre(Acting)TeamManagerDistribution(Acting)ManagerNight Shift(Acting)TeamManagerSpecialtyServices(Acting)restructuring of staff in Thunder Bay who wereresponsible for registration and the production ofcertificates.All the shaded management positions in Figure5 were filled by staff who had previously beenteam representatives. The new managers were designatedas acting. We noted that all the new managerswere appointed without advertisement orinternal competition. These clerical staff were promotedinto the most senior management positions,where they were responsible for supervising theteam managers.ManagerMedicalCodingWe noted that in one case, a contract employeewho had no management experience wasappointed team manager to supervise permanentstaff. The Public Service Act stipulates that contractTeam representativesTeamManager(Acting)Note: Shaded boxes with white type indicate individuals whose previous or home position was team representative.TeamManager(Acting)TeamManagerstaff are not permitted to supervise permanentemployees unless prior approval is obtained fromthe Public Service Commision. While such approvalhad been delegated to the Deputy Minister, wefound that the required approval was still notobtained until six months after the appointment.Some new managers found themselves nowTeamManager(Acting)supervising managers who used to be their superiors;yet none of the existing managers was giventhe opportunity to compete for the new positions.At the time of the appointment, there were about10 team managers in existing permanent positions,but none of them was promoted to the new leveland several were transferred to a non-productionenvironment even though they had years of experiencein producing certificates. We also noted that:Chapter 3 • VFM Section 3.11

2362005 Annual Report of the Office of the Auditor General of OntarioFigure 6: Production of Registrations and Certificates per Staff, October 2001–December 2004Source of data: Office of the Registrar General500450Chapter 3 • VFM Section 3.11# of Registrations and Certificates Completed per Staff400350300250200150100500Oct 01Dec 01Feb 02• There was no job specification for the new levelof managers, although there was a genericdescription for team managers and other staffreporting to them.•Apr 02Jun 02Aug 02Oct 02The appointment of the new level of managersin October 2003 did not comply with theOntario government’s direction in August 2003that no new position should be created withoutthe Deputy Minister’s prior approval.•The new managers were all unionized staff in anacting capacity. A number of them were themselvesconcerned about their effectiveness asmanagers. Because they were expected to managefellow workers, these acting managers wereconcerned about what might happen shouldthey not retain their acting position and rejointhose workers as peers in the future.Dec 02Feb 03Apr 03Jun 03Aug 03Oct 03Dec 03Feb 04Apr 04Jun 04Aug 04Oct 04Dec 04• Until 2003, on average there had been fewerthan 10 employee grievances a year; by 2004,that number had grown to 35.The perception of unfair employment practicesand the absence of a fair and objective promotionprocess led to morale issues among staff, andthis in turn adversely affected the operation of theOffice. Figure 6 illustrates how the average numberof registrations and certificates produced per staffdeclined significantly. It also shows that althoughthere were some improvements beginning in February2004, the average numbers produced per staffwere still significantly lower than the numbers producedin the previous two years.We noted that there was a sudden decline instaff productivity around October 2003, when thenew computer system was implemented and theOffice’s management structure was reorganized.

Office of the Registrar General237Although about 250 more staff were hired in theensuing months to deal with the delays in issuingcertificates, this number was not sufficient to eliminatethe delays.At the completion of our fieldwork in March2005, all of the new managers appointed in October2003 were still in their positions in an actingcapacity.RECOMMENDATIONTo improve staff productivity and morale, theOffice of the Registrar General should complywith prudent human resources managementpractices that include:• proper planning and approvals before proceedingwith an organizational restructuring;• the development of clear job specificationsto ensure that staff are fully aware of theirduties and responsibilities;•a proper assessment of staff qualificationsbefore appointing anyone to a position,including an assessment of the required education,experience, and skills of the position;• the advertising of and competition for jobopenings to ensure fairness and accessibilityunless extenuating circumstances warrantotherwise; and•the proper approval for any departure fromPublic Service Act requirements or ManagementBoard of Cabinet directives.OFFICE RESPONSEThe Office supports this recommendation andagrees that a properly trained managementteam and workforce are essential, not only tomaintain regular operational activities, butespecially throughout a time of large-scalechange.The two new management positions offeredin 2004 were designed to oversee the alignmentof four teams and manage workflow. In responseto a chronic lack of learning opportunities (andthe requests of some staff), these positions wereoffered to internal candidates as temporary actingassignments. The initial plan was for these assignmentsto last through the transition phase of thetechnology replacement project (an estimated sixmonths). Because of the processing-time delays in2004, the length of these assignments exceededthe Office’s expectation. It would have createdmore risk and inefficiency to bring in managerswith no program knowledge during this period.Based on an external consultant’s review,new permanent management positions wereapproved for 2005, and recruitment througha competitive process (with advertising, opencompetition, etc.) is complete. Recruitmentincluded following selection criteria for interviewsand having a structured interview bypanel and structured reference checks. Existingjob specifications were used for the vast majorityof staff (for example, team representativesand team managers). New job specificationshave been developed to support recruitment forall new permanent positions in areas such asoperational support.The Office recently advertised and recruitedfor team manager positions as well as administrativeassistant positions. The Office will continueto follow all human resources policies andpractices with respect to recruitment. As a partof the new Ministry of Government Services,the Ministry that is responsible for corporatetraining, the Office is committed to identifyingdevelopmental and training opportunities andproviding them to staff.The Office agrees with the need for approvalfor departure from the Public Service Act or anyManagement Board of Cabinet directives.Chapter 3 • VFM Section 3.11

2382005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.11SAFEGUARDING VITAL EVENTSINFORMATIONBoth the Ministry’s internal auditors and the CorporateAudit Cluster from the then–ManagementBoard Secretariat had conducted reviews of securitycontrols in place to protect and safeguard access toconfidential personal information maintained inthe Office’s computer systems. We reviewed theirwork and agreed with their concerns, including thefollowing more significant ones:•There was no off-site storage of the tape backupfor the computer system. The inability to recoverdata posed a high risk in the event of a disaster,such as a fire.•There was no firewall protection to preventunauthorized access to the document managementsystem, workstations, network and imageservers, and other system components in ThunderBay.•There was no formal policy that ensured propersegregation of duties and proper authority togrant access to the system.•The account lockout settings were weak. Forinstance, the system configuration that limitedthe number of failed log-ins allowed wasdisabled, so that hackers could have as manyattempts as they needed to guess a password.• There was no system-generated tracking ormonitoring of access to the system database.The system had an audit-trail mechanism butit was not enabled, resulting in the inability totrack access. The Office indicated that systemaudit trails would cause significant performancedegradation and would not normally be enabledunless specifically requested by management.• Employees had the ability to print screen contentsto printers within the office. A person withmalicious intent who worked as an employeecould easily print confidential information forlater use in building false identities.Our audit identified the following additionalconcerns:•Although approximately 300 contract staff werehired to help address the problem of servicedelays, there was no background check for thesestaff, who were given access to confidential clientinformation.•Public-key infrastructure (PKI) is a commonmethod for authenticating a message sender/receiver or encrypting a message. The Officeindicated that PKI authentication had been putin place for the processing of certificates. However,it did not protect vital events registrationdata from unauthorized access.•The Office had introduced an on-line certificateapplication form that applicants could completeand print to mail in. At the time of our fieldwork,applicants were able to view personal informationof other applicants that had been enteredon-line. The Office was not aware of the problemuntil the public complained to the Minister. TheOffice informed us that the problem has sincebeen corrected.RECOMMENDATIONTo ensure that confidential data are adequatelyprotected against unauthorized access andtampering, the Office of the Registrar Generalshould implement appropriate access and securitycontrols, including promptly addressing thesecurity concerns already identified.OFFICE RESPONSEOntario has one of the most secure vital statisticsorganizations in North America. Vital StatisticsCouncil for Canada security protocols havebeen developed based on Ontario’s securitymeasures and experiences.The Office has implemented several phasesof enhanced security measures addressing securityconcerns and emerging threats. It continues

Office of the Registrar General239to monitor the effectiveness of those measures,as well as emerging risks and issues, makingchanges accordingly.INTEGRATING REGISTRATION ANDCERTIFICATE ISSUANCERegistration and certificate issuance involve similarwork using the same data. In registration, theinformation received by the Office is scanned anddata are entered into the computer. Registrationinformation is then printed and sent out to relatedparties for confirmation of accuracy and for subsequentcorrection of any registration errors. In certificateissuance, certificate applications are scannedand data are entered, and data are then matchedto the original registration records. Once the dataare matched, a printed certificate is sent out to theapplicant.In 2003, the Office established the positionof Chief Security Officer and Investigator, whoseresponsibilities include monitoring and improvingsecurity in the Office.With respect to specific concerns highlightedin the Auditor General’s report, the Ministryis moving or has moved to implement solutions.For example, the Ministry has alreadyimplemented off-site tape backup storage, andthe Office’s IT provider will have implementedenhanced firewall protection by the end ofNovember 2005.The Ministry takes security very seriouslyand will continue to develop appropriate securitymeasures to ensure the integrity of Ontario’svital event data and documents.Since the two stages use the same data followingalmost identical procedures, we believe thatintegrating the two has the potential to enhanceproductivity and service to the public. For instance,a certificate could be issued to an individual oncetheir registration data was complete and enteredinstead of requiring that the individual first confirmthe accuracy of the information processed. Correctionscould still be made in the small numberof instances where information is found to beinaccurate. Combining registration with certificateissuance could save the time now needed for subsequentmatching and shorten the turnaround time inproviding services to the public.RECOMMENDATIONTo meet its mandate of registering vital eventsand providing certificates more efficiently, theOffice of the Registrar General should formallyassess the option of integrating the registrationand certificate issuance processes into one combinedprocess.OFFICE RESPONSEThe Office agrees with this recommendationand has been given approval for a new integratedbirth registration and birth certificateapplication process. This will simplify the registrationprocess by allowing parents to registerthe birth and apply for a birth certificate,on-line, at the same time. The first phase ofintegrated birth registration (pilots) will beimplemented in early 2006 with the introductionof the Integrated Birth Registration “SmartForm.”Chapter 3 • VFM Section 3.11

Chapter 3Section3.12Ministry of Community Safety and Correctional ServicesOntario Provincial PoliceChapter 3 • VFM Section 3.12BackgroundUnder the Police Services Act, the Ontario ProvincialPolice (OPP) primarily provides:•and trail systems;•patrols on all provincial highways, waterways,front-line police services in smaller rural communitiesthat do not have their own municipalpolice service;•in Ontario;•emergency support services to all communitiessupport for complex criminal and organizedcrime investigations, as well as intelligence withrespect to anti-terrorism activities; and•laboratory services in support for criminalinvestigations.With approximately 5,500 uniformed officers,1,800 civilian employees, and 800 auxiliary officers,the OPP is one of North America’s largestdeployed police services. The service maintains79 local detachment offices and 87 satellite offices(which report to one of the detachments) throughoutthe province. Each detachment reports to oneof six regional headquarters, which in turn report toOPP General Headquarters in Orillia. The Commissionerof the OPP reports to and is accountable tothe Minister of Community Safety and CorrectionalServices.The OPP provides municipal policing services toover 300 municipalities and First Nations communitiesthroughout the province. Of these, 130 municipalitieshave entered into five-year fee-for-servicecontracts with the OPP, while 182 other municipalities(commonly referred to as non-contract municipalities)have no contractual arrangements, butare billed based on the level of policing servicesprovided.In addition to the responsibilities specificallyset out by the legislation, the OPP has other dutiesassigned by the Minister of Community Safety andCorrectional Services, such as maintaining specializedprovincial registries—including ViCLAS(Violent Crime Linkage Analysis System) and theOntario Sex Offender Registry—and providingsecurity at Queen’s Park, as well as protective servicesfor key Ontario government officials and visitingdignitaries. In addition, the OPP is engaged ina number of multi-jurisdictional policing initiativesaimed at co-ordinating law enforcement efforts toreduce criminal activities.For the 2004/05 fiscal year, OPP expendituresbefore municipal recoveries (costs paid by municipalitiesfor policing services) totalled $733.2 million,as detailed in Figure 1.Since the time of our last audit in 1998, OPPexpenditures net of recoveries for the provisionof municipal policing services (billed by the OPPbut collected and recorded by the Ministry of240

Ontario Provincial Police241Figure 1: OPP Expenditures Before Recoveries fromMunicipalities for Policing Services, 2004/05($ million)Source of data: Ontario Provincial Policefleetmanagement($58.3)Finance and the Ontario Shared Services withinthe Ministry of Government Services) haveincreased, as detailed in Figure 2. We note that the23% increase in total OPP expenditures between1999/2000 and 2002/03 is similar to the increasein total expenditures for all policing in Canada,based on the most recent information availablefrom Statistics Canada.Total = $733.2investigations andorganized crime($72.5)We also note that the per-capita cost of municipaland provincial policing in Canada for 2003 was$205. Ontario, Quebec, and Manitoba have thehighest municipal and provincial policing costs percapita, while the four Maritime provinces have thelowest, as Figure 3 illustrates.corporate andstrategic services($118.2)field and traffic services ($479.2)other ($5.0)SIGNIFICANT DEVELOPMENTS SINCETHE TIME OF OUR LAST AUDITSince our last audit in 1998, a number of significantdevelopments or initiatives have impacted on theOPP’s delivery of police services. These include:•the passage of Regulation 3/99 under the PoliceServices Act, which establishes minimum servicestandards for all police services in Ontario,including standards in such areas as crime prevention,law enforcement, and the maintenanceof public order;•the establishment within the OPP of a corporateQuality Assurance Unit that conducts reviews ofOPP operations to assess compliance with legislativerequirements and with applicable policiesand procedures;•the OPP’s implementation of a new computerizedDaily Activity Reporting (DAR) systemthat tracks how officers’ time is spent, as wellas a Records Management System (RMS) thatrecords and permits the analysis of case-relatedinformation; and•a significant expansion of the number of municipalitiesthat have contracted with the OPP forpolicing services, as well as the introductionof billing for services provided to non-contractmunicipalities (which, prior to 1998, receivedthe services for free).Chapter 3 • VFM Section 3.12Figure 2: OPP Expenditures and Recoveries from Municipalities for Policing Services ($ million),1998/99–2004/05Source of data: Public Accounts of the Province of Ontario1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05total expenditures 535.6 565.5 616.7 648.3 695.4 717.1 733.2recoveries from municipalities forpolicing services208.2 184.3 183.8 181.0 187.8 209.4 249.4net expenditures 327.4 381.2 432.9 467.3 507.6 507.7 483.8

2422005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.12Figure 3: Per-capita Spending on Municipal andProvincial Policing, by Province, 2003Source of data: Police Resources in Canada(Canadian Centre for Justice Statistics, Statistics Canada, 2004)250200150100500Audit Objective and ScopeOur audit objective was to assess whether the OPP’sdelivered with due regard for economy and effi-police services were:•ciency; and•of a quality that complied with Regulation 3/99and related Police Orders (OPP policies andprocedures).national averageNfld &Lab.P.E.I.N.S.N.B.Que.Ont.Man.Sask.Alta.B.C.The scope of our audit included a review ofavailable documentation, including policies andprocedures, at the OPP’s General Headquarters, aswell as interviews with senior officers and civilianstaff. To get a better understanding of police operations,we also reviewed documentation and helddiscussions with officers at two regional headquarters,five detachments (including both the detachment’smain office and any satellite offices), andtwo regional communications centres. To obtainfurther information, we sent a questionnaire to 25detachments that we did not visit; all detachmentsthat received our questionnaire responded to it.At the time of our audit, the federal AuditorGeneral’s office was conducting an audit of theRCMP. We therefore met with staff at the federalAuditor General’s office in Ottawa and with seniorRCMP officers to discuss common issues identifiedduring our audit.Prior to the commencement of the audit, weidentified audit criteria to address our audit objective.These criteria were reviewed and agreed to bysenior OPP management.Our audit was performed in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountants,and accordingly included such tests and otherprocedures as we considered necessary in thecircumstances.Because the Ministry of Community Safety andCorrectional Services’ Internal Audit Services hadnot conducted any substantial work at the OPP inthe last four years, we were unable to rely on themto reduce the scope of our audit work. However,our review of reports and related supporting documentationprepared by the OPP’s Quality AssuranceUnit found that this work could be relied on, and inmany cases it corroborated our own observationsresulting from detachment visits.SummaryWhile several issues from our last audit—such asthe use of overtime and billings to municipalities—have been largely addressed, in other areas—suchas staff deployment, shift scheduling, and theimplementation of community-oriented policingprinciples—much work remains to be done. Withrespect to the economy and efficiency with whichthe OPP was delivering police services, we foundthe following:•The staff deployment model in effect at the timeof our audit was not being used. As a result, theactual total workload of individual detachments

Ontario Provincial Police243was not taken into account in assigning officersto each detachment.•The 12-hour work shift that was adopted by themajority of OPP detachments does not providean optimal match between the number of officerson duty and the demand for police services.In that regard, we note that research undertakenin other jurisdictions on police shift schedulingindicates that the 12-hour shift can have significanthealth implications and that a variable shiftarrangement offers the best matching of availableofficers to demand for service.•The Differential Response Unit function was notfully implemented in all regions, despite the factthat this function has proven very effective infreeing up officer time to respond to more seriouscalls for service. In fact, statistics from oneregion where the Differential Response Unithad been effectively implemented indicate thateach Differential Response Unit officer handledapproximately 950 calls per year, whichcompares very favourably to the approximately200 calls per year handled by non–DifferentialResponse Unit officers.•Information provided in the Daily ActivityReporting system was not always completeand accurate. This information is critical fordecision-making and for proper monitoring andassessment of operations by the OPP.We also note that two of the operational issuesidentified at the time of our 1998 audit have beenacted upon, as follows:•Increases in overtime expenditures for the pastseven years have been moderate; in fact, overtimehas decreased over the past two years.•Billings and collections for municipal policingservices are up to date.Regulation 3/99 of the Police Services Act (whichbecame effective January 1, 2001) established minimumservice standards for quality police servicesin Ontario. Related Police Orders provide furtherpolicies and procedures to help ensure consistent,high-quality service. We found the following withrespect to the consistency and quality of specificareas of service:•There was little evidence that the objectives ofcommunity-oriented policing were being met atsome detachments, and no minimum requirementshad been established to guide detachmentsin the consistent implementation ofcommunity-oriented policing and solicitation ofcommunity input. Also, there were no internalmeasures in place to evaluate the effectivenessof community-oriented policing.•There were no provincial standards for whatan adequate level of traffic patrol should be; asa result, traffic patrol often had not been givenhigh priority, and there was a significant variancein the level of traffic patrol provided byvarious detachments and regions.•Although the Basic Constable Training courseincluded both in-car and classroom-based drivertraining, no regular periodic or remedial trainingwas being provided, despite the high collisionrate of OPP vehicles and a number of preventablecollisions that individual officers had ina relatively short period of time.•The requirements for ensuring restricted physicalaccess to seized property, seized drugs, andarmaments stored at detachments, as well as therecordkeeping and disposal requirements for thesame, were often not adhered to.•The OPP’s three quality-assurance processes,involving inspections and self-assessments,were not implemented fully and on schedule.The objectives of the quality-assurance functionmight be better met through another processthat is less administratively cumbersome andmore comprehensive, with appropriate followupprocedures for ensuring that correctiveaction is taken.Chapter 3 • VFM Section 3.12

2442005 Annual Report of the Office of the Auditor General of OntarioDetailed Audit ObservationsFigure 5: Calls for Service Received by the OPPSource of data: Ontario Provincial PoliceChapter 3 • VFM Section 3.12DUE REGARD FOR ECONOMY ANDEFFICIENCYStaff DeploymentThe OPP has approximately 5,500 uniformed officers.Since our 1998 audit, the number of uniformedofficers has increased at a slower rate than thedemand for police services (as measured by thenumber of calls for service), as detailed in Figures 4and 5.Not only has the number of calls for serviceincreased, but the amount of time spent on correspondingadministrative functions such as travel andcourt duty has also increased accordingly.Although the 12.5% increase in the total numberof OPP police officers between 1998 and 2004 issomewhat higher than the 9.4% increase in policeofficers for all of Canada for the same period asreported by Statistics Canada, this difference can beattributed to the increase in the number of municipalitiespoliced by the OPP since 1998.Staff Deployment ModelIndividual detachments can have up to three distinctpolicing responsibilities: municipal policingfor contracted municipalities, municipal policingfor non-contract municipalities, and provincialresponsibilities such as highway patrol and provincialpark security.Figure 4: Uniformed OPP OfficersSource of data: Ontario Provincial Police1998 2004 % Changecommissioned officers 133 169 27.1staff sergeants 231 198 (14.3)sergeants 839 964 14.9constables 3,685 4,169 13.1Total 4,888 5,500 12.51998 2004 % ChangeCriminal Code 125,698 139,368 10.9traffic 209,515 283,333 35.2other 220,340 304,778 38.3Total 555,553 727,479 30.9The OPP currently has a staff deployment modelthat was developed in the 1980s. The model is todetermine the required staffing levels for detachmentsbased on the number of calls for service,which is considered to be the detachment’s workload,with adjustments to allow for such activitiesas court attendance, training, patrol, and administration.We were advised that the OPP and RCMPare jointly working on a new model that, whencompleted, will replace the existing model.However, in practice the current model is usedonly to estimate the number of officers requiredby a detachment for its municipal contract obligationsat the time of either inception or renewal of amunicipal policing contract. It should be noted thatthe cost of any additional officer(s) is billed to themunicipality.The staff deployment model has not been usedto determine staffing requirements either formunicipal policing for non-contract municipalitiesor for provincial responsibilities such as highwaypatrol. When compared to the staffing estimatesarrived at where the deployment model is used,most detachments are understaffed given theiroverall policing responsibilities. In addition, 19 ofthe 25 detachments that responded to our questionnaireindicated they felt they were short-staffed,with the shortages ranging from one to 17 officersand averaging approximately six officers.Detachments that do not have a municipal contractcomponent are particularly adversely affectedby this practice. For example:•One detachment with only non-contractmunicipal policing and provincial policing

Ontario Provincial Police245Figure 6: Number of Calls for Service by Hour of Day, 2004Source of data: Ontario Provincial Police50,00045,00040,00035,000Calls for Service30,00025,00020,00015,00010,0005,00001 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Time of Dayresponsibilities had a staff of 64 officers, whilethe detachment advised us that the staff deploy-In practice, we found that over 80% of all detachmentsscheduled their officers in 12-hour shifts,ment model indicated that 76 were required.• Another detachment, which had only highwaypatrol responsibilities, had a staff of 45officers, even though, according to the detachmentcommander, the model indicated that 60were required. The detachment commander alsostated that the detachment had not had a staffingincrease in more than 10 years, despite significantincreases in all workload indicators. Infact, he noted that the detachment’s staff complementhad decreased during this time.Shift SchedulingClearly a key factor in optimizing detachmentstaff deployment is ensuring that staff schedulingis commensurate with peak workload periods.generally splitting the staff evenly between the dayand night shifts. We understand that many officersprefer a 12-hour shift for personal reasons, such asmaximizing the number of days off and minimizingwork-related transportation time and costs. However,as shown in Figure 6, the number of calls forservice varies significantly depending on the time ofday. If staff levels remain the same for all time periods—asis typical when 12-hour shifts are used—itbecomes virtually impossible to have more officerson duty when demand for police services is higher.We noted that research undertaken in otherjurisdictions such as England (specifically, researchby the Home Office—a U.K. government departmentresponsible for overseeing the police servicein England and Wales) indicates the following:Chapter 3 • VFM Section 3.12

2462005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.12• A variable shift arrangement offers the bestmatching of available staff resources to demandfor service.•A well-designed variable shift arrangement canprovide up to 70% more staff on duty at peaktimes than a shift pattern with flat supply.•Significant concerns exist regarding the healthand safety implications of 12-hour shifts, particularlyin armed-response and traffic services.In the 1992 Report of the Auditor General of Canada,the RCMP was questioned for its use of the12-hour shift, and, since that time, the RCMP hasmoved to a variety of different shifts, with the 10-hour shift being the most common.RECOMMENDATIONTo help ensure that available uniformed officersare allocated to detachments based on assessedneed and efficiently deployed, the Ontario ProvincialPolice (OPP) should:•expedite completion of the joint OPP–RCMPstaffing model and ensure that:•it takes into consideration non-contractmunicipal policing and provincial policingresponsibilities in estimating thenumber of officers that need to beassigned to each detachment; and•it is used by the OPP for allocating officersto detachments; and•reassess the merits of the 12-hour shiftschedule and consider alternatives thatwould provide a better match between thenumber of officers on duty and the demandfor police services.MINISTRY RESPONSEThe Ontario Provincial Police (OPP) will reviewthe staffing allocation for non-contract municipalitiesand provincial responsibilities basedon the current deployment model. The OPPacknowledges the need to provide staffing todetachments per the deployment model inorder that the detachments may respond to thenumber of calls for service; however, additionalresources and funding are required to meet thedetachment workload demands.The OPP will continue its involvement withthe OPP–RCMP National Resourcing MethodologyTask Force as a potential alternative to theexisting deployment model to meet evolvingorganizational needs.In April 2005, a regional scheduling reviewcommittee was formed with a mandate toreview the current shift schedules in an effort tosee if there are alternative schedules that wouldbetter suit the needs of the community and theorganization. This committee is working in conjunctionwith the Ontario Provincial Police Association(OPPA). The fieldwork is scheduled to becompleted and a draft report issued in fall 2005for further assessment and potential provincialimplementation.In addition, during the upcoming collectivebargaining process to begin after the currentOPPA Uniform Memorandum of Understandingexpires on December 31, 2005, the OPP willexplore opportunities for increased schedulingflexibility.Differential Response UnitIn regions where the Differential Response Unit(DRU) function is implemented, when a call forservice is received at the regional communicationscentre, the operator makes a determination as towhether the call requires an officer to be dispatchedor whether the call can be handled by telephone. Ifthe determination is made that an officer does notneed to be dispatched, the call is forwarded to aDRU officer, who may be either in the regional communicationscentre or at one of the detachments inthat region.

Ontario Provincial Police247The DRU officer normally deals with all aspectsof the call over the telephone. However, as a matterof OPP policy, if a caller demands or a municipalityrequests that a police officer respond, an officer isdispatched regardless of the nature of the call.There are currently no requirements for regionseither to implement the DRU function or to reporton its implementation or the results achievedthereby.Our review of statistics for 2004 for one of theregions where the DRU function was fully implementedindicated that six officers effectively handled5,700 DRU calls. This equates to 950 calls perofficer, which compares very favourably to the averageof approximately 200 calls per year handled bynon-DRU officers. The DRU function was able tofree up a significant amount of officers’ time eitherfor responding to and dealing with higher-prioritycases or for other activities, such as traffic patrol orcommunity-oriented policing services.While the benefits of implementing a DRUfunction seem apparent, we found that in threeof the six regions the DRU was not effectivelyTwo regions had not implemented the DRU func-implemented:•tion at all.•One region implemented the DRU function onlywhen officers were temporarily assigned to lightduties, and therefore were available to take DRUcalls.These observations are similar to those noted inour 1998 Annual Report.RECOMMENDATIONGiven the significant benefits of freeing upofficer time to handle more serious mattersthrough implementing the Differential ResponseUnit (DRU) function, the Ontario ProvincialPolice should:•encourage all regions across the province tofully implement the DRU function; and• require the regions to provide the informationnecessary to assess the results achievedand promulgate best practices across theprovince.MINISTRY RESPONSEThe Ontario Provincial Police (OPP) recognizesthat Differential Response Units (DRUs) are aneffective method of service delivery. Regionalcommanders have been directed to review theviability of implementing DRUs within theirrespective regions, given the calls for service, thecurrent staffing complement, and geographicimplications. The results of these reviews willbe assessed at a corporate level within the OPPand direction provided regarding the implementationof the DRUs, as appropriate, across theprovince.Information SystemsSince our 1998 audit, the OPP has introduced twonew computerized information systems to assist inmanaging its daily operations.•The Daily Activity Reporting (DAR) system,which was introduced in 2000, is primarily atime accounting system that tracks the timespent by each officer on common activities suchas traffic patrol, Criminal Code investigations,and administration. It also tracks the number ofcalls for service to which the officer responds.The information is used for such things as statisticalanalysis of OPP operations, determiningbilling for municipal policing services, and staffingallocations.•The Records Management System (RMS), whichwas also introduced in 2000, records and permitsthe analysis of case-related information,such as witness statements and officers’ notes.Chapter 3 • VFM Section 3.12

2482005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.12While both these systems represent majoradvancements over the previous systems and allowdetailed analysis of the information they contain,the usefulness of the DAR system was limitedbecause there were no procedures in place toensure that the information it contained was completeand accurate. Specifically, we noted that:•Officers enter their own information into theDAR system, and there is no supervisory reviewor approval of the information entered to ensurethat it is complete and accurate. For example,our review of a sample of overtime claim formsused for payroll purposes found that for 60% ofthe cases where overtime hours were claimed,the hours were not correctly reported in the DARsystem.•Officers may enter information into the DARsystem either from the mobile workstations inpolice vehicles or from computers in the detachmentoffice. A number of officers expressed concernsabout the unavailability of computers fordata entry or about the fact that the often-slowconnection speeds made entering informationexcessively time-consuming.•Some officers also noted that because some ofthe information to be entered was already in theRMS, they placed a lower priority on re-enteringinformation into the DAR system.•Over 30% of all hours recorded in the DAR systemare for administrative activities. The OPPhas not assessed whether it is reasonable forsuch a relatively high proportion of time to bespent on administration.With respect to the RMS, we noted that the systemdefault requires information entered by officersto be reviewed and approved for completeness andaccuracy by a superior officer before it is acceptedin the system. However, an officer can bypass therequirement for supervisory approval.RECOMMENDATIONTo help ensure that the information in the DailyActivity Reporting system can be relied on fordecision-making purposes, the Ontario ProvincialPolice should:•develop procedures whereby the completenessand accuracy of the information enteredby individual officers is reviewed andapproved by a senior officer;•assess alternatives for inputting informationinto the system in order to minimize the timerequired; and•periodically review the hours entered forspecific functions to assess whether the proportionof hours being charged to each activityis reasonable.To ensure that all information entered intothe Records Management System is reviewedand approved, the System’s override option—whereby officers can bypass the required supervisoryfunction—should be reconsidered.MINISTRY RESPONSEAll staff and supervisors will be reminded oftheir obligation to enter information accuratelyand to obtain appropriate sign-off. The OntarioProvincial Police (OPP) will reiterate the procedures/obligationsrelating to the entry ofcomplete and accurate information and supervisoryreview responsibilities through its trainingof officers and supervisors. Supervisors willbe reminded of the availability of reports to bereviewed to determine the reasonableness of thehours allocated to activities in the system.The Data Integrity Team, with its crossorganizationalrepresentation, will continue toidentify efficiencies and best practices relatingto data entry/integrity and bring these forwardin order to make enhancements to the systemand develop training and job aids such as

Ontario Provincial Police249user-friendly instructions to be posted besideeach computer at the detachment.The OPP identified the system’s overrideoption as an issue, and an enhancement requestwas submitted to the Justice Technology ServicesDivision of the Ministry. The enhancementrequest sent to the vendor of the Records ManagementSystem for implementation in a futurerelease has been noted as a high priority.OvertimeIn our 1998 Annual Report, we noted that overthe then previous four years, overtime expenditureshad increased by 140%, from $12 million inthe 1993/94 fiscal year to about $29 million in the1996/97 fiscal year.As Figure 7 indicates, the increase in overtimeexpenditures for the past seven years has been muchmore moderate. Overtime expenditure reduction hasbeen a focus of the OPP over the last two years, witha target of reducing overtime by 25% in 2003/04and 2004/05. As indicated in Figure 7, overtimeexpenditures have indeed decreased over the pasttwo years, but only by 3% and 10%, respectively.While these percentages are significantlylower than the targets, overtime expendituressince 1999/2000 have increased by less than theincreases in total salary and wage expenditures,excluding overtime, and in the number of calls forservice. In addition, and as shown in Figure 8, salarycosts (including overtime) per call for serviceincreased modestly, from $678 in 1999/2000 to$687 in 2004/05, which is less than the general salaryincreases over that time.However, our review of the overtime claimsprocess at the detachments we visited indicatedthat policies and procedures with respect to overtimewere often not followed. Specifically:Figure 7: OPP Overtime Expenditures, 1998/99–2004/05Source of data: Ontario Provincial Police($ million)40353025201510501998/991999/20002000/01• In many instances there was no evidence thatthe overtime paid was approved by a superiorofficer, as required.•2001/022002/032003/042004/05We noted cases where, contrary to the directionsprovided to detachments, overtime was workedand paid for administrative purposes such astraining, meetings, travel, and report-writing.RECOMMENDATIONTo help ensure that overtime is reasonable andincurred only when operationally necessary, theOntario Provincial Police should ensure that asuperior officer approves all overtime claims.MINISTRY RESPONSEThe Ontario Provincial Police (OPP) is committedto ensuring that proper controls are in placeto manage overtime expenditures. All OPP staffand supervisors will be reminded of their obligationto obtain appropriate sign-off on all overtimeclaims.Chapter 3 • VFM Section 3.12

2502005 Annual Report of the Office of the Auditor General of OntarioFigure 8: OPP Salary Costs and Calls for Service, 1999/2000–2004/05Source of data: Ontario Provincial Policetotal salary and wages(including overtime) ($ million)% Change Between1999/1999/20002000 2000/01 2001/02 2002/03 2003/04 2004/05 and 2004/05367.4 392.3 423.1 452.6 497.3 500.1 36.1total calls for service 1 541,827 536,649 580,025 636,187 674,697 727,479 34.3salary cost ($) (includingovertime) per call for service678.1 731.0 729.4 711.5 737.0 687.4 1.41. Information in this row is for the first calendar year in the column head (i.e., information in the 1999/2000 column is for the 1999 calendar year).Chapter 3 • VFM Section 3.12Revenue from Municipal Policing ServicesFor the 2004/05 fiscal year, the OPP billed about$167 million to 130 municipalities for contractedpolicing services and about $82 million to 182municipalities for non-contracted policing services.In our 1998 Annual Report, we noted that the 40municipalities that were then under contract wereto be billed about $40 million per year. However,five of these municipalities had not been billed forthe previous three years, with the unbilled amounttotalling about $23 million. In addition, receivablesat December 1997 totalled $12.6 million, over halfof which had been outstanding since 1993.Our review of the OPP’s current billing practicesand collections found that 92% of contractand non-contract municipalities were billed on amonthly basis and that all billings were up to date.The remaining 8% of municipalities are billed quarterly;these billings are also up to date.At the time of our audit, only $2 million of theamounts billed were outstanding longer than 60days, and this situation was due to an unresolvedbilling issue.We acknowledge the improvements made in thisarea and the actions taken to implement our previousrecommendations in this regard.Actual Criminal Occurrences and ClearanceRatesAlthough the number of calls for service increasedsignificantly between 1999 and 2004, statisticsmaintained by the OPP’s information system, asshown in Figure 9, indicate that the total numberof criminal offences, including violent crimes,decreased over that same period. The clearancerate for all offences remained relatively stable.The clearance rates for all types of criminaloffences compare favourably to similar rates for theQuebec Provincial Police, and the overall clearancerate is somewhat higher than similar rates for mostlarge municipal police forces in Ontario.QUALITY OF SERVICECommunity-oriented PolicingFor approximately 15 years, the Police Services Acthas required the Minister of Community Safety andCorrectional Services (prior to November 2003,the Solicitor General) to develop and promote programsfor community-oriented police services.In addition, to encourage better quality and consistencyin policing services provided across theprovince, Regulation 3/99 (which became effectiveJanuary 1, 2001) established minimum servicestandards for quality police services in Ontario. Akey requirement of the regulation is that every chief

Ontario Provincial Police251Figure 9: Number and Clearance Rate of CriminalOffences by Type, 1999–2004Source of data: Ontario Provincial Police1999ViolentCrimesof police shall establish specific procedures andprocesses for problem-oriented policing and crimeprevention initiatives (commonly referred to ascommunity-oriented policing).To comply with the community-oriented policingrequirements, OPP Police Orders indicate acommitment to community-oriented policing principlesin every aspect of service delivery in the OPPand indicate that the service will operate in partnershipwith the community by:•involving the people of the community in theidentification of crime, traffic, and social orderproblems and solutions;•PropertyCrimes Drugs Otherproviding policing services that are consistentwith the identified concerns, expectations, andneeds of the community; andTotal AllOffencesoffences 16,200 61,575 7,780 57,482 143,037CR 1 84% 30% 79% 52% 48%2000offences 17,164 59,876 8,248 60,503 145,791CR 1 86% 30% 83% 73% 50%2001offences 15,273 48,702 6,482 49,068 119,525CR 1 84% 26% 78% 47% 45%2002offences 14,578 46,185 6,605 44,946 112,314CR 1 92% 29% 85% 59% 53%2003offences 13,241 47,160 5,095 44,502 109,998CR 1 92% 23% 74% 43% 42%2004offences 14,578 47,288 6,127 44,757 112,750CR 1 90% 22% 74% 45% 44%1. CR = Clearance Rate• participating with other concerned agencies andcommunity groups to effectively address policeand community concerns.In practice, a key aspect of implementingcommunity-oriented policing principles typicallyinvolves regular meetings and communicationsbetween members of the local detachment, volunteerCommunity Policing Committees made up ofcommunity representatives and other interestedparties, and Police Service Boards and MunicipalCouncils, where applicable. Effective implementationof community-oriented policing would alsoproactively deal with community concerns andreduce the amount of reactive law enforcementwork required to keep communities safe.Senior OPP management advised us that objectivesrelating to community-oriented policing wereestablished through the detachments’ annualbusiness-planning process, whereby detachmentsprepare a business plan that includes various commitmentsand priorities. However, our review of anumber of business plans indicated little evidenceof this. For instance:•Stated commitments and priorities oftenreflected higher-level provincial and regionalpriorities, with little specific evidence ofcommunity-oriented initiatives, and were similarfrom year to year.•Due to a lack of supporting documentation, itwas often not clear which, if any, of the commitmentsand priorities had been identified by thelocal community.In addition, despite the OPP’s stated commitmentto community-oriented policing, thereare no minimum requirements established toguide detachments in consistently implementingcommunity-oriented policing principles. Althoughthese principles have been effectively implementedat some detachments, they were not fully implementedat others, often for the following reasons:•lack of priority when compared to other servicepressures facing the detachment;Chapter 3 • VFM Section 3.12

2522005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.12• confusion as to what is required to meet theobjectives;•an apparent lack of interest on the part of thecommunity in participating in communityorientedpolicing; and•insufficient resources to adequately address thecommunity’s stated concerns.In response to a recommendation in our 1998Annual Report, the OPP indicated that it would coordinate,support, and monitor implementationof community-oriented policing. However, at thetime of our current audit, the unit responsible forthis had been disbanded, and we noted no evidenceof other types of overall co-ordination or monitoringof the ongoing implementation of communityorientedpolicing principles. In our view, this gapcontributed to the confusion regarding the requirementsof community-oriented policing and to a significantvariance in implementation.Further, because there are no internal measuresor reporting requirements for evaluating the effectivenessof the principles—at either the detachmentor regional level—the extent to which they arebeing implemented and the extent of communityinvolvement are unclear.RECOMMENDATIONTo ensure that all detachments are proactivelydealing with community concerns and are complyingwith community-oriented policing principles,the Ontario Provincial Police should:•establish minimum requirements to guidedetachments in the consistent implementationof community-oriented policingservices;•co-ordinate and monitor the ongoing implementationof community-oriented policingprinciples and the achievement of relatedobjectives across the province; and•periodically evaluate the effectiveness ofcommunity-oriented policing program servicedelivery and, if necessary, take correctiveaction.MINISTRY RESPONSEThe Ontario Provincial Police (OPP) recognizesthat there is a need to refresh the organizationalco-ordination and support of communityorientedpolicing in order to maximize its impactand efficiencies across the province. The deliveryof community-oriented policing must remainflexible to reflect specific community needs. TheOPP is committed to having regular meetingsbetween local detachments and community representativesand taking specific actions to ensurethat the principles of community-oriented policingare consistently reinforced and supportedthrough recognized programs, measures, andevaluation of results.Traffic PatrolThe OPP is responsible for patrolling all provincialhighways, as well as all roads within the municipalitieswhere they provide policing services. Thekey objective of the highway patrol activity is toincrease police visibility and enforcement actionwith a view to reducing collisions and resultantdeaths, personal injuries, and property damage.There are currently no provincial standards forwhat an adequate level of traffic patrol would be.As a result, traffic patrol is often not perceived as apriority, particularly in the light of many competingrequirements (such as calls for service). Theabsence of provincial standards contributed to asignificant variance in the level of traffic patrol providedby various detachments and regions, as thefollowing examples illustrate:•One region that assigned a high priority to trafficpatrol developed its own standards for itsdetachments, specifying the number of hours

Ontario Provincial Police253to be spent on provincial highway patrol by officersassigned to its detachments. In addition, theregion had four roaming teams that patrolledhighways within the region.•Detachments and regions that assigned a lowerpriority to traffic patrol had not developedany standards for traffic patrol and often indicatedthat traffic patrol was provided only ifand when time permitted. In addition, in somedetachments no staff were dedicated solely totraffic patrol.Traffic patrol hours in the detachments we visitedranged from a low of 8% to a high of 26% ofthe total hours worked by the detachment’s officers.Assigning additional resources to traffic patrolcan have significant benefits. For example, oneregion that experienced a high rate of collisionsin a specific area in 1999—including 29 fatalitiesin 19 incidents—received approval to create a 22-member traffic patrol unit. The creation of the unit,along with increased visibility and enforcementactions, resulted in the traffic fatality rate droppingby 90% (from 29 to 3) between 1999 and 2001, andby 70% from the longer-term average of about 10per year.Similarly, a detachment in another region wasidentified as having had 20% of the traffic fatalitiesin the region (out of 14 detachments) in 2004. Theregional traffic unit was subsequently stationed inthat area for three months to provide additionalenforcement action and visibility. During thatthree-month period, the detachment had only onetraffic fatality, compared to five during the sametime period in the previous year.Ontario’s Ministry of Transportation estimatedthat in 2002, vehicle collisions in Ontario costnearly $11 billion, or approximately $30 millionevery day. It also estimated that for every dollarspent on traffic management, 10 times that amountcould be saved on collision-related expenditures,including health care and insurance claims.RECOMMENDATIONTo increase police visibility and enforcementaction with a view to reducing collisions andresultant deaths, personal injuries, and propertydamage, the Ontario Provincial Police should:•establish provincial standards with respect toadequate levels of traffic patrol and considerthe advisability of increasing the numbers ofdedicated highway patrol officers; and•ensure that the patrol standards, once established,are met and that the results achievedare monitored and assessed.MINISTRY RESPONSEIncreased police visibility and the reduction ofmotor vehicle collisions are key priorities withinthe Ontario Provincial Police (OPP).In January 2005, the OPP created a TrafficImplementation Team to address recommendationsfrom an extensive internal study conductedby the OPP. The Highway Safety Divisionwas created in May 2005, and one of its key prioritiesis establishing provincial patrol standardsand systems to monitor, assess, and report onresults.The OPP is committed to enhancing its focuson traffic safety within the resourcing available.The Highway Safety Division will be workingclosely with the regional commanders acrossthe province to ensure optimum deployment ofstaff resources to focus on the reduction of collisionsand resultant deaths, personal injuries,and property damage.Motor Vehicle Collision Data—Number ofAccidents by TypeThe OPP is a participant in Road Safety Vision2010 (Vision 2010), which is a national initiativefrom the Canadian Council of Motor TransportChapter 3 • VFM Section 3.12

2542005 Annual Report of the Office of the Auditor General of OntarioFigure 10: Traffic Collisions in OPP Jurisdictions, 1999–2004Source of data: Ontario Provincial Police1999 2000 2001 2002 2003 2004fatal collisions 465 444 485 463 455 456personal injury 14,945 14,678 14,407 15,065 14,635 14,242reportable damage 51,654 55,341 55,705 59,385 62,614 58,985Total 67,064 70,463 70,597 74,913 77,704 73,683fatalities 541 520 567 537 511 516Chapter 3 • VFM Section 3.12Administrators aimed at reducing traffic fatalitieson the roadways and making Canadian roads thesafest in the world.Over the period from 1987 to 2001, the numberof licensed drivers in Canada has increased from17 million to 21 million, and the number of registeredvehicles has increased from 16 million to18 million. Despite these increases, the number offatalities and serious injuries have decreased overthat time.Vision 2010 has set a national target that callsfor a 30% decrease in the annual average numberof road users killed and seriously injured during the2008–2010 period as compared to the 1996–2001period. During 1996 to 2001, OPP jurisdictionsexperienced approximately 530 fatalities per year.To meet the Vision 2010 requirements, that numbermust be reduced by approximately 160, to 370.As Figure 10 shows, OPP jurisdictions hada fairly stable rate of fatal accidents from 1999through 2004. The number of actual deaths averaged532 per year.Strengthening the highway patrol function, asrecommended in the previous section of this report,would help the OPP to meet the Vision 2010 goal.Police Academy, which covers basic administrativerequirements and what to expect at theOntario Police College;•an in-depth 12-week Basic Constable Trainingcourse at the Ontario Police College, whichincludes simulation exercises, classroom discussion,and case studies in a number of areas,including community-oriented policing, domesticviolence, the use of firearms, physical fitness,police vehicle operations, provincial statutes,the use of force, and defensive tactics; and•four weeks at the Provincial Police Academy formore in-depth training on traffic control, firearms,cruiser familiarity, and physical fitness.Regular training for active members of theservice consists primarily of four days of annualtraining at the Provincial Police Academy, whichincludes re-qualification courses in the use of force,firearms, and CPR, and academic upgrades necessitatedby new legislative requirements for officers,such as the one-time in-car training provided in2000 for driver pursuits.Our review of the initial and ongoing trainingprogram identified two areas where additional ormore timely training is required: driver training andfirearms training.Officer TrainingBefore an officer becomes an active member ofthe OPP, he or she is provided with the followingtraining:•a one-week orientation course at the ProvincialDriver TrainingAlthough the Basic Constable Training courseincludes both in-car and classroom-based drivertraining, no additional regular or remedial drivertraining is provided either as part of the requiredannual training or on an as-required basis.

Ontario Provincial Police255In our view, this may have contributed to a highnumber of preventable collisions involving on-dutyofficers. For example, based on statistics preparedby the OPP as part of a Collision Review Projectundertaken in 2004, we noted the following:•For 2000 through 2004, the OPP’s averagenumber of collision/damage occurrences wasapproximately 1,600 annually, or about onesuch occurrence per year for every two vehicleson the road.•Of the collisions that occurred in 2001 and2002, 51% were classified by the OPP as preventable,and the majority occurred on regularpatrols during daylight hours on dry asphaltroads in clear weather conditions.•For that same two-year period, 37.1% of the collisionsinvolved officers with between zero andfive years of service (a group that constitutedonly 25.9% of all active officers).•Some individual officers have been involved inmultiple collisions—for example, within a sixmonthperiod in 2004, one officer was involvedin eight instances of vehicle damage, two ofwhich were deemed to have been preventablecollisions, and in six other incidents where damagewas found on the vehicle.The OPP’s Collision Review Project also resultedin the creation of a Fleet Safety Officer position aswell as recommendations for enhancements withrespect to collision data collection and analysis.We also noted that, when an officer is involved ina collision, a member of a higher rank is required toinvestigate the collision when practical. However, inpractice we found that in many cases an officer of ahigher rank did not investigate the collision.Firearms TrainingBy regulation under the Police Services Act, “[a]Member of a police force shall not carry a firearmunless, during the twelve previous months,the member has successfully completed a trainingcourse on the use of firearms.”We found that two of the six regions compliedwith this requirement. The other four regions,however, did not interpret the regulation correctlyand instead conducted their firearms training ona calendar-year basis. As a result, an officer carryinga gun in these regions might not have had firearmstraining for almost 24 months. For example,in one region we found that for 349 of the approximately1,250 officers who received firearms trainingin 2003 and 2004, the training was overdue,and therefore these officers were non-compliantwith the regulation’s firearms training requirement.Some officers did not receive their firearms traininguntil 21 months after their last firearms training.In that regard, a number of officers indicated to usthat firearms training even once every 12 monthswas not enough and that more frequent trainingwould be beneficial.In addition, we found that there was no centralizedtracking system for firearms training receivedby front-line officers. Instead, each region is responsiblefor tracking, co-ordinating, and ensuringthat each officer within that region receives theappropriate training. The lack of a centralized systemis inefficient, creates inconsistent practicesand reporting among the regions, and can lead toinaccuracies of records in cases where an officeris trained in a location other than his or her homeregion.RECOMMENDATIONTo minimize property damage and to reduce therisk to officers and the public, the Ontario ProvincialPolice should:•consider adding a driver-training componentto its annual training program and providingremedial driver training where necessary;• ensure that every officer receives firearmstraining at least once every 12 months, asrequired by regulation; andChapter 3 • VFM Section 3.12

2562005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.12• consider implementing centralized trackingfor firearms training to ensure that the intentof required training is understood, that trainingis undertaken consistently across theprovince, and that accurate records are kepton the training undergone by each officer.MINISTRY RESPONSEThe Ontario Provincial Police (OPP) has recognizedthe need to reduce risks to officers and thepublic and minimize property damage by focusingresources in the area of officer safety. TheOPP has integrated training components intothe new-recruit training and coach–officer trainingto enhance driver awareness and reduce collisionsand damage. A video is currently beingproduced that will be utilized in training for allofficers, and the delivery mechanism is underdiscussion. The OPP will continue to assess thedifferent training models, ranging from formaldriver training to awareness building, to ensurethat a cost-effective solution is put in placeto address its operational requirements andreduce preventable officer collisions/damage tovehicles.The OPP will ensure that every officerreceives firearms training at least once every 12months.A centralized database to track trainingattendance is under development. The OPPAcademy is in the consultation phase of theimplementation of this database, and it is anticipatedthat it will be operational by January2006.Security of Seized Items and DetachmentArmamentsment armaments, the Ontario Provincial Police hasestablished requirements for ensuring that:• physical access is restricted in areas in thedetachment where seized items are stored;•adequate records are kept with respect to itemsplaced into, inspected, and removed from therestricted areas; and•regular audits to verify the existence of seizeditems are conducted, and seized items that areno longer required are disposed of in a timelymanner.In the detachments we visited, we found thatthese requirements were often not adhered to. Forexample, we found that:•While all detachments had restricted areas forthe storage of seized property, drugs, and firearms,in several cases the keys to those areaswere left in an open drawer and were accessibleto everyone.•In several cases, we found that the requiredrecords of items placed in and removed fromrestricted areas were not maintained or, wheremaintained, were not adequately completed.As a result, it was often not clear who had hadaccess to the items and for what purpose.•Required periodic audits of seized items wereoften not conducted. In addition, items that hadbeen approved for disposal were often not disposedof on a timely basis.We also noted that, in many cases, access torestricted areas was not supervised. As a result,individual officers had unsupervised access todrugs and other seized items, a situation that couldcompromise the integrity of the evidence.Many of our findings in this area are consistentwith those identified in the OPP’s Quality Assurancereports (see the next section).To maintain the integrity and security of seizedproperty, drugs, and firearms, as well as of detach-

Ontario Provincial Police257RECOMMENDATIONTo preserve the security and integrity of seizedproperty, drugs, and firearms and of detachmentarmaments, the Ontario Provincial Policeshould:•comply with internal requirements withregard to restricting access to and maintainingadequate records of these items;•do so on a timely basis; and•when items have been approved for disposal,ensure that access to high-risk items such asseized drugs is supervised.MINISTRY RESPONSEThe Ontario Provincial Police (OPP) acknowledgesthat these are key areas where there is aneed to enhance controls. Regional and detachmentcommanders have been reminded of theimportance of adherence to policies and proceduresin these areas and have been directed toconduct a full review of their respective locationsand provide a report back by fall 2005.The Quality Assurance Unit continues to provideguidance and support to the field to minimizerisk in this area.Quality-assurance ProcessesAs noted earlier, the Ministry of Community Safetyand Correctional Services (previously the Ministryof the Solicitor General) Internal Audit Serviceshas not conducted any substantial audit work atthe OPP in the previous four years. However, theOPP itself has three quality-assurance processes:inspections and verifications; the Self-Audit Workbook;and the Management Inspection Process.Inspections and VerificationsOPP policy requires that inspections and verificationsbe conducted at detachments on a three-yearcycle by members of the Quality Assurance Unitfrom the OPP’s General Headquarters accompaniedby staff from the relevant regional headquarters.The inspection process consists of a brief randomcheck; the verification process involves a morein-depth review and the completion of a detailedchecklist for selected high-risk areas of detachmentoperations. After either process, a report isissued to the detachment commander. Space is providedon the report for the commander’s responses,including what action will be taken on the identifiedconcerns. Once completed by the detachmentcommander, the document is filed at the QualityAssurance Unit. The Quality Assurance Unit preparesan annual summary of the common issuesand concerns for review by the provincial commanders.Our review of a sample of inspection and verificationreports found that the reports were beingsatisfactorily completed. In many cases, items notedin these reports corroborated our own observationsresulting from our visits to detachments. However,we also noted that the Quality Assurance Unit wasnot meeting the required three-year cycle, and inmost cases either no responses were provided toobserved deficiencies or the responses that wereprovided appeared inadequate. As a result, it wasoften not clear whether any corrective action hadbeen taken as a result of these reports.Self-Audit WorkbookThe Self-Audit Workbook (SAW) is required to becompleted annually by detachments, regional units,and bureaus within the OPP. Within detachments,the detachment commander or a designate completesa self-assessment questionnaire on selectedaspects of detachment operations and submits thecompleted document to the Quality Assurance Unitat the OPP’s General Headquarters.Chapter 3 • VFM Section 3.12

2582005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.12Our review of the responses to the SAW questionnairescompleted in the detachments we visitedfound that their accuracy was often questionable,with the result that little reliance can be put onthis process. In particular, our review of responsesprovided to 10 randomly selected questions foundthat they often contradicted the actual practice inthe detachment. For example, the SAW questionnaireasked if officers’ daily journals were regularlyreviewed and initialled by supervisors, andthus monitored for completeness and accuracy.Although the detachments we visited had answeredyes to this question, our review and discussionswith applicable staff revealed that this procedurehad often not been followed.Management Inspection ProcessThe Management Inspection Process is a quarterlyprocess whereby the senior officers in a detachmentreview selected aspects of detachment operationsand report their findings to the detachment commander.In early 2005, the Quality Assurance Unitprovided a standardized template for use in completingthis process. We observed that before thetemplate was distributed, these reports were submittedin a variety of formats ranging from one to20 pages long.Our review of the Management Inspection Processat the detachments we visited showed that inmany cases either the required inspections were notcompleted quarterly as required or, if they had beencompleted, the resulting report could not be found.We also note that because there is no requirementfor these reports to be sent to the regional headquartersor the Quality Assurance Unit, detachmentscannot be held accountable through thisprocess.We support the OPP’s internal quality-assuranceobjectives but believe that the use of three separateprocesses to meet those objectives warrantsreview. For instance, a comprehensive process utilizingstaff from different detachments and regionsmight prove to be both less administratively timeconsumingand more effective than the presentthree processes.RECOMMENDATIONThe Ontario Provincial Police should assesswhether its three quality-assurance processesas currently implemented meet its objectivesfor the quality-assurance function or whetherthese objectives can be achieved through a moreeffective process.MINISTRY RESPONSEIn April 2005, the Ontario Provincial Policecreated a Risk Management Section, whichassumed the responsibility for overseeing theinternal quality-assurance processes throughoutthe organization. In July 2005, a projectwas initiated to review and refine the internalquality-assurance processes with regard toefficiency and effectiveness. This review willconsider:• the findings noted;•internal stakeholders; and•the results of extensive consultation withnew processes that are targeted for implementationin early 2006.

Chapter 3Section3.13Ministry of Health and Long-Term CareRecovery of Health CostsResulting from AccidentsBackgroundThe Ministry of Health and Long-Term Care (Ministry)has the legal authority to recover the medicaland hospital costs incurred in treating peopleinjured in accidents caused by someone else. Theserecoveries are usually made through “subrogation,”a legal term unique to insurance law. This recoverymechanism provides the Ministry “the rightto recover costs incurred as the result of an injurysuffered by an insured person, caused by the faultor negligence of another person.” In subrogation,the injured person’s lawyer is required to act onbehalf of the Ministry, saving the Crown the need toengage its own counsel.Until 1990, the Ministry’s right of subrogationalso extended to injuries arising from automobileaccidents where a driver insured in Ontario wasfound at fault. But changes that year to the InsuranceAct, which reformed the automobile insuranceindustry in Ontario, eliminated that right. Theprovince recovered no health costs resulting fromautomobile accidents until 1996, when the InsuranceAct and related regulations were amendedto require automobile insurers to pay an annual“assessment of health system costs” (assessment).The assessment is in lieu of the province subrogatingindividual claims against at-fault drivers. TheMinistry of Finance administers the Insurance Act,while the Financial Services Commission of Ontario(Commission) is responsible for collecting theannual assessment from insurers. The Commissionhas collected about $80 million annually since 1996from automobile insurance companies through theassessment.The Ministry of Health and Long-Term Carehas a right of subrogation for all insured servicesprovided to victims of non-automobile accidentsthrough the Health Insurance Act, and all servicesand benefits rendered in accordance with the Long-Term Care Act. These accidents typically includeslips and falls, medical malpractice, product liability,and general liability. Cost recoveries arepursued by the Subrogation Unit (Unit) of the Ministry’sSupply and Financial Services Branch. TheUnit has a staff of 21 and spends about $2.5 millionannually to pursue an average of 13,000 activecase files, recovering about $12 million a year (netof legal costs). Total assessment and other subrogationrecoveries have remained stable over the lasteight years, as illustrated in Figure 1.Chapter 3 • VFM Section 3.13259

2602005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13Figure 1: Annual Health-care-cost RecoveriesSource of data: Public Accounts of OntarioHealth SubrogationAssessment 1 RevenueTotalFiscal Year ($ million) ($ million) ($ million)1995/96 — 5.3 5.31996/97 32.9 9.7 42.61997/98 78.3 9.2 87.51998/99 79.1 12.8 91.91999/2000 81.1 10.4 91.52000/01 83.9 12.3 96.12001/02 77.1 10.7 87.82002/03 82.2 13.3 95.52003/04 80.2 11.7 91.92004/05 80.3 12.0 92.31. Annual health assessment revenues vary from the total requiredassessment amount of $80 million due primarily to the timing of receiptof payments from the insurance companies.Audit Objective and ScopeThe objective of our audit was to assess whethersatisfactory policies and procedures were in placeto identify and recover the cost of health servicesprovided to individuals injured as a result of someoneelse’s negligence.Our audit was performed in accordance withstandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountants,and accordingly included such tests and otherprocedures as we considered necessary in the circumstances.Prior to commencing our work, weidentified the audit criteria we would use to addressour audit objective. These criteria were reviewedand agreed to by senior Ministry management.The scope of our audit included a review andanalysis of information available at the Ministryof Health and Long-Term Care’s Subrogation Unit,and the Ministry of Finance’s Financial ServicesCommission of Ontario. As well, we interviewedstaff responsible for administering health-care-costrecoveries. We also researched third-party recoveryprograms in other jurisdictions, and reviewedresearch and related reports of experts in the fieldof health-care-cost recovery resulting from negligentor wrongful acts.Our audit did not include a review of the policiesand procedures for recovery of health-carecosts by the Workplace Safety and Insurance Boardof Ontario for insured persons injured at the workplace.Neither did we examine the process used bythe Financial Services Commission to calculate andcollect the assessment from individual auto insurers,given that the total amount is established byregulation and simply allocated to the automobileinsurers based on their related premium revenues.The Ministry’s Internal Audit Services had notconducted any recent audits or reviews relating tothe operation of the Subrogation Unit or the assessmentof health system costs that affected the scopeof our audit.SummaryThe Health and Finance ministries did not havesatisfactory policies and procedures in place toidentify and recover the cost of provincially fundedhealth services provided to people injured throughsomeone else’s fault. We believe that the ministriescould potentially recover twice as much as they donow, perhaps in excess of $100 million a year more.However, to accomplish this, they will need betterinformation on recoverable health costs actuallybeing incurred by the province.The Ministry of Finance has not changed the$80-million annual assessment charged to theautomobile insurance industry since its introductionin 1996. According to the Ministry of Finance,it has undertaken periodic informal reviews of theannual assessment paid by insurers to offset auto

Recovery of Health Costs Resulting from Accidents261accident health costs incurred. In each of thesecases, a decision was made to maintain the currentassessment level in view of the instability ofauto insurance rates and the potential negativeeffect on premiums. However, given that Ontario’slevy per registered vehicle is among the lowest ofthe provinces, and that Ontario’s health costs haverisen 70% since 1996, there is a compelling case fora formal review of the current $80-million figure.Annual assessment revenues would rise by over$56 million if the province recovered the same proportionof health-care costs that it did in 1996. Suchan increase would also result in a per-vehicle assessmentamount that is more comparable to mostother provinces.Comprehensive data on the cost of health-careservices provided in Ontario to people injured inmotor vehicle accidents was not available. But ourreview of what information there was, and comparisonsto other jurisdictions, leads us to conclude thatthe actual health costs incurred are considerablyhigher than what is currently being recovered fromthe annual assessment and that Ontario recoversproportionately less than most other provinces.The Ministry of Health and Long-Term Care’spolicies and procedures for subrogating non-vehicleaccident cases did not ensure that it identified andrecovered all the eligible costs that it should. Inparticular:•There were no recent studies or analyses of theactual health-care costs incurred as a result ofaccident-related injuries. The absence of informationsystems or processes to collect and analyzehealth-care costs and insurance industrydata has limited the Ministry’s ability to quantifythe extent and costs of cases not reported.•While the Ministry has some procedures toproactively identify and report potential courtactions and settlements, much more could bedone to identify unreported cases that may justifysubrogation. Ministry staff acknowledgedthat many cases in which they may have aninterest go unreported. Hospitals alone incurredcosts of over $500 million in 2004 to treat morethan 38,000 people injured in slips and falls, butthe Ministry was subrogating only about 2,800such cases annually. The potential for increasedrecoveries is thus substantial, even though therehas been no study of the proportion of theseaccidents that is attributable to third-partynegligence.•Staff were not required to obtain managementapproval for individual settlements, regardlessof amount, to ensure that the settlementsreached were appropriate in the circumstances.Documentation supporting settlement agreementswas insufficient and had not been periodicallyreviewed by an appropriate level ofauthority.•In calculating recoveries of hospital-care costs,the Ministry did not use the uninsured hospitalrates charged to non-residents receivingtreatment here, as required by the legislation.Instead, it used the Interprovincial Hospital Billingrates, normally charged to other Canadiansinjured in Ontario. The uninsured rates are, onaverage, 77% higher than the Interprovincialrates currently used by the Ministry. Althoughother provinces also use the Interprovincial HospitalBilling rates, they add a capital-cost componentof 25% to 30%. Ontario does not.•The Ministry did not have the necessary datacollection systems to proactively fulfill itsresponsibility to monitor the automobile insuranceindustry’s compliance with its paymentresponsibilities for non-professional health servicesprovided to persons injured in automobileaccidents.The Ministry also needs to review the feasibilityand cost-effectiveness of alternative recovery methods,such as bulk subrogation agreements with liabilityinsurers similar to the automobile insuranceassessment, as a way of increasing recoveries ofhealth costs arising from non-automobile accidents.Chapter 3 • VFM Section 3.13

2622005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13Detailed Audit ObservationsHEALTH SYSTEM COSTS ASSESSMENTPrior to the introduction of the Insurance Actamendments in 1990, the Health Ministry had fullright of subrogation against defendants in automobileaccident litigation. From 1978 to 1990, theMinistry entered into individual voluntary arrangements,commonly referred to as “bulk subrogationagreements,” with the automobile insuranceindustry. Under these agreements, insurers made apredetermined lump-sum payment to the Ministryfor health-care costs in lieu of individual case-bycasesubrogation. These amounts were based on apercentage, to a maximum 2.4%, of the insurer’sthird-party liability premiums. In the last year ofthe agreements, the Ministry recovered $52 millionfrom the insurance industry. With the passing ofthe amendments to the Insurance Act in 1990, boththe right of subrogation and the bulk subrogationagreements were eliminated, and the province nolonger recovered any health-care costs from automobileinsurers.In 1996, the Insurance Act was amended toinclude an annual assessment of automobile insurersfor health-care costs incurred by the Ministry.The amount, known as the “assessment of healthsystem costs” (assessment), was set at $80 milliona year, and was intended to help defray costsincurred under the acts or programs administeredby the Ministry of Health and Long-Term Care.According to the Ministry of Finance, sinceits inception, the annual assessment has beenreviewed informally on a regular basis, but no formalreview has been initiated. Since, in each ofthese cases, a decision was made to keep the currentlevel of assessment, the amount has remainedunchanged. The original negotiations to determinethe assessment amount recognized that this newcost would increase the premiums charged by insurers.Since then, there has been much public concernover the rising cost of automobile insurance. Consequently,the Ministry of Finance’s emphasis hadbeen on seeking ways to reduce the costs incurredby motorists and insurers. For example, the 4%sales tax on insurance premiums was phased outover four years, starting in 2001. This saved insureddrivers at least $800 million since then and almost$380 million in the 2004/05 fiscal year alone.Reforms were also introduced to control risinghealth-care costs. For example, guidelines wereestablished for the treatment of minor injuries,such as whiplash, so that injured individuals receiveappropriate treatment through their insurancepolicy rather than through the public health-caresystem.As part of our audit, we compared the assessmentamount to the changes in provincial healthcarecosts and motor vehicle third-party liabilitypremiums since 1996. The results of our analysisindicated that while the assessment remained at$80 million, the costs for hospital and physicianservices alone have increased almost 70%. In orderto recover today an amount proportional to thatcollected in 1996, the assessment would have torise by $56 million. In addition, we note that theassessment as a percentage of insurance companies’revenues from auto insurance liability premiumshas declined from about 4% to about 2%.We also compared Ontario’s assessment to theamounts levied in other jurisdictions and foundthat on a per-registered-vehicle basis, Ontario’srate was among the lowest in Canada, as illustratedin Figure 2. If Ontario’s assessment per registeredvehicle were raised to the national average, theassessment amount would increase by $60 million,or about $8 per registered vehicle.Given the differences in population and registeredvehicles, the other provinces appear to berecovering a substantially higher percentage oftheir accident-related health costs from the insuranceindustry. In Alberta, a July 2003 report by

Recovery of Health Costs Resulting from Accidents263Figure 2: Comparison of Automobile Insurance Industry Assessment for Provincial Health Costs, 2004Source of data: 2004 Interprovincial Third-Party Liability Conference and Canadian Vehicle Survey (Statistics Canada, 2004)706050Levy per Vehicle ($)403020100SaskatchewanManitobaOntarioBritish ColumbiaQuebecAverage (excluding Ontario)PEINewfoundland & LabradorAlbertaNova ScotiaNew Brunswickan independent study group, co-sponsored and vided as a result of a road accident. We noted thatco-funded by the Insurance Bureau of Canada the health-costs levies of two other provinces thatand Alberta Health and Wellness, estimated that have a more formal process have increased an averageof 45% since 1996.the annual cost to Alberta’s health-care system oftreating people injured in such accidents was over In Ontario, neither the Finance Ministry nor$150 million. The estimate was based on a study the Health Ministry has formally studied the costof a sample of the 32,000 casualties that occurred of health-care services provided to individuals forin that province in 2001. The group further estimatedthat about $100 million of these costs were dents. Reliable estimates are difficult to make in theinjuries suffered as a result of automobile acci-the result of negligence. Alberta was recovering absence of such studies. Nevertheless, given thatapproximately 60% of these costs ($60.3 million) there are far more injuries from motor vehicle accidentsin Ontario than in Alberta (more than 84,000from the insurance industry.Assessments in other provinces may be proportionatelyhigher because most other jurisdic-of Transportation), related health costs would alsoin 2003, according to data from Ontario’s Ministrytions require their respective health departments be significantly higher than the costs incurred into annually review and assess the adequacy of the Alberta. It is therefore likely that Ontario is recoveringfar less than 60% of its actual health costshealth levy in recovering provincial health costsarising from negligence. As part of these review resulting from motor vehicle accidents caused byprocesses, provincial health departments attempt to others.quantify the actual costs of the health services pro-Chapter 3 • VFM Section 3.13

2642005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13RECOMMENDATIONTo help ensure that the “assessment of healthsystem costs” meets its original objective, theMinistry of Finance, in conjunction with theMinistry of Health and Long-Term Care, shouldreview the adequacy of the current assessmentamount in recovering the cost of provinciallyfunded health-care services provided to individualsinjured in automobile accidents.MINISTRIES’ RESPONSESMinistry of Health and Long-Term CareThe Ministry fully supports the Auditor General’srecommendation to review the adequacy ofthe current assessment of health system costs.In consultation with the Ministry of Finance, theMinistry will conduct an appropriate analysis toensure that the assessment is in keeping with the1996 intent. In advance of this anticipated jointreview, the Ministry will search for data sourcesto determine the true full costs associated withmotor vehicle accident injuries and the potentialrecoverable costs over the past 10 years.Ministry of FinanceThe Ministry agrees with this recommendationand will review the current assessment, takinginto consideration the cost of vehicle accidenthealth-care costs and the impact of increasingthe assessment on Ontario’s auto insurancepremiums.COST OF PROVIDING HEALTH-CARESERVICE TO ACCIDENT VICTIMSSince 1990, no definitive studies or analyses havebeen undertaken to determine the actual cost ofhealth-care services associated with accidentrelatedinjuries. Health records can only identifyaccident victims who visit an emergency room orare hospitalized, not those who receive treatmentdirectly from a physician or clinic. With the exceptionof workplace accidents covered by the WorkplaceSafety and Insurance Board, the current OHIPbilling process does not require a physician to indicateif the services are being provided as the resultof an accident. Similarly, police collision data andaccident reports are not linked to the health-caresystem. Consequently, it is difficult to obtain informationabout accidents directly.As part of our audit, we attempted to estimatethe cost of providing hospital care to persons injuredin accidents relating to automobiles and to slips andfalls. Using the Ministry’s statistical databases for2003/04, we obtained a report on the number ofreported hospitalizations attributed to those typesof accidents and the costs of a sample of them. Dataon specific cases were prepared using the InternationalClassification of Disease codes (ICD-10codes). Developed by the World Health Organization,these clinical diagnosis codes classify casesby disease, injury, and cause of death. The resultsof our analysis are summarized in Figure 3. Whileonly a portion of these accidents were a result ofnegligence, the figures indicate the magnitude ofpotential costs to the health-care system. Morestudy is needed in this area. The experience of otherprovinces that have conducted such studies maybe of assistance in conducting the needed study inOntario.It is critical that an analysis of the costs associatedwith health services provided to injured partiesas a result of negligence be conducted to ensurethat any future negotiations with the insuranceindustry are based on sound information aboutthe actual costs of providing these services. Forexample, it would be useful to research the proportionof slips and falls due to the negligence ofothers.

Recovery of Health Costs Resulting from Accidents265Figure 3: Estimated Hospitalization Costs Attributed to Accidents, 2003/04Source of data: Ministry of Health and Long-Term Care, Ontario Case Costing Initiative DatabasesService CostCost of Estimated Total# of Cases in Emergency Ward# of Cases Hospitalization Hospital CostsType of Accident Emergency Ward ($ million) Hospitalized ($ million) ($ million)automobile 74,890 24.3 6,865 94.1 118.4slips and falls 344,360 76.8 38,780 451.4 528.2Total 419,250 101.1 45,645 545.5 646.6RECOMMENDATION(This and all subsequent recommendations wereissued to and responded to by the Ministry ofHealth and Long-Term Care.)To help determine the recoverable amountsfor the costs of health-care services providedto injured parties as a result of someone else’snegligence, the Ministry should develop a costeffectivemethod for periodically collecting thenecessary cost information to reliably estimatethe cost to the health system.MINISTRY RESPONSEThe Ministry fully agrees with the Auditor General’srecommendation and will explore the useof available corporate databases to obtain betterinformation relating to the cost of treatmentfor victims of accidents and will work with theMinistry of Finance on future reviews of theassessment of health system costs. During thecourse of analyzing and evaluating health-carecosts to determine the appropriateness of theassessments for automobile insurance claims,the Ministry will develop a mechanism (such asstatistical reports) to assist in determining theproper costs to be recovered.IDENTIFICATION OF POTENTIALSUBROGATION CASESThe Subrogation Unit relies on the legislativerequirement that the plaintiffs, their lawyers, andthe defendants’ insurers must notify the Ministryof pending lawsuits, claims against insurance policies,and settlements resulting from negligence.However, the Unit has neither the resources nor asystematic method to proactively identify instanceswhere it has not been notified of a legal action orsettlement in which recoveries could be made.According to a 1996 internal review, Subrogationstaff said that they were receiving notificationin only 60% of the potential health-care recoverycases. They said that the problem “would onlyincrease as legal representatives become aware ofthe loopholes within the existing legislation.” Forexample, many large organizations are either selfinsuredor have a high deductible, and often settledirectly with the injured party to avoid publicity orincreased insurance premiums. The current legislativereporting requirements do not cover selfinsurers.Consequently, the Unit believes that manypotential third-party liability cases are still notbeing identified and reported to the Ministry.Insurers are expected to complete a standardaccident report for all claims, providing the Ministrywith details of the claim, including the insurerand injured-party information. At the time of ouraudit, Ministry management estimated that only2% of its current subrogation cases were a result ofinformation provided by insurers. Legal experts sayChapter 3 • VFM Section 3.13

2662005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13that if liability insurers voluntarily reported all outof-courtsettlements, the Ministry’s subrogation revenuescould rise by 25%, or $3 million.The Ministry also needs better information tohelp it monitor claims reporting by insurers. Forexample, the Ministry needs to collect informationin order to compare the number of notificationsby insurers to their share of the liability insurancebusiness and to their loss-experience data. Explanationscould be obtained from those companieswith below-average notifications in comparison tothe policies written or losses incurred. In one province,the health department tracks the number ofnotifications by insurance company for analysispurposes.One way to proactively detect potential subrogationcases at the point of origin is to periodicallycollect case information from hospital databasesusing the ICD-10 codes. As part of our audit, weasked the Ministry to use these codes to prepare ananalysis for the 2003/04 fiscal year of all patientsreceiving hospital treatment for injuries resultingfrom slips and falls. From this analysis, we foundthat some 38,000 people were hospitalized thatyear for such falls, at a cost to the provincial hospitalsystem of approximately $530 million. In comparison,the Subrogation Unit annually recoversfrom about 2,800 cases relating to falls, or lessthan 7% of such hospital admissions. Although it isunlikely that most falls are the result of negligenceof a third party, the very low notification rate suggeststhat liability insurers may not be alerting theMinistry to all negotiated settlements.The data from a sampling of 11 Ontario hospitalsalso indicated that 50 patients suffered seriousaccidental falls resulting in hospitalization costsexceeding $100,000 each. These costs don’t includethe amounts paid out for physician services throughthe OHIP system, or any other services providedby long-term care facilities or other service providers.We provided these data to the Unit and as ofMay 2005, it was still in the process of investigatingthe cases to determine if any of them are subject tosubrogation.Another way to increase reporting of settlementsby insurers and lawyers is to periodically remindthem of their legal responsibility to inform the Ministryof all such settlements. Reminders could bedelivered by placing articles in insurance industryand legal profession periodicals, by speaking at theappropriate conferences, or by working with industryassociations to clarify respective responsibilitiesin this area.RECOMMENDATIONTo help improve the effectiveness of the notificationprocess for potential subrogation cases, theMinistry should:•assess the potential of using data containedin the health-care information systems todetect unreported subrogation claims;• develop a process to efficiently collect andanalyze insurance company claims data; and• develop a stakeholder education strategyto reinforce awareness among lawyers andinsurers of their legal obligations to reportaccidents resulting from the negligence ofsomeone else.MINISTRY RESPONSEThe Ministry agrees with the Auditor Generalthat a number of opportunities exist that couldimprove the effectiveness of the notificationprocess for potential subrogation cases. Whileinvestigating the usefulness of the corporatehealth databases for motor vehicle accidentcosting purposes, the Ministry will also evaluatethe usefulness of the information for identifyingother unreported accident claims for whichthe Ministry may have a right of subrogation. Inaddition, the Ministry will continue to research

Recovery of Health Costs Resulting from Accidents267other potential sources of information that mayexist or be in development within the Ministryor at other ministries.The Ministry has identified the need for variousreporting requirements, including the needto capture data not currently available. TheMinistry will be creating an internal databasethat will provide critical information, such asthe ratio of the number of accidents reportedby each private casualty insurer in the provinceto the volume of business as reported byeach insurer in their Annual Statistical Report.Where a significant deviation exists between thenumber of accident cases reported to the Ministryversus the losses reported by the insurer,follow-up with individual insurers will takeplace.In the past, the Ministry has placed a“Reminder to Solicitors” in the Ontario Report(a serial publication that contains, among otherthings, government notices to the legal profession)reminding legal counsel of their statutoryduty to include a claim on behalf of the Ministryin their client’s (the insured person’s) personalinjury claim for damages. The Ministry willreview the timing for inserting a future notice tosolicitors. In addition, as part of a stakeholdereducation strategy, the Ministry will continueto provide information sessions at industrysponsoredconferences and trade shows, witha target audience of private insurance claimsspecialists, lawyers, and health-care providers.Also, other strategies will be evaluated andimplemented based on their anticipated effectiveness.Such strategies could include publishingarticles in industry publications andengaging plaintiff law firms to present the Ministry’srequirements at specific venues, such asOntario Trial Lawyers Association seminars.REVIEW OF SUBROGATION FILESThe Subrogation Manager and Officers are responsiblefor evaluating potential cases to ensure thatthe Ministry’s legal right to recover funds is maximized.Each year, the Unit opens and closes approximately5,000 case files. Subrogation Officers have agreat deal of autonomy in reaching decisions withplaintiffs, their legal representatives, and insuranceadjusters.In reviewing a sample of subrogation files, weobserved the following:•The Unit’s current policy does not require a SubrogationOfficer to obtain the Unit Manager’sapproval before accepting a settlement offer.Currently, Subrogation Officers have completeauthority, regardless of the dollar value of acase, to respond to a settlement offer by acceptingit, rejecting it, or referring it to senior management.•Although the Unit’s policy indicates that SubrogationOfficer files are to be reviewed by theManager or Team Leader, we found no formaldocumentation or reports on the results of suchreviews, or any ensuing recommendations. Thecase files we reviewed generally lacked sufficientdocumentation to support the settlementreached. In one case involving past and futurehealth costs of $700,000, the SubrogationOfficer accepted a lawyer’s telephone offer of$200,000. However, the file did not provide thecalculations used to reach the anticipated futurehealth costs or the reasons why the settlementoffer was deemed adequate.We noted that at least one province has policiesand procedures requiring the approval ofsenior management for settlements in excess of$50,000. As well, the program director in that provinceindicated that they use a standard process toperiodically audit their case files for adherence toprogram-documentation policy and procedures.Such an independent review of the closed filesprovides senior ministry management with someChapter 3 • VFM Section 3.13

2682005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13assurance that decisions and actions are properlydocumented, both administratively and legally,and that a reasonable settlement is achieved in thecircumstances. Given the complexity of the subrogationprocess, periodic review by independentexperts could provide an opportunity for staff trainingand ensure a more consistent recovery process.RECOMMENDATIONTo help ensure that settlement decisions areappropriate and supported by adequate documentation,the Ministry should:•update its policies to require managementapproval for settlements over a specifiedamount; and•periodically conduct an independent reviewof case files, and document the results,including actions taken to correct anydeficiencies.MINISTRY RESPONSEThe Ministry agrees with the findings of theAuditor General’s review and assessment of currentsubrogation operational policies and procedures.Currently, Subrogation Officers, who areresponsible for file development and negotiationof the Ministry’s subrogated claim, have completecontrol of the file. Subrogation files arereferred or escalated to senior staff or the UnitManager based on the complexity of the file orfor non-routine matters (such as a variation of acase-law precedent) and not based on the valueof the potential subrogated interest. Althoughthere is a requirement to document all file activity,it is acknowledged that this may be lackingin some instances.In order to ensure that settlement decisionsare appropriate, the Ministry will:•conduct a review of its current policies andprocedures;• update operational procedures to reflect anew automated workflow system;• require management approval for settlementsover a predetermined amount; and•develop a standardized process to periodicallyreview case files for adherence toprogram-documentation policy and proceduresbased on best practices used in otherjurisdictions.CALCULATION OF HOSPITAL COSTSThe Health Insurance Act (Act) defines for subrogationpurposes the cost of a service rendered to aninsured person—a resident of Ontario—in a hospitalor health facility. Specifically, the Act requiresthe Ministry to use the hospital rates that apply topersons not covered by any provincial health plan.These rates are considerably higher than the InterprovincialHospital Billing rates charged to otherCanadians receiving treatment in Ontario.In reviewing a sample of subrogation files,we observed that the Ministry was not using therequired uninsured rates when preparing paymentsummaries. Rather, it used the Interprovincialrates for both in-patient and out-patient services.Although the Unit maintains and annually updatesthe uninsured rates for all Ontario hospitals, managementwas unable to explain the rationale forusing the lower Interprovincial rates rather thanthe required, higher, non-insured rates when calculatingthe costs of health-care services for subrogationpurposes.To estimate the impact of the difference in rates,we obtained a sample of more serious cases from 11hospitals and compared their uninsured rates perday and their actual average costs per day to theInterprovincial rates for both in-patient and outpatientservices. Based on our sample, the Interprovincialrates used in subrogating claims did notrealistically reflect the true cost of hospital services,

Recovery of Health Costs Resulting from Accidents269and were significantly below the current hospitaldaily rates charged to uninsured patients.The insured rates used by the Unit are on average77% lower than the uninsured rates. Assumingthat about half of the current annual subrogationrevenues of $12 million relate to hospital costs, theMinistry could collect $4 million more if it used therates required by legislation or $1.6 million morebased on actual costs. Actual recoveries would varydepending on such factors as court decisions, sizeof awards, and liability limits of insurers.We noted that while other provincial healthdepartments use the Interprovincial Hospital Billingrates, they add a capital component of 25% to30% in arriving at their hospital per-diem rates. InOntario, no allowance for capital costs is added tothe Interprovincial rates.RECOMMENDATIONTo help ensure that health-care costs arerecovered as required by legislation, the Ministryshould discontinue its practice of using theInterprovincial Hospital Billing rates to calculatecosts for subrogation claims.MINISTRY RESPONSEThe Ministry agrees with the Auditor General’sfindings and will review the hospital costrecovery rate. The Ministry’s review will requireextensive consultation with private casualtyinsurers, who may need to modify or adjusttheir policy/premium rating practices to accommodatethis cost exposure.also known as the independent right of recovery,and annual health cost assessments on the insuranceindustry.In some other jurisdictions—Alberta, forexample—subrogation has been replaced with theindependent-right-of-recovery method, in whichthe province launches its own legal action independentof the injured person.In reviewing the Ministry’s subrogationactivities, we observed that the Unit is pursuing asignificant number of files for which it has a relativelysmall subrogation interest. Although eachindividual file is relatively insubstantial, on a cumulativebasis they represent considerable revenueand are worth pursuing.Unit staff indicated that much of the administrativecost of subrogation relates to collecting theinformation on health costs incurred. Once thisinformation is obtained, they will pursue virtuallyall claims they have researched because there arefew additional costs. More than two-thirds of allfiles closed in 2004/05 resulted in recoveries of lessthan $1,000, as indicated in Figure 4.Prior to the introduction in 1996 of the assessmentof health system costs, the Ministry negotiated“bulk subrogation agreements” with the majorOntario automobile insurers. In exchange for waivingits subrogation rights, the Ministry acceptedfrom insurers a payment based on a proportion oftheir premium revenues. The primary benefit of thisFigure 4: Recovery per Closed Subrogation File,2004/05Source of data: Ministry of Health and Long-Term Care, Subrogation UnitChapter 3 • VFM Section 3.13OTHER APPROACHES TO RECOVERINGCOSTSThere are a variety of other methods for recoveringhealth costs incurred as the result of the negligenceof someone else. These include direct court action,# of Closed % of Total % of AnnualAmount Recovered Files Files Recoveryless than $1,000 3,524 68 8$1,001–$5,000 1,288 25 24$5,001–$10,000 225 4 12$10,001–$100,000 166 3 34over $100,000 14

2702005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13approach was a reduction in the administrative andlegal costs of subrogating claims individually.Similar agreements with the insurance industrycould be examined for non-automobile cases.The introduction of agreements containing annualassessments would be more economical to administerand would provide greater certainty and predictabilityfor both the Ministry and the insuranceindustry. However, before entering into such agreements,the Ministry needs better information onthe costs of health services it provides to accidentvictims.The decrease in caseload resulting from implementingsuch agreements would potentially enablethe Ministry to redeploy resources to other areas,including monitoring the recovery of health-carecosts from self-insured and uninsured parties, orfocusing greater effort on monitoring larger casesnot covered by new bulk agreements.Since 1996, the Ministry has been developingthe necessary legislative changes to allow the recoveryof other health-care service costs not includedin the current subrogation legislation. Theseinclude the cost of prescription drug benefits andassistive devices such as wheelchairs. In our reviewof other provinces’ recovery programs, we notedthat four of the largest provinces currently includethe cost of prescription drugs in their recovery processes.In its business case, the Unit estimated thatadding prescription drug benefits and assistivedevices would result in additional recoveries of$5 million a year.RECOMMENDATIONTo help ensure that the recovery of health-carecosts is being made in an efficient and effectivemanner, the Ministry should formally analyzeother methods of cost recovery and pursueinitiatives already identified that may increasecost recoveries.MINISTRY RESPONSEThe Ministry agrees with the Auditor General’srecommendation to formally analyze othermethods of cost recovery that will result in operationaland cost-recovery efficiencies.To achieve this goal, the Ministry will:•continue with its plans to expand the rightof subrogation to other ministry-funded programs,such as the Ontario Drug Benefit Plan(ODB) and the Assistive Devices Program(ADP), which requires legislative amendmentsto overcome barriers that limit theMinistry’s entitlement to recover costs;•update and validate past analysis on thepotential recovery of other ministry-fundedprograms (ODB and ADP specifically);•analyze the financial impacts on cost recoveryfrom legislative amendments (removingbarriers); and•quantify the value of the potential healthcarecost recovery of all recoverable accidentclaims not currently reported by using informationand data collected from the reviewof data sources for identifying non-reportedaccident claims.The completion of these steps may be necessaryto maximize cost recovery under any othermethod of cost recovery, including entering intoagreements with the private casualty insurers.LEGAL BARRIERS TO SUBROGATIONPROCESSThe legislation governing the Ministry’s right ofsubrogation has historically been subject to legalchallenges that tended to weaken the Unit’s abilityto recover health costs. According to staff,these have become more numerous and creative inrecent years, leading to precedents and interpretationsof the legislation that have either reduced or

Recovery of Health Costs Resulting from Accidents271eliminated the Ministry’s ability to recover costs incertain circumstances.Other provinces have encountered similar difficulties.However, most of the provinces wereviewed either amended their legislation orinitiated policy changes to address the effects ofprecedent law. For example, Alberta discontinuedsubrogation in favour of the direct-recoverymethod. Prince Edward Island and Nova Scotiaamended their legislation to reduce the effectsof certain legal precedents on their subrogationprograms.According to ministry documentation, since1995 the Unit has been proposing amendments toits legislation designed to clarify the Ministry’s subrogationrights and reduce the effects of court decisions.For example, changes were recommended tostrengthen the notification requirements for lawyers,insurance companies, and self-insured personsand to increase the sanctions for failure to notifythe Ministry.The Ministry advised us that it anticipated thatthe necessary amendments to the Ministry of HealthAct would be introduced in the spring 2006 session.MONITORING INSURERS’ COMPLIANCEWITH PAYMENT RESPONSIBILITYWith the amendments to the Insurance Act in 1990,automobile insurers became responsible for the costof non-professional health-care services requiredby their clients following automobile accidents.These include personal support, attendant care,and homemaking assistance. Such services may beprovided through the ministry-funded CommunityCare Access Centres (CCACs), long-term-carefacilities, or other service providers, who invoicethe insurer. Alternatively, automobile insurers mayarrange for their clients to receive these servicesand pay the service provider directly.In a 1996 internal review, the Unit estimatedthat the province, through the CCACs, was providingabout $10 million a year in attendant andhomemaking services that should have been paidby insurers.The Unit assumed responsibility for monitoringcompliance by insurers with these paymentresponsibilities. But it was never given the necessarysupporting data-collection systems requiredto effectively fulfill this mandate. The Unit doesnot have a systematic process in place to monitoror detect insurers who fail to make the appropriatepayments. Consequently, it can seek full reimbursementfrom an insurer only after becoming awarethat the province has paid for non-professionalservices that were the responsibility of that insurer.In an effort to help clarify the respective responsibilitiesof all parties, the Unit undertook an educationand awareness program. Unit staff attendedmeetings sponsored by hospitals, insurers, andcommunity service providers to explain the parties’respective roles with regard to responsibilities forproviding services.However, we observed that the Unit has littleinformation on the effectiveness of these educationand awareness programs. As well, the Unit does notroutinely receive information from insurers or theCCACs indicating either the number of automobileaccident victims referred by the CCAC to theirinsurers or the number of seriously injured automobileaccident victims receiving CCAC servicesdue to insufficient insurance coverage. Such informationwould provide the Unit with an indicationof the magnitude of payments currently being madeby the insurance industry and the potential for furtherrecoveries.RECOMMENDATIONTo help ensure that the Subrogation Unit iseffectively fulfilling its responsibility to monitorinsurers’ compliance with their payment responsibilities,the Ministry should develop:Chapter 3 • VFM Section 3.13

2722005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.13• a formal communication plan to increasepublic and private awareness of the respectiveresponsibilities of the province and insurersfor certain health services associatedwith automobile accidents; and•processes to collect information from theinsurance industry and service providers tohelp identify those health costs that shouldhave been borne by insurers.MINISTRY RESPONSEThe Ministry agrees with the findings and recommendationsof the Auditor General. Toensure the compliance of private automobileinsurers in making payments and provisions forcertain health-care benefits required as a resultof a motor vehicle accident, the Ministry will putin place a formal structure to improve communicationswith Community Care Access Centres(CCACs) and other stakeholders. The plan willinclude:•CCACs in the province;•expanding its information sessions to allformalizing an information package forall CCACs and companies in the insuranceindustry;•communicating the automobile insurer’srequirements in all information sessions,conferences, and other stakeholder forums;• in consultation with CCACs, developingprocesses to collect information on the effectivenessof any communication strategies andinformation sessions; and•researching other methods that may beavailable or developed to collect informationfrom the insurance industry or other areas,such as health-care-provider groups or theMinistry of Finance.MEASURING AND REPORTING ONPROGRAM EFFECTIVENESSGood performance information is essential forsound decision-making and for demonstrating theachievement of program objectives. Currently, theSubrogation Unit has two distinct goals:•recover the cost of health services resultingfrom an injury to an insured person caused bythe fault of another where the law permits suchrecovery; and•monitor insurers’ compliance with their responsibilityto pay for certain health-care benefitsrequired by an insured person injured as a resultof an automobile accident.The Ministry has not established specific objectiveswith measurable targets to allow senior managementto assess how effectively the Unit isfulfilling its goals and achieving specific results. Atthe time of our audit, the Unit was providing seniormanagement with basic monthly information onits subrogation activities, including the number offiles opened and closed, and recoveries made. As forits monitoring of insurance industry payments, theUnit was unable to provide any data on its activitiesin this regard.Other statistical information, such as the ratioof recoveries to actual health-care costs incurred,might provide a better indication of the Unit’s effectivenessin recovering costs. It would also permitmanagement to identify trends that require furtherinvestigation and corrective action.RECOMMENDATIONTo help demonstrate that the Ministry is effectivelyfulfilling its goals for recovering healthcosts and for monitoring whether insurers’ paymentresponsibilities are being adhered to, andto support the related decision-making process,the Ministry should develop measurable objectivesand performance targets to track progressin achieving these goals.

Recovery of Health Costs Resulting from Accidents273MINISTRY RESPONSEThe Ministry agrees with the Auditor General’srecommendation that measurable objectivesand targets be established. The SubrogationUnit does provide a five-year outlook on subrogationcost recovery based on past-year recoveriesand current indicators, such as the impactof case law.In 2005, the Subrogation Unit implementeda new automated workflow system. As partof this automated system, the Ministry willdevelop meaningful indicators in support of aManagement Information System (MIS). ThisMIS will include individual and collective performancemeasurements to evaluate file managementprocesses and the cost effectiveness ofpursuing certain file types.The Ministry will establish measurableobjectives using information and data gatheredfrom other data sources while identifyinghealth-care costs for victims of motor vehicleaccidents and identifying other sources for nonreportedclaims.Chapter 3 • VFM Section 3.13

Chapter 3Section3.14Ministry of Government ServicesTemporary Help ServicesChapter 3 • VFM Section 3.14BackgroundTemporary help services are defined as the shorttermengagement of qualified employees acquiredthrough a private-sector temporary help agency,a temporary fee-for-service arrangement, or othersources outside of the public service. The Ministryof Government Services (Ministry), formerly ManagementBoard Secretariat, is responsible for thedevelopment of government-wide policies, such asthe Temporary Help Services Policy, and the mandatoryrequirements in the Procurement Directivefor Goods and Services. This directive specifies theFigure 1: Expenditures—Temporary Help Services,1994/95–2003/04 ($ million)Source of data: Public Accounts of Ontario70principles governing the planning, acquisition, andmanagement of temporary help required by thegovernment.Based on the best information available at thetime of our audit, there were about 4,400 peopleengaged to perform work for the Ontario governmentwho were not employees of the province.Most were temporary help workers, employedeither directly by a government ministry on a feefor-servicebasis or through a private-sector temporaryhelp agency. Temporary help ranges fromentry-level clerical and other administrative staff tohighly skilled professionals, engaged on a day-todaybasis or for more extended periods of time. Inthe 2004/05 fiscal year, government-wide expenditureson temporary help services were $40.1 million,and over the preceding 10 years, expendituresrecorded for temporary help totalled $460 million,as illustrated in Figure 1.605040Audit Objective and Scope27430201001994/951995/961996/971997/981998/991999/20002000/012001/022002/032003/04The objective of our audit was to assess whethertemporary help services were acquired and managedwith due regard for value for money, and incompliance with legislation, policy, and contractualagreements.The criteria used to conclude on our auditobjective were discussed with, and agreed to

Temporary Help Services275by, senior management and related to systems,policies, and procedures that should be in place.Our audit was performed in accordance with thestandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountants,and accordingly included such tests and otherprocedures as we considered necessary in thecircumstances.The scope of our audit work included interviewswith ministry staff, a review of government policiesand administrative procedures, and an examinationof invoices and other related documents. Weconducted detailed testing at five government ministriesthat account for 58% of temporary help servicesexpenditures: Health and Long-Term Care;Attorney General; Community and Social Services(including Children and Youth Services); and twoformer ministries that are now part of the new Ministryof Government Services: Management BoardSecretariat and Consumer and Business Services.Additional testing of select issues was conductedat four other ministries that accounted for an additional22% of temporary help services expenditures,as illustrated in Figure 2.Our audit also included a review of work thathad been done by internal audit throughout thegovernment. We did not reduce the extent of ouraudit work because internal audit had not conductedany audit work specifically related to temporaryhelp services.SummaryIn four of the five ministries we selected for detailedtesting, we found non-compliance with governmentprocurement policies designed to ensure thattemporary help services were acquired and managedwith due regard for value for money. Fundamentalprocedures designed to ensure complianceFigure 2: Temporary Help Expenditures by SelectedMinistries, 2003/04Source of data: Public Accounts of OntarioTemporary % ofHelp TotalMinistry Costs ($) CostsWhere Detailed Testing PerformedHealth and Long-Term Care 9,456,553 22.0Management Board Secretariat* 6,005,197 13.9Attorney General 4,700,181 10.9Community and Social Services 3,659,004 8.5Consumer and Business Services* 1,268,068 2.9Where Selected Testing Performedand value for money need to be put in place atthese four ministries. In the fifth, the Ministry ofCommunity and Social Services, we concluded thatadequate procedures were in place for some aspectsof temporary help procurement, although improvementswere still needed in other areas.Specifically, we noted the following:•Despite a government policy that, with fewexceptions, limits the tenure of temporary helpemployees to six months, more than 60% of thetemporary staff we tested were working in thegovernment for more than six months, and 25%were there more than two years. One temporaryemployee had worked for the government continuouslyfor more than 12 years.•25,089,003 58.2Public Safety and Security 3,892,206 9.0Finance 2,798,946 6.5Transportation 2,495,896 5.8Education 339,970 0.8Where No Testing Performed9,527,018 22.1other ministries 8,470,163 19.7Total 43,086,184 100.0* As of June 2005, ministry became part of the new Ministry of GovernmentServices.In four of the five ministries we examined,almost 90% of the temporary help staff wetested were engaged for purposes otherChapter 3 • VFM Section 3.14

2762005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14than those permitted by government policy(replacing absent employees, temporarily fillingvacant positions, or augmenting staff duringpeak workload periods). Only the Ministryof Community and Social Services was substantiallyin compliance with this requirement.•The temporary help engagements we testedwere sole-sourced, with no quotes from othervendors, and none was competitively tendered.Over half of these arrangements resulted in paymentsexceeding $25,000, the threshold forwhich a competitive process is required. Since1999, when the government did not renewstanding agreements with a number of temporaryhelp agencies, tens or even hundreds of millionsof dollars may have been spent without acompetitive process in place.•We noted significant differences in the ratesof various agencies, suggesting that ministriescould have obtained the same services for lesshad they shopped around. We also found thatoverall, the temporary agency staff that wereviewed were paid more—sometimes substantiallymore—than comparable governmentemployees. For example, one temporary helpemployee was paid $125 per hour when a comparablegovernment employee would havereceived only $60 per hour.•In the 2003/04 fiscal year, the province paid onetemporary help agency $10.5 million, includingalmost $4 million from the former ManagementBoard Secretariat. We were informed thata former employee of the Secretariat runs thisagency. Another agency, run by a former Ministryof Health and Long-Term Care employee,collected almost $700,000 from that ministryduring the 2003/04 fiscal year. A perception ofunfair advantage can be created when governmentministries do significant business withentities run by former government employeesand such work is awarded without a competitiveprocess.• Some temporary workers are retired governmentemployees who collect full pensionswhile earning a salary for their temporary workdespite specific regulations requiring that theirpensions be reduced when they return to workfor the province.•We found that numerous temporary employeeswere listed as secondments from organizations,such as hospitals, that receive provincial funding.The Ministry of Health and Long-Term Careemploys almost two-thirds of such secondedemployees working in the government. However,many of these individuals were recruitedby the ministry and put on the payroll of theseoutside organizations to facilitate their secondments.In return, the organizations receivedincreases in their provincial funding to coverthe salaries of these individuals. Consequently,money that was recorded, for example, as hospitaloperating grants was being spent on otherhealth programs and ministry administrationinstead.•We noted many errors in recording consultingservices as temporary help, and many othercases where temporary help was accountedfor as either consulting services or transferpayments. Consequently, any decision-makingbased on this information for ministry orgovernment-wide management and control purposesmay be flawed.•Alternatives for providing temporary helpemployees were last considered in 1996, whenthe government was contemplating cancellationof its in-house pool of temporary staff. In 1997,the government selected 20 vendors to supplytemporary help for 69 job classifications. Theagreements with these vendors expired in 1999.Since then, neither the government nor the ministrieswe reviewed had analyzed the costs andbenefits of alternative options for staffing temporaryhelp assignments more cost effectively.

Temporary Help Services277OVERALL MINISTRY RESPONSEWe appreciate the Auditor General’s commentsregarding temporary help services inthe Ontario government and are committed toensuring that proper controls are in place andfollowed.Since the 1990s, the size of the Ontario PublicService (OPS) has dropped considerably. Thesize of the Ontario government’s workforce hasbeen reduced by 20%, from over 81,000 fulltime-equivalents(FTEs) in 1995 to 65,000 in2005. Between 1995 and 1998, FTEs droppedby just over 15,000. The speed and magnitudeof this decline placed considerable strain onthe OPS and its ability to deliver quality publicservices. In order to maintain quality deliveryof key government programs and services, theOPS has historically used alternative short-termworkforce arrangements where necessary, suchas during peak workload periods. The Ministryrecognizes that although temporary contractedarrangements are a necessary component in thedelivery of services, an appropriate workforcebalance and compliance with OPS procurementand human resources (HR) directives must beachieved. To this end, our existing procurementand HR policies and directives provide acomprehensive framework that ministries mustfollow.Part of the Ministry’s mandate is a commitmentto rebuild the public service in key priorityareas. This means carefully reviewing the mix ofclassified, unclassified, temporary, and consultingworkers to ensure the appropriate use andoptimal balance of workers. To date we have:•Reduced the use of consultants: In collaborationwith bargaining agents, converted workpreviously done by consultants into 590 staffpositions, saving $22 million a year;•Undertaken a process to identify and achievethe appropriate level of contingent staffwithin our workforce and will collaboratewith our bargaining agents as part of thisprocess; and•Strengthened our control environment:Established and implemented an appropriatecontrol environment regarding the acquisitionof consulting and goods and services.Our efforts over the last three years haveresulted in a 24% drop in spending on temporaryhelp services.The Ministry is implementing an action planthat includes strengthening existing policies,introducing a vendor-of-record arrangement,and implementing other supporting tools.Detailed Audit ObservationsPLANNING FOR THE USE OF TEMPORARYHELPThe Procurement Directive for Goods and Servicesstates that ministries must undertake planning asan integral part of the acquisition process. Thisplanning includes the justification of the need forthe service, an assessment of the availability of thenecessary resources internally, and the receipt ofall necessary authorizations. Additionally, the TemporaryHelp Services Policy outlines the conditionsrequired to determine if the acquisition of temporaryhelp is appropriate.Conditions Required for the Use ofTemporary HelpThe Temporary Help Services Policy states that suchservices can be used only where a regular employeeis absent due to vacation, sick leave, other leaveof absence, or an inter-ministry secondment; duringan interim period when a position has becomevacant and a replacement is being actively sought;Chapter 3 • VFM Section 3.14

2782005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14or to augment staff during peak workload periods.The policy further stipulates that no temporaryworker may be employed for more than six months,except when replacing an employee on a leave ofabsence of more than six months. The policy ismandatory for all ministries; however, many of themanagers we interviewed who had engaged temporaryemployees claimed that they were not aware ofthe existence or the contents of this policy.We reviewed the circumstances under whichtemporary help services were engaged at five ministriesand found that four of them did not haveprocedures in place to ensure that temporary helpservices were engaged in accordance with governmentpolicy. We found that the fifth, Communityand Social Services, had procedures but that compliancecould be improved. Specifically, we notedthe following:•Only the Ministry of Community and SocialServices employed temporary help in substantialcompliance with government policy. In the fourother ministries that we examined, almost 90%of the temporary help staff that we tested werenot filling in for absent employees, temporarilycovering vacant positions, or augmenting staffduring peak workload periods.•More than 60% of the temporary help staff wetested had worked continuously in the governmentfor more than six months, and 25% hadbeen there more than two years. One personin our sample had been working in the governmentcontinuously for more than 12 years, andanother eight for more than five years each.•Ministry management indicated that temporaryagency staff were acquired not just to backfillvacancies or to augment staff during peak workloads,but also to deal with permanent increasesin work. For example, the workload in one ministryprogram increased due to a change in programeligibility rules in 1999 that made morepeople eligible for funding support. As a result,the number of applications to the programincreased, and more staff were needed for dataentry. The ministry stated that it had intendedto automate the process, and so acquired temporaryagency personnel instead of hiring permanentstaff. At the time of our audit, however,no definitive plans were in place to automatethe process, and the program had continuallyengaged individuals from a temporary helpagency.Not only is such long-term employment of nongovernmentpersonnel contrary to governmentpolicy, but the two major government unions havealleged that such arrangements contravene thecontracts negotiated with them. In 2002, both theOntario Public Service Employees Union (OPSEU)and the Association of Management, Administrativeand Professional Crown Employees of Ontario(AMAPCEO) filed grievances claiming that the governmentviolated collective agreements by usingtemporary help agency personnel and fee-for-serviceconsultants to perform work that should have goneto government employees. The unions sought ordersdirecting the employer to stop such practices.In respect of OPSEU, the grievance boardordered the government to prepare a list of nongovernmentemployees in each work site identifiedin the grievance. At the time of our audit, the grievanceprocess was still underway, but concerns overseveral work sites have been resolved by mediation,with the requirement that government employeesfill 590 positions held by temporary help workers.With regards to AMAPCEO, the grievance boardordered the government in October 2004 to collectinformation on the use of non-government employeesand disclose it to the union. At the time of ouraudit, AMAPCEO and the government had notreached a settlement.

Temporary Help Services279Justifying the Use of Temporary HelpServicesIn addition to the requirement in the ProcurementDirective for Goods and Services to justify the use oftemporary help services, the Temporary Help ServicesPolicy states that ministry files should includethe rationale for the use of such services. Suchdocumentation helps to ensure compliance and isparticularly relevant when hiring individuals withtechnical or other specialized skills.We selected a sample of temporary employeesfrom five ministries to determine if proper justificationwas documented prior to their engagement.We found that the requirement to justify the needfor temporary help was not documented in four ofthe five ministries selected for detailed testing. Onlythe Ministry of Community and Social Services hadprocedures in place to ensure that the need for theengagement of temporary help services was documented.At the other four ministries tested, wenoted that for over 80% of the temporary help servicearrangements we reviewed, there was no documentedjustification identifying the need to engagesuch services.Assessing the Availability of InternalResourcesThe Procurement Directive for Goods and Servicesrequires that the availability of necessary humanresources should be addressed and documentedduring the planning phase of the acquisition process.Related guidelines also state that althoughboth government and non-government employeescan complete temporary work, the services of temporaryhelp agencies may not be purchased whenexisting ministry resources are available.The ministries we tested did not formally assesswhether internal resources were available beforeacquiring temporary help services from outsidesources. We were informed that resources fromother areas of the government were limited becauseof staffing constraints in place at the time. However,without an assessment of available resources,ministries cannot ensure that operational needsare being met in the most cost-effective manner. Inaddition, the proper evaluation and documentationof available resources could help ministry managementidentify recurring areas where training or hiringindividuals with the required skills would bea more appropriate strategy for obtaining staffingresources.Authorization for Hiring Temporary HelpTemporary help services acquired in accordancewith government policy must be short-term andwould not usually exceed the thresholds establishedfor ministry approvals. Accordingly, eachministry is required to determine its own proceduresconsistent with obtaining value for money. Inaddition to the required ministry approvals, agovernment-wide hiring freeze in effect sinceAugust 2003 required ministries to obtain deputyminister approval prior to filling a newly createdposition, a permanent vacancy of any duration, or atemporary vacancy of more than six months.We reviewed the approval processes in placeand found that of the five ministries tested, onlythe Ministry of Community and Social Services hadprocedures in place to document approvals andobtain the required deputy minister sign-off to hiretemporary help for more than six months. None ofthe other four ministries could provide evidencethat proper approvals had been received prior tohiring more than 90% of their temporary helppersonnel.RECOMMENDATIONThe Ministry of Government Services shouldwork with senior government managersto implement procedures to ensure properChapter 3 • VFM Section 3.14

2802005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14planning and compliance with government poli-document the justification for the use of tem-cies, including the requirements to:•poses allowed by government policy;•porary help;•engage temporary help only for those pur-consider the availability of resources fromother areas within the ministry and acrossthe government; and•obtain the necessary approvals if temporaryhelp is to be engaged for longer than sixmonths.MINISTRY RESPONSEThe Ministry agrees with the recommendations.In order to maintain quality delivery ofkey government programs and services, theOntario Public Service (OPS) has historicallyused alternative short-term workforce arrangementswhere necessary, such as peak workloadperiods. The Ministry recognizes that althoughtemporary contracted arrangements are a necessarycomponent in the delivery of services, anappropriate workforce balance and compliancewith OPS procurement directives must beachieved. Our existing procurement and humanresources (HR) policies and directives provide acomprehensive framework that ministries mustfollow.Ministries have been instructed to ensurethat when acquiring temporary help servicesthey document the reason for the engagement,confirm that internal resources are not availableto carry out the work, and ensure that all necessaryapprovals have been obtained and are fullydocumented. These arrangements must also fitinto an overall workforce plan and strategy.In 2004/05, the OPS strengthened controlsover the hiring of permanent and contract staff.These controls ensure that appropriate accountabilityis in place for staffing activities, fiscalresponsibility is maintained, and the size of theOPS workforce is appropriate.In order to support ministries in the procurementof temporary help services, the Ministryhas clarified all controls regarding the appropriateuse and acquisition of temporary helpservices. The clarification of our HR policiesand procurement practices regarding temporaryhelp will complement existing controls andstrengthen our current practices.On September 2, 2005, the Ministry providedspecific direction to all ministries in orderto ensure that they fully document the followingrequirements:••help services; and•availability of existing resources;business rationale for retaining temporaryadherence to delegation-of-authorityapproval levels.In October 2005, the Ministry will launchan on-line tool kit to assist ministries in adheringto existing procurement and HR policies anddirectives, including the requirement that alltemporary assignments over six months have anapproved business case.The Ministry is currently undertaking acomprehensive review of the government’stemporary help policy. In the context of thisreview, the Ministry will be providing furtherdirection as to the appropriate use of alternativestaffing arrangements. This review will becompleted by March 31, 2006. The review willcomplement our overall objectives to reduce thecontingent workforce, where appropriate, as perour labour relations commitments.ACQUISITION OF TEMPORARY HELPSERVICESThe Procurement Directive for Goods and Servicesstates that goods and services shall be acquired

Temporary Help Services281from qualified vendors through a competitive processto meet specific needs and to achieve, at thevery least, value for the money expended. Thevendors shall not be permitted to gain a monop-Directive also states that:• vendor access to competitions for governmentbusiness shall be open, fair, and transparent;•goods and services, and in resulting contracts;•oly for a particular kind of work; and• relationships shall not be created that result inconflicts of interest shall be avoided in acquiringcontinuous reliance on a particular vendor.Competitive AcquisitionIn 1999, when the government did not renewstanding agreements with a number of temporaryhelp agencies, ministries were informed that theywere to acquire temporary help services from theprivate sector through the normal procurementprocesses. The Procurement Directive for Goodsand Services specifies that services valued at over$100,000 require an open competition; services valuedbetween $25,000 and $100,000 require ministriesto obtain three vendor submissions, bids,or proposals; and for services valued at less than$25,000, ministries may set their own competitiveprocurement processes, such as the solicitation ofquotes from several vendors, to achieve value formoney.We reviewed the acquisition process at five ministriesand found that, regardless of the amount,no competitive process was used for the engagementof temporary help services. Almost 15% ofthe temporary help service arrangements resultedin payments of more than $100,000, and all wereundertaken without open competition. Another40% of the arrangements that we reviewed costmore than $25,000 but were done without vendorsubmissions, bids, or proposals. In many of theengagements we reviewed, costs were expectedto exceed the $25,000 and $100,000 competitionthresholds even before the assignments wereawarded. The assignments under $25,000 weresole-sourced without receiving quotes from othervendors. Overall, over the past five years, this couldhave amounted to tens or even hundreds of millionsof dollars being awarded without any competitiveprocesses in place. Consequently, there is no assurancethat temporary help services were acquiredat the best price or that ministries achieved valuefor money. For example, one fee-for-service assignmentinvolved consultants hired without competitionat daily rates of $990, $550, and $470, to act asproject lead, project manager, and data co-ordinator,respectively. The total cost of the assignment was$432,000, well beyond the $100,000 threshold fora mandatory open competition.By definition, temporary help assignments aresupposed to be short-term in nature. However, wefound that many were multi-year engagements thatshould have been subject to a competitive tenderingprocess. Disclosures by one ministry under theunion grievance process indicated that 44% of temporaryhelp assignments either were ongoing orhad unknown end dates.ContractingThe Procurement Directive for Goods and Servicesrequires that the ministry and the vendor sign awritten contract formally defining the responsibilitiesof both parties before the supply of the goodsand services commences.We noted that for almost all of the temporaryhelp service arrangements we tested, there wereno signed contracts. Ministry staff did not requestsigned contracts or written agreements from temporaryhelp agencies. Agencies occasionally sent aletter confirming the name of the individual, thestart date, and the rate charged. However, therewas generally no documentation outlining thenature of the assignment, the expected duration,or other details such as controls over rate changes.Chapter 3 • VFM Section 3.14

2822005 Annual Report of the Office of the Auditor General of OntarioFigure 3: Comparison of Temporary Help Agency Hourly RatesSource of data: Audited ministriesMinimum Maximum $ %Job Classification Rate ($) Rate ($) Difference Differenceoffice and administrative assistant – class 8 17.75 32.56 14.81 83office and administrative assistant – class 9 20.18 39.00 18.82 93systems officer – class 2 24.55 62.07 37.52 153systems officer – class 4 24.55 44.83 20.28 83Chapter 3 • VFM Section 3.14Furthermore, we noted that the invoices for somevendors outlined a disclaimer of responsibility andan apparent assumption of liability by the ministry.The Procurement Directive for Goods and Servicesstates that ministries must consult with legal counselregarding procurement documents to help ensurethat the government’s interests are protected.Comparison of Temporary Help ServicesCostsWe attempted to determine whether the ratescharged for temporary services in our sample werereasonable by comparing the rates for similar servicescharged by different agencies. We noted significantdifferences between agency rates. Ministriesmight have obtained similar services at a betterprice had they compared rates among suppliers. Asample of those differences is contained in Figure 3.We also compared the rates paid for temporaryhelp staff from outside agencies with the salariesand benefits that would have been paid to governmentemployees, and found that overall, temporaryhelp was more expensive. Some temporary-agencystaff that we reviewed were paid considerablymore than comparable government employees. Forexample, one temporary help employee was paid$125 per hour when a comparable governmentemployee would earn only $60 per hour, includingbenefits.Potential Conflicts of InterestThe Procurement Directive for Goods and Servicesrequires ministries to include provisions in theirprocurement documentation that define potentialconflicts of interest, and require prospectivevendors to declare any actual or potential conflicts.Since the ministries we tested generally did notrequire vendors to submit written proposals or signcontracts, the ministries could not provide any evidencethat the vendors they engaged to provide serviceswere not in a conflict of interest.We noted that during the 2003/04 fiscal year,one vendor was paid $10.5 million, includingalmost $4 million from the former ManagementBoard Secretariat. A corporate search revealedthat a former employee in the human resourcesdepartment of the Secretariat was the presidentand director of this agency. Many temporary helpstaff from this vendor that we selected for reviewwere paid more than comparable governmentemployees—in some cases, substantially more.Another agency collected almost $700,000 fromthe Ministry of Health and Long-Term Care duringthe 2003/04 fiscal year. We were informed that aformer employee of this ministry was the presidentand director of this agency. In both cases, the ministriesthat engaged these two agencies said thatthey assumed that the former employees owned thebusinesses, but neither agency was asked to supplyany details to verify that there were no perceived oractual conflicts.

Temporary Help Services283There is a risk that doing significant businesswith entities run by former government employees,especially those selected without a competitiveprocess, can create a perception of unfair advantageand possible conflict of interest. Currently, none ofthe ministries we tested have safeguards in place,such as signed written contracts or annual declarations,to guard against such perceived or actual conflictsof interest.RECOMMENDATIONTo ensure that temporary help services areacquired in accordance with established governmentprocurement policies and at the best price,the Ministry of Government Services shouldwork with all government ministries to ensurethat:•the competitive selection requirements forthe procurement of goods and services areadhered to and, where required, an open,fair, and transparent process is followed;•appropriate standard contracts or supportingdocumentation is in place for all temporaryhelp arrangements to define the rightsand responsibilities of the ministry and thevendor, the nature of the assignment, theexpected duration, and the cost; and•the procurement procedures that weredesigned to identify and deal with potentialconflict-of-interest situations are compliedwith.MINISTRY RESPONSEThe Ministry agrees with the recommendation.In order to maintain quality delivery of keygovernment programs and services, the OntarioPublic Service (OPS) has historically used alternativeshort-term workforce arrangementswhere necessary, such as during peak workloadperiods. The Ministry recognizes that althoughtemporary contracted arrangements are a necessarycomponent in the delivery of services, anappropriate workforce balance and compliancewith OPS human resources (HR) and procurementdirectives must be achieved. To this end,our existing procurement and HR policies anddirectives provide a comprehensive frameworkthat ministries must follow.On September 2, 2005, the Ministry providedinstructions to ministries to ensure thatthey are in compliance with the existing ProcurementDirective for Goods and Services whenacquiring temporary help services. In order tosupport ministries in the procurement of temporaryhelp services, the Ministry is implementinga set of interim management controls, whichincludes clarifying current policies regardingthe appropriate use of temporary help services.In October 2005, the Ministry is launching atool kit to assist ministries in the procurementprocess for all existing and future engagements.As well, all ministries will commence a reviewof existing temporary help services in order toensure compliance with existing procurementand HR policies and practices.The tool kit helps ensure that:•ministries conduct, in accordance withthe procurement policy framework, anappropriate competitive process to acquiretemporary help services;•all temporary help services are governed bya written contractual agreement, includingthe appropriate conflict-of-interest provisions;and•managers are well supported in their policycompliance efforts by being provided withtools/templates on methods and proceduresto be used in acquiring and managing temporaryhelp services.The Ministry is also developing an overallprocurement strategy for temporary helpservices and will be conducting an open,Chapter 3 • VFM Section 3.14

2842005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14competitive procurement process to establish agovernment-wide, centrally managed vendorof-record(VOR) arrangement for temporaryhelp services. This VOR arrangement will ensurethat ministries obtain competent, qualified, andskilled temporary help services at the best price.It is expected that the arrangement will be inplace by winter 2006. In the meantime, ministrieswill be required to adhere to the interimcontrols and comply with existing procurementand HR practices to ensure that the bestprice is obtained for the taxpayer. All ministrieswill be required to use this VOR arrangement,which ensures that vendors of temporary helpservices doing business with the governmenthave a written contractual agreement, includingthe nature of the assignment, the expected duration,cost, and standard provisions that are inall government contracts to prevent conflict ofinterest.As part of the implementation of the VORarrangement, the Ministry is undertaking acomprehensive education initiative to ensurethat managers across all ministries are aware ofthe procurement requirements for temporaryhelp services. The Ministry is also working withInternal Audit to seek its assistance to assesswhether ministries have put in place controlsand other tools to ensure that they are compliantwith both procurement and temporary helppolicies.Use of Former Government EmployeesAt each of the five ministries tested, we noted thatformer government employees had been hired backthrough temporary employment agencies. In total,20% of temporary agency staff tested were formergovernment employees, and half of those wereretirees who were receiving a government pension.Ministry staff informed us that they prefer to useformer government employees because they requireless training and are familiar with governmentprocesses.However, the Public Service Pension Act and theOntario Public Service Employees’ Union Pension Actstipulate that any former member of the OntarioPublic Service receiving a pension who, in the opinionof the pension board, is re-employed or engagedin any capacity by the government shall have his orher pension reduced. Engagement by the governmentcould include working for third-party corporationsif the pension board determined that thesubstance of the arrangement was in effect the reemploymentof the individual.The pension reduction limits the retiree’s combinedincomes from pension and re-employmentto the amount he or she was making just prior toretiring as a public servant. We were informed thatthese requirements exist to prevent individualsfrom receiving a full pension and a governmentpaycheque at the same time. The pension boardsinformed us that they rely on ministries to notifythem if pensioners return to work. We understandthe practical difficulties a central government ministrywould have in collecting such informationfrom government-wide sources. Nevertheless, thePension Benefits Act, which applies to all Ontariopension plans, requires that the employer provideany information necessary for the purposes of complyingwith the terms of the pension plan.We estimated that 80% of the former employeesin our sample who had returned as temporary helpwould be subject to the pension reduction. However,when we followed up on two-thirds of them,we found that neither the responsible ministriesnor the former employees had reported temporaryhelp earnings to the pension board.RECOMMENDATIONTo help ensure compliance with pension legislationintended to prevent former employees from

Temporary Help Services285simultaneously receiving a full pension andemployment income from the government, theMinistry of Government Services should assessthe feasibility of developing government-wideprocedures to obtain and report to the relevantpension boards information on former employeeswho return to work for the government.MINISTRY RESPONSEThe Ministry takes the need for compliance withpension legislation seriously and works closelywith the Ontario Pension Board and the OPSEUPension Trust to ensure that we are meeting ourobligations as sponsor of the pension plans andas employer.Section 26 of the Public Service PensionPlan (a schedule to the Public Service PensionAct) provides the basis for our responsibilities asemployer when re-employing a pensioner memberof the Public Service Pension Plan. Similarly,Article 13 of the OPSEU Pension Plan providesguidance vis-à-vis members of the OPSEU plan.These provisions are intended to limit theearnings of a member who is receiving a pensionor limit individual members from receivinga pension while being employed or engaged byan employer who contributes to the plans. Thepractice of the Ontario Pension Board and theOPSEU Pension Trust has been to require individualplan members to report a situation of reemploymentor re-engagement. With respectto the employer reporting individual membersto the pension plans, privacy concerns must betaken into consideration when contemplatingthe collection and/or provision of informationto third parties such as the pension boards. Inaddition, every effort is made by the pensionboards to inform retirees of their responsibilitieswith respect to re-employment.The Ministry will continue to work with theOntario Pension Board and the OPSEU PensionTrust to identify information needs. TheMinistry will work with the Ontario PensionBoard and the OPSEU Pension Trust to determinethe feasibility of their developing proceduresregarding the collection and reporting ofrelevant information. Privacy legislation andoperational requirements will be considered inall decisions.Temporary Employees Acquired withTransfer-payment FundsSecondments are the transfer of staff from ministriesor broader public-sector organizations totemporary assignments with another governmentministry or organization. The secondment of stafffrom other organizations can provide governmentministries with needed expertise and policy advice.We found that more than 200 temporary employeeswere secondments from outside entities, suchas hospitals and universities, that receive transferpaymentfunding from the province. The Ministryof Health and Long-Term Care engaged two-thirdsof these individuals.We tested a sample of secondments at the Ministryof Health and Long-Term Care from organizationsreceiving transfer-payment grants and foundthat 67% of the individuals tested had not beenemployed by these organizations, which were primarilyhospitals, prior to their secondments. Oftenthe Ministry would recruit an individual, requestthat the transfer-payment organization employ theindividual, and increase the transfer-payment fundingto cover the cost. In some cases, the agreementswith the entities clearly stated that individuals werebeing hired by the outside organization solely forthe purpose of facilitating secondments to the Ministry.As well, in most cases the related salary andbenefit costs were recorded as transfer-paymentgrants for the operation of hospitals, whereas mostof these individuals were working as ministry staffChapter 3 • VFM Section 3.14

2862005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14in various other program areas throughout theMinistry.While these other program areas were generallyunder the same vote and item as hospital grantsand therefore were technically in compliance withthe legislative spending authority under the SupplyAct, recording these expenditures as hospital operatinggrants did not meet Public Accounts reportingrequirements that expenditures be recorded tothe appropriate program and salary and benefitsexpenditure classifications. We also found thatsecondments were often not temporary: 10% ofthe individuals tested had been with the Ministryfor more than five years, and two of them for 10 ormore years. Furthermore, we found that approximatelyhalf of the seconded employees we reviewedwere being paid more than government staff performingsimilar duties. For example, one individualwas being paid $315,000 annually, compared to amaximum of $160,000 for an equivalent governmentemployee. In addition, we found instances ofindividuals who earned over $100,000 whose salarieswere not disclosed publicly as required by thePublic Sector Salary Disclosure Act, 1996.An internal audit of one program in 2003 raisedconcerns regarding such secondment arrangementsand recommended that the Ministry of Healthand Long-Term Care fill the positions with regularpermanent employees. In response to the auditreport, the Ministry indicated that it would makethese positions permanent, subject to the availabilityof salary dollars in its budget. Since thattime, however, the overall number of secondmentsministry-wide has increased, from approximately100 in 2003 to 150 in 2004.RECOMMENDATIONTo ensure that ministry staff are employed andaccounted for in accordance with the spiritand intent of government and Public Accountsfinancial reporting policies, the Ministry of Gov-ernment Services should work with senior ministrymanagers to develop specific policies andprocedures with respect to secondments fromtransfer-payment organizations.MINISTRIES’ RESPONSESMinistry of Government ServicesThe Ministry will work with the appropriateministries to review existing transfer-paymentsecondment policies and procedures and makerecommendations on improvements wherenecessary.Ministry of Health and Long-Term Care (MOHLTC)Health care in Ontario and Canada has evolvedsignificantly over time. In particular, advancinghealth technologies, increasingly sophisticateddiseases, and health human resources shortagesare three high-demand specialized issues.The critical nature of these issues often requiresimmediate response and attention.It is no longer accurate to see a sharp divisionbetween MOHLTC and health-care providers,with MOHLTC developing policy and thehealth-care providers acting in accordance withministry policy. A new relationship betweenMOHLTC and health-care providers has evolved,whereby a strong partnership has benefited bothpolicy development and health-care delivery.These benefits have been achieved by the movementof staff between the partners throughsecondment arrangements. These secondmentshave strengthened both policy development andthe implementation of key initiatives to improvethe operations of health-care providers.It is MOHLTC’s position that all the fundingin this vote has been spent to strengthenand improve the health-care system. However,in reviewing the accounting for these individualsas it relates to the Public Accounts, it wasnoted that several charges had been made to the

Temporary Help Services287wrong account in error. An adjusting entry willbe made in this fiscal year for those charges thatwere made to other accounts to ensure compliancewith the reporting requirements. These arenot of a material nature.MOHLTC will:•establish interim accountability measures tocentralize approval processes and reduce thenumber of transfer arrangements;•immediately review all existing transfer-payment arrangements to ensure thatsecondments from transfer-payment organizationsare properly accounted for;•as required; and•disclose transfer-payment partners’ salaries,adjust account reporting as required andimplement controls to ensure consistentreporting in the future.to be assessed at least annually. A performanceappraisal of the temporary help agency and itsemployees would facilitate the assessment of thequality of work and suitability of the agency oremployees of that agency for future work.We noted that one ministry, Community andSocial Services, required temporary help employeesto sign the same oath of office and secrecyrequired of all government employees. However,confidentiality declarations were made by only halfthe temporary staff tested at the other four ministries.Temporary employees often have access tohighly sensitive personal and government information.Since January 2005, the Attorney General hasrequired all ministry personnel, whether permanentor temporary, to undergo an extensive backgroundcheck. Subsequently, three temporary helpemployees who failed the checks were dismissed.MANAGING THE USE OF TEMPORARYHELPThe Procurement Directive for Goods and Servicesstates that all ministries are responsible for establishingappropriate organizational structures, systems,policies, processes, and procedures to enablethe responsible and effective management of theprocurement of goods and services. The directivealso states that vendor performance must be managedand documented, and any performance issuesmust be resolved.Managing Temporary Help ServicesAs would be expected, temporary help who didnot meet performance standards were sent back totheir agencies and replaced. However, performanceassessments were not prepared for temporary helpagencies or most of the employees they assigned togovernment ministries. The Procurement Directivefor Goods and Services requires vendor performancePayments to Temporary Help AgenciesMost of the payments that we selected for testingconsisted of invoices and timesheets completedby the temporary help employee and signed byministry staff as verification of the hours worked.However, as noted previously, in almost all of thetemporary assignments we reviewed, no contractor purchase order was in place outlining the natureof the assignment, the expected duration, and thecost. Some of our specific concerns were as follows:• The Procurement Directive for Goods and Servicesstates that contract prices must not changewhen vendor costs increase unless the ministryhas changed the basic terms and conditions ofthe contract. The ministry must give approval inwriting before prices are altered. However, wenoted instances where rates changed during theterm of the temporary help assignment. In somecases, the rates changed because the temporaryemployee’s responsibilities changed. But in mostcases, there was no change in the nature of theservices provided, and there was no evidenceChapter 3 • VFM Section 3.14

2882005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14that the ministries had approved the ratechanges in advance.•One temporary help employee was paid almost$130,000 to work with municipalities to helpthem access a provincial computer system. However,payments were made without written confirmationfrom the municipalities that the hourshad been worked and the invoiced services hadbeen provided.•We noted many errors in recording consultingservices as temporary help, and many othercases where temporary help was recorded aseither consulting services or transfer payments.Consequently, any decision-making based onthis information for ministry or governmentwidemanagement and control purposes may beflawed.RECOMMENDATIONIn order to ensure the responsible and effectivemanagement of temporary help services, theMinistry of Government Services should workwith senior ministry staff to implement proceduresto ensure that:•the performance of temporary help agenciesand their employees is assessed periodicallyand, as required, at least annually;•all individuals working for the governmentsign the required oath of confidentiality and,for particularly sensitive functions, moreextensive background checks are performed;• rates charged and services provided bysuppliers of temporary help services arematched against purchase orders and contractsprior to payment; and•the cost of temporary help services isrecorded accurately in the accountingrecords.MINISTRY RESPONSEThe Ministry agrees with the recommendationof the Auditor General.In order to maintain quality delivery of keygovernment programs and services, the OntarioPublic Service (OPS) has historically used alternativeshort-term workforce arrangementswhere necessary, such as during peak workloadperiods. The Ministry recognizes that althoughtemporary contracted arrangements are a necessarycomponent in the delivery of services, anappropriate workforce balance and compliancewith OPS human resources (HR) and procurementdirectives must be achieved. To this end,our existing procurement and HR policies anddirectives provide a comprehensive frameworkthat ministries must follow.The previously mentioned tool kit will provideclear direction to ministries regarding thedocumentation of performance of vendors.The government-wide vendor-of-record(VOR) arrangement will include clear directionsto ministries on how to use the arrangement,including the requirement for additional competitionwhen the planned work is estimatedto be valued at $25,000 or more. As well, theVOR arrangement will require that all temporaryhelp agency staff be pre-assessed on competencies,qualifications, and skills, and that allrequisite background checks, confidentialityrequirements, and security checks be completedin accordance with government policy. All vendorswill be required under the master contractwith the Ministry to ensure that they are in compliancewith all legal and policy confidentialityrequirements.The Ministry has improved the controls ofthe payment process through full implementationof an enterprise-wide financial controlsystem and training on the associated paymentprocess verification controls. Proper accounting

Temporary Help Services289and documentation procedures required toprocess temporary help services expenditureshave been communicated and will be monitoredannually for compliance.GOVERNMENT-WIDE TEMPORARY HELPSERVICES POLICIESAssessing Alternatives to Temporary HelpThe Ministry of Government Services is responsiblefor co-ordinating government-wide initiatives toachieve improvements in the planning, acquisition,and management of goods and services. Ministriesare required to consider and document alternativeways to satisfy their needs, and select the mostappropriate option.Alternatives for providing temporary helpemployees were last considered in 1996, when thegovernment was contemplating cancellation of—and ultimately cancelled—its in-house pool of temporarystaff, managed by the former ManagementBoard Secretariat and called GO-Temp. Optionsconsidered at that time included continuing withGO-Temp, allowing programs to hire temporarystaff from temporary help agencies through normalprocurement practices, or setting up vendor-ofrecord(VOR) arrangements in the Greater TorontoArea only.The government chose the VOR option, a procurementarrangement based on a fair, open, transparent,and competitive process that authorizesqualified vendors to supply goods or services basedon terms and conditions set out in the VOR agreement.Such a vendor list helps ministries achieveefficiencies because much of the work of identifyingprospective suppliers and evaluating their rates andcredentials is done at periodic intervals rather thanevery time a contract is tendered.Beginning in 1997, the VOR process resulted inthe selection of 20 vendors that would supply temporaryhelp for 69 job classifications. However,this VOR agreement expired in 1999 and was notrenewed. At the time of our audit, there was noVOR established, either government-wide or byindividual ministries, for the acquisition of temporaryhelp services.The reasons given for the cancellation of GO-Temp were to realize cost savings, reduce the sizeof the government, and provide business opportunitiesto the private sector. At the time of our audit,and nine years after the GO-Temp alternative wascancelled, the government had not done any analysisto determine whether these objectives were met.In addition, since the 1996 review of GO-Temp services,neither the former Management Board Secretariatnor the ministries we reviewed had formallyanalyzed alternative options for staffing temporaryassignments. Our research into other Canadianjurisdictions indicated that three jurisdictions inCanada use an in-house pool of temporary staff.The federal government and Manitoba restrict theirin-house pool to clerical and administrative personnel,while Nova Scotia maintains a diversifiedpool of skilled staff. Given that it has been almost10 years since temporary help staffing was lastreviewed and $40 million to $50 million is beingspent annually, an analysis of the cost effectivenessof the current approach may be warranted.RECOMMENDATIONTo ensure the best value for the moneyexpended, the Ministry of Government Servicesshould conduct a formal assessment of the variousalternatives for staffing short-term temporaryassignments, and periodically evaluate theprocess selected to determine if the expectedbenefits and/or cost savings are being realized.MINISTRY RESPONSEThe Ministry agrees with the recommendationof the Auditor General.Chapter 3 • VFM Section 3.14

2902005 Annual Report of the Office of the Auditor General of OntarioChapter 3 • VFM Section 3.14A major component of the Ministry’s mandateis the renewal and revitalization of humanresources in the Ontario Public Service (OPS).From this perspective, the work was begun in2004 by the Centre for Leadership and HumanResource Management. The Ministry is developinga strategy to review human resources(HR) policies and practices to ensure that workforceplanning in the OPS reflects modern HRpractices.As part of our ongoing review of the vendorof-record(VOR) arrangement, its effectivenessand usage will be monitored. As well, an analysisof the VOR arrangement will be undertakento identify future improvements that can bemade to the approach in order to enhance effectiveness,efficiency, and the identification ofadditional value-for-money considerations.Workforce PlanningThe Ministry of Government Services is responsiblefor monitoring and assessing the effectiveness ofhuman resources management policies that applyacross the Ontario Public Service. As of March 31,2005, the provincial government employed 65,000public servants hired under the authority of thePublic Service Act. The government supplementsits workforce with, in addition to public servants,people from temporary help agencies, fee-for-servicestaff, external consultants, transfer-payment-agencyemployees, and others. However, the Ministry couldnot provide an estimate of the number of such peopleengaged to perform work for the government. Inaddition, although the Ministry could not attest tothe accuracy or completeness of the information itprovided to us, we estimate that there were roughly4,400 people engaged to perform work for the governmentwho were not public servants.Given the large number of such employees in thegovernment, staffing decisions involving this groupshould be integrated into overall staff managementplans. We reviewed the latest available humanresources management plans for all governmentministries and noted that they did not integratenon-government employees into their ministry staffmanagement plans.In August 2003, a government-wide hiringfreeze was announced as part of an $800-millionexpenditure reduction plan. In December 2004,the hiring freeze was replaced by permanent hiringcontrols. However, the substantial use of temporaryhelp workers may distort overall staffing numbersand defeat the purpose of hiring controls, which isto reduce expenditures.In addition, while the Ministry of GovernmentServices is required to track the actual number ofpublic servants, it does not have reliable informationon the number of approved staff and resultantvacancies. Without such information, it is not possibleto determine if ministries are over or undertheir approved staff complement. Without reliabledata on approved ministry staffing or the number oftemporary workers, it is difficult to make informedstaffing decisions, especially for the government asa whole.RECOMMENDATIONTo ensure effective monitoring and control ofthe government workforce, the Ministry of GovernmentServices should:•workforce plans and policies; and•include non-government employees in itstrack the approved versus actual staff complementfor each ministry.MINISTRY RESPONSEThe Ministry agrees with the importance ofeffective workforce planning and having processesin place that will support this goal. Infact, continually improving workforce planningis a priority in the Ontario Public Service (OPS).

Temporary Help Services291To this end, the government has converted 590positions that were previously filled by contractedworkers into full-time-equivalent (FTE)positions. The OPS is a large, complex organization.Alternative workforce arrangements areneeded to deliver our mandate, including theneed to bring in temporary help and/or specializedskills. The $43 million spent on temporaryservices during the 2003/04 fiscal year constitutesapproximately 1% of overall salary costsfor the OPS.As well, improved workforce planning in thelast few years has assisted in reducing the OPS’sreliance on temporary help and fee-for-serviceconsultants. Over the past three years, expenditureson temporary help services have declined24%, from $52.4 million in the 2002/03 fiscalyear to $40 million in 2004/05. We expect thistrend to continue.In December 2004, the government institutedpermanent hiring controls to ensure thatappropriate accountability is in place for staffingactivities, fiscal responsibility is maintained,and the size of the OPS is appropriate givenfiscal realities and the delivery of priority services.The controls included the introduction ofan FTE limit for each ministry that is approvedthrough the annual results-based planningprocess. The OPS has further demonstratedeffective workforce planning through our businessplanning process, whereby ministries canseek approvals to convert budget from fee-forservicecontractors into FTEs, given appropriatebusiness rationale. In addition, our most recentcollective agreement with our largest bargainingagent has a provision both to examine what theappropriate classified/unclassified staff balanceshould be and to reduce, year over year, thereliance on our unclassified workforce. Theseactions demonstrate our commitment to ensuringan appropriate workforce balance takinginto account business needs, collective agreementprovisions, and emerging priorities.Chapter 3 • VFM Section 3.14

Chapter 4Follow-up ofRecommendations in the2003 Annual ReportIt is our practice to make specific recommendationsin our value-for-money (VFM) audit reportsand ask ministries and agencies to provide a writtenresponse to each recommendation, which weinclude when we publish these audit reports inChapter 3 of our Annual Report. Two years afterwe publish the recommendations and relatedresponses, we follow up on the status of actionstaken by ministries and agencies with respect to ourrecommendations.Chapter 4 provides some background on thevalue-for-money audits reported on in Chapter 3 ofour 2003 Annual Report and describes the currentstatus of action that has been taken to address ourrecommendations since that time as reported bymanagement. Our follow-up work consists primarilyof inquiries and discussions with managementand review of selected supporting documentation.This is not an audit, and accordingly, we cannotprovide a high level of assurance that the correctiveactions described have been implemented effectively.The corrective actions taken or planned willbe more fully examined and reported on in futureaudits and may impact our assessment of whenfuture audits should be conducted.Chapter 4292

Chapter 4Section4.01Ministry of the Attorney GeneralCourt ServicesFollow-up to VFM Section 3.01, 2003 Annual ReportBackgroundThe Court Services Division (Division) of the Ministryof the Attorney General supports the operationsof the court system through a network ofcourt facilities located in 181 communities acrossthe province and approximately 3,500 court supportstaff. Its functions include providing administrativeand support services to the Judiciary,preparing enforcement documentation, maintainingcourt records, and collecting fines.The Division’s expenditures for the 2004/05fiscal year were $340 million ($302 million in2002/03): $130 million ($107 million in 2002/03)was spent on operating the offices of the Judiciaryand on salaries and benefits for approximately 690full- and part-time provincially appointed judges,and $210 million ($195 million in 2002/03) wasspent on administrative and court staffing costs andother expenses required to support the operationsof courts. In addition, the Ministry spent $4 million($35 million in 2002/03) on capital projects tomodernize and improve court buildings.In our 1997 audit of what was then the CourtsAdministration Program, we noted that the successfulimplementation of a number of ongoinginitiatives was needed to address the serious backlogof cases and deficiencies in the management ofprogram resources. However, we concluded in our2003 audit that little progress had been made sincethat time. For example:•The effective administration of the courts washampered by the lack of a clear division ofauthority and responsibility between the Ministryand the Judiciary in the management ofcourt services.• Efforts to reduce backlogs had not beeneffective.•antiquated computer and information systems.• The lack of ministry effort to collect millions ofThere had been little improvement to the courts’dollars in outstanding fines weakened the credibilityof the justice system.Other concerns noted during our 2003 auditincluded:•Controls over the planning, contractor selection,and project management for capital projectswere inadequate.•Numerous significant deficiencies and inconsistenciesin the level of security at courthousesacross the province were noted.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Chapter 4 • Follow-up Section 4.01293

2942005 Annual Report of the Office of the Auditor General of OntarioCurrent Status ofRecommendationsWhile the Ministry has made progress in implementingsome of our recommendations, on severalothers, such as reducing the backlog in the courtsystem, only limited progress has been made. Thecurrent status of action taken on each of our recommendationsis as follows.ADMINISTRATIVE STRUCTURE OF THECOURTSfiscal year, and the Ministry expects that performancemeasures for all key service standards will beestablished by the end of 2005/06.In December 2004, a Memorandum of Understanding(MOU) was signed between the Ministerand the Chief Justice of the Ontario Court of Justicethat renewed the financial and administrativeauthorities and responsibilities of both parties. Nosimilar MOUs have been established with the chiefjustices of the Ontario Court of Appeal and theSuperior Court of Justice.However, the Ministry has not made any significantchanges to the structure of courts administrationto achieve greater accountability for desiredresults.Chapter 4 • Follow-up Section 4.01RecommendationTo help ensure that the justice system functions effectivelyand to improve the stewardship of funds providedto the courts, the Ministry and Judiciary shouldimprove their administrative and management proceduresby establishing:• a process of greater co-operation in decisionmakingthat addresses long-standing concerns;• a better structure of courts administration withgreater accountability for achieving desired resultssuch as reducing case backlogs.Current StatusThe Ministry indicated that it has continued towork with the Judiciary to build good relationshipsat all levels and to encourage joint management of,and decision-making about, existing institutionalchallenges and ongoing operational issues. Forexample, the Ministry informed us that representativesof each Chief Justice participate on seniormanagement committees within the Division andon divisional planning and policy meetings.Co-operation between the Division and the Judiciaryalso occurred in establishing the Division’sfive-year plan on business goals and service standards,which will support greater accountability forthe Division’s delivery of court administrative services.The plan has been updated for the 2004/05CASE BACKLOGSRecommendationThe Ministry should work with the Judiciary andother stakeholders to develop more successful solutionsfor eliminating backlogs, including:•creating better tools to identify the sources andspecific reasons for delays so that action can betaken to address potential problems in a moretimely manner;•assessing the resource implications of actionstaken and decisions reached by the different partiesto a trial so that resources allocated to courtscan handle the increased caseloads; and•establishing realistic targets and timetables foreliminating backlogs.Current StatusThe Ministry has put in place or continues to usea number of measures to address delays and backlogs,particularly in criminal cases and child protectionproceedings. These measures include theimplementation of the Justice Delay Reduction Initiative(JDRI) to make additional judicial, Crown,and court service resources available to 10 targetsites with more significant criminal court delays.Administrative best practices designed to minimizeadministrative delay and increase operational

Court Services295efficiencies are also being piloted in the 10 JDRIsites. The Ministry is currently in the process ofmonitoring the effectiveness and the success of theJDRI sites. In addition, blitz courts—which involvemobile court resources, including judges, Crownattorneys, and support staff—also continued to beused to help courts with more serious backlogs.The Ministry indicated that it has taken steps toimprove the scope and accuracy of its reports anddata on the various court activities that will allowfor better assessing the reasons for court delaysand how court resources are used. For example,changes to its Integrated Courts Offences Network(ICON) were made to capture information on thereasons for case postponements.In June 2004, the Division implemented a newdaily data extraction process for the Ontario Courtof Justice criminal data to ensure that charges arenot double-counted. Also, the Ministry has restatedthe data for the last five fiscal years to eliminatedouble-counted charges. As a result, the Ministryreports that the number of criminal charges pendinggreater than eight months in the Ontario Courtof Justice in February 2002 was 89,000 (comparedto 99,000 as previously reported).The Ministry also advised us that it is committedto developing statistical tools for diagnosing thetrends and systemic causes of delays and that itspriority is reducing the backlog of cases that are atrisk of being stayed due solely to systemic administrativedelay. However, aside from this commitmentof resources towards reducing backlogs relating toadministrative issues, the Ministry was unable toprovide us with any assessments it had made of theresource implications of actions taken and decisionsreached by the different parties to a trial.Despite the Ministry’s continuing efforts toreduce backlogs of cases in the courts, the backlogshave remained constant over the last five years.While the Ministry has added resources to the courtsystem, it continues to be unable to dispose of casesat a rate equal to or greater than the rate at whichcases are received. Figure 1 illustrates the backlogsof pending charges in the Ontario Court of Justice,which handles the majority of criminal cases.The Ministry could not estimate a timetable foreliminating backlogs, because many of the factorsthat contribute to delays (for example, the numberand complexity of cases) are beyond its control.INFORMATION SYSTEMS AND THE USEOF NEW TECHNOLOGIESRecommendationTo help ensure the timely disposition of cases andimprove efficiencies, the Ministry should take thenecessary steps to upgrade the information technologiesused in courts. In addition, the Ministry shouldestablish a comprehensive plan for the timely implementationof new information technologies.Current StatusThe Ministry indicated that it is in the process ofupgrading its Integrated Court Offences Network(ICON) system to improve workflow for supportstaff through enhanced access to and display ofdata. The Ministry is also in the process of implementinga new case management system for civiland family courts.However, so far limited progress has been madeby the Ministry in developing a comprehensiveplan for the information system requirements forthe courts’ systems and in implementing additionalinformation technologies in courts.The Ministry’s strategic long-term informationtechnology plan had not been updated in recentyears. The Ministry indicated that it would be in abetter position to update the plan once operational,policy, legal, and technology priorities have beenset out and agreed to for the remainder of this fiscalyear and for future years.According to the Ministry, the use of video technology,which allows an accused person who is incustody to appear in a criminal courtroom by videoconferencing from a correctional institution orChapter 4 • Follow-up Section 4.01

2962005 Annual Report of the Office of the Auditor General of OntarioFigure 1: Five-year Summary of Average Age of Criminal Charges Pending, Ontario Court of JusticeSource of data: Ministry of the Attorney General300250215< 8 months> 8 months227235 231250200# of Charges (thousand)1501001341381441461595081 89 91 85 910March 2001 February 2002* March 2003 March 2004 March 2005*March 2002 data unavailable due to labour disruption.Chapter 4 • Follow-up Section 4.01police station, has grown approximately 50% since2002 and is now being used in 30% of the appearancesin adult and youth courts.However, the Ministry has since discontinuedtwo projects it assumed from the terminated IntegratedJustice Project: digital audio recording toreplace manually prepared courtroom transcripts;and accepting certain electronic forms filings fromlawyers, primarily for civil and small claims courtdocuments. The Ministry indicated that decisions toterminate these projects were made after long trialswith both technologies determined that neither wasconsidered cost effective or compatible with courts’future information technology needs.FINANCIAL INFORMATIONRecommendationTo manage the cost of court operations effectively, theMinistry should:• identify and collect the information needed toassess whether court services are being providedeconomically and efficiently; and•determine how information technology can best beutilized to facilitate this process.Current StatusThe Ministry implemented the Integrated FinancialInformation System (IFIS) in October 2004.Standard monthly reports are generated to trackmonthly expenditures by region and branch forforecasting and reporting purposes. Cost codesin IFIS have been established to capture costs bypractice areas, including by court types and judicialsupport costs. It is anticipated that full reportingof costs by practice areas will be available in the2006/07 fiscal year. Any further analysis and comparisonsof court services costs using IFIS is beingconsidered for future years.

Court Services297EXPENDITURE CONTROLSRecommendationThe Ministry should ensure that adequate controls arein place over expenditures so that goods and services,including consultants, are acquired competitively andin compliance with Management Board of Cabinetdirectives.Current StatusThe Ministry indicated that it has provided trainingon financial management, procurement, reporting,and controllership topics to senior management toensure that required procedures and controls areadequately communicated and to reinforce adherenceto proper practices. We were advised thatthis training would be offered on an annual basis.According to the Ministry, the implementation ofIFIS has also further enhanced controls over procurementand expenditure management, includingrequiring on-line requisitioning and approval basedon delegations of authority.CAPITAL PROJECTSRecommendationTo ensure that courthouse construction and renovationprojects are acquired competitively, on budget,and in accordance with Management Board of Cabinetpolicies, the Ministry, in conjunction with theOntario Realty Corporation, should adequately planand manage its capital projects. In addition, the Ministryshould ensure that appropriate controls are inplace so that contractors are only paid for completedwork.Current StatusThe Ministry has made a number of improvementsin controls over planning and project managementfor capital projects, including detailed projectinventory data, new project control sheets, andmore comprehensive financial tracking sheets. Newreports provide current and multi-year informationon major and minor capital projects, on lease information,and on identifying potential issues thatrequire further direction.The Ministry also indicated that it has establisheda closer working relationship with itsmandatory service provider, the Ontario RealtyCorporation (ORC), to ensure that courthouseprojects are adequately planned and managed. Anupdated service-level agreement has been establishedbetween the Ministry and ORC. To improvecommunication, ORC has dedicated a small team ofindividuals to deal exclusively with the Ministry’sfacility requirements, and monthly meetings areheld between the Ministry and ORC to discuss thestatus of projects and financial matters.To further enhance the Ministry’s strategic capitalplanning process, the Ministry, in partnershipwith ORC and the Ministry of Public InfrastructureRenewal, is developing a comprehensive asset managementplan with data on base building conditionsfor all facilities within the Ministry’s portfolio.The asset management plan, which is currently inthe early stage of development, will be used as aplanning tool to track facilities’ current conditionsand to plan for future capital investment needs,including both capital repair and facilities renewalrequirements.Training has been provided to all facility managementstaff on project tracking and controllershipwithin the Ministry to help ensure that allrequired procedures, approvals, and policies relatedto capital expenditures are being adhered to.COURT SECURITYRecommendationTo ensure the safety of judges and persons involvedin court proceedings, the Ministry should act quicklyin co-operation with stakeholders to establish andmaintain an appropriate level of security in allcourthouses.Chapter 4 • Follow-up Section 4.01

2982005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.01Current StatusWe reported in our 2003 Annual Report that theDivision had initiated a court security project andthat its January 2003 report indicated numerousgaps in security measures at courthouses surveyed.The Ministry informed us that attempts have beenmade on an ongoing basis to address security deficienciesidentified in the January 2003 report.In February 2005, the Division also initiated anannual review of 23 key court security elementsidentified in the January 2003 report. Managers ofCourt Operations at each courthouse were to surveythe current status of all elements of the courtsecurity checklist to attempt to ensure that due diligencewas being exercised in relation to these keyelements and report back to the Division’s seniormanagement.In addition, court security is being assessedin developing the previously mentioned comprehensiveasset management plan for all facilities inthe Ministry’s portfolio. Information gathered sofar during this review continues to identify thatsecurity-related enhancements are needed forcourthouses across the province. We were informedthat the Ministry will set priorities for securityrelatedenhancements as part of its multi-year capitalplans for court facilities.COLLECTION OF FINESRecommendationTo better ensure that offenders pay their fines, theMinistry should:• forward all outstanding fines to the CollectionManagement Unit for collection on a timely basis;• authorize more vigorous enforcement measures topursue outstanding fines; and• improve its system for tracking fines.Current StatusAccording to the Ministry, transfer of new outstandingfines to the Ministry of Government Services’Collection Management Unit (CMU) has occurredevery three to four months since March 2003. TheMinistry plans to increase the frequency of transfersto weekly on a pilot basis commencing in fall 2005.As of January 31, 2005, the Ministry prepared a reconciliationto identify the reasons for any outstandingfines that were not transferred to the CMU.While no new enforcement measures have beenimplemented, the Ministry informed us that moreaggressive efforts have been made to use existingenforcement options for collections. In addition,the Ministry now produces management reportsevery six months to monitor the collection rates foroutstanding fines.PERFORMANCE REPORTINGRecommendationThe Ministry should measure and report on its costeffectiveness,efficiency, and outcomes in providingcourt services by:•working with the Judiciary to develop appropriateperformance indicators and targets against whichit can measure the achievement of its businessgoals and operational standards;•ensuring its information systems gather andreport the information needed for management tomonitor performance on an ongoing basis; and• reporting regularly to the public on itsperformance.Current StatusThe Division has developed a five-year operationalplan that sets out five business goals for the Divisionand 44 measurable service standards for the provisionof court services. For example, business goalshave been established for timely and efficient caseprocessing and for efficient resource management.According to the Ministry, performance measuresfor all key service standards and commitments inits five-year plan are under development and areexpected to be completed during the 2005/06 fiscalyear. The five-year plan, including service standards,will be reviewed and updated annually in

Court Services299consultation with the Judiciary and court users.The goals, standards, and initiatives establishedin the five-year plan have been published in theDivision’s annual report, which is available to thepublic.To better measure performance, new standardstatistical reports have been developed to trackthe effectiveness and efficiency of criminal caseprocessing using data from the ICON system. TheMinistry also expects that its new case managementsystem for civil and family courts will producemore enhanced performance reporting later in the2005/06 fiscal year.In addition, the Ministry has drafted a reportproviding highlights on court activity trends for allpractice areas (small claims court, court of appeal,criminal, family, and civil proceedings). The report,which will be posted on the Ministry’s Internet websiteduring the current fiscal year once it has beenapproved, provides a trend analysis over the pastfive years and over the past 12-month period.Chapter 4 • Follow-up Section 4.01

Chapter 4Section4.02Ministry of Children and Youth ServicesChildren’s Mental HealthServicesFollow-up to VFM Section 3.02, 2003 Annual ReportChapter 4 • Follow-up Section 4.02BackgroundThe Children’s Mental Health Services programfunds transfer-payment agencies that provide servicesto children and/or the families of childrenwho have social, emotional, or behavioural problemsor psychiatric disorders. Under provisions ofthe Child and Family Services Act, approximately 250community-based agencies are funded. The typesof services offered include assessment, psychiatrictherapy, counselling, crisis intervention, and skillstraining and education, as well as residential-basedservices (mental health services offered in a residentialsetting) to children who require more intensiveassistance.Children’s Mental Health Services expenditureswere $424.4 million in the 2004/05 fiscal year($315 million in the 2002/03 fiscal year), a substantialincrease from $213 million in the 1996/97fiscal year. At the time of our 2003 audit, most ofthe increase had been spent on several new initiativesin the previous two years that in most casesprovide intensive services to relatively few individualswith complex special needs.We concluded that the Ministry was not adequatelymonitoring and assessing the quality ofthe services provided by the community-based agenciesit was funding. As a result, the Ministry couldnot be assured that vulnerable children in need werereceiving the care and assistance they required.More specifically, we found that the Ministry:•had not established service quality standardsand service evaluation criteria to help ministrystaff monitor whether or not services were ofan acceptable quality and represented value formoney spent;•had not established waiting-time standards foraccess to service that were reasonable and commensuratewith individual children’s needs, andwas not monitoring the extent and impact oflengthy waiting times for service; and•was not receiving or assessing information fromagencies about the outcomes of the services theywere providing.We also found that the Ministry’s funding decisionswere not based on sufficiently detailed andrelevant financial and operational information fromagencies to ensure that the amounts approved werecommensurate with the demand for, and level andquality of, services to be provided.Our findings were of particular concern becausemany dealt with issues we had previously raised inour 1997 audit of the program. Although the Ministryagreed with the recommendations in that audit300

Children’s Mental Health Services301and agreed to implement the necessary correctiveaction, progress had been less than satisfactory.We note that the Ministry again agreed with ourrecommendations in the 2003 audit and committedto taking the necessary corrective action.Current Status ofRecommendationsAccording to information received from the Ministryof Children and Youth Services, some progresshas been made on most of the recommendationsin our 2003 Annual Report. However, on others,progress has been slower than anticipated. The currentstatus of action taken on each of our recommendationsis as follows.Quality of ServiceRecommendationTo ensure that agencies are aware of the Ministry’sservice-delivery expectations and to assist ministrystaff in assessing whether services are of an acceptablequality and represent value for money spent, the Ministryshould:•establish standards for acceptable service quality,as well as criteria for evaluating service quality,for all Children’s Mental Health Services programsthat it funds; and•periodically evaluate the quality of services providedand work with its partner agencies to takecorrective action where necessary.Current StatusSince the time of our 2003 Audit Report, the governmenthas established a new Ministry of Children andYouth Services that is responsible for the program.The Ministry of Children and Youth Services hashad discussions with various internal and externalstakeholders with a view to developing a policyframework that will:• identify and communicate vision, principles, andcore functions; and• be a foundation for the development of evidence-based standards and guidelines.Public release of the policy framework isexpected in early 2006.In addition, a framework for monitoring andoutcome analysis has been developed for the113 new programs funded through the 2004/05budget. The Ministry has developed and will beimplementing customized data templates for thesenew programs.Waiting ListsRecommendationIn order that the necessary services are provided tochildren most in need on a timely basis and, whenthey are not, that the negative impact on children islessened, the Ministry should:•establish standards for access to service that arereasonable and commensurate with individualchildren’s needs; and•assess the extent to which the standards are compliedwith and develop strategies to monitor andremedy situations where waiting times for serviceare too lengthy.Current StatusThe Ministry is in the process of developing a policyframework for children and youth mental healthservices that will be a foundation for the developmentof evidence-based standards and guidelines,including issues of access to services. In that regard,the Ministry is working with its partners to collectreliable data on waiting times and service deliveryby fall 2005.In the interim, $25 million in new funding forchildren and youth mental health services (annualizedto $38 million) was announced in the 2004/05budget. Incremental funding allocations to 113new programs and the expansion of 96 existingChapter 4 • Follow-up Section 4.02

3022005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.02programs are expected to significantly reduce waitingtimes for services.The Ministry is also working with the Hospitalfor Sick Children and Children’s Mental HealthOntario to develop baseline data for current waitingtimes. The first report on such data has alreadybeen received. The intent is to use the baseline datato develop an annual report on children’s mentalhealth services in Ontario.Performance MeasurementRecommendationIn order that children who are receiving mental healthservices are provided with the care and assistance theyrequire, the Ministry should:•regularly obtain and assess information about thelevel and outcomes of the services provided by itscommunity-based service-delivery agencies; and•take the necessary steps to ensure that the existingquarterly reporting process is effective in providingreliable and useful information on both expendituresand service outputs.Current StatusThe Ministry established a new Research and OutcomeMeasurement Branch in spring 2005. TheBranch is in the process of developing outcomemeasures for children’s mental health services.Once the outcome measures are completed, theBranch will also be responsible for monitoring themand for incorporating them into ministry-levelreporting.Agency Funding Requests and ApprovalsRecommendationIn order to help ensure that agency funding is equitableand based on meeting the needs of children inevery community, the Ministry should:•ensure that all agencies include sufficientlydetailed, reliable, and relevant information intheir program budget submissions;• assess all requests for funding and ensure that theamounts approved are commensurate with thedemand for and value of the services to be provided;and•ensure that funding provided is spent for the purposesintended.Current StatusThe Ministry is in the process of revising the servicedescription schedules in its agency service contractsto make ministry expectations clearer. It is anticipatedthat the revised service description scheduleswill be included in the 2006/07 budget package.Once these schedules are revised, the Ministry willbe in a better position to assess the reasonablenessof funding requests and ensure that funding providedis being spent for the purposes intended.Annual Program ExpenditureReconciliationsRecommendationIn order to strengthen its financial accountabilityprocess, the Ministry should ensure that AnnualProgram Expenditure Reconciliations (APERs) andaudited financial statements contain sufficientlydetailed and comparable information to allow for thedetection of ineligible or inappropriate expenditureitems and funding surpluses. Secondly, the Ministryshould develop a more effective process for the reviewand approval of APERs.Current StatusThe 2004/05 Transfer Payment Budget Packagesent to the agencies included a specific sectioncontaining APER policies for easier reference.In addition, to make the process more effective,in 2003/04 and 2004/05, regional office staffreceived training on the APER process. Includedin the training material was a review of admissibleand inadmissible expenditures.

Children’s Mental Health Services303Surplus RecoveryRecommendationThe Ministry should not enter into service agreementsthat span two fiscal years, since doing so circumventsManagement Board Secretariat’s requirement to identifyand recover annual funding surpluses.Current StatusIn 2003/04 and 2004/05, the Ministry providedaccrual accounting training to regional office staff.In addition, revised business practices are intendedto ensure that funding provided is consistent withsubsidies earned on an annual basis.Based on the Ministry’s Internal Audit Services’review of a sample of agreements, it was foundthat the agreement terms generally did not extendbeyond the related fiscal year. In addition, the Ministryhas emphasized to its staff through its trainingcourses in 2003/04 and 2004/05 that annual surplusrecoveries must be identified through the yearendreconciliation process.regional director that the information contained inthe SMIS is complete, has been verified, and is reliablefor use as corporate data.The Ministry’s long-term goal is to automate thereceipt of data from service providers. The Ministrybelieves that such automation should significantlyreduce the number of data entry errors.Information SystemsRecommendationThe Ministry should ensure that its managementinformation systems provide sufficiently detailed,relevant, and accurate information in order to helpdetermine whether services provided by transferpaymentagencies are effective and represent value formoney spent.Current StatusTo enhance the quality of Service ManagementInformation System (SMIS) data, the Ministryimplemented two types of exception and variancereports in the SMIS to assist in the validation of thedata provided and entered into the system. Thesereports are available to the regional office staff forreview and follow-up.As of February 2005, the regional directorswere required to complete an Enhanced Sign-offProtocol, which is a quarterly confirmation by eachChapter 4 • Follow-up Section 4.02

Chapter 4Section4.03Ministry of Community and Social ServicesFamily ResponsibilityOfficeFollow-up to VFM Section 3.03, 2003 Annual ReportChapter 4 • Follow-up Section 4.03BackgroundAt the time of our 2003 audit, the Family ResponsibilityOffice (Office), under the authority of theFamily Responsibility and Support Arrears EnforcementAct, 1996, administered and enforced allcourt-ordered child and spousal support in Ontario,as well as court-ordered support from many otherjurisdictions where the payers were resident inOntario. The Office also enforced private separationagreements that are voluntarily registeredwith a court and filed with the Office. At March 31,2005, the Office was administering approximately186,350 family-support cases (approximately180,600 in 2002/03).During the 2004/05 fiscal year, the Office collectedapproximately $612.3 million from supportpayers (approximately $561 million in 2002/03)and forwarded a similar amount to support recipients.At the end of both March 31, 2005, andMarch 31, 2003, payment arrears totalled approximately$1.3 billion, which represents an 8%increase since our 1999 audit. We also noted thatapproximately 23,000 support recipients, whosecases were in arrears totalling over $200 million in2003, were receiving provincial social assistance.In 2003, we concluded that the Office did nothave satisfactory systems and procedures in placefor initiating contact and taking appropriate andtimely enforcement action where payers were inarrears on their family-support obligations. It wasour view that unless the Office took aggressiveenforcement action, supported by effective casemanagement and significantly improved informationtechnology and communications systems, itwas in grave danger of failing to meet its mandatedresponsibilities. Our specific findings included thefollowing:•Unlike most other provinces, which use a processof individual case management, Ontario didnot assign each case to an individual caseworker.Therefore, no one individual had responsibilityfor or was held accountable for the administrationof most cases.•Since 1994, the number of caseworkers haddeclined by 20%, whereas the number of caseshad increased from 126,000 to 180,000, withthe result that the average number of cases percaseworker had steadily increased. For example,the average number of cases with outstandingwork items assigned to senior caseworkers hadbeen ranging from 600 to more than 1,300, averaging890 cases per caseworker. By comparison,304

Family Responsibility Office305the average caseloads in Quebec and Albertawere 400 and 335, respectively.•The Office’s practice of commencing enforcementaction only after being notified by recipientsof non-payment resulted in unreasonabledelays in enforcement. On average, sevenmonths elapsed between the time support fellinto arrears and the time the Office initiated thefirst enforcement action.•More than half the cases in arrears we reviewedhad inordinately long gaps—often as long astwo years—between enforcement actions.Staff efforts to enforce support obligations andto provide responsive client services continued tobe significantly hampered by the Office’s inabilityto develop and implement the necessary improvementsto its computer system. Although the Officeindicated as far back as 1994 that the computer systemmust be replaced, the same computer systemcontinued to be used even though it could not providetimely and appropriate information to facilitateclient service or management of the program.We also found that almost 90% of telephonecalls made from outside the Greater Toronto Area tothe Office’s call centre were blocked and thereforenot answered. As a result, clients had to call repeatedlyin order to get through.We made a number of recommendations forimprovement and received commitments fromthe Office that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information received from the FamilyResponsibility Office and the Ministry of Communityand Social Services, some progress has beenmade in implementing the recommendations wemade in our 2003 Annual Report. Further progresson several recommendations depends on the successfulimplementation of a new case managementsystem to be completed by October 2006. The currentstatus of action taken on each of our recommendationsis as follows.ENFORCING SUPPORT OBLIGATIONSAND RELATED MATTERSCase RegistrationRecommendationTo ensure that the Office fulfills its responsibilities tocollect and forward support payments to families, itshould ensure that it receives all the required informationfor registering and enforcing support obligationson a timely basis and promptly initiate follow-upaction when it does not.Current StatusIn May 2005, the Ministry announced the selectionof the successful vendor for the development andimplementation of a new case management systemreferred to as the new Integrated Service DeliveryModel (ISDM). This system is to be able to identifyincomplete registrations and generate letters to followup with the appropriate parties on any missingregistration information.Although the Office indicated in 2003 that itwould review and redesign the filing package tohelp clients better understand what informationwas required, it had not yet done so at the time ofour follow-up because it wanted to ensure compatibilitywith the new case management system.The Office was also in the process of developingan enhanced three-phase outreach plan to increasethe Office’s visibility and to promote greater clientservice to payers and recipients. Specifically, underphase 1, the Office has developed and distributednew outreach materials that help explain the rolesand responsibilities of recipients and payers.Phase 2 is to reach out to targeted stakeholdergroups to explain in more detail how the OfficeChapter 4 • Follow-up Section 4.03

3062005 Annual Report of the Office of the Auditor General of Ontarioworks. Phase 3 is to build on phase 2 by maintainingongoing stakeholder communications.assign a “buddy backup” to each case-team member.ISDM technology is expected to be in place byOctober 2006.Document ScanningCaseloadsChapter 4 • Follow-up Section 4.03RecommendationIn order for all necessary case documentation to beavailable on a timely basis for administering casesand for answering telephone inquiries, the Officeshould ensure that:••and•all necessary case documentation is scanned;scanned documents are of an acceptable quality;system downtime is minimized.Current StatusThe Office purchased new scanners in November2003. We were advised that all documents thatshould be scanned are now scanned and that thescanned documents are of good quality even whenthe original document contains blue ink (we foundin 2003 that the Office’s scanning equipment couldnot scan blue ink). According to the Office, thereis no longer any system downtime with the newscanners.Case Management ModelRecommendationTo help ensure that effective and timely enforcementactions are taken, the Office should review itscase management practices and consider assigningthe responsibility for each case to an individualcaseworker.Current StatusThe new Integrated Service Delivery Model(ISDM), whose upcoming implementation wasannounced in May 2005, is to operate as a casemanagement tool. Under the ISDM, cases are to beassigned to individual members of case teams basedon their experience level. This system is to alsoRecommendationTo help improve the administration of family-supportcases in a timely and effective manner, the Officeshould establish criteria and standards for manageablecaseloads and staff accordingly to ensure that thestandards are met.Current StatusA recently announced service delivery system,which is to be in place by October 2006, has beendesigned to be able to streamline case managementprocesses and to actively monitor caseloads.The new system is also to have the ability to producereports to facilitate caseload management(including, for example, reports on the number ofcases per caseworker and the specific cases assignedto each caseworker, as well as various statisticalanalyses). As a result, management will be ableto assess the adequacy of current staffing levelsunder the new, more streamlined case managementprocess.Bring-forward NotesRecommendationTo help ensure that client inquiries and enforcementactions are dealt with appropriately, the Office shouldensure that all caseworkers conduct the necessaryfollow-up work on a timely basis.Current StatusWe were advised that the Office’s new servicedelivery system, to be in place by October 2006,will have the capability to create for individualcaseworkers an automatic reminder to follow upon an action taken in a case—this “case actionitem” is similar to a bring-forward note but is automaticallygenerated by the system rather than by

Family Responsibility Office307the caseworker. The system is also to be capable ofmonitoring whether or not the case action itemshave been acted on and listing those items that areoutstanding for longer than a specific time period.These capabilities should help ensure timely followupwork.Support Enforcement ActionRecommendationTo help ensure the effectiveness of its enforcementactions in collecting support arrears, the Officeshould:•identify accounts in arrears on a more timely basisand initiate contact with the defaulting payer assoon as possible;• adhere to the established timetable for the prescribedenforcement steps in a timely manner; and• ensure that supervisory staff monitor case files forcompliance with the prescribed steps and establishedtimetable and where necessary take correctiveaction.Current StatusLegislative amendments aimed at strengtheningthe Office’s authority to enforce support orders andto find defaulting payers were introduced in theHouse through Bill 155 in December 2004. OnJune 13, 2005, this bill received royal assent as theFamily Responsibility and Support Arrears EnforcementAmendment Act, 2005.The province announced through the 2004 provincialbudget that $40 million would be investedover the next four years to improve the ability of theOffice to identify, track down, and collect supportpayments that are in arrears.We were informed that in November 2004 theOffice implemented an Arrears File Review projectto reduce the $1.3 billion in arrears. This projectinvolved a team of 40 additional temporary staffdedicated to reviewing cases with arrears over$50,000 and cases not yet assigned to a caseworker.At the beginning of the project, 38,828 cases representingabout $640 million in arrears outstandingwere selected for review. As of March 29, 2005,12,291 of these cases had been reviewed, and 1,941of those cases were closed for various reasons—such as, for example, terminated orders or thefact that no arrears were outstanding. Also, 7,925enforcement actions were taken, which resulted ina total of $26 million being collected.In addition to the above, the Office took twoother initiatives: a credit-bureau initiative in January2004 and a trace-and-locate initiative in February2004.Under the credit-bureau initiative, the Officemailed letters to support payers with payments inarrears to encourage them to enter into voluntarypayment arrangements with the Office or havetheir arrears reported to a credit bureau. BetweenJanuary 2004 and March 2005, the Office sent outabout 87,000 letters to payers owing approximately$820 million. As a result of these letters, the Officereceived $112 million in payments.The trace-and-locate initiative involves theinvestigation of the Office’s returned mail in orderto locate payers, update the Office database withthe correct payer information, and take applicableenforcement actions. By March 31, 2005, about32,500 pieces of returned mail had been reviewed,resulting in 16,600 payer addresses being updated.Payment ProcessingRecommendationTo ensure that internal controls are strengthened andthat all support payments received are forwarded tothe intended recipient on a timely basis, the Officeshould:•follow up on and resolve all items in both the identifiedand unidentified suspense accounts on atimely basis; and•adequately document the basis on which initiallyunidentified receipts were identified and managementapproval of the release of such funds.Chapter 4 • Follow-up Section 4.03

3082005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.03Current StatusThe Office advised us that many of the items in theidentified suspense account relate to single paymentsthat are required to be manually pro-ratedand allocated to different related accounts, which isa time-consuming process. At the time of our followup,the Office had implemented an automatedprocess that speeds up the allocation of identifiedsuspense account items and should free up stafftime to clear unidentified suspense account items ona more timely basis.The Office also expected that the new servicedelivery model will better document the basis onwhich initially unidentified receipts were identifiedand management approval of the release of suchfunds.Interest on ArrearsRecommendationTo help ensure compliance with support orders andto encourage prompt payment from payers, the Officeshould compute and charge interest on arrears forthose cases where the court orders stipulate that interestis applicable.Current StatusThe Family Responsibility and Support ArrearsEnforcement Amendment Act, 2005, which receivedroyal assent on June 13, 2005, included an amendmentthat enables the Office to automatically calculateand collect interest on arrears based on astandard rate for all cases. The rate will be subjectto revision either annually or semi-annually.The Office expected that its new service deliverymodel, to be in place by October 2006, would beable to automatically calculate and record interestdue on outstanding payments.Customer ServiceRecommendationSince the call centre is the primary means wherebyclients communicate with the Office, the Office shouldreview its call-centre operations and take the stepsnecessary to ensure that all calls are answered orresponded to within a reasonable period of time.Current StatusThe Office advised us that it implemented in September2004 monthly “snapshot” reports that comparethe number of calls handled, the number ofcalls abandoned, the average speed of answer, andthe average waiting time for abandoned calls.Based on an analysis of the results, which indicatedthat a low volume of calls were being receivedbetween 5 p.m. and 7 p.m., the call-centre hourswere reduced in November 2004 to the peak callinghours of 8 a.m. to 5 p.m., Monday to Friday. Thisreduction in hours enabled more resources to bedevoted to answering more calls and reducing waittimes during the peak calling hours.In addition, we were informed that calling staffresources were realigned so that customer serviceclerks, who answer general inquiries, increasedtheir time spent at the call centre from 4.5 hoursper day to 6 hours per day.Call-centre AlternativesRecommendationTo help alleviate the demand for information and servicesthrough the Office’s call centre, the Office shouldconsider expanding access to detailed account informationand the range of services available throughthe automated telephone line and website.Current StatusWe were informed that the Office’s automatedtelephone line was improved in 2004. Improvementsincluded a new phone script and the abilityfor callers to skip those sections of the scriptthat they already know. In addition, the Office

Family Responsibility Office309now distributes Personal Identification Numbers(PINs) to recipients and to payers so that they canaccess their case-specific information on the phone.Approximately 151,250 PINs had been issued byApril 30, 2005.Website improvements have also been implementedthat include a new easy-to-remember Internetaddress and on-line program forms. As well, anew section on “Employers and Income Sources”answers frequently asked questions, providesinformation on electronic payment options, andgives mailing addresses for payments and othercorrespondence.Computer SystemRecommendationWe urge that the process of implementing the neededcomputer support for the Office’s operations be significantlyaccelerated.Current StatusIn May 2005, the Ministry announced the selectionof the successful vendor to develop and implementthe Office’s service delivery system. The new systemis expected to be in place in October 2006.• the number of telephone calls to the call centre thatwere blocked and therefore not answered;• the aging of support arrears and an assessment oftheir collectibility; and• the nature and number of complaints received.Current StatusThe current information system cannot:• identify cases in arrears that are not assigned tocaseworkers and therefore not actively enforced;• track the timeliness of enforcement actionstaken on accounts that have been assigned;• monitor the number of blocked calls;• age cases that are in support arrears; and• track the nature and number of complaintsreceived.According to the Office, the new service deliverysystem should be able to address these concernswhen it is implemented.As well, the Office informed us that it continuesto work with other enforcement jurisdictions inCanada on developing baseline data to identify performancemeasures and establish guidelines andstandards.Assessment of Client SatisfactionPERFORMANCE MEASUREMENTReporting Program EffectivenessRecommendationTo help ensure that and be able to assess whetherfamily-support obligations are effectively enforcedand that areas in need of improvement are identified,the Office should measure and report on additionalresults indicators, such as:•the number of cases with significant arrears notassigned to a caseworker and therefore not activelyenforced;•the timeliness of enforcement actions taken onassigned accounts;ComplaintsRecommendationTo help increase client satisfaction and the effectivenessof services provided, the Office should:•complaints are addressed; and•log complaints from all sources to ensure that allcategorize and analyze the complaints receivedfrom all sources to identify areas most in need ofimprovement.Current StatusWe were informed that the Office fully implementeda document-management system calledCorrespondence Control Management Mercury onJune 10, 2005. According to the Office, this systemcan track complaints, report accurately on issuesChapter 4 • Follow-up Section 4.03

3102005 Annual Report of the Office of the Auditor General of Ontariothat arise in correspondence, and identify trends inclient and stakeholder correspondence. However,it will take several months of data input before theOffice can fully utilize these capabilities.Client Satisfaction SurveysRecommendationTo aid in the assessment of both customer satisfactionand effectiveness of services provided, the Officeshould regularly conduct client satisfaction surveysthat identify areas that are working well and those inneed of improvement.Current StatusThe Office received Deputy Minister approval inmid-February 2005 to conduct the survey, and theselection of a market research consultant was finalizedin July 2005. The Office anticipates that thesurvey will be conducted in late fall 2005.Chapter 4 • Follow-up Section 4.03

Chapter 4Section4.04Ministry of Consumer and Business ServicesPolicy and ConsumerProtection ServicesDivisionFollow-up to VFM Section 3.04, 2003 Annual ReportBackgroundThe mandate of the Policy and Consumer ProtectionServices Division (Division) of the Ministryof Consumer and Business Services is to overseebusiness and other practices in the Ontariomarketplace. The Marketplace Standards and ServicesBranch, which accounts for approximatelytwo-thirds of the Division’s expenditures, administersvarious statutes relating to consumer protectionand business licensing. Its activities include theregistering and licensing of a number of industries,processing consumer complaints, inspecting businessesfor compliance with consumer protectionacts, and investigating alleged infractions.Since 1997, the Ministry has also delegatedthe administration of several consumer and publicsafety statutes in such sectors as amusementdevices, boilers, elevators, fuels, electricity, andnew-home warranties to eight delegated authorities.The delegated authorities are not-for-profitcorporations that carry out the day-to-day functionsof ensuring public safety and consumer protectionby regulating and monitoring business practices intheir industry. Nevertheless, the Ministry retainsoverall responsibility for the outcomes of the delegatedauthorities’ activities in protecting the consumersand the public. The Division’s Sector LiaisonBranch is responsible for overseeing the eight delegatedauthorities.In the 2004/05 fiscal year, the Division hadapproximately 94 staff (100 staff in 2002/03) andoperating expenditures of approximately $9 million(approximately $10 million in 2002/03).In 2003, we found that the Marketplace Standardsand Services Branch (Branch) did not deployits inspection resources based either on an assessmentof risk or on the number of complaints itreceived. For example, while the practices of debtcollectors had been the number one source of complaintsand inquiries received by the Branch, with atotal of approximately 4,000 received in 2001/02,the Branch conducted fewer than 10 inspectionsof collection agencies. In contrast, although theBranch received only eight complaints about theatresand video retailers, the Branch devoted 95%of its inspection resources and conducted 1,600inspections to check whether video retail storeswere operating with a valid licence and were sellingadult videos only with proper stickers indicatingtheir ratings.Chapter 4 • Follow-up Section 4.04311

3122005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.04We also concluded that the Ministry had notbeen effectively monitoring cemeteries’ trustaccounts to ensure that deposits from sales of plotswere sufficient to support the cost of caring for andmaintaining the cemeteries. In addition, the outcomesof its regulatory activities were not beingadequately captured by the Ministry’s ManagementInformation System.With respect to the delegated authorities, wenoted that:•The Ministry had not ensured that data on theoutcome of delegated authorities’ activities, asreported by the authorities—such as the numberof safety-related incidents and the number ofserious injuries—were reliable.•The Ministry had not assessed the sufficiencyand appropriateness of the enforcement activitiesundertaken by the delegated authorities inresponse to identified violations.•The Ministry was unable to obtain adequateinformation about the outcomes and activitiesof the Ontario New Home Warranty Program(now called the Tarion Warranty Corporation)to assess whether new homeowners were beingproperly protected.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information received from the Ministryof Consumer and Business Services, some progresshas been made on implementing the recommendationsin our 2003 Annual Report. The current statusof action taken on each of our recommendations isas follows.MARKETPLACE STANDARDS ANDSERVICES BRANCHFollowing Up on Consumer ComplaintsRecommendationTo adequately protect the public, the Ministry shouldallocate its inspection resources for monitoring variousindustries based on a systematic assessment ofrisk as well as on the number of complaints it receivesabout these industries.As well, the Ministry should ensure that unscrupulouspractitioners are removed from the marketplaceon a timely basis to protect consumers and the publicfrom potential losses and abuse.Current StatusThe Ministry had not yet performed an updatedrisk analysis, nor had it allocated its inspectionresources based on the number of complaints itreceived. Nevertheless, as a temporary measure,the Ministry had followed a consultant’s recommendationto arbitrarily allocate its proactiveinspection resources equally among the debt recovery,cemetery, and theatres sections.From January 2004 to March 2005, the Ministryemployed the services of an investigator to reviewcomplaints against collection agencies in order toidentify unscrupulous practitioners that should beconsidered for removal from the marketplace. TheMinistry indicated that, as a result of this review,more timely administrative actions were taken towarn unscrupulous practitioners and revoke theirlicences. It took, on average, only several months—instead of the two or more years it was taking atthe time of our audit—to revoke the licence of anunscrupulous practitioner. The Ministry advised usthat starting August 2005, when its contract withthe investigator was to expire, its Compliance andConsumer Services Bureau Section and its InvestigationsOffice would assume the responsibilities forinvestigating outstanding charges and taking proposedactions against collection agencies.

Policy and Consumer Protection Services Division313Monitoring Cemeteries’ Trust AccountsMeasuring and Reporting on EffectivenessRecommendationTo comply with legislative requirements relating tocemeteries in Ontario and to make sure that sufficientfunds are available for the proper care and maintenanceof cemeteries, the Ministry should ensurethat:•cemetery registration records are complete andannual returns are filed by all cemetery ownerswithin the required time frame; and•ministry staff verify, on a timely basis, the balanceof trust accounts established to care for and maintaincemeteries.Current statusCemeteries are required to submit their annualreports on care and maintenance within threemonths after the end of their fiscal year and to submitaudited statements if their trust fund accountsexceeded $500,000 within six months after the fiscalyear end. As of May 2005, most cemeteries hadsubmitted the required annual report for 2003, butalmost 570 cemeteries, or 21%, had not, and thesewere being followed up on.Of 119 cemeteries with trust fund accountsexceeding $500,000, 64, or 54%, had not submittedtheir audited statements for 2003 as required.The Ministry indicated that notifications or inspectionsorders had been issued to the owners of thesecemeteries.According to the Ministry, staff were utilizingthe Ministry’s tracking system to help verify trustaccount balances by matching and reconcilingannual returns submitted by cemetery owners andthose received from external trustees. The Ministryalso informed us that its tracking system had beenmodified to reflect the status of trust account balances,and it was being used to generate a report onoutstanding annual returns.RecommendationTo enhance management’s ability to properly measureand report on its effectiveness in protecting consumersand public safety, the Ministry should:•use its management information system to captureand analyze the outcomes of its activities andthereby be in a position to improve and report onits effectiveness; and•conduct proper consumer satisfaction surveys ofboth telephone and written complaints.Current StatusThe Ministry advised us of two enhancements thathad been made in recording inspection outcomes.First, a results field was added to the tracking systemto capture action taken after inspection visitsfocusing on the non-regulatory/licensing statutes.Second, a follow-up field was added to the trackingsystem to monitor post-inspection action taken bythe Division.The Ministry had engaged a third party to conductsurveys of consumers calling the Ministry’sConsumer Services Bureau. According to the Ministry,the surveys indicated that 97% of callers weresatisfied with the services they received.DELEGATED ADMINISTRATIVEAUTHORITIESTechnical Standards and Safety AuthorityRecommendationTo better protect public safety the Ministry shouldimprove its monitoring of delegated administrativeauthorities (delegated authorities) by:•reported by the delegated authorities; and•ensuring the reliability of the outcomes that aremonitoring the activities of the delegated authoritiesto ensure that inspections, investigations,enforcement measures, and other appropriateactions are taken on a timely basis and areChapter 4 • Follow-up Section 4.04

3142005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.04sufficient to ensure the achievement of establishedsafety outcomes.Current StatusTo ensure the reliability of outcomes reported, theTechnical Standards and Safety Authority (TSSA)and the Electrical Safety Authority (ESA) engageda third party to validate their safety data. The TSSAentered into a contract with its external auditor inJanuary 2005 to provide validation of data includedin the TSSA’s State of Public Safety Report 2004,which was to be published in August 2005. The ESAentered into a contract with a consultant in January2004 to provide validation of data included inits already published Electrical Safety in Ontario—2003 Report (2003 Annual Safety Report) (the ESA’s2004 Annual Safety Report was to be published inSeptember 2005).The Ministry indicated that, since our audit,it had implemented new ways of monitoring theactivities of delegated authorities. These includedenhanced performance reports for delegatedauthorities and a complaint-tracking system. TheMinistry indicated that it has committed to reviewingthe reports and providing analysis and feedbackto the authorities.Electrical Safety AuthorityRecommendationTo help reduce electrical incidents involving seriousinjuries and the deaths of electricians, the Ministryand the Electrical Safety Authority should work withother stakeholders to develop consistent safety standardsfor the training and initial and ongoing licensingof electricians working in Ontario.Current StatusBill 70 amended Part VIII of the Electricity Act, 1998to establish a statutory framework for provincewidelicensing of electrical contractors, masterelectricians, and electricians in the compulsoryelectrical trades to be administered by the ElectricalSafety Authority. The Bill received royal assent inNovember 2004. At the time of our follow-up, regulationswere under development and targeted to becompleted in summer 2005.Ontario Motor Vehicle Industry CouncilRecommendationTo protect consumer interests with respect to the regulationof the motor vehicle industry in a more costeffectivemanner, the Ministry should work with theOntario Motor Vehicle Industry Council on ways toimprove the effectiveness of consumer protection withrespect to motor vehicle repairs.Current StatusPrior to our follow-up, through an initiative calledthe Strategic Partnership on Auto Repair, the Ministry’sMarketplace Standards and Services Branchhad discussed the potential for co-ordinated inspectionactivity with the two ministries—Environmentand Labour—involved in inspecting vehicle repairshops for their own purposes (for example, for compliancewith the Clean Air program, workplacesafety, and mechanic certification). The objectivesof the proposed partnership were to share and conserveresources, reduce the regulatory burden onbusiness, and focus on chronic violators. At the timeof our follow-up, the Ministry indicated that it andthe other ministries were in the process of addressingissues of information sharing. It was also consultingwith the Ontario Motor Vehicle IndustryCouncil on how to improve the effectiveness ofmotor vehicle repairs.Ontario New Home Warranty ProgramRecommendationThe Ministry should take action to ensure that betteraccountability mechanisms are in place to protectconsumers buying new homes in Ontario.

Policy and Consumer Protection Services Division315Current StatusSubsequent to our 2003 audit, the name of theOntario New Home Warranty Program changed toTarion Warranty Corporation. In 2003, an accountabilityletter was signed between Tarion and theMinistry that establishes formal reporting requirementsand outlines the roles and responsibilitiesof each party. In addition, the Ministry indicatedthat, through its negotiation efforts, Tarion bylawswere changed to allow four government appointeesto serve on Tarion’s board. As of March 2005,four ministerial appointees were on the 17-memberboard.Governance and Accountability ofDelegated AuthoritiesRecommendationTo better protect consumers and the public, the Ministryshould strengthen its governance and accountabilityarrangements with delegated administrativeauthorities (delegated authorities) by:•delegated authorities on a timely basis;•establishing administrative agreements with thehaving an adequate number of government, consumer,and public representatives on the boards ofdirectors of the delegated authorities to achieve afair balance of representation;•ensuring that sufficient levels of resources aredevoted to monitoring the performance of the delegatedauthorities; and•ensuring that reporting and other performancerequirements are complied with on a timely basis.Current StatusAt the time of our follow-up, the Ministry hadupdated its administrative agreements with six ofthe eight delegated authorities with which it hadalready negotiated such agreements eight yearsago. As for the remaining two delegated authorities:• A letter of accountability pertaining to theOntario New Home Warranty Program—now“Tarion”—had been signed by the Ministry thatestablishes formal reporting requirements andoutlines the roles and responsibilities of eachparty.•The Funeral, Burial and Cremation Services Act,2002, which pertains to the Board of FuneralServices, received royal assent on December 13,2002. However, the regulations under the Act,which are necessary to bring the Act into force,had not yet been finalized at the time of ourfollow-up. The Ministry indicated that it wouldwork with the Board to establish an administrativeagreement once the regulations are in place.The Minister has legislated authority to appointup to 50% of the members on the boards of directorsof delegated authorities. In the past year, theMinistry adjusted the composition of the boards ofboth the Technical Standards and Safety Authorityand Tarion to increase the number of ministerialappointees. As of March 2005, the percentageof ministerial appointees on the boards of the eightdelegated authorities ranged from 22% to 38%. Inaddition, the Ministry was tracking the ministerialappointee process and the attendance of ministerialappointees at board meetings.The Ministry’s Sector Liaison Branch has beengiven the responsibility for monitoring the performanceof delegated authorities. The Ministryinformed us that it had reviewed the Branch’sresources for this task and had hired additionalstaff. Also, in response to Internal Audit recommendations,the Ministry’s Compliance and ConsumerServices Bureau had assumed the responsibility ofhandling consumer inquiries and complaints relatingto the delegated authorities. This change hasenabled Sector Liason Branch staff to devote moreresources to monitoring the performance of thedelegated authorities. Consumers are referred tothe Sector Liaison Branch only if dealing with theinquiry or complaint requires special technical and/or governance and accountability expertise.The Ministry had developed a ministry-wideannual report tracking system to monitor the reportChapter 4 • Follow-up Section 4.04

3162005 Annual Report of the Office of the Auditor General of Ontariotabling process from the time the draft report isreceived until the reports are tabled in the Legislature.The Ministry had also improved its trackingof delegated authorities’ performance statistics toensure timely quarterly reporting.Chapter 4 • Follow-up Section 4.04

Chapter 4Section4.05Ministry of EducationCurriculum Developmentand ImplementationFollow-up to VFM Section 3.05, 2003 Annual ReportBackgroundThe Education Act gives the Minister of Educationbroad authority over the “courses of study that shallbe taught” to the province’s 1.4 million elementaryand 700,000 secondary students in its 4,000 elementaryand 800 secondary schools.Prior to 1996, school boards had considerablelatitude regarding the curriculum that they taught.In 1996, the Ministry of Education undertook, forthe first time, the development of a province-widecurriculum. The Ministry began introducing thenew curriculum in September 1997 and completedits development work with the introduction of thegrade 12 curriculum in September 2002. The Ministryestimated that the costs of developing andimplementing the new curriculum between 1996and January 31, 2003, were about $488 million.We concluded that the process by which theMinistry developed the new curriculum was appropriate,and according to most of the educators weinterviewed, it resulted in a good-quality productthat was an improvement over what they hadbefore.However, the educators we interviewedexpressed concerns regarding the way the curriculumwas implemented. Their major concernwas that the Ministry rushed the implementation,with the result that a new curriculum and changesin student assessment practices were introducedbefore appropriate training, textbooks, and othermaterials were readily available. This made theinitial years of implementation extremely difficultfor students and teachers.Educators also expressed concerns about thesuitability of the new curriculum for weaker students.Recent studies and test results had indicatedthat many students were still not succeeding underthe new curriculum and that many students wereentering secondary school without the educationalfoundation required to graduate.We also concluded that the Ministry and theschool boards we visited did not have sufficient andreliable information to, for example:•measure and report on the extent to whichstudents have learned the new curriculum ingrades and subjects other than those that havebeen tested province-wide;•measure the extent to which consistency in studentassessment has been achieved among theprovince’s schools; and•identify and prioritize the problems underlyingpoor student achievement; develop viableimprovement plans; and track and reportresults.Chapter 4 • Follow-up Section 4.05317

3182005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.05We made recommendations for improving curriculumimplementation processes, and the Ministrycommitted to taking corrective action.Current Status ofRecommendationsBased on information obtained from the Ministry ofEducation, the Ministry has made progress on all ofthe recommendations we made in our 2003 AnnualReport, with significant progress being made onsome. The current status of action taken on each ofour recommendations is as follows.IMPLEMENTATION OF THE CURRICULUMRecommendationTo help ensure that future revisions to the curriculumare implemented more effectively, the Ministry shouldensure that:•implementation; and•teachers receive appropriate training prior toeducational publishers have sufficient lead timeto develop appropriate textbooks and classroommaterials.To help improve the implementation of the currentcurriculum, the Ministry should work with schoolboards to ensure that teachers receive more specificimplementation training, including training onthe use of tools such as the course profiles and unitplanner.Current StatusThe Ministry advised us that revisions to the curriculumhave been and will continue to be madeunder the Sustaining Quality Curriculum Initiative,an ongoing cycle of curriculum review, to ensurethat the curriculum remains current and relevant.For example, the curriculum documents for SocialStudies, History, and Geography—grades 1 to 8,for Canadian and World Studies—grades 9 to 12,and for Mathematics—grades 1 to 10 were revised,approved, and released in 2004 and 2005.The Ministry indicated that it has taken the followingactions regarding our recommendation:• Training support on curriculum revisions isbeing provided to teachers well in advance ofmandatory implementation dates. For example,training sessions took place in June 2004 for theSeptember 2005 implementation of revisions tothe grades 1 to 8 Social Studies curriculum.• Educational publishers are being providedwith the lead time they need to develop textbooksand classroom materials for curriculumrevisions through semi-annual meetings of theTrillium List Advisory Committee and informationsessions on specific curriculum initiatives.•School boards were given $7.7 million in 2004 toprovide local school training to teachers on theelectronic curriculum unit planner, student evaluationand assessment, the revised achievementcharts, and the revised curriculum policy documentsreleased in 2004 and in 2005. The boardshad reported back to the Ministry on the use ofthe funds. The Ministry has reviewed the boardreports and confirmed that the funds were usedon the priority areas outlined above.ADDRESSING THE NEEDS OF AT-RISKSTUDENTSRecommendationTo help ensure that the curriculum serves the needs ofall students, the Ministry should:•develop policy guidance governing the promotionof at-risk students, including ways to increase participationin remedial programs such as summerschool, to help ensure that all students acquire theknowledge, skills, and work habits required to succeedin subsequent grades and ultimately to obtainan Ontario Secondary School Diploma; and•require boards to track the participation of at-riskstudents in remedial programs and to assess the

Curriculum Development and Implementation319effectiveness of the programs in improving studentperformance.Current StatusThe Ministry advised us that policy guidance hasnot yet been developed regarding the promotion ofat-risk students or for increasing the participationof at-risk students in remedial programs. However,the Ministry indicated that addressing the learningrequirements of students at risk of not succeedingcontinues to be a ministry priority. The Ministryalso indicated that it has conducted research on theapproaches to promoting at-risk students used inother jurisdictions and has reviewed relevant studies,the results of which are to be summarized in aresearch paper. The Ministry advised us that it hascompleted a series of consultations with representativesfrom the three provincial principals’ associations.A survey was conducted to gather broaderinput, and the findings are under analysis. In addition,the Ministry is in the process of contractingwith provincial principals’ organizations to developprincipals’ resource materials to support promotionaldecisions and remediation practices forstruggling students.The Ministry advised us that tracking the participationof at-risk students in, and assessing theeffectiveness of, remedial programs, is dependenton the further development of its informationmanagementinfrastructure. The introduction ofthe Ontario Education Number in September 2004(a unique student identification number assignedby the Ministry to elementary and secondary studentsacross the province to make it easier to keepreliable records on them) and the implementationof a new data collection system over the next twoyears are intended to:•allow for reporting on student achievement atthe classroom, school, board, and provincial levels;and•greatly facilitate the collection and analysisof accurate and timely data about educationin Ontario, including the education of at-riskstudents.The Ministry also indicated that school boardsare now required to track students who have beenunsuccessful in the Ontario Secondary School LiteracyTest, and therefore must complete the OntarioSecondary School Literacy course before they cangraduate.MONITORING CURRICULUM QUALITYAND IMPLEMENTATIONRecommendationTo help determine whether the Ministry’s expectationsfor curriculum reform are being met, and to enhancethe public accountability of school boards, the Ministryshould:•implement procedures to monitor and report onconsistency in teachers’ student assessment prac-assess the benefits of developing common province-tices throughout the province;•wide exams;•establish a process for strengthening school boardimplementation processes, the scope of whichincludes evaluating the adequacy of key curriculumdelivery, student assessment, improvementplanning, and results reporting procedures ofschool boards; and•develop and report on outcome-oriented measuresof effectiveness for elementary and secondaryeducation.Current StatusThe Ministry advised us that, to encourage andincrease consistency in teachers’ student assessmentpractices, it has provided teachers with training,exemplars, and achievement charts and hasresearched actions taken in other jurisdictions.The Ministry also advised us that it has consultedwith supervisory officers’ organizations (includingthe Ontario Public Supervisory Officers’ Associationand the Ontario Catholic Supervisory Officers’Association) to gather information on the feasibilityChapter 4 • Follow-up Section 4.05

3202005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.05of developing and implementing procedures formonitoring and reporting on consistency in teachers’student assessment practices throughout theprovince. In addition, a survey was conducted inthe French-language system to gather informationon consistency in student assessment. The Ministryindicated that it is in the process of contracting for aresource document to help promote consistency instudent assessments.The Ministry has not yet assessed the benefitsof developing common province-wide exams. TheMinistry advised us that it was providing support todistrict steering committees to monitor the implementationof the curriculum and that the developmentof outcome-oriented measures of effectivenessfor elementary and secondary education would beaddressed when the new data collection system isimplemented. The Ministry also indicated that itwas exploring models to be used to monitor curriculumimplementation in a selected discipline.STRENGTHENING IMPROVEMENTPLANNING AND RESEARCHRecommendationTo help ensure that decisions regarding curriculumdelivery are based upon sufficient and reliableinformation, and to enhance the effectiveness of theimprovement planning process, the Ministry should:•establish standards regarding the capability of studentinformation systems that school boards useand the information that is recorded on them;• co-ordinate and support training for schooland board personnel in implementing effectiveimprovement planning processes;•implement, either through the Education Qualityand Accountability Office or otherwise, a reviewfunction for school board and school improvementplanning processes that includes on-site examination;and•co-ordinate and support research on key curriculumdelivery issues.Current StatusThe Ministry stated that, while it had not establishedstandards for student information systems, itdid develop in May 2004 common data definitionsfor the information that is shared between the Ministry,school boards, and schools. The Ministry alsoadvised us that the new data collection systemwould enable it to generate more accurate, reliable,and complete statistics and would provide a betterbasis for assessing needs and for developing policiesto meet them.The Ministry indicated that training for theimplementation of improvement planning, aswell as the establishment of a review function toassess improvement planning processes, wouldbe deferred until the mandate and priorities ofthe Literacy and Numeracy Secretariat have beenestablished. We were advised that beginning in the2005 school year, the Literacy and Numeracy Secretariatwould work collaboratively with boards tostrengthen the school improvement planning processfor kindergarten to grade 6.With respect to co-ordinating and supportingresearch on key curriculum delivery issues, theMinistry noted that it had established a number ofexpert panels, such as the Early Reading, Literacy,and Early Math panels, to consider specific issues.Panel reports resulted in a number of additionalsupport materials and resources, and examples ofbest practices and instructional strategies have beendistributed to schools. The Ministry indicated thatit also researched and developed a resource relatingto improving boys’ literacy skills, which was introducedat a provincial symposium and distributedto all boards and schools in the province. A multiyearformal evaluation of the Early Reading andEarly Math strategies was being undertaken to provideempirical evidence of progress achieved andguidance on areas needing improvement. We wereadvised that a pilot project to support remediationfor Mathematics in grades 7 to 9 is being initiated.The project is specifically designed to measure the

Curriculum Development and Implementation321effectiveness of materials, training, and implementationin this area.EVALUATING THE ANNUAL EDUCATIONPLAN/TEACHER ADVISER PROGRAMRecommendationIn order to help ensure that appropriate benefits arerealized from the Annual Education Plan/TeacherAdviser Program, the Ministry should, in conjunctionwith school boards and principals, formally assess thesuccess of the program in meeting the needs of the students.If the assessment is positive, measurable objectivesfor the program should be established.Current StatusThe Ministry indicated that, from August to November2004, it undertook a review of the implementationof the Annual Education Plan and the TeacherAdviser Program in Ontario schools. As a result ofthis review, effective June 27, 2005, schools are nolonger required to establish a Teacher Adviser Program.The Annual Education Plan continues to be arequirement for students in grades 7 to 12.Chapter 4 • Follow-up Section 4.05

Chapter 4Section4.06Ministry of Economic Development and TradeBusiness and EconomicDevelopment ActivitiesFollow-up to VFM Section 3.06, 2003 Annual ReportChapter 4 • Follow-up Section 4.06BackgroundThe Ministry of Enterprise, Opportunity and Innovationwas created on April 15, 2002, with the amalgamationof the science and technology activitiesof the former Ministry of Energy, Science and Technologywith the business and economic developmentactivities of the former Ministry of EconomicDevelopment and Trade. The Ministry’s mandatewas to foster an Ontario with competitive businessesand a prosperous economy by promotinginnovation, economic growth, and job creation. Infall 2003, the Ministry was renamed the Ministry ofEconomic Development and Trade.At the time of our audit in 2003, the Ministryhad four divisions employing 300 staff who deliveredits business and economic developmentactivities:•The Competitiveness and Business DevelopmentDivision supported business development,managed the government’s relationshipwith various industry sectors, and delivered theStrategic Skills Investment program, which providedfinancial support to training institutions todevelop job skills for Ontario’s labour market.• The Investment Division attracted investment tothe province, marketing it as a premier investmentlocation using advertising and promotionand by generating business leads and providinginvestment services.•The Trade Development Division was responsiblefor increasing Ontario’s global exports byworking with Ontario-based firms to expandtheir exports worldwide. A government agency,Ontario Exports Inc., carries out most of theresponsibilities of this Division.•The Corporate and Field Services Divisionoffered financial and management advice tobusinesses and entrepreneurs and operated anetwork of field offices and small-business enterprisecentres to promote growth, export activity,and job creation.In the 2004/05 fiscal year, the Ministry spent$63.9 million ($78.9 million in 2002/03) to carryout its business and economic developmentactivities.In 2003, we concluded that the Ministry did nothave the necessary strategic planning processes andinformation systems to support training institutionsin addressing skills shortages and to assist Ontariobusinesses in expanding their export potential. Forexample, we noted the following:322

Business and Economic Development Activities323• The Ministry had not evaluated the StrategicSkills Investment program to determine whetherthe program was successful in addressing thecurrent and anticipated skills needed to ensurebusiness competitiveness in Ontario and toensure that students obtained employment intheir respective areas of training.•The Ministry had not developed methods tomeasure the extent to which it had achieved itsobjective of promoting innovation, economicgrowth, and job creation. Instead, the Ministrytended to assess performance by measuringactivities; for example, it assessed exporttrade performance by monitoring the numberof clients assisted rather than by determiningwhether any increases in export trade had actuallyoccurred as a result of ministry activities.We found that the Ministry’s advertising andmarketing campaign to encourage investment inthe province was well planned and that appropriateresearch was carried out to support the developmentof a focused marketing plan.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information received from the Ministry,progress has been made on all of the recommendationswe made in our 2003 Annual Report.The current status of action taken on each of ourrecommendations is as follows.COMPETITIVENESS AND BUSINESSDEVELOPMENTStrategic Skills Investment Program—Identifying and Responding to SkillsShortagesRecommendationTo ensure that the Strategic Skills Investment programadequately supports the development of thestrategic skills necessary to enhance business competitiveness,the Ministry should:•resolve its database concerns to determine whetherthe program is adequately addressing skills shortagesand whether graduates are employed in theareas for which they were trained; and•review the reasonableness of the percentage ofministry funding that is used for construction andequipment costs instead of for direct training costs.Current StatusThe Ministry reported that a new data report totrack and summarize student enrolment and completioninformation across all projects has beenimplemented. However, the Ministry cancelled theStrategic Skills Investment program during its planningprocess for the 2004/05 fiscal year. In spite ofthe program’s cancellation, the Ministry intendedto continue to track student enrolment and coursecompletion information for all existing StrategicSkills Investment projects until they are complete.The Ministry also stated that options were examinedand recommendations proposed to trackwhether graduates obtained employment in theareas for which they were trained, but because ofthe cancellation of the program, these recommendationswould not be introduced.Prior to the cancellation of the program in 2004,the Ministry hired a consultant to review the reasonablenessof the percentage of ministry fundingused for construction and equipment costs versusdirect training costs. The consultant concludedthat the flexibility of the program to fund the typesChapter 4 • Follow-up Section 4.06

3242005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.06of costs required by each project was effective andshould not be changed.Strategic Skills Investment Program—Evaluating and Processing ProposalsRecommendationTo ensure that the Strategic Skills Investment programincreases the responsiveness of training institutionsto meeting business needs, the Ministry should:• ensure that in-kind contributions from privatesectorpartners are properly valued and, whereamounts are significant, request independentvaluations;•review its share of funding for training programsin relation to the share provided by industry partnersand consider developing funding-level guidelines;and•ensure that training program proposals are evaluated,processed, and approved on a timely basis.Current StatusPrior to cancellation of the Strategic Skills Investmentprogram, the Ministry had implemented aprocedure to independently verify in-kind contributionsgreater than $100,000. The Ministry hadalso reviewed its share of funding and found that itaveraged 25%. The Ministry committed to a guidelineof funding no more than 50% of any singleproject. For all projects subsequently funded, priorto the cancellation of the program, the highest programpercentage contribution was 35%, accordingto the Ministry. In addition, the Ministry informedus that, at the time the program was cancelled, ithad planned to set target dates for obtaining projectapprovals.EXPORT TRADE AND INVESTMENTRecommendationTo more effectively support the Ministry’s initiativesfor increasing Ontario exports and attracting investmentto the province, the Ministry should:• perform a formal analysis of export opportunities,assess the success of the previous initiativesof Ontario Exports Inc., and conduct a comprehensivecost/benefit analysis of this agency’s tradedevelopment initiatives; and•track the source of business investment leads generatedin the Investment Division to help improveits strategic planning and resource allocation.Current StatusThe Ministry and Ontario Exports Inc. completeda three-year strategic plan for the 2003/04 to2005/06 fiscal years. The plan identified marketand sector priorities and key activities for eachmarket and sector. The Ministry reassessed andupdated its priority sectors, markets, and activitiesin the 2004/05 fiscal year. Performance measureswere refined and submitted to the ManagementBoard of Cabinet in February 2005. The measuresare to be reviewed in late June or July 2005.The Ministry also informed us that it has addedthe source of business investment leads to its investmenttracking system.TRADE DEVELOPMENT AND FIELDSERVICES GRANTSRecommendationTo help meet program objectives for grant programs,the Ministry should ensure that proper systems formonitoring recipients are in place and that the successof each program is formally evaluated and taken intoconsideration in future funding decisions.Current StatusThe Ministry stated that it has implementedsystems for monitoring grant recipients and trackingresults under two youth entrepreneurshipprograms—the Summer Company and My Companyprograms—that we reviewed in our 2003Annual Report. Furthermore, the Ministry affirmedthat similar monitoring and evaluating procedureswould be implemented for all new programs, such

Business and Economic Development Activities325as its new $500 million Ontario Automotive InvestmentStrategy program. In addition, with respectto the Canada Science and Technology Centrein Jiangsu, China, a recipient of Trade DevelopmentDivision grants that we reviewed in our 2003Annual Report, the Ministry informed us that itwould no longer provide direct support for theCentre. The Ministry has eliminated the funding itbudgeted for the Centre from its estimates for the2004/05 fiscal year.MEASUREMENT OF AND REPORTING ONPROGRAM EFFECTIVENESSRecommendationTo measure and report on the effectiveness of itsbusiness and economic development activities, theMinistry should develop performance measures thatdemonstrate how program initiatives contribute tothe fostering of competitive businesses and a prosperouseconomy.Current StatusThe Ministry has proposed a Performance ImprovementPlan that it submitted to the ManagementBoard of Cabinet in February 2005. We wereinformed that the plan was being reviewed andwas expected to be addressed by the ManagementBoard of Cabinet in late June or July 2005.At the time of our follow-up, the Ministry wasalso working with the Results Office, a section ofthe Cabinet Office, to help develop performancemeasures relating to ensuring that plans, capacity,and monitoring processes are in place to deliver onthe government’s three key priorities of “Successfor Students,” “Healthier Ontarians,” and “StrongPeople, Strong Economy.”TRAVEL EXPENDITURESRecommendationTo ensure that all travel services are acquired economically,that Ontario government rules are followed,and that employees are reimbursed for only legitimatebusiness expenditures, the Ministry should:•reiterate to employees the necessity of followinggovernment travel policies and advise staff thatany exceptions to the rules will not be reimbursed;and•reimburse only those travel claims that are accompaniedby proper supporting documentation.Current StatusThe Ministry reported that steps have been takento address deficiencies in travel expense claims,including revising travel policies to include internationalair travel, following up immediately on anydetected instances of non-compliance with staff,educating all managers on travel policies, and postingtravel reminders on the ministry Intranet site.The Ministry completed a quality-assuranceaudit of travel claims in November 2004 to determinethe level of compliance with travel policiesand identify any areas needing further follow-upwith staff. Results were communicated to managersand staff. The Ministry also communicated to staffthe requirements of a new government-wide traveldirective.MANAGEMENT OF CONSULTINGSERVICESRecommendationTo achieve value for money when using consultingservices, the Ministry should ensure that:•consultants are hired through a competitive selectionprocess and are treated fairly and equitably,and any exceptions are adequately justified, documented,and approved;•contracts and payments are properly monitoredand controlled, and any increases in the ceilingprice are justified, formally agreed to in advance,and properly approved;•contracts outlining the key deliverables, costs, andother significant project details are signed beforeconsultants begin their assignments; andChapter 4 • Follow-up Section 4.06

3262005 Annual Report of the Office of the Auditor General of Ontario• formal evaluations are prepared for consultantswhen their assignments are completed, and theseevaluations are made available to other divisionsfor future evaluations of consulting proposals.Current StatusThe Ministry reported that it has implementedsignificant improvements in its management ofconsulting services to address the specific recommendationsof the Auditor General’s report. Theseinclude updated policies and procedures, improvedcommunication of ministry policies, increased controlsover the acquisition of consulting services,enhanced reporting requirements, and customizedtraining for staff. In addition, the Ministry statedthat it was continuing to monitor contract managementfor compliance with Management Boardof Cabinet directives and would be conducting aquality-assurance audit of consulting services thatwas scheduled to be completed by the end of June2005.Current StatusAn evaluation of the Ministry’s program to encourageinvestment in Ontario included a recommendationthat the Ministry hire permanent staff forthe regular data maintenance work and contract asneeded for the complicated system developmentwork on the Ontario Investment Service website.Accordingly, two programmers have been hired toperform regular data maintenance, while externalconsultants carry out design services and systemsdevelopment on an as-needed basis. The Ministryestimated that, with this new arrangement, approximately$150,000 would be saved annually.ONTARIO INVESTMENT SERVICEWEBSITEChapter 4 • Follow-up Section 4.06RecommendationTo ensure that the Ministry’s requirements for theOntario Investment Service website are met in themost economical manner, the Ministry should considerthe costs and benefits of having the functionsperformed internally.

Chapter 4Section4.07Ministry of Economic Development and TradeScience and TechnologyFollow-up to VFM Section 3.07, 2003 Annual ReportBackgroundThe goals of the Ministry of Economic Developmentand Trade (formerly named the Ministry of Enterprise,Opportunity and Innovation) are to promoteinnovation, economic growth, and job creation. Tohelp achieve these goals, the Ministry funded severalmajor science and technology programs andspent $1.3 billion between April 1, 1998 and March31, 2003, with total announced program commitmentsof $4.3 billion.During our audit, we did not receive adequateaccess to all the information we requested from theMinistry—information that the Ministry must provideto us under section 10 of the Auditor GeneralAct (at the time of the audit, the Audit Act). Suchlimitations on our access to information preventedus from being able to conclude on our audit objectivesand complete this audit in a timely manner.The Ministry was of the opinion that it provided theinformation in accordance with government protocols.However, we continually expressed the viewthat we were not provided with all the informationneeded to satisfactorily complete our audit work.Notwithstanding the limitation on our access toinformation, we still noted a number of significantconcerns, as follows:•The Ministry had paid the Ontario InnovationTrust $750 million to support the capital cost ofresearch in Ontario, but the Ministry was receivingvirtually no information from the Trust anddid not have the required monitoring processesin place to hold the Trust accountable for itsexpenditure of public funds.•The Innovation Institute of Ontario (IIO)—anon-profit corporation that administers theOntario Research and Development ChallengeFund—often destroyed research-proposalassessments without the required written consentfrom the Ministry.•We found that the marks on the Ministry’s summaryof the Premier’s Research ExcellenceAwards competition did not agree with thereviewers’ original score-sheet marks. Such findingslimit the Ministry’s ability to demonstratethe fairness of the selection process.•A review of the minutes from advisory boardmeetings where research proposals were recommendedfor funding revealed occasions onwhich a conflict of interest should have beendeclared, but there was no indication in the minutesthat a conflict had been declared.•Although the Ministry had spent hundreds ofmillions of dollars on science and technologyresearch, it had made little effort to ensure thatintellectual property rights arising from fundedresearch ultimately benefited the province.• In July 2000, the Ministry single-sourcedthe administration of the Ontario Researchand Development Challenge Fund to the IIO.Chapter 4 • Follow-up Section 4.07327

3282005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.07According to ministry documents, the Ministrydid not issue a request for proposals (RFP)because once an RFP is out, anyone who is eligiblemust be treated fairly in the process, andproblems could arise if a bidder was not dealtwith fairly. This contradicts the basic principlesof government fairness with respect to procurementof goods and services.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information received from the Ministryof Economic Development and Trade, progresshas been made on all of the recommendations wemade in our 2003 Annual Report, with substantialprogress having been made on several. The currentstatus of action taken on each of our recommendationsis as follows.COMPLIANCE WITH GOVERNMENT ANDMINISTRY POLICIESGovernance and Accountability—OntarioInnovation TrustRecommendationTo ensure the effective oversight of the Ontario InnovationTrust’s spending of potentially more than$1 billion in public funds, the Ministry should:•negotiate an agreement with the Trust to establishproper governance and accountabilityarrangements;•implement procedures for routinely obtaining andreviewing information on the status of recipienteligibility and ongoing results;• implement procedures for identifying areas of noncomplianceand initiating corrective action whererequired; and•ensure that all government Board appointmentsare up to date.Current StatusIn 2004, the province reversed a 2002 commitmentto contribute an additional $300 million tothe Ontario Innovation Trust, resulting in totaltrust funding being limited to $750 million. Consequently,the Trust decided to proceed with committedeligible project disbursements but would onlyapprove new projects to the extent they could befunded from existing resources. As of July 2004, theMinistry assumed responsibility for directly fundingany new research infrastructure programs, previouslyfunded by the Trust.The Ministry of Economic Development andTrade reached an agreement with the Ontario InnovationTrust effective April 1, 2004 that clarified theroles, responsibilities, and relationship between theMinistry and the Trust. The agreement also set outaccountability principles and operating procedures,including provisions for financial reporting to theMinistry. Consequently, at the time of our follow-upthe Ministry was receiving and reviewing detailedoperating and financial information from the Trust.The agreement with the Ontario InnovationTrust also commits the Trust to ensuring that recipientsare bound to achieve specific measurableresults. At the time of our follow-up, recipients wererequired to report periodically on both the financialstatus of the project and the results achieved. TheMinistry has also devised a process with the Trustto identify and address non-compliance matters,including provisions for the audit and recovery offunds in the event of non-compliance.The Trust’s Board consists of seven directors,three of whom are to be appointed by the province.At the time of our follow-up, the Ministry reportedto us that the only government appointment to theTrust’s Board was the Assistant Deputy Minister of

Science and Technology329its Research and Commercialization Division. Thisappointment expired in April 2005, and the Ministrywas working on a new appointment at thetime of our follow-up. The Ministry reported thatit had raised the matter of the other two vacancieswith the Public Appointments Secretariat. On July21, 2005, three government representatives wereappointed to the Trust’s Board.Governance and Accountability—OntarioResearch and Development ChallengeFundAt the time of our follow-up, the ChallengeFund was in the process of winding down and wasto be replaced by the Ontario Research Fund. Theremaining Challenge Fund projects were to run tocompletion, with the last project scheduled to finishin December 2009. The new Ontario ResearchFund consolidates operating, capital, and overheadfunding into one comprehensive program that is tobe managed by the Ministry. An MOU between theMinistry and the Ontario Research Fund’s AdvisoryBoard is to be closely modelled after the ChallengeFund’s MOU.RecommendationTo ensure that the required accountability mechanismsare in place for the management of the OntarioResearch and Development Challenge Fund (ChallengeFund), the Ministry should:•update the Memorandum of Understandingbetween the Challenge Fund and the ministries tooutline the responsibilities of the Challenge FundBoard and special advisory committees and toreflect current program objectives and suitableperformance measures; and•ensure that primary and direct oversight responsibilityfor the Challenge Fund rests with a leadministry.Current StatusA new Memorandum of Understanding (MOU) forthe Ontario Research and Development ChallengeFund (Challenge Fund) took effect on April 1, 2004.The MOU recognizes the Ministry of EconomicDevelopment and Trade as the lead ministry forthe program. The MOU also spells out the Fund’smandate and objectives and outlines the responsibilitiesof the Challenge Fund’s Board and its advisorycommittees. In addition, the MOU requires that theMinistry establish performance measures in respectof the Fund, assess performance in relation to thesemeasures, and monitor and report on the performanceof the Fund in relation to these measures.Project Selection—Ontario Research andDevelopment Challenge FundRecommendationTo ensure that the Ontario Research and DevelopmentChallenge Fund selection process is timely, fair,and transparent and that adequate procedures are inplace to assess project eligibility, the Ministry should:• require the Innovation Institute of Ontario toretain all relevant documentation;• implement procedures for periodically verifyingeligibility and ensuring that any exceptions to programeligibility criteria are well supported;•ensure that all applicable ministers are apprisedof the Board’s recommendations or, if appropriate,obtain a delegation of authority for the Ministerof Enterprise, Opportunity and Innovation toapprove projects for funding on behalf of all ministerswho are party to the agreement; and•ensure that applications for research funding arereviewed within the specified time frame and thatrecommendations are made to the required ministerson a timely basis.Current StatusThe Ministry has instructed the Innovation Instituteof Ontario (IIO) to retain all relevant documentsas required by the service contract withthe Ministry and as consistent with the government’sretention schedule. The Ministry signed anChapter 4 • Follow-up Section 4.07

3302005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.07amending agreement to its contract with the IIO toprovide for the verification of ongoing project eligibilityand other IIO responsibilities. The Ministrynow receives monthly reports from the IIO to verifyeligibility and to monitor program progress on anongoing basis.A new Memorandum of Understanding assignedresponsibility to the Ministry of Economic Developmentand Trade for approving projects for fundingon behalf of and in consultation with the ministriesof Agriculture and Food; Training, Colleges andUniversities; and Finance. However, as of October2003, no more research project competitions wouldbe held for the Challenge Fund, as the program isbeing replaced by the Ontario Research Fund.Project Selection—Ontario ResearchPerformance FundRecommendationTo help ensure that recipients of Ontario ResearchPerformance Fund grants meet eligibility criteria andensure that all new recipients meet program eligi-are paid the proper amounts, the Ministry should:•bility requirements;•ensure that signed confirmation letters are on fileverifying the amount of grants provided by otherministries to eligible recipients;•amounts are calculated accurately; and•implement procedures for verifying that grantestablish a deadline for submissions and for finalizingannual payments under the program.Current StatusThe Ministry stated that, in July 2004, the OntarioResearch Performance Fund became a componentof the new Ontario Research Fund. With thatchange, a procedure was put in place to ensure thatlead ministries funding research are accountablefor ensuring recipient eligibility, retention of confirmationletters, and verification of grant amountcalculations. Submission deadlines and paymentprocedures are included in the new administrativeprocedures manual.Project Selection—Premier’s ResearchExcellence AwardsRecommendationTo provide assurance that a fair and transparentselection process is followed and that due diligenceis demonstrated when assessing proposals for thePremier’s Research Excellence Awards, the Ministryshould ensure that:•all selection documents—including proposals,individual score sheets, summary score sheets, andwritten recommendations—are kept on file for aspecified retention period;•reviewed for accuracy; and•all individual and summary score sheets arethe selection process and evaluation criteriaare explicitly stated to potential applicants andapplied consistently.Current StatusThe Ministry stated that all documentation is nowretained, including all individual and summaryscore sheets. The Premier’s Research ExcellenceAwards Advisory Board met in January 2004 andagreed to ensure greater consistency in the reviewers’scoring by adopting several measures, includinga two-tiered due-diligence process wherebyministry staff review and consolidate AdvisoryBoard results for presentation to the awards’ Board.In addition, the Ministry included program guidelinesand eligibility criteria on its website to clarify,for potential applicants, the selection process andevaluation criteria.Project Selection—Premier’s PlatinumMedal for Research ExcellenceRecommendationTo ensure that a fair and transparent selection processis in place for selecting recipients of the Premier’s

Science and Technology331Platinum Medal for Research Excellence, the Ministryshould:•update the Memorandum of Understanding withthe Advisory Board to reflect the Board’s responsibilityfor the program; and•retain all documentation necessary to adequatelysupport the eligibility and selection of each recipientof the Premier’s Platinum Medal for ResearchExcellence.Current StatusIn spring 2004, the Memorandum of Understandingwith the Advisory Board for selecting PlatinumMedal winners was finalized, along with a proceduresmanual for administering the program. However,in fall 2004, a realignment of the Ministry’sscience and technology programs was approved,and no funding was included for further Premier’sPlatinum Medal for Research Excellence awards.Program MonitoringMonitoring the Ontario Research andDevelopment Challenge Fund GrantsRecommendationTo ensure that Ontario Research and DevelopmentChallenge Fund (Challenge Fund) grants are used forthe purposes intended and that project performance isreported on and monitored, the Ministry should:•review for continued eligibility all projects thathave not received payments from the ChallengeFund in the previous six months, and implementan ongoing process for identifying and followingup on such projects;•establish an overall policy regarding when auditedreports are required, implement clear guidelineson the form and content of these reports, andensure that quarterly, annual, audited, and finalproject reports are received when due; and•on a timely basis review and analyze all reportsreceived to ensure that projects remain eligible, todetermine whether milestones have been met, andto assess whether performance has beensatisfactory.Current StatusAlthough the Challenge Fund is in the process ofwinding down, as at March 31, 2005, 71 projectswere still in progress with contracts totalling morethan $360 million. To monitor project progress onan ongoing basis, at the time of our follow-up theMinistry was receiving monthly reports from theInnovation Institute of Ontario identifying ChallengeFund projects that had not requested fundingin the previous six months, along with otherprojects not meeting compliance requirements.Actions planned and taken to attain compliancewith reporting requirements are also included inthe report on a project-by-project basis. The Ministryalso established policies, procedures, and formatsfor Challenge Fund project reporting as part ofits new program administration process.Monitoring the Ontario Centres of ExcellenceRecommendationTo help ensure that an adequate monitoring processis in place to demonstrate that the Ontario Centres ofExcellence use public resources prudently and in compliancewith defined performance expectations, theMinistry should:•implement a process for tracking the receipt of allrequired monitoring reports and follow up on anyoutstanding reports in a timely manner; and•adequately review all reports received and reconcilethe annual reports’ information with thatcontained in the audited financial statements toensure that reported information is accurate andcomplete.Current StatusA new governance structure for the Centres ofExcellence was put in place effective April 1, 2004.As a result, the Centres of Excellence are to reportto the Ministry through a non-profit corporation,Ontario Centres of Excellence Inc., under contractChapter 4 • Follow-up Section 4.07

3322005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.07to manage the Centres for the Ministry. The contractsets out performance measures and requirementsfor accountability and governance. Staff havebeen assigned responsibility to monitor the receiptof reports, review and analyze these reports, andfollow up on any outstanding issues.Monitoring the Premier’s Research ExcellenceAwardsRecommendationTo help ensure that the Premier’s Research ExcellenceAwards program meets its objectives of attracting,developing, and keeping talented graduate studentsand researchers in Ontario and that funds are spentappropriately, the Ministry should:•reports are received on a timely basis;•ensure that all required financial and performanceverify that funds are being spent for the purposesintended, that the information submitted is accurate,and that project targets and milestones arebeing met; and•analyze and consolidate the performance informationreported by recipient institutions to assess theprogram’s accomplishments and report this informationannually to the program’s board and tothe Minister as required.Current StatusAt the time of our follow-up, the Ministry wasreplacing the Premier’s Research Excellence Awards(PREA) program with a successor program calledthe Research Talent Development Program. TheMinistry stated that it has put in place revisedprocedures to ensure that funds are used for theintended purpose, and that appropriate performanceand financial information was received andreviewed for consolidation and reporting to thePREA board and the Ministry. The Ministry alsostated that these procedures would be carried overto the successor program.Monitoring Potential Conflicts of InterestRecommendationTo ensure compliance with the government’s postserviceand conflict-of-interest requirements and toensure that its science and technology activities areconducted in an open, fair, and transparent manner,the Ministry should:•develop consistent conflict-of-interest policiesthat apply to all science and technology grantprograms;•monitoring potential conflicts of interest; and•develop standardized procedures for adequatelyinform the responsible Minister of all conflicts ofinterest as required.Current StatusThe Ministry informed us that, after consultationwith representatives from its science and technologyprograms, it has implemented conflictof-interestpolicies and procedures for itstransfer-payment programs. The guidelines areincluded in its agreements with the boards of theOntario Innovation Trust, the Ontario Researchand Development Challenge Fund, and the Premier’sResearch Excellence Awards. The Ministryalso stated that accompanying procedures requireconflict-of-interest matters to be promptly broughtto the attention of the Minister. The Ministry statedthat a conflict-of-interest policy would be appliedconsistently to all new ministry funding programs.Project BenefitsIntellectual Property RightsRecommendationTo help meet its overall objectives of supporting jobcreation and economic growth that benefits the peopleensure compliance with program policies on intel-of Ontario, the Ministry should:•lectual property rights;•review existing policies and develop consistencyamong programs regarding the ownership of intellectualproperty; and

Science and Technology333• formally assess the various programs’ success inmeeting their objectives.Current StatusIn December 2004, the Minister established theCommercialization Advisory Council, among whosekey tasks is reviewing intellectual property barriersto commercialization. The Ministry stated that itexpects the Council’s work to result in a consistentpolicy for science and technology programs andthat it would establish criteria for assessing the programs’success in meeting their objectives. Preliminaryfindings of the Committee were expected bymid-2005.Industry SupportRecommendationTo better ensure that the required private-sector contributionsare actually made, the Ministry should:• verify that the required commitment confirmationletters are received before funding researchprojects;•consistently apply the criteria for proportionateprogram funding and document justification forany exceptions; and•develop policies for the independent valuation ofin-kind contributions.Current StatusThe Ministry informed us that the Challenge Fundhas not accepted any new project proposals sinceOctober 2003 and that the fund was being replacedby the new Ontario Research Fund, a program thatwill be administered by the Ministry. The Ministrystated that the Innovation Institute of Ontario,which administers the Fund, has verified receiptof commitment confirmation letters from any newprivate-sector partners joining an existing projectand has maintained the information on a projectmanagement database to verify ongoing eligibility.At the time of our follow-up, the Ministry wasworking with representatives of both governmentand the academic community to determine appropriatelevels of private-sector contributions for newprograms. The Ministry also informed us that a consistentpolicy for the valuation of in-kind contributionswas being developed and was expected to becompleted by mid-2005 and to be put in place forall of its research and technology programs.PROGRAM FINANCIAL ANDADMINISTRATIVE CONTROLSProgram AdministrationRecommendationTo improve the Division’s financial and administrativecontrols, help achieve due regard for economy, andimprove staff efficiency, the Ministry should:•assess the continued merit of any approvedresearch projects that are inactive and, wherenecessary, terminate funding commitments toinactive projects;•made to cover only current needs;•review prepaid funding, so that payments areclarify the roles and responsibilities of advisoryboard members and others involved in administeringscience and technology programs; and•develop an information system to provide the Ministry’sstaff with the information needed for effectivelyoverseeing its transfer-payment programs.Current StatusThe Ministry now receives and reviews monthlyreports from the Innovation Institute of Ontario,the administrator of the Challenge Fund. Thisreport details the status of all Fund projects. Tworesearch projects have been terminated, primarilydue to failures on the part of the private-sectorpartners to fulfill commitments to the projects.Prepaid funding had been provided to theOntario Innovation Trust and the Ontario ResearchPerformance Fund. The Ontario Research Fundassumed the responsibilities of the OntarioResearch Performance Fund in July 2004. At thetime of our follow-up, the Trust was also windingChapter 4 • Follow-up Section 4.07

3342005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.07down, as no new funding had been received by theTrust since May 2000.Updates of the memoranda of understandingbetween the Ministry and the boards of the OntarioInnovation Trust and the Challenge Fund includeda clarification of the roles of board members as wellas of subsidiaries of the Trust.The Innovation Institute has implemented anelectronic grants management information systemfor the Challenge Fund and the Ontario InnovationTrust. The Ministry has also developed a projecttrackingdatabase for its new Ontario ResearchFund.Innovation Institute of Ontario—AdministrationRecommendationTo ensure that the fees paid to the Innovation Instituteof Ontario (IIO) for administering the OntarioResearch and Development Challenge Fund (ChallengeFund) are reasonable, the Ministry should:•have been achieved;•assess whether the expected benefits of outsourcinginsist on receiving a budget and operating plansfrom the IIO before each fiscal year begins, insteadof after the year has been completed;•ensure that it receives audited financial statementsfrom the IIO for use in assessing the appropriatenessof fees charged for administering the ChallengeFund; and•ensure that the detailed breakdown of the budgetsubmissions correlates with the expense categoriesused in the financial statements and follow up onany discrepancies.Current StatusThe Ministry informed us that it had recently completeda review of its science and technology programswhen developing its Science and TechnologyStrategy. This resulted in a new transfer-paymentprogram—the Ontario Research Fund—thatreplaces the Ontario Innovation Trust, the OntarioResearch and Development Challenge Fund, andthe Ontario Research Performance Fund. Whileoutsourcing the delivery of new programs was anoption considered, the Ministry will administer thisparticular new program internally.The Ministry informed us that it had receivedfrom the Innovation Institute of Ontario (IIO)budgets and operating plans for the 2003/04 and2004/05 fiscal years prior to fiscal-year commencement.The Ministry also received the audited financialstatements for the most recent fiscal year endingMarch 31, 2004. To enable comparison with theaudited financial statements, the Ministry had beenprovided with a detailed breakdown of all budgetline items for the 2004/05 fiscal year. The Ministryinformed us that it had reviewed the budgetsubmission and followed up with the IIO on anydiscrepancies.MEASURING AND REPORTING ONPROGRAM EFFECTIVENESSProgram PlanningRecommendationTo formalize its co-ordination responsibilities andprovide clear direction for program development anddelivery, the Ministry should:•review all research programs and prepare adetailed strategic plan that sets specific goals andobjectives for research in the province; and•outline policies—such as conflict-of-interest rules,project selection criteria, and monitoring guidelines—thatall programs must follow regardless ofthe delivery mechanism.Current StatusThe Ministry informed us that the governmentapproved a broad strategic plan for all its scienceand technology programs in fall 2004. This planformed the basis for discussions with stakeholdersin the last quarter of 2004 in seven regions ofthe province. The discussions focused on the issues

Science and Technology335raised by stakeholders with respect to the designand implementation of the new Ontario ResearchFund and Ontario Commercialization Program.At the time of our follow-up, the Ministry wasexpecting to complete the development of policiesfor conflict of interest, selection criteria, and monitoringguidelines by September 2005. The Ministrywas intending to apply these policies consistentlyacross programs and included relevant requirementsin all memoranda of understanding with programboards.gross domestic product, business expenditureson research as a proportion of all expenditures onresearch, and numbers of research personnel. Specificprogram measures include amounts investedin support of innovation by third parties to matchministry program funding and numbers of peopleacquiring enhanced skills through ministry support.The Ministry stated that it expects to furtherdevelop internal performance measures in the2005/06 fiscal year in its annual report to the ManagementBoard of Cabinet.Effectiveness ReportingRecommendationTo provide better accountability to the public and theLegislature for its use of public funds, the Ministryshould:•develop performance measures, targets, andbenchmarks that reflect its accomplishments andcontributions to the overall goals of promotinginnovation, economic growth, and job creation;• perform the necessary assessments to measurewhether its initiatives are effective in achievingoverall ministry goals; and•report on the actual achievement of these measures,explaining any significant deviations fromestablished targets and benchmarks.Current StatusThe Ministry informed us that, in March 2005, itcompleted a review of publicly available indicatorsand performance measures from five provincesand states, five countries, and five reports spanningmultiple jurisdictions. The Ministry found broadperformance measures widely used but little in theway of program-specific performance measuresthat reflect outcomes from research.The Ministry has proposed several broad performancemeasures to Cabinet Office and hasdrafted several program-specific performancemeasures. Broad measures involved gross domesticexpenditures on research as a proportion ofChapter 4 • Follow-up Section 4.07

Chapter 4Section4.08Ministry of EnvironmentEnvironetFollow-up to VFM Section 3.08, 2003 Annual ReportChapter 4 • Follow-up Section 4.08BackgroundThe Ministry of the Environment has a broad mandateto restore, protect, and enhance Ontario’senvironment. It works to ensure cleaner air, water,and land, and healthier provincial ecosystems,through a number of acts and associated regulations,including the Ontario Water Resources Act and theEnvironmental Protection Act.In 2000, the Ministry developed a new informationtechnology vision and strategy, calledEnvironet, to strengthen the delivery of its environmentalprograms. As of March 2003, the Ministryhad spent approximately $17.1 million developingthe four Environet management information systemswe reviewed.In our 2003 Annual Report, we concluded thatthe Ministry’s Environet systems did not provideministry staff with the information needed to supportthe Ministry’s responsibilities of ensuring thatdrinking water met regulatory standards, that hazardouswaste movements were properly controlled,and that all air emissions were monitored andreported where required. Our major findings were:•Three hundred of 1,476 registered non-municipalwaterworks had never submitted any test resultsto the Ministry, and 612 (27%) had not submittedthe minimum number of water samples for twoof the highest-risk substances, E. coli bacteria andfecal coliform.• Although exceedances (water samples withunacceptably high concentration levels of regulatedsubstances) were only a small proportionof the total samples submitted to the Ministry,we did identify 6,725 exceedances from 2001up to the time of our audit. Of these, 3,181were Adverse Water Quality Incidents (AWQIs),which are more serious exceedances that canaffect human health. Ministry systems and proceduresdid not ensure that all AWQIs werereported and addressed. For example, the Ministrywas not aware of 31 out of 46 AWQIs thathad occurred at one waterworks.•Less than 1% of the province’s hazardous wastemovements were monitored by the new hazardouswaste information system. An older, inefficientpaper-manifest system was still being usedto handle almost all transactions because thenew system could not accept paper submissions.We also noted no evidence of follow-up actionon over 5,000 unauthorized hazardous wastemovements flagged by the system.•Total inspection activity was at 73% of 1995/96levels, and inspectors were averaging fewerinspections annually. We were informed thatthis was due to the increased length of time itnow takes to conduct inspections. Given the significantincrease in the number of facilities coveredby recent regulations, the Ministry neededto develop a strategy to deal with these newfacilities. For example, in 2002 inspectors visited336

Environet337only 54 of the 357 private drinking water treatmentplants and 44 of the 1,119 smaller plantsand designated facilities.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information received from the Ministry,some progress has been made on all of the recommendationsmade in our 2003 Annual Report,with substantial progress being made on those recommendationsrelating to the drinking water componentof Environet. The current status of actiontaken on each of our recommendations is as follows.Drinking Water Information System (DWIS)RecommendationTo ensure that the quality of Ontario’s drinking wateris properly monitored and that appropriate inspectionand other follow-up action is taken on a timely basiswhen necessary, the Ministry should:• complete the development of the Drinking WaterInformation System (DWIS) as soon as possible;• explore ways to use DWIS and its data to generatereports that would help inspectors identify andprioritize candidates for inspection and summarizewaterworks regulatory compliance; and•improve validation procedures to ensure all waterworksrecords in DWIS are accurate.Current StatusThe Ministry informed us that it had completed thedevelopment and implementation of an enhancedversion of the Drinking Water Information System(DWIS), including the data migration of over 3,500drinking water systems. Significant enhancementsmade include more efficient data input capabilities,easier retrieval of Adverse Water Quality Incident(AWQI) information, improved security and changecontrol features, and improved compliance checkingfunctionality to align with current regulatoryreporting requirements.The Ministry also reported that it has improvedon the reports available to support and help prioritizeinspection and enforcement activities. A suiteof about 30 operational reports is now available.These reports support inspectors, laboratory servicesstaff, and registration and compliance officers,for example, by identifying drinking watersystems that have missing test results, have notidentified a licensed laboratory for the testing ofregulatory samples, or have not submitted requiredinformation such as an annual report or an AWQIreport, and by identifying laboratories that havenot reported an AWQI to the Spills Action Centre(SAC). Work is also proceeding on the developmentof a business intelligence tool that will enable datamining and reporting from a variety of ministrydatabases.The Ministry further informed us that validationprocedures have been improved through theimplementation of smart forms, which make it possibleto submit drinking water system profile informationelectronically for direct entry into the DWISdatabase. Other enhancements that help to improvethe accuracy of this submitted information includenew edit checks, drop-down menus, and pick lists;and the availability of on-line help. Efforts are alsounderway to make further improvements to thesesmart forms. Registration and compliance officersare responsible for reviewing and assessing informationprovided by the drinking system owner andensuring its completeness before it is incorporatedinto the database. Quality-assurance reviews ofdata entered into DWIS are also undertaken weekly,and new or updated information obtained by fieldinspectors is also entered into DWIS on a regularbasis.Chapter 4 • Follow-up Section 4.08

3382005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.08Submission of Water-sample Test ResultsRecommendationTo enhance its ability to respond to water problemspromptly, the Ministry should improve controls toensure all waterworks submit their water-sample testresults and compliance reports in accordance withregulatory requirements.Current StatusThe Ministry informed us that DWIS reporting toidentify water systems and laboratories that do notsupply required information has now been completedand that available compliance reports havesignificantly increased the Ministry’s abilities toensure regulatory compliance. The system can now,on a daily basis and based on the classification ofthe drinking water system, check submitted sampletest results against expectations, flag any missingtest results, and present the results in a detailedreport. Drinking water inspectors can now queryDWIS to generate compliance reports to help planand prepare for inspections, and registration andcompliance officers can generate reports on submissionstatus for such items as drinking watersystem annual reports and engineers’ reports andevaluations.Exceedances and Adverse Water QualityIncidentsRecommendationTo improve its ability to investigate and resolve waterproblems promptly, the Ministry should:•enhance the existing system to highlight allAdverse Water Quality Incidents for managementattention to ensure timely follow-up action; and•promptly update substance concentration limits toreflect new and amended standards.adverse water quality test result. For example, SACstaff can now ensure that the local public healthunit has been contacted and determine whetheran emergency response has been initiated fromthe appropriate ministry district office. In cases ofmicrobiological exceedances, the SAC must makepersonal contact with district office staff to ensurethat appropriate follow-up action is taking place.Field staff must ensure that all required notificationsand corrective actions are undertaken bythe drinking water system owner or operator toensure that the incident is appropriately resolved.Where field staff suspect laboratory discrepancies,they contact the laboratory in question for furtherinvestigation.The Ministry has developed and implementeda risk-based protocol to ensure timely notificationof appropriate staff and senior management whenAWQIs occur. This protocol formalizes the businessrelationships between the SAC, the Safe DrinkingWater Branch, and the Operations Division at boththe regional and district levels to ensure promptand appropriate responses, including on-site investigation.The protocol deals with the full range ofpotential AWQIs, the required written and verbalnotifications both during and after normal workinghours, and what ministry actions are required tofollow up on and resolve the incident.The Ministry has also advised us that procedureshave been put in place to ensure that newstandards, once brought into effect through a newor amended regulation, are input into DWIS on atimely basis. Specifically, when the EnvironmentalSciences and Standards Division informs theDrinking Water Management Division of a new oramended limit and its effective date, the requiredupdates are performed by a database administrator.Current StatusThe Ministry reported that the AWQI module inDWIS has been enhanced to ensure that additionalinformation is provided for reporting of anReporting of Adverse Water Quality IncidentsRecommendationTo ensure that all serious water problems are corrected,the Ministry should consider incorporating

Environet339a follow-up reporting/resolution module within theDrinking Water Information System that would provideinformation to management about incident resolutionfor each Adverse Water Quality Incident.Current StatusThe Ministry informed us that when an AWQIoccurs, the SAC records both the verbal and writteninformation provided by the laboratory andthe drinking water system owner into DWIS. Theinformation is automatically transferred to the Ministry’sIntegrated Divisional System (IDS), and anincident report is automatically generated. Completedetails of the resolution of all AWQIs are currentlycaptured in IDS. Closure of the AWQI reportrequires the submission of a Notice of Issue Resolutionby the drinking water system owner, and newdrinking water system regulations effective May2003 require reports to be submitted to the Ministryfor every AWQI no later than seven days afterthe issue has been resolved. The AWQI module ofDWIS now includes the ability to record when thiswritten notice has been received, and DWIS cangenerate reports to inform management on the statusof these reports.Hazardous Waste Information Network(HWIN)RecommendationTo ensure that all hazardous waste movements areproperly monitored to minimize the risk to the public,the Ministry should:•develop and deliver an ongoing incentive, conversion,and communication strategy to promote theadoption of electronic manifests by the hazardouswaste industry; and•develop Hazardous Waste Information Networkanalytical and reporting tools that provide summaryinformation related to the generation andmovement of hazardous waste and help identifypotential problems warranting follow-up.Current StatusThe Ministry informed us that Hazardous WasteInformation Network (HWIN) outreach activitieshave been completed to determine why industryusers are not using electronic manifests. Ninemeetings were held with key clients from fall 2003through fall 2004. A summary of stakeholder concernshas been compiled for consideration as partof a comprehensive overhaul of the HWIN programonce an anticipated waste regulation review initiativeis announced.The Ministry informed us that developmentwork continues on the HWIN reporting function.Two exception reports have been operational forsome time and are generated to provide informationregarding uncertified carriers and receivers, aswell as carriers and receivers that carry or receiveuncertified waste. These reports are provided tothe appropriate district office for follow-up. Ministrystaff can also extract a number of informationreports from the HWIN system to obtain such detailsas company registration, status, and site information;payment and other financial transaction details; andinformation on manifests recording the movementof hazardous waste.As of May 15, 2005, generator exception reportswere available from the HWIN. HWIN carrier andreceiver exception reports have been developedand are in the final stages of testing. At the time ofour follow-up, these reports were anticipated to beavailable at the end of September 2005. The full setof exception reports for generators, carriers, andreceivers are available through the older HWIS system.These reports will be used by ministry staff tofollow up on problems identified. It is intended thatHWIN will identify potential exceptions in the samemanner as the older HWIS system does, with theaddition of generator exception reports. Full implementationof these and other improvements, suchas those suggested through the outreach initiative,will occur as part of the comprehensive overhaulChapter 4 • Follow-up Section 4.08

3402005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.08once the anticipated waste regulation review initiativeis announced.Ministry staff are currently in the process of followingup on suspected violations from the 2004exception reports and are using exception reportdata as part of the risk assessment process to determinewhich facilities are candidates for inspectionor alternative enforcement or abatement activity forthe 2005/06 fiscal year.Registration of Hazardous Waste FacilitiesRecommendationTo ensure that all hazardous waste is moved inaccordance with regulatory standards, the Ministryshould:•registered;•by unregistered generators; and•ensure all active hazardous waste generators areinvestigate hazardous waste movements initiatedinvestigate hazardous waste movements where thegenerator, carrier, or receiver is not authorized tohandle the waste type.Current StatusThe Ministry informed us that registrations werereceived from 72% of all known generators duringthe January 1 through February 15, 2005 registrationperiod. Compared to 2004, this represents anincrease of 22% in the number of generators whoregistered within the legislated time frame. Pastministry practice was to send out three remindernotices, but in 2005 more than 16,000 fourthnotices and, commencing February 24, more than11,000 fifth notices were either emailed or sent byregular mail to known generators who were not yetregistered. The fifth notice advised these generatorsthat the 2005 registration period had passed, thatthese generators’ registrations had now expired,and that they might be in violation of Ontario’swaste management regulations. The Ministryalso informed us that the registration system hasbeen streamlined and made easier to understand,reducing the number of calls to the Ministry’s helpdesk during the registration period by approximately50% compared to the same period in 2004.The Ministry informed us that HWIN-basedinformation documenting waste shipments generated,carried, or received without proper authorizationcontinues to be developed. Generatorexception reports are now available, while carrierand receiver exception reports are not yet availablefrom HWIN but can still be produced through theolder HWIS system. Full exception reports for carriersand receivers were expected to be available laterin 2005.Unauthorized waste movements are investigatedthrough a variety of means, including HWISor HWIN exception reports provided to district stafffor follow-up, the receipt of a complaint regardingwaste management activities, or as a result ofobservations made during proactive inspectionsof waste generators and receivers by district staff.Through the use of exception reports, the Ministryidentified a total of 156 receiver exceptions and 187carrier exceptions for the 2004 calendar year. Theseexception reports are currently being reviewed andare being provided to the district offices for appropriatefollow-up. Where violations are confirmed,the incident will be referred to the Ministry’s Investigationsand Enforcement Branch (IEB) for furtherenforcement action.The Ministry further informed us that, in additionto following up on exception reports, it remainscommitted to undertaking inspections of hazardouswaste facilities. Since January 2003 it has undertakenover 1,470 inspections at sites where hazardouswaste is either generated or received. Overtwo-thirds of these sites were found to be in regulatorycompliance, with no environmental or humanhealth concerns being identified. The Ministry initiatedabatement activities for the remaining onethird,where non-compliance was found. Theseabatement activities ranged, depending on thenature and severity of the problem identified, from

Environet341scheduling the site for re-inspection at a later date,to requiring the site owner to develop voluntaryabatement measures, to issuing an order requiringthe company to take specific action, to issuing anoffence notice and referring the case to the IEB.INSPECTIONS AND MANAGEMENTINFORMATION SYSTEMSRecommendationTo ensure inspection coverage is risk-based and thatinspection resources are allocated most efficiently, theMinistry should:•develop Environet reports that analyze the stateof Ontario’s environment and compliance withits regulations so that inspection resources canbe allocated based on the greatest risks to humanhealth;•re-assess waterworks inspection coverage to ensuremore non-municipal waterworks are inspected;and•complete the development of a regime for laboratoryinspections to ensure testing standards arebeing met and all Adverse Water Quality Incidentsare reported promptly.Current StatusThe Ministry informed us that it uses the fullsuite of reports and query capabilities generatedthrough DWIS and the Laboratory and WaterworksInspection System (LWIS), as well as informationgathered from across other program areas, as aidsto its work-planning and priority-setting and inits targeting of drinking water systems that maybe non-compliant, particularly in areas relatedto the protection of human health. According tothe Ministry, the combined capabilities of DWIS,LWIS, and other systems such as IDS have allowedit to become more efficient at identifying drinkingwater health risks across the province. These technologieshave facilitated the implementation of anew risk-based approach to proactive inspectionsfor municipal drinking water systems. For example,by running queries on LWIS, the Ministry determineswhich municipal systems are eligible for anew Focused Inspection Protocol. A municipal systemis eligible for such focused inspections if it hasbeen fully inspected with no noted deficiencies forthree consecutive years. Because of their demonstratedlower risk, the scope of inspections at suchfacilities is reduced, thereby allowing inspectors tospend more time on higher-risk systems.Inspectors also use DWIS before an inspection toreview the facility’s AWQI history to identify areasrequiring close attention. In future, the Ministryplans to share or merge data between LWIS andDWIS, thereby enabling AWQI information to beavailable in LWIS. When this capability is in place,a system that is eligible for a focused inspectionbut has a significant history of AWQIs may have itsfocused inspection supplemented with additionalelements from the more detailed inspection protocolto address additional areas of potential risk.In addition, the Ministry informed us that a linkbetween Environet and IDS has also been completed,facilitating the transfer of IDS data intothe Environet system. The Ministry is planningto develop compliance and enforcement reportsusing these new data, and is also developing a businessintelligence tool to further support the drinkingwater program. Environet reports will also beinstrumental in fulfilling new legislative requirementsfor preparing the Chief Drinking WaterInspector’s annual report on the overall performanceof drinking water systems in Ontario.For non-municipal systems, the Ministry advisedus that it is currently developing a comprehensiverisk-based compliance strategy. Key to this strategyis the advice received from the Advisory Councilon Drinking Water Quality and Testing Standardsestablished by the Minister in 2004. The Council’sreport, released in February 2005, made a numberof recommendations, including the development ofrisk-based, site-specific approaches for municipalnon-residential, non-municipal seasonal residential,Chapter 4 • Follow-up Section 4.08

3422005 Annual Report of the Office of the Auditor General of Ontarioand non-municipal non-residential systems; andthat the responsibility for these systems be transferredto the public health units. A working groupof Ministry of Health and Long-Term Care and Ministryof Environment staff is currently working tofinalize the strategy.With respect to laboratory inspections, the Ministryinformed us that it has developed and implementeda laboratory licensing and inspectionprogram, and the inspection program has beenoperational since October 2003. All licensed laboratoriesperforming drinking water testing are subjectto inspection, and a laboratory inspection protocoldocument has been developed and is being used bylaboratory inspectors to ensure regulatory compliance.The Ministry conducts pre-planned inspections(which may be announced in advance or takeplace on a surprise basis), and also conducts inspectionsin response to suspicions or allegations ofnon-compliance.Chapter 4 • Follow-up Section 4.08

Chapter 4Section4.09Ministry of Health and Long-Term CarePublic Health ActivityFollow-up to VFM Section 3.09, 2003 Annual ReportBackgroundUnder the direction of the Chief Medical Officerof Health, the Ministry’s Public Health Division’sresponsibilities include administering the PublicHealth Activity. The primary legislative authoritygoverning the Activity is the Health Protectionand Promotion Act. During the 2004/05 fiscal year,the Ministry provided approximately $275 million($240 million in 2002/03) to 37 local health units,primarily for the delivery of mandatory health programsand services.We concluded in our 2003 Annual Report thatthe Ministry did not have adequate procedures toensure that its expectations for public health werebeing met in a cost-effective manner. In particular,we were concerned that the Ministry had not analyzedthe extent to which individuals received differinglevels of service or were exposed to differinglevels of risk depending on where in Ontario theylive. For instance, in 2002, per capita funding formandatory health programs and services rangedfrom approximately $23 to $64 among the 37 localhealth units.The Ministry had conducted virtually no regularassessments in the previous five years to determinewhether the health units were complying with theguidelines for mandatory programs and services.Such assessments were recommended in the Reportof the Walkerton Inquiry. Some of the other matterswe noted included the following:•None of the 33 local health units reportinginformation to the Ministry had conducted thenecessary inspections of all of the food premiseswithin their jurisdiction. In fact, 13 of the33 local health units had only conducted therequired inspections for less than 50% of thehigh-risk premises in their jurisdictions. Fourlocal health units did not report theirinformation.•Seventeen out of 25 local health units that providedinformation to the Ministry reported thatless than half of the high-risk food premises intheir jurisdictions had food handlers who hadthe required training to help recognize and preventrisks associated with food-borne illnesses.• In 2001, local health units inspected onlyapproximately 60% of Ontario’s tobacco vendorsto verify compliance with the Mandatory HealthPrograms and Services Guidelines regardingsales to people under the age of 19.•In 2001, only 65% of individuals identified asrequiring medical surveillance for tuberculosiswere successfully contacted and managedby local health units in accordance with theMinistry’s Tuberculosis Control Protocol. Also,we were informed that nine local health unitswould provide a letter for immigrants withinactive tuberculosis to verify that the individualswere complying with federal medicalChapter 4 • Follow-up Section 4.09343

3442005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.09surveillance requirements, even though the individualshad not had the physical examinationand x-ray required by the federal guidelines.•The limited information the Ministry had withrespect to immunization indicated that at least14% of children had not had all required vaccinationsby age seven.•The Ministry lacked accurate and timely informationon communicable diseases and immunization,limiting its ability to identify and takeany necessary action.•The Ministry had not yet developed a processto ensure that local health units were conductingrisk assessments of and taking appropriateaction against the West Nile virus.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information received from the Ministryof Health and Long-Term Care between Februaryand May 2005, some progress has been madein addressing all of the recommendations in our2003 Annual Report, with significant progress beingmade on several. The current status of action takenon each of our recommendations is as follows.FUNDINGRecommendationTo help it meet its objectives for the Public HealthActivity, the Ministry should ensure that individualswith similar needs and risks receive a similar level ofservice regardless of where in the province they live.To help ensure that provincial funding is allocatedon a consistent basis, the Ministry should provideclear guidance on what constitutes an eligible publichealth expenditure.Current StatusThe Ministry advised us at the time of our followupthat improved equity in public health servicesacross Ontario would be facilitated through increasingthe province’s share of public health costs from50% to 75% by the year 2007, as announced in the2004 Ontario Budget.In addition, a new Financial Planning andAccountability Guide, issued in February 2005,clarified the Ministry’s funding policy and providedsome guidance on what constitutes an eligiblepublic health expenditure. The Ministry indicatedthat the revised Guide will ensure more consistencyamong public health units’ grant requests andrelated reporting.In January 2005, the Ministry established aCapacity Review Committee to advise the Ministryon ways to improve the public health system. TheMinistry informed us that as part of this review, theCommittee is expected to make recommendationson an evidence-based approach to public healthfunding, with a modernized and needs-based allocationmethodology. The Committee’s final report isexpected in December 2005.COMPLIANCE WITH LEGISLATION ANDGUIDELINESRecommendationTo help ensure compliance with legislation and theMandatory Health Programs and Services Guidelines,the Ministry should:•establish more valid measures for assessing theperformance and overall effectiveness of publichealth programs and services delivered by localhealth units;•information reported by local health units; and•periodically verify the reliability of the complianceensure that every local health unit has a full-timemedical officer of health as required by legislation.

Public Health Activity345Where local health units are using other measurementtools, such as accreditation, the Ministry should:• obtain any resulting reports and analysis; and• assess whether any of these tools should be used byall local health units.Current StatusThe June 2004 Operation Health Protection actionplan includes a review of the Mandatory HealthPrograms and Services Guidelines, whose measuresfor assessing the performance and effectiveness oflocal health units in delivering programs and serviceswere found to be problematic in 2002. TheMinistry informed us that the review was to ensurethat the Guidelines are consistent with needs, bestpractices, and lessons learned from Ontario’s experiencewith Walkerton, West Nile virus, andSARS. The Ministry also informed us that a performancemeasurement system for local healthunits was being introduced in 2005, whereby thelocal health units are to be monitored against performancemeasures in order for the Ministry toassess local-health-unit performance and overallprogram effectiveness.As well, the Ministry is planning to seekapproval in the 2005/06 fiscal year to create anenhanced program to conduct more comprehensiveassessments and to measure the performance oflocal health units. The program is to include verifyingthe compliance information reported by localhealth units.The Ministry indicated that a Local PublicHealth Capacity Review, included in the June2004 Operation Health Protection action plan, isto include an approach to addressing the requirementsfor and availability of medical officers ofhealth. The report resulting from the Review isexpected by December 2005.As well, the Ministry stated that it had conductedan in-depth review of accreditation as itpertains to the accountability framework for publichealth and that the resulting options analysis documentwould be considered as part of the Local PublicHealth Capacity Review. The Review report isalso to address whether the Ministry should obtainthe results of accreditation or other measurementtools used by local health units.FOOD SAFETYInspection of Food PremisesRecommendationTo help minimize the risk to the public of food-borneillnesses, the Ministry should ensure that local publichealth units are conducting the required inspectionsand Hazard Analysis Critical Control Point Protocolaudits of food premises to ascertain whether foodpremises are complying with acceptable public healthpractices.Current StatusThe Ministry indicated that at the time of our followupit was continuing to collect information annuallyfrom local health units on the completion of inspectionsand Hazard Analysis Critical Control PointProtocol audits. It informed us that data collectedto date showed that more inspections and auditswere now being completed. Also, the Ministry nowrequests explanations from those local health unitswhose results fall below average.Food-handler TrainingRecommendationTo help minimize the risk to the public of food-borneillnesses, the Ministry should:•food-handler-training requirements;•ensure that public health units are complying withassess the risk of not requiring trained food handlersat food premises using fewer than threeemployees to prepare food; and•determine whether food-handler training shouldbe legislated.Chapter 4 • Follow-up Section 4.09

3462005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.09Current StatusThe Ministry informed us that, as a first steptowards ensuring compliance with food-handlertrainingrequirements, its review of the MandatoryHealth Programs and Services Guidelines wouldinclude a review of the Food Safety Program. Wewere advised that, in this regard, the Federal, Provincialand Territorial Committee on Food SafetyPolicy was in the process of determining whatfood-safety-training criteria to adopt, which wouldin turn help shape the Ontario model for foodsafetytraining and certification. As well, ministrystaff were in ongoing discussions with stakeholdersregarding mandatory food-handler trainingand certification and were also reviewing the FoodPremises Regulation under the Health Protectionand Promotion Act to determine the implications ofintroducing into the legislation mandatory foodhandlertraining and certification for high- andmedium-risk food premises.TOBACCO CONTROLRecommendationTo improve tobacco control in Ontario and therebyhelp achieve the Ministry’s goal of reducing prematuremortality and morbidity from preventable chronicdiseases, the Ministry should:•ensure that local health units work towardsthe goal of reducing the number of minors havingaccess to tobacco products by conducting therequired number of inspections and compliancechecks; and•determine whether changes to legislation wouldassist the Ministry and local health units in bettermeeting tobacco control objectives.Current StatusIn June 2005, legislation was passed that will makeworkplaces and public places smoke-free throughoutOntario and will strengthen controls on youthaccess to tobacco. The Ministry informed us thatthe number of compliance checks that local healthunits are required to conduct would be increased. Inaddition, at the time of our follow-up, the Ministryinformed us that increased tobacco enforcementtraining and support occurred in 2004 and would beexpanded substantially in 2005. Additional fundingwas approved for a comprehensive Ontario tobaccostrategy that is committed to preventing youthfrom starting to smoke, helping people who smoketo quit, and protecting the public from the healtheffects of second-hand smoke.TUBERCULOSIS CONTROLMedical SurveillanceRecommendationTo help reduce the incidence of active tuberculosis, theMinistry should enhance the effectiveness of medicalsurveillance by:•ensuring that local health units consistently andappropriately complete the medical surveillanceof individuals with inactive tuberculosis, includingensuring that they have undergone a physicalexamination and x-ray; and•using all available sources of information, includingthe Ontario Health Insurance Program’s RegisteredPersons Data Base, to track those individualsunder medical surveillance who were not successfullycontacted and managed by local health units.Current StatusThe Ministry informed us that it held a teleconferencewith local health units in spring 2004 toreinforce the medical surveillance requirementsof the Ministry’s Tuberculosis Control Protocol,which includes a requirement that individuals withinactive tuberculosis who are referred for medicalsurveillance undergo a physical examination andan x-ray. In addition, the Ministry indicated thatan electronic database was set up in March 2004to capture information about medical surveillancereporting and that changes were made to theReportable Disease Information System in June

Public Health Activity3472004 to capture compliance requirements. In thisregard, the Ministry informed us that it conductsregular monitoring to ensure that local health unitsupdate these information systems within establishedtime frames. As well, the planned implementationof the Integrated Public Health InformationSystem across all local health units by December2005 should improve the follow-up of persons onmedical surveillance, since it would enable the localhealth units to access tuberculosis data from otherOntario local health units.The Ministry also informed us that a process isbeing finalized for locating individuals on medicalsurveillance by accessing their addresses withouttheir consent from the Ontario Health Insurance Program’sRegistered Persons Data Base. The addressand other information to help locate an individualwill be available once all other possibilities for contactingthe individual have been exhausted.Contact TracingRecommendationTo help monitor the effectiveness of tuberculosis controlin reducing the risk of spreading active tuberculosis,the Ministry should obtain more complete informationon the results of tuberculosis contact tracing bylocal health units.Current StatusThe Ministry indicated that consultations with theappropriate parties were ongoing to ensure thatcomplete contact tracing information would be capturedin the previously mentioned Integrated PublicHealth Information System, which was expected atthe time of our follow-up to be fully implementedby December 2005.TreatmentRecommendationTo help prevent the spread of drug-resistant tuberculosis,the Ministry should develop and implementstrategies to better ensure that all patients actuallycomplete the required treatment.Current StatusThe Ministry indicated that it was reviewing thecriteria used by local health units for placing individualswith tuberculosis on Directly ObservedTherapy (DOT) and that it expected to issue a newDOT assessment tool to local health units in August2005. In addition, the Ministry stated that treatmentcompletion data were being compiled andanalyzed monthly and that local health units werebeing contacted to update the Reportable DiseaseInformation System as necessary. These data are tobe captured in the Integrated Public Health InformationSystem once it is implemented.The Ministry noted that treatment completiondata were not being entered in the Reportable DiseaseInformation System after an individual leftOntario. Therefore, the Ministry was developingat the time of our follow-up an inter-jurisdictionalform, expected to be finalized in late fall 2005,for local health units to obtain information on thetreatment of patients who have moved outside ofOntario.VACCINE-PREVENTABLE DISEASESVaccines CoveredRecommendationTo help reduce the incidence of vaccine-preventable diseases,the Ministry should ensure that other vaccinesrecommended by the National Advisory Committee onImmunization are added to Ontario’s routine immunizationprogram unless sound reasons exist for notincluding the recommended vaccines.Current StatusSince our 2003 audit, three new publicly fundedvaccines have been added to the recommendedschedule of routine childhood immunizations. TheMinistry indicated at the time of our follow-up thatit was continuing to review the National AdvisoryChapter 4 • Follow-up Section 4.09

3482005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.09Committee on Immunization’s recommendationsfor new vaccinations.ImmunizationRecommendationTo help achieve its goal of reducing the incidence ofvaccine-preventable diseases, the Ministry shouldmore effectively monitor the immunization statusof children to ensure that all school-aged childrenhave had the required vaccinations. To this end, theMinistry should ensure that it has an immunizationregistry that provides complete, accurate, and timelyimmunization information.Current StatusThe Ministry informed us that it was in the processof preparing a comprehensive plan, with timelinesfor the development and implementationof an immunization information system. In thisregard, the Ministry indicated that it is workingwith Canada Health Infoway, a federal corporationwith a mission to foster and accelerate the developmentand adoption of electronic health informationsystems. Until a new immunization systemis implemented, the Ministry continues to use itsImmunization Record Information System to providesome immunization information. The Ministryindicated that, at the time of our follow-up, this systemincluded immunization coverage data up to the2001/02 school year. The Ministry expected thatcoverage data up to the 2003/04 school year wouldbe included by September 2005.In addition, the Ministry was continuing to participatein the Canadian Immunization RegistryNetwork, a federal/provincial/territorial workinggroup that makes recommendations for nationallyconsistent data and standards for immunizationregistries.Influenza VaccineRecommendationTo help determine the effectiveness of the universalinfluenza immunization program, the Ministryshould evaluate whether the program is meeting itsobjectives of decreasing the number of cases and severityof influenza and reducing the impact of influenzaon emergency room visits and other areas of thehealth-care system.Current StatusThe Ministry indicated at the time of our followupthat a formal evaluation of the universal influenzaimmunization program had commenced andwould be completed in two phases over a number ofyears. Results from Phase 1 are expected by February2006, and Phase 2 results are expected in spring2010. The results of the evaluation are expectedto provide information on whether the program isreducing the burden of influenza in Ontario.Vaccine WastageRecommendationTo help limit vaccine wastage, the Ministry shouldobtain accurate and complete information about vaccinewastage and take appropriate action to reducewastage.Current StatusIn October 2003, the Ministry issued revised guidelinesto improve vaccine storage and handling andthereby reduce wastage. In addition, the Ministryinformed us at the time of our follow-up that it wastracking vaccines that were not maintained at thecorrect temperature and therefore resulted in vaccinewastage. The Ministry indicated as well thatrequirements for vaccine inventory managementwere to be included in the comprehensive plan forthe previously mentioned proposed immunizationinformation system.

Public Health Activity349WEST NILE VIRUS CONTROLRecommendationTo facilitate an effective response to West Nile virus bylocal health units, the Ministry should ensure that:•local health units comply with the Control of WestNile Virus regulation and other guidance providedby the Ministry, including conducting riskassessments;•local health units carry out West Nile virus interventionsin a cost-effective manner based on theresults of local risk assessments; and•there is an electronic system in place to record andreport all cases of the West Nile virus on a timelybasis.Current StatusThe Ministry indicated at the time of our follow-upthat its monitoring of local health units for compliancewith the Control of West Nile Virus regulation,including monitoring of risk assessments, wasongoing.In response to the second part of the recommendation,the Ministry indicated that it revieweddetailed budget reporting templates for all localhealth units to determine the cost-effectiveness oftheir West Nile virus–related activities. In addition,the Ministry held West Nile virus teleconferenceswith local health units to help them in their virusinterventions, while routinely receiving mosquitodata during 2004. As well, the Ministry stated thatit had been working with the Public Health Agencyof Canada and the Ministry of the Environment tokeep up to date on effective West Nile virus surveillance,prevention, and control measures. The Ministryshares this information with the local healthunits.The Ministry also advised us that the ReportableDisease Information System was updated in 2004to include human cases of West Nile virus. As well,all reported cases of West Nile virus are able to betracked in the Integrated Public Health InformationSystem expected to be implemented by December2005.INFORMATION SYSTEMSRecommendationTo help ensure that timely, consistent, and integratedinformation is available to deliver public healthservices across the province, the Ministry shouldimplement, either in conjunction with the federal/provincial/territorial initiative to implement an automatedpublic health information system or independently,an adequate public health surveillance systemfor communicable diseases and immunization.Current StatusThe Ministry indicated that, as previously mentioned,it was expecting to have the Integrated PublicHealth Information System implemented acrossall local health units by December 2005. The systemwas piloted in two local health units as wellas at the Ministry, and enhancements were undertakenfor outbreak management, contact tracing,and quarantine management. Also, as previouslymentioned, a comprehensive plan for the developmentand implementation of a new immunizationinformation system, which is to include timelinesfor various aspects of the plan, was being developedat the time of our follow-up.Chapter 4 • Follow-up Section 4.09

Chapter 4Section4.10Ministry of Training, Colleges and UniversitiesOntario StudentAssistance ProgramFollow-up to VFM Section 3.10, 2003 Annual ReportChapter 4 • Follow-up Section 4.10BackgroundThe Ontario Student Assistance Program (OSAP)is a provincially administered and federally andprovincially funded program that provides needsbasedfinancial assistance to full-time students toenable them to attend an approved postsecondaryschool. The objective of OSAP is to help studentsfrom lower-income families meet the costs of postsecondaryeducation so that all qualified studentscan have access to postsecondary education.For the 2004/05 fiscal year, provincial OSAPexpenditures totalled $327 million ($356 millionin 2002/03). These expenditures include defaultclaims on loan guarantees, loan forgiveness grants,interest subsidies while students are attendingschool, interest relief during the repayment stage,and various need- and merit-based bursaries andscholarships.In our 2003 Annual Report, we concluded that,since our 1997 audit of OSAP, the Ministry hadtaken action to address a number of our recommendationsand significantly improve the overalladministration of the program. Notwithstandingthese improvements, there were several areaswhere further action was required. In particular:• The Ministry had paid about $2 million moreannually in interest costs and risked at least$6 million more in annual default costs than itshould have because some loan advances to studentswere paid earlier than necessary; exceptin cases where students had significantly underreportedtheir income, its repayment policiesfor loan overpayments were too permissive; andthere was a lack of effective monitoring of academicstatus changes by postsecondary schools.Effective monitoring would have reduced students’financial assistance; the lack of suchmonitoring caused the Ministry to pay loan forgivenessgrants to students who were not eligibleto receive them.•Our own analysis to identify instances and patternsof reporting errors or abuse by studentsrevealed unlikely circumstances that the Ministryought to have questioned, such as studentsor parents reporting in their applications anincrease of three or more dependent childrenfrom the previous year.•The Ministry could have further reduced thecost of defaulted student loans by several milliondollars by making greater use of defaultmanagement practices successfully employedin other jurisdictions. It had also not referredat least 60,000 additional defaulted loans on350

Ontario Student Assistance Program351which collection efforts had been unsuccessfulto the Canada Customs and Revenue Agency,which would have collected the outstandingamounts from any future income tax refundsowing to the individuals with the defaultedloans.We made a number of recommendations forimprovement and received commitments from theMinistry that it would take action to address ourconcerns.Current Status ofRecommendationsAccording to information obtained from the Ministryof Training, Colleges and Universities, the Ministryhas taken some action on all of the recommendationswe made in our 2003 Annual Report. Thecurrent status of action taken on each of our recommendationsis as follows.DETERMINING ELIGIBILITY AND LOANENTITLEMENTSVerifying IncomeRecommendationTo ensure that efforts to verify incomes reported onapplications are effective and timely, the Ministryshould:•analyze the results of income verification to ascertaintrends, identify cases where it is not workingeffectively, and take any necessary correctiveaction; and•negotiate policy changes that will permit parentaland spousal incomes to be verified at the sametime.Current StatusAfter our 2003 audit, the Ministry indicated thatit had undertaken further analysis and determinedthat under-reporting of income is one ofthe primary causes of overpayments. The Ministryamended OSAP regulations under the Ministry ofTraining, Colleges and Universities Act to specifythe circumstances under which the Minister mayplace restrictions on future eligibility for studentloans, including instances where incorrect informationwas provided by a student. We were advisedthat the Ministry was still defining the process tobe followed on how to consistently deal with loanoverpayments that were the result of studentsunder-reporting their income or the income of theirparents or their spouses.The Ministry is working on a Memorandum ofUnderstanding with the federal government toaddress income verification. Since the Ministry hasacknowledged that the under-reporting of incomeis one of the primary causes of overpayments,requiring income reporting and appropriate periodicverification of income reported by studentswho are receiving ongoing loan assistance is a criticalinternal control.The Ministry indicated that changes in policyregarding income verification must be negotiatedwith the federal government, that it has held discussionswith the federal government on incomeverification, and that the negotiations are still inprocess. According to the Ministry, the specific issueof verifying spousal income at the same time thatparental income is verified was raised in February2005. At the time of our follow-up, this issue wascontinuing to be negotiated in conjunction with thefederal government’s review of the methodology forneeds assessment, and a working group had beencreated with representatives from the federal governmentand other provinces to address this issue.The Ministry advised us that it had not yet finalizedwhat actions would be taken against studentswho under-report income and that it would continueto actively investigate the most serious casesof significant under-reporting.Chapter 4 • Follow-up Section 4.10

3522005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.10Calculating Entitlements Where ApplicantsReport Income from Social AssistanceRecommendationTo properly determine entitlements in cases wherespousal income includes social assistance as a sourceof income, the Ministry should correct existing loanapplicationprocessing procedures so that other significantreported income sources are considered.Current StatusIn its 2003 response to this recommendation, theMinistry indicated that it would insert additionaledit checks when processing 2004/05 loan applications.However, we were advised during our follow-up that, due to the low numbers of occurrenceswhere spousal income includes social assistance,the Ministry is monitoring the individual occurrencesthrough manual verification checks.The Ministry advised us that since March 2005,it has also been examining ways of improving thedata match agreement with the Ministry of Communityand Social Services in order to identify individualswith social assistance income.REDUCING STUDENT LOANOVERPAYMENTSRecommendationTo minimize the occurrence and size of loan overpaymentsand to reduce the related interest and defaultcosts, the Ministry should:•analyze loan overpayments yearly to determinethe main reasons for them and take correctiveaction based on the results;•closely to students’ cash flow requirements;•match the timing of loan disbursements moreensure that all Financial Aid Offices monitor students’academic status during the entire year andpromptly record any changes to that status on theOSAP information system in accordance with ministryexpectations; and• consider limiting the amount of loan overpaymentthat a student who has not reported accurateinformation to the Ministry is permitted to retain.Current StatusAt the time of our follow-up, the Ministry hadreviewed the reasons for loan overpayments, hadcommunicated this information to the federalgovernment, and had indicated that OSAP policychanges and extensive negotiations with the federalgovernment would be required to address the reasonsfor overpayments. The Ministry informed usthat it was proposing to investigate serious cases ofincome under-reporting and would use the resultsof the investigation to determine future policy work.With respect to adjusting the timing of loan disbursements,we were advised that a request for proposalswould be issued in fall 2005 by the federalgovernment for a loan service provider that couldalso make monthly loan disbursements. The Ministryindicated that, subject to ministerial approvaland the successful selection of a service provider, itwould move to monthly disbursements of studentloan funding. The earliest possible date for initiatingmonthly disbursements would be the 2006/07academic year.In September 2004, the Ministry posted areminder to financial aid administrators on its websitethat changes identified when they confirm astudent’s enrolment are to be processed on a timelybasis to ensure that student accounts are reassessedand updated appropriately. In November 2004, theMinistry posted an additional reminder to financialaid administrators that they are required to monitorstudents’ academic status for the purpose of releasingloan funding appropriately.In this regard, the monitoring of students’ academicstatus was found to be one of the main deficienciesfound in compliance audits completedat public institutions in 2004 for the 2001/02academic year. As a result, the Ministry formedan audit working group, consisting of financialaid administrators and ministry personnel, to

Ontario Student Assistance Program353identify best practices and disseminate them to allinstitutions.With respect to limiting the amount of loanoverpayments students can retain, the federal governmentwas seeking approval to include a provisionin the Canada Student Financial AssistanceRegulations that would give the federal Ministerauthority to recover amounts of loans and/or grantsissued to students that exceeded the amounts theywere entitled to. The Ministry advised us that it wasclosely monitoring the federal initiative and will beassessing whether the federal changes are practicaland reasonable for Ontario to implement as well.CONTROLLING ONTARIO STUDENTOPPORTUNITY GRANT PAYMENTSRecommendationTo ensure that only eligible students receive OntarioStudent Opportunity Grants, the Ministry shouldwork with postsecondary schools to identify studentswho reduce their course load to part-time status andstudents who do not formally withdraw from theirprogram but make no attempt to complete the academicyear.MANAGING THE RISK OF PROGRAMABUSERecommendationTo minimize the risk of OSAP abuse by students, theMinistry should use its extensive database to identifyindividual cases of potential abuse and analyze summarystatistics for possible trends warranting investigationand, where necessary, appropriate correctiveaction.Current StatusIn fall 2004, the Ministry completed some preliminaryanalysis on students reporting significantincreases in dependants from the previous academicyear and identified savings in both loansand grants totalling approximately $167,000. TheMinistry is considering a requirement that studentswho report an increase in dependants from oneyear to the next provide supporting documentation.The Ministry informed us that, in view of therecommendations relating to student support programsin the Postsecondary Education Reviewissued in February 2005, it is reviewing the availabilityof resources to undertake further dataanalysis.Current StatusThe audit working group formed by the Ministry in2004, composed of ministry and financial aid officepersonnel, has a mandate to:•discuss and address recent complianceaudit findings that include instances of noncompliancewith Ontario Student OpportunityGrant requirements; and•improve the audit process to ensure that it is costeffective.We were advised that compliance audit guidelines/proceduresfor the 2004/05 academic yearwere to be released in fall 2005.REDUCING DEFAULTED STUDENT LOANSRecommendationTo continue reducing the losses arising from defaultedstudent loans, the Ministry should:•implement best practices used successfully inother jurisdictions to reduce the risk and cost ofdefaulted student loans; and•establish income tax set-off arrangements for alldefaulted loan accounts for which normal collectionefforts have been exhausted.Current StatusThe Ministry has taken additional steps to reduceloan defaults as follows:•The Ontario Debt Reduction in Repayment(DRR) program was implemented in NovemberChapter 4 • Follow-up Section 4.10

3542005 Annual Report of the Office of the Auditor General of OntarioChapter 4 • Follow-up Section 4.102004 to assist borrowers facing exceptionallylong-term financial difficulty by forgiving a portionof their outstanding loan principal, therebylowering their monthly loan payments. The DRRprogram is available to borrowers who havebeen out of school for at least five years andhave exhausted all available periods of interestrelief (that is, six-month periods during whichthe government pays interest on the borrower’sbehalf and borrowers are not required to makeany payments). It is hoped that the student, byhaving a portion of his or her loan forgiven, willbe able to repay the remaining loan instead ofdefaulting on the entire loan amount. Since theprogram was only recently implemented, its successin reducing loan defaults is unknown.•Starting in September 2004, students were ableto check the status of their loan on-line. The goalof this provision is to improve students’ awarenessof their debt levels.•The Ministry informed us that, once a newservice provider is in place, it will negotiate,through the federal government, default managementarrangements with the service providerfor high-risk borrowers who warrant additionalattention.As for arranging for income tax set-off fordefaulted accounts, the Ministry has increased thenumber of accounts subject to this arrangementby 40,000 over the past two years, raising the totalnumber of such accounts from 27,000 to 67,000.EXPANDING PERFORMANCE REPORTINGRecommendationTo evaluate and report on the effectiveness of theOntario Student Assistance Program and strengthenaccountability, the Ministry should establish deadlinesto begin publicly reporting the agreed-upon performancemeasures.Current StatusAt the time of our follow-up, the Ministry was publiclyreporting on graduation and employment ratesof students and loan default rates. The reporting ofthese measures meets the initial reporting requirementsunder the Pan-Canadian Designation PolicyFramework, implemented in November 2004 afterapproval by federal and provincial officials (theFramework guides governments in developing,implementing, and maintaining policies relating tohow designated educational institutions managestudent financial assistance).Ontario has committed to actively participatingin the further development of the Framework,including the creation of additional indicators.At present, the Framework has two indicators forassessing and monitoring the performance of educationalinstitutions. The administrative complianceindicator deals with how appropriately institutionsadminister their student loan programs. The repaymentindicator measures institutional financial riskby calculating student loan repayment rates foreach institution. Institutions assessed to be at moderateor high financial risk are to be identified andgiven repayment-rate performance-improvementtargets and may be subject to specified interventionsand sanctions.A student assistance policy working group, comprisingfederal and provincial representatives, metin February 2005 to review potential student loanprogram performance measures. Further meetingsare to be held during the 2005/06 fiscal year.

Chapter 5Public Accounts of theProvinceIntroductionThe Public Accounts for each fiscal year, endingMarch 31, are prepared under the direction of theMinister of Finance, as required by the Ministryof Treasury and Economics Act (Act). The PublicAccounts comprise the province’s annual report,including the province’s consolidated financialstatements, and three supplementary volumes.The consolidated financial statements of theprovince are the responsibility of the government ofOntario. This responsibility encompasses ensuringthat the information in the statements, including themany amounts based on estimates and judgment, ispresented fairly. The government is also responsiblefor ensuring that a system of control, with supportingprocedures, is in place to provide assurance thattransactions are authorized, assets are safeguarded,and proper records are maintained.Our Office audits the consolidated financial statementsof the province. The objective of our auditis to obtain reasonable assurance that the government’sfinancial statements are free of material misstatement—thatis, that they are free of significanterrors or omissions. The financial statements, alongwith our Auditor’s Report on them, are included inthe province’s annual report.The province’s annual report contains, in additionto the province’s consolidated financial statements,a discussion and analysis section thatprovides additional information regarding theprovince’s financial condition and its fiscal results.Providing such information enhances the fiscalaccountability of the government to both the LegislativeAssembly and the public.The three supplementary volumes of the PublicAccounts consist of the following:•Volume 1 contains the ministry statements anda number of schedules providing details of theprovince’s revenues and expenditures, its debtsand other liabilities, its loans and investments,and other financial information.•Volume 2 contains the audited financial statementsof the significant provincial Crown corporations,boards, and commissions whoseactivities are included in the government’s consolidatedfinancial statements, as well as othermiscellaneous financial statements.•Volume 3 contains detailed schedules of ministrypayments to vendors and transfer-paymentrecipients.Our Office reviews the information in the annualreport and Volumes 1 and 2 of the Public Accountsfor consistency with the information presented inthe consolidated financial statements.The Act requires that, except in extraordinarycircumstances, the government deliver its annualChapter 5355

3562005 Annual Report of the Office of the Auditor General of Ontarioreport to the Lieutenant Governor in Council on orbefore the 180th day after the end of the fiscal year.The three supplementary volumes must be submittedto the Lieutenant Governor in Council beforethe 240th day after the end of the fiscal year. Uponreceiving these documents, the Lieutenant Governorin Council must lay them before the Assemblyor, if it is not in session, make the information publicand then, when the Assembly resumes sitting,lay it before the Assembly on or before the 10th dayof that session. The annual report and three supplementaryvolumes of the Public Accounts for the2004/05 fiscal year were all delivered to the LieutenantGovernor in Council on September 27, 2005and made public on this date, thereby meeting the180-day requirement.The Province’s 2004/05Consolidated FinancialStatementsThe Auditor General Act requires that the AuditorGeneral report annually on the results of the Auditor’sexamination of the province’s consolidatedfinancial statements. I am pleased to report thatmy Auditor’s Report to the Legislative Assembly onthe consolidated financial statements for the yearended March 31, 2005 is clear of any qualificationsor reservations and reads as follows:I conducted my audit in accordance withCanadian generally accepted auditing standards.Those standards require that I planand perform an audit to obtain reasonableassurance whether the financial statementsare free of material misstatement. An auditincludes examining, on a test basis, evidencesupporting the amounts and disclosuresin the financial statements. The audit alsoincludes assessing the accounting principlesused and significant estimates made by theGovernment, as well as evaluating the overallfinancial statement presentation.In my opinion, these consolidated financialstatements present fairly, in all materialrespects, the financial position of the Provinceas at March 31, 2005 and the results ofits operations, the changes in its net debt,and its cash flows for the year then endedin accordance with Canadian generallyaccepted accounting principles.Toronto, OntarioAugust 19, 2005[signed]Jim McCarter, CAAuditor GeneralExpanding the GovernmentReporting EntityChapter 5To the Legislative Assembly of the Province ofOntarioI have audited the consolidated statement offinancial position of the Province of Ontarioas at March 31, 2005 and the consolidatedstatements of operations, change in net debt,and cash flow for the year then ended. Thesefinancial statements are the responsibility ofthe Government of Ontario. My responsibilityis to express an opinion on these financialstatements based on my audit.The “government reporting entity” refers to, collectively,all of the organizations whose activities areincluded in the government’s financial statements.Inclusion in the reporting entity essentially meansthat an organization’s operating results and itsassets and liabilities are consolidated with or otherwiseincorporated into the government’s financialstatements, so that they form part of both the government’sannual deficit or surplus and its accumulateddeficit or surplus.

Public Accounts of the Province357The government’s consolidated financial statementsreflect the accounting standards recommendedby the Public Sector Accounting Board(PSAB) of the Canadian Institute of CharteredAccountants (CICA). As indicated our 2004 AnnualReport, in August 2003, PSAB revised its reportingentitystandard for fiscal years beginning on orafter April 1, 2005. Under the new standard, thedecision of whether to include an organization inthe government reporting entity is to be based onone overall consideration—the extent of governmentcontrol over the organization’s activities. Inessence, if a government controls an organization,that organization should be included as part of thegovernment’s reporting entity. Assessing the degreeof government control is not an exact science andrequires the exercise of professional judgmentregarding the nature of the relationship betweenthe government and the organization. Accordingly,the PSAB standard offers considerable guidance ona number of control indicators to help users of thestandard assess the degree to which governmentcontrol exists in specific situations.As we indicated last year, the governmentcompleted an analysis of the impact of this newstandard on its reporting entity, and in the 2004Ontario Budget announced its intention to add theprovince’s 105 school boards and school authorities,24 community colleges, and 155 hospitals toits reporting entity. Most other provinces are now orwill be including school boards, colleges, and hospitalsin their respective reporting entities. In accordancewith the new standard, these institutions areto be consolidated into the province’s financialstatements for the first time in the 2005/06 fiscalyear.This change will be significant. Effective the2005/06 fiscal year, the province’s annual surplusor deficit will include the impact of these organizations’annual surpluses or deficits, and their netassets or net debts will form part of the province’saccumulated deficit. Transfers to these organizationswill no longer be accounted for as currentexpenses of the government; rather, the accountingwill be contingent on the use of such funds bythe recipient organizations. In particular, any capitalassets acquired or constructed with the capitaltransfers these organizations receive from the provincewill form part of the province’s investment incapital assets and will be amortized over the assets’useful lives.The government is dealing with a number ofissues regarding the consolidation of these organizations.These issues include adjusting for fiscalyear-ends and accounting policies that differbetween the organizations and the province; thevaluation of these organizations’ capital assets;obtaining reasonable assurance that the newlyconsolidated amounts represent bona fide provincialassets, liabilities, revenues, and expenses; andensuring that the presentation and disclosure ofthese consolidated organizations within the government’sfinancial statements is appropriate.Recognizing the challenges posed by its newrequirements, PSAB also approved transitionalprovisions in March 2004 to allow governments totemporarily consolidate any newly included organizationson a “modified equity” rather than a “fullyconsolidated” basis. These provisions are in effectuntil fiscal years beginning on or after April 1,2008. Under the provisions, as long as certain criteriaare met, the new organizations’ accountingpolicies can differ from those of the province,and their total net assets and surpluses or deficitsmay be reflected as a single line item on the province’sstatements rather than having each of theiraccounts combined with the government’s accountson a line-by-line basis.In its 2004 Budget, the government expressedserious concerns about the eventual need to consolidatethese new organizations on a line-by-line basisand expressed its preference that, given the natureof the governance and accountability relationshipbetween the government and these organizations,Chapter 5

3582005 Annual Report of the Office of the Auditor General of OntarioChapter 5modified equity accounting be adopted on a permanentbasis. We will work with the Ministry of Financeto resolve this issue prior to the expiry of the PSABtransitional provisions.Stranded Debt of theElectricity SectorIn the last few Annual Reports, we have discussedthe electricity sector and the government’s effortsto deal with the stranded debt arising out of therecent major reforms occurring in that sector. Theterm “stranded debt” refers to the amount of debtand other liabilities of Ontario Hydro that couldnot be serviced in a competitive environment.When the Ontario Electricity Financial Corporation(OEFC), a new agency of the province, commencedoperations on April 1, 1999, it assumed thestranded debt of $19.4 billion that the province,through OEFC, became responsible for retiring.As at March 31, 2005, the stranded debt, which isincluded in the province’s consolidated financialstatements, was $20.4 billion. The government hasa long-term plan in place to retire this debt solelyfrom dedicated revenue streams derived from theelectricity sector. This long-term plan is updatedannually to reflect current information and assumptions.As with any long-term plan, there is a degreeof uncertainty as to whether forecasted results willbe achieved.The stranded debt includes a liability of approximately$4 billion relating to obligations under certainlong-term power-purchase contracts enteredinto by the old Ontario Hydro. The liability arosebecause, under these contracts, which expire onvarious dates to 2048, the government is committedto purchasing power at prices that are expectedto exceed market prices.In our 2004 Annual Report, we discussed governmentproposals to further reform the electricitysector. One of these proposed reforms was to passlegislation such that the OEFC would receive actualcontract prices rather than market prices from electricityconsumers for power generated under theselong-term contracts. The government was consideringeliminating its $4-billion liability when thislegislation was passed and recording a one-timerevenue gain in the 2004/05 fiscal year. As indicatedin our 2004 Annual Report, we continued towork with the Ministry of Finance and the OEFCduring the current year on this proposed transaction.On March 18, 2005, the Ministry of Financemade an announcement in this regard:After careful review of the impacts of significantreforms in the electricity sector,the government has made a final decisionregarding its treatment of the liability for certainlong-term power purchase agreements.The government has determined that themost cautious and prudent accounting decisionis to eliminate the $3.9-billion liabilityover time, instead of recording the gain in2004/05, Finance Minister Greg Sorbara saidtoday. The Auditor General agrees with thisproposed accounting treatment.This accounting treatment was reflected in theprovince’s consolidated financial statements for theyear ended March 31, 2005.Multi-year FundingIn prior years’ Annual Reports, we have reportedconcerns that we had regarding the government’saccounting and accountability for multi-year funding.In this regard, we believe it essential that theannual operating statements of government properlyreflect revenues and expenditures relating to thefiscal period being measured. When this practice isnot followed and distortions are significant, users of

Public Accounts of the Province359financial statements cannot evaluate a government’sfiscal performance for the year vis-à-vis its budget,assess its revenues earned vis-à-vis its expenditureson government programs, or make useful comparisonsof such information between past and futureperiods or between jurisdictions.Based on a review of a number of transferpaymenttransactions that occurred near the endof this fiscal year, we continue to have concernsin this area. Normally the government providestransfers to its service delivery partners on an asneededbasis. Operating transfers are generally providedover the course of the year as such funds arerequired to finance operations, and capital fundsare normally provided on a cost-recovery basis asthe transfer-payment recipient completes specificstages of a pre-approved capital project. However,just prior to or on March 31, 2005, the governmententered into a number of transfer-paymentarrangements and expensed the amounts involved,thereby increasing the deficit for the year by almost$1 billion more than otherwise would have beenthe case. None of these transfers were originallyplanned for; that is, none had been included in thegovernment’s Budget for the 2004/05 fiscal year,and in many cases, normal accountability and controlprovisions were reduced or eliminated to makethe transfers “unconditional,” thus helping ensurethat they would qualify for immediate expensing.The following provides details of the most significantof these year-end transactions:•In late March 2005, the province entered intotransfer-payment contract agreements with anumber of school boards, colleges, and universitieswhereby $722 million was to be provided onan immediate basis to fund a number of futureinitiatives, many of them unspecified, relatedto such areas as research, technological educationand equipment, the professional needsof teachers and support staff, school libraries,special education, apprenticeship programs,and deferred maintenance. The amounts wereexpensed immediately, with the funds beingprovided shortly after the year-end.•In late March 2005, the province entered intoagreements with a number of hospitals to provideimmediate transfers of $184 million for variousfuture capital projects. Again, the amountswere immediately expensed, with the moneyprovided shortly after the year-end.•On March 31, 2005, the province terminated along-term funding agreement with the City ofHamilton related to the Red Hill Creek Expresswayand entered into a new agreement wherebyit immediately paid out all of its remaining commitmentsunder the project, which amounted to$36 million. Government documents indicatethat a key reason this was done was to “createfinancial flexibility” for the province.•On March 29, 2005, the government introduceda transition fund for tobacco farmers and enteredinto an agreement with the Ontario Flue-CuredTobacco Growers’ Marketing Board to provide a$35-million unconditional grant to help tobaccogrowers exit the tobacco industry. The fundswere immediately expensed and provided shortlythereafter as an “emergency” payment.None of these funds were spent providing education,health care, or other services to Ontariansin the 2004/05 fiscal year; rather, they will be spentin future years. However, under the current generallyaccepted accounting principles as promulgatedby the Canadian Institute of Chartered Accountants(CICA), unconditional transfers of this nature canbe recorded as expenses in the current year.The CICA has recognized that current publicsectorstandards addressing transfers of this naturegive governments considerable latitude in accountingfor such transfers. A CICA Task Force has beenestablished to study the issue, and the work ofthe Task Force is nearing completion. We haveexpressed our concerns on this issue to the TaskForce, and we are hopeful that, once approved bythe CICA’s Public Sector Accounting Board, the newChapter 5

3602005 Annual Report of the Office of the Auditor General of OntarioChapter 5standards in this area will provide valuable guidanceto both financial statement preparers andauditors in accounting for transfers of this nature.With the adoption of the expanded governmentreporting entity for the 2005/06 fiscal year, transfersof this nature to hospitals, school boards, andcolleges will not have an impact on the province’sannual surplus or deficit.Accounting for Capital AssetsIn January 2003, the Public Sector AccountingBoard (PSAB) revised a 1997 standard setting outrules for the recognition, measurement, amortization,and presentation of capital assets in a government’sfinancial statements. Until recent years,most governments, including that of Ontario, hadcharged to operations 100% of the cost of capitalassets in the year such assets were acquired or constructed.The revised standard recommends that,similar to the approach taken in the private sector,the cost of capital assets be recorded as assets ingovernment financial statements and be amortizedto expense over their estimated useful lives.The government phased in its adoption of thesePSAB recommendations beginning in the 2002/03fiscal year by valuing and capitalizing the province’sland holdings, buildings, and transportationinfrastructure. As a result, in 2003 the governmentrecognized for the first time over $13 billion of netcapital investments. These account for an estimated90% or more of the government’s total tangiblecapital assets.Although no specific timetable has been set, thegovernment has indicated that over the next severalyears it intends to adopt this PSAB standard forOntario’s remaining tangible capital assets, such asits computer systems, vehicles and equipment, andother smaller-value capital items. We encourage thegovernment to complete its capitalization projectas soon as possible and to include these assets andrelated amortization in its financial statements.Other Recommendations forImprovementAlthough the audit of the province’s consolidatedfinancial statements was not designed to identify allweaknesses in internal controls or to provide assuranceson financial systems and procedures as such,we noted a number of areas during the audit wherewe believed improvements could be made. Whilenone of these matters affects the fairness of theconsolidated financial statements of the province,they are covered, along with accompanying recommendationsfor improvement, in an annual managementletter to the Ministry of Finance.New and ProposedAccounting StandardsThe CICA’s Public Sector Accounting Board (PSAB)serves the public interest and that of the professionby issuing accounting standards and guidance thatwill improve the financial and performance informationreported by governments and other publicsectorentities. Such improved information benefitsdecision-makers and other users of the information.The more significant issues PSAB has been dealingwith over the last year that will or may affectthe province’s financial statements and reportingpractices are briefly outlined below.TRANSFER-PAYMENT ACCOUNTINGPRACTICESAs discussed previously in this chapter, PSAB isworking on amendments to the current standard

Public Accounts of the Province361for accounting for transfers by both transferringand recipient governments or organizations. Giventhat billions of dollars are involved in such governmenttransfers, these amendments have the potentialto have a significant impact. For example, whilethe amendments that could be adopted have notbeen finalized, they could include allowing recipientgovernments to defer and recognize transfersas income in future years if specific restrictions areplaced on the transferred funds by the transferringgovernment. Conversely, in certain circumstances,a transferring government may be able to recognizefunds provided as assets—rather than as currentyearexpenses—if the funds must be used to providefuture value.PERFORMANCE REPORTINGA project started by PSAB in 2004 intended to resultin a new Statement of Recommended Practicefor reporting on performance is continuing. Theproject has been undertaken to improve consistencyin performance reporting, as there is currently nogenerally accepted approach to public-sector performancemeasurement and reporting. The projectis intended to develop recommended practices forreporting both financial and non-financial performanceinformation in order to provide a comprehensive,balanced, and transparent picture of agovernment’s performance.SOURCES OF GAAPIn November 2004, PSAB approved a new standardon generally accepted accounting principles(GAAP). This standard sets out what constitutesthe primary sources of GAAP for the public sector,with the accounting standards and guidance issuedby PSAB being the primary source of authoritativeguidance. The standard also addresses what shouldbe considered when dealing with a particularaccounting or reporting issue that is not addressedby the primary sources of GAAP, or when additionalguidance is needed to apply a primary source tospecific circumstances.INFORMATION ON MEASUREMENTUNCERTAINTYIn February 2005, PSAB issued a new standard onthe disclosure of measurement uncertainty thatcould have a significant effect on the province’sfinancial statements. While the private-sector standardon measurement uncertainty applies only toitems recognized on the face of the financial statements,this public-sector standard also requiresthat measurement uncertainty information be disclosedwhen significant amounts are disclosed onlyin financial statement notes, as occurs with certaincontingent liabilities.Disclosure of Information onBusiness SegmentsIn July 2005, PSAB issued an Exposure Draft on segmentdisclosures. Examples of possible governmentbusiness segments include the health-care sector, theeducation sector, and the social services sector. Theproposed standard would require additional disclosureof financial information with respect to thesedistinct activities that the government is engagedin. The new standard addresses concerns about thelevel of aggregation of government consolidatedfinancial statements in that such aggregation maynot provide sufficiently detailed information to usersabout the different types of activities that the governmentis engaged in, or the resources devoted toand the costs of those activities.Chapter 5

3622005 Annual Report of the Office of the Auditor General of OntarioChapter 5APPLYING FAIR VALUE MEASUREMENTOF FINANCIAL INSTRUMENTSFinancial instruments or derivatives are typicallyused to manage foreign-currency and interest-raterisk using foreign-exchange forward contracts,swaps, futures, options, and other instruments. InSeptember 2005, PSAB issued a Draft Guidelineaddressing the financial-reporting consequencesfacing governments arising from including in theirconsolidated financial statements governmentorganizations and partnerships that have implementedthe new private-sector standards coveringthe recognition and measurement of financialinstruments. Under the new standard, revaluationof these assets or liabilities at fair value, resulting inunrealized gains or losses, may be required in subsequentperiods. As a result, on consolidation of allorganizations in the reporting entity, such unrealizedgains and losses arising from these revaluationsmay affect the government’s annual surplus ordeficit or the province’s change in net debt, which isnot the case under the current standards.Unfunded Liability of theWorkplace Safety andInsurance BoardIn 1993 and 1998, our Office commented on thesignificant unfunded liability of the WorkplaceSafety and Insurance Board (Board) and the importanceof the Board having a credible plan in place toreduce its unfunded liability. Failure to effectivelycontrol and eliminate the unfunded liability couldresult in the Board being unable to meet its existingand future financial commitments to provideworker benefits. In view of the fact that the Boardstill has a multi-billion-dollar unfunded liability andthis liability has increased significantly in the lastfew years, we feel it necessary to again comment onthis issue.The Board is a statutory corporation createdby the Workplace Safety and Insurance Act, 1997(Act). Its primary purposes are to provide incomesupport and fund medical assistance to employeesinjured on the job. Such assistance can be bothshort or longer term in nature. In situations wherean employee’s injuries do not permit a return to theworkplace, a disability pension may be paid. TheBoard is also committed to the prevention of workplaceinjuries and illnesses.It is important to note that under the Act, fundingof the Board’s liabilities, including the largeunfunded liability, is a future financial obligation ofprivate-sector employers and not of the province.The Board has therefore been classified as a trustfund for provincial accounting purposes. It is notincluded in the province’s consolidated financialstatements, although its assets and liabilities aredisclosed in the notes to the financial statements.The Act states that:The Board has a duty to maintain the insurancefund so as not to burden unduly orunfairly any class of Schedule 1 employers[generally all private-sector employers] infuture years with payments under the insuranceplan in respect of accidents in previousyears. (Subsection 96(3))Notwithstanding this legislative requirement,the assets in the Board insurance fund are substantiallyless than what is needed to satisfy the estimatedlifetime costs of all claims currently in thesystem—thus producing an unfunded liability.As illustrated in Figure 1, after having declinedfor a number of years, the unfunded liability hasrisen significantly over the past few years. Thisincrease is primarily attributable to a combinationof rising benefit costs and a significant reductionin the rate of return on investments in the early2000s. A reluctance to increase premium ratesover this period has also contributed to the risein the unfunded liability. We understand that this

Public Accounts of the Province363Figure 1: Workplace Safety and Insurance Board,Closing Unfunded Liability, 1994–2004 (as atDecember 31)Source of data: Workplace Safety and Insurance Board Audited FinancialStatements($ billion)1210864201994reluctance was driven by the potential impact onemployers and employment, and by the fact thatOntario’s premium rates are already among thehighest in Canada, because of the unfunded liabilitycomponent.Concerns about the unfunded liability were alsoexpressed in a May 2004 report initiated by theMinistry of Labour. A consulting firm was engagedto conduct an independent audit of the Board’soperations. Although the unfunded liability was notspecifically included as an audit objective, the consultantsconcluded that “addressing the unfundedliability is fundamental to achieving financial stability.”They concluded that the Board would have tosignificantly increase its revenues, from both premiumsand investments, and decrease its operatingcosts to meet its goal of eliminating the unfundedliability by 2014. They further noted that theachievement of administrative and corporate costefficiencies, while important, would not alone significantlyreduce the unfunded liability.1995199619971998199920002001200220032004** In 2004, the Board adopted an accounting policy in accordance with newstandards set by the Canadian Institute of Chartered Accountants that allowfor unrealized gains and losses to be recognized. However, for the purposeof illustrating the trend in the unfunded liability consistently over time, theunfunded liability for 2004 has been adjusted to eliminate the effects of thisnew accounting policy.Recently, initiatives have been undertaken bythe Board to deal with the growing unfunded liability.In 2005, the Board developed a Funding Frameworkthat formalized the funding strategy of theBoard, described the criteria for projecting fundingrequirements, and set the basis for determining premiumrates. The Funding Framework was approvedby the Board of Directors in July 2005. Althoughfunding requirements had been reviewed each yearas part of the process of setting premium rates forthe forthcoming year, the funding strategy itselfhad not had a major review since 1998. The FundingFramework reconfirmed the Board’s commitmentto fully fund the system by 2014.In September 2005, the Board announced thatthe 2006 average premium rate was to increase 3%from the 2005 premium rate, representing only thesecond time in the last 10 years that the Board hasraised the average rate. The Funding Frameworkestablishes maximum annual increases in premiumrates in the range of 3% to 5%. At that time, theBoard President stated that “we cannot allow thisdebt load to be passed on to future generations ofemployers.”This recent action is an important step inaddressing the Board’s significant unfunded liabilityand in meeting the intent of the Workplace Safetyand Insurance Act, 1997 to limit the burden of existingcommitments on future employers. Ongoingcommitment to the new Funding Framework willbe needed if the Board’s goal of eliminating theunfunded liability by 2014 is to be achieved.Other MatterThe Auditor General is required under section 12of the Auditor General Act to report on any SpecialWarrants and Treasury Board Orders issued duringthe year. In addition, under section 91 of the LegislativeAssembly Act, the Auditor General is requiredto report on any transfers of money between itemswithin the same vote in the Estimates of the Officeof the Legislative Assembly.Chapter 5

3642005 Annual Report of the Office of the Auditor General of OntarioChapter 5LEGISLATIVE APPROVAL OFGOVERNMENT EXPENDITURESShortly after presenting its budget, the governmenttables in the Legislature detailed ExpenditureEstimates outlining each ministry’s spending proposalson a program-by-program basis. The StandingCommittee on Estimates reviews selected ministryestimates and presents a report on them tothe Legislature. The estimates of those ministriesthat are not selected for review are deemed to bepassed by the Committee and are reported as suchto the Legislature. Orders for Concurrence for eachof the estimates reported on by the Committee aredebated in the Legislature for a maximum of threehours and then voted on.Once the Orders for Concurrence are approved,the Legislature provides the government with legalspending authority by approving a Supply Act,which stipulates the amounts that can be spent byministry programs as set out in the estimates. Oncethe Supply Act is approved, the individual programexpenditures are considered to be Voted Appropriations.The Supply Act pertaining to the fiscal yearended March 31, 2005 received Royal Assent onDecember 16, 2004.Typically, ministry programs require fundsbefore the Supply Act is passed, and the Legislatureauthorizes these payments by means of motionsfor interim supply. For the 2004/05 fiscal year, thetime periods covered by the motions for interimsupply and the dates that the motions were agreedto by the Legislature were as follows:•March 29, 2004; and•April 1, 2004 to June 30, 2004—passedJuly 1, 2004 to December 31, 2004—passedJune 21, 2004.SPECIAL WARRANTSIf motions for interim supply cannot be approvedbecause, for instance, the Legislature is not in session,section 7(1) of the Treasury Board Act, 1991allows the issue of Special Warrants authorizingthe incurring of expenditures for which there is noappropriation by the Legislature or for which theappropriation is insufficient. Special Warrants areauthorized by Orders-in-Council approved by theLieutenant Governor on the recommendation of thegovernment.There were no special warrants issued for thefiscal year ended March 31, 2005.TREASURY BOARD ORDERSSection 8(1) of the Treasury Board Act, 1991allows the Treasury Board to make an Orderauthorizing expenditures to supplement theamount of any Voted Appropriation that is insufficientto carry out the purpose for which it wasmade. The Order can be made provided that theamount of the increase is offset by a correspondingreduction of expenditures to be incurred from otherVoted Appropriations not fully spent in the fiscalyear. The Order may be made at any time before theaudit of the books of the government of Ontario forthe fiscal year is completed.Figure 2 is a summary of the total value of TreasuryBoard Orders issued for the past five fiscalyears. Figure 3 summarizes Treasury Board Ordersfor the 2004/05 fiscal year by month of issue.According to the Standing Orders of the LegislativeAssembly, Treasury Board Orders are tobe printed in The Ontario Gazette, together withexplanatory information. However, we noted thatthe most recent Orders printed in the Gazette wereFigure 2: Total Value of Treasury Board Orders Issued,2000/01–2004/05($ million)4,0003,6003,2002,8002,4002,0001,6001,2008004000$2,107.9$907.7$1,393.1$2,265.6$3,852.82000/01 2001/02 2002/03 2003/04 2004/05

Public Accounts of the Province365Figure 3: Treasury Board Orders by Month of Issue,2004/05Month of Issue Number Authorized ($)July 2004–February 2005 41 406,092,200March 2005 36 2,415,197,500April 2005 15 1,003,026,800June 2005 1 58,500August 2005 3 28,450,300Total 96 3,852,825,300those that were issued for the 2000/01 fiscal year. Adetailed listing of 2004/05 Treasury Board Orders,showing the amounts authorized and expended, isincluded as Exhibit 3 of this report.EXCEEDED APPROPRIATIONSection 12(2)(f)(ii) of the Auditor General Actrequires that we report on any cases where essentialrecords were not maintained or the rules andprocedures applied were not sufficient to ensurethat expenditures were made only as authorized.Based on this year’s audit of the summary financialstatements, we noted that the actual expensesincurred and charged to the accounts for the fiscalyear ended March 31, 2005 exceeded the legislativeappropriation for one Vote/Item at the Ministryof Transportation by $8,120. According to the Ministry,this occurred as a result of an oversight on itspart in accounting for fiscal year-end accruals forthis particular Vote/Item.TRANSFERS AUTHORIZED BY THEBOARD OF INTERNAL ECONOMYWhen the Board of Internal Economy authorizesthe transfer of money from one Item of the Estimatesof the Office of the Assembly to anotherItem within the same Vote, section 91 of the LegislativeAssembly Act requires that the Auditor Generalmake special mention of the transfer(s) in theAnnual Report.With respect to the 2004/05 Estimates, therewere no transfers made within the Votes of theOffice of the Assembly.UNCOLLECTIBLE ACCOUNTSUnder section 5 of the Financial Administration Act,the Lieutenant Governor in Council, on the recommendationof the Minister of Finance, may authorizean Order-in-Council to delete from the accountsany amount due to the Crown that is deemed uncollectible.The amounts deleted from the accountsduring any fiscal year are to be reported in the PublicAccounts.In the 2004/05 fiscal year, receivables of$208.5 million due to the Crown from individualsand non-government organizations were writtenoff (in 2003/04, the comparable amount was$214 million). The major portion of the write-offsrelated to the following:••School Board;••taxes;•the Student Support Program; and•$66.4 million for uncollectible retail sales tax;$55.2 million loaned to the Toronto District$45.6 million for uncollectible corporate taxes;$7.8 million for uncollectible employer health$6.0 million for uncollectible receivables under$5.7 million for uncollectible receivables underthe Ontario Disability Support Program.Volume 2 of the 2004/05 Public Accountssummarizes the write-offs by ministry. All of theabove are included, except for the write-off forthe Toronto District School Board, which we havebeen informed will be included in Volume 2 of the2005/06 Public Accounts.Under the accounting policies followed in theaudited financial statements of the province, a provisionfor doubtful accounts is recorded againstaccounts receivable balances. Accordingly, mostof the write-offs had already been expensed in theaudited financial statements. However, the actualdeletion from the accounts required Order-in-Councilapproval.Chapter 5

Chapter 6The Office of the AuditorGeneral of OntarioChapter 6The Office of the Auditor General of Ontario iscommitted to promoting accountability, economy,efficiency, and effectiveness in governmentand broader public-sector operations for the benefitof the citizens of Ontario. The Office providesobjective information and advice to the LegislativeAssembly of Ontario on the results of ourindependent value-for-money and financial auditsand reviews. In so doing, the Office assists theAssembly in holding the government, its administrators,and grant recipients accountable for thequality of their stewardship of public funds and forthe achievement of value for money in the deliveryof services to the public.New Auditor General ActThe legislation governing the work of the Officeincluded in this Annual Report was the Audit Act,which was passed in 1977 and came into force onApril 1, 1978. The Audit Act was amended withthe passage on November 22, 2004 of Bill 18, theAudit Statute Law Amendment Act. In addition to themost significant amendment—the expansion of theOffice’s value-for-money audit mandate to organizationsin the broader public sector that receivegovernment grants—the resulting legislation wasrenamed the Auditor General Act, with other correspondingname changes (for example, “ProvincialAuditor” to “Auditor General” and “Assistant ProvincialAuditor” to “Deputy Auditor General”).Other amendments in Bill 18 included:•assigning the Auditor General the authority toconduct value-for-money audits of Crown-controlled corporations and their subsidiaries;• setting the Auditor’s term of appointment to afixed non-renewable period of 10 years (changingthe earlier term of serving up to age 65);• requiring that the Auditor express his or heropinion on whether the consolidated financialstatements of Ontario are presented fairly inaccordance with appropriate generally acceptedaccounting principles;•providing for the collection and use of personalinformation by the Auditor General.The effective date of the expanded value-formoneyaudit mandate was April 1, 2005. Since thisstart date fell in the middle of our ongoing auditcycle and was not retroactive to cover grants providedbefore November 30, 2004, we will not bereporting on value-for-money work related to theexpanded mandate until our 2006 Annual Report.366

The Office of the Auditor General of Ontario367Appointment of New AuditorGeneralIndependenceThe Auditor General is appointed as an officerof the Legislative Assembly by the LieutenantGovernor in Council—that is, the LieutenantGovernor appoints the Auditor General on andwith the advice of the Executive Council (the Cabinet).The appointment is made “on the address ofthe Assembly,” meaning that the appointee mustbe approved by the Legislative Assembly. The AuditorGeneral Act also requires that the Chair of theStanding Committee on Public Accounts—who,under the Standing Orders of the Assembly, is amember of the official opposition—be consultedbefore the appointment is made (for more informationon the Committee, see Chapter 7).Erik Peters, the former Provincial Auditor,retired in September 2003. Jim McCarter, theAssistant Provincial Auditor at that time, becamethe Acting Provincial Auditor on Mr. Peters’ retirement.In fall 2004, the Office of the LegislativeAssembly conducted a Canada-wide search forqualified candidates, and the candidates on a shortlist were interviewed by a selection panel. Thepanel was chaired by the Speaker of the LegislativeAssembly and included the Chair of the StandingCommittee on Public Accounts, a member fromeach of the other two political parties, the Directorof Human Resources for the Office of the LegislativeAssembly, and a retired former managing partnerof a major public accounting firm. The recommendationof the selection committee was put forward,and on December 15, 2004, the appointment of JimMcCarter as Auditor General was approved by theLegislative Assembly.The Auditor General and staff of the Office areindependent of the government and its administration.This independence is an essential safeguardthat enables the Office to fulfill its auditing andreporting responsibilities objectively and fairly.The Board of Internal Economy—an all-partylegislative committee that is independent of thegovernment’s administrative process—reviews andapproves the Office’s budget, which is subsequentlylaid before the Legislative Assembly. As requiredby the Auditor General Act, the Office’s expendituresrelating to the 2004/05 fiscal year have beenaudited by a firm of chartered accountants, andthe audited financial statements of the Office andrelated discussion of results are submitted to theBoard and are subsequently required to be tabledin the Legislative Assembly. The audited statementsand related discussion of results are presented atthe end of this chapter.Audit ResponsibilitiesWe audit the financial statements of the provinceand the accounts of many agencies of the Crown.However, most of our work relates to our value-formoneyaudits of the administration of governmentprograms. Commencing with our 2005/06 valuefor-moneyaudit year, that work will also includebroader public-sector activities involving governmentgrants and carried out under government policiesand legislation. Our responsibilities are set outin the Auditor General Act (reproduced in Exhibit 4).The Office reports on its audits in an AnnualReport to the Legislative Assembly. In addition, theOffice may make a special report to the Assemblyat any time on any matter that in the opinion of theAuditor General should not be deferred until theChapter 6

3682005 Annual Report of the Office of the Auditor General of OntarioChapter 6Annual Report. We also assist and advise the StandingCommittee on Public Accounts in its review ofthe Office’s Annual Report.It should be noted that our audit activitiesinclude examining the actual administration andexecution of the government’s policy decisions ascarried out by management. However, the Officedoes not comment on the merits of governmentpolicy, since the government is held accountablefor policy matters by the Legislative Assembly,which continually monitors and challenges governmentpolicies through questions during legislativesessions and through reviews of legislation andexpenditure estimates.We are entitled to have access to all relevantinformation and records necessary to the performanceof our duties under the Auditor General Act.Out of respect for the principle of Cabinet privilege,the Office does not seek access to the deliberationsof Cabinet. However, the Office can access virtuallyall other information contained in Cabinet submissionsor decisions that we deem necessary to fulfillour auditing and reporting responsibilities underthe Auditor General Act.ONTARIO’S CONSOLIDATED FINANCIALSTATEMENTS AND PROGRAMS/ACTIVITIES FUNDED BY TAXPAYERSThe Auditor General, under subsection 9(1) ofthe Auditor General Act, is required to audit theaccounts and records of the receipt and disbursementof public money forming part of the ConsolidatedRevenue Fund, whether held in trust orotherwise. To this end, the Office carries out anannual attest audit to enable the Auditor General toexpress an opinion on whether the province’s consolidatedfinancial statements are fairly presented.As well, the Office carries out cyclical value-formoneyaudits of programs and activities fundedby taxpayers (see the “Value-for-money Audits”and “Attest Audits” sections later in this chapter fordetails on these two types of audits).AGENCIES OF THE CROWN AND CROWN-CONTROLLED CORPORATIONSThe Auditor General, under subsection 9(2) ofthe Auditor General Act (Act), is required to auditthose agencies of the Crown that are not audited byanother auditor. Exhibit 1, Part 1 lists the agenciesthat were audited during the 2004/05 audit year.Public accounting firms are currently contractedby the Office to audit the financial statements of anumber of these agencies on the Office’s behalf.Exhibit 1, Part 2 and Exhibit 2 list the agencies ofthe Crown and the Crown-controlled corporations,respectively, that were audited by public accountingfirms during the 2004/05 audit year. Subsection9(2) of the Act requires that public accountingfirms that are appointed auditors of certain agenciesof the Crown perform their audits under the directionof the Auditor General and report their resultsto the Auditor General. Under subsection 9(3) ofthe Act, public accounting firms auditing Crowncontrolledcorporations are required to deliver tothe Auditor General a copy of the audited financialstatements of the corporation and a copy of theirreport of their findings and recommendations tomanagement (contained in a management letter).ADDITIONAL RESPONSIBILITIESUnder section 16 of the Auditor General Act(Act), the Auditor General may, by resolution ofthe Standing Committee on Public Accounts, berequired to examine and report on any matterrespecting the Public Accounts.During the period of audit activity covered bythis Annual Report (October 2004 to September2005), the Office was involved in the followingassignment under section 16: on April 8, 2004, theStanding Committee on Public Accounts directed

The Office of the Auditor General of Ontario369the Auditor General to examine the government’sIntensive Early Intervention Program for Childrenwith Autism, including addressing three specificissues raised in the motion, and to report his findingsand recommendations to the Committee.The report on this work was submitted to theCommittee in early November 2004, and the Committeeheld a public hearing on the subject onNovember 18, 2004.Section 17 of the Act requires that the AuditorGeneral undertake special assignments requestedby the Assembly, by the Standing Committee onPublic Accounts (by resolution of the Committee),or by a minister of the Crown. However, these specialassignments are not to take precedence over theAuditor General’s other duties. The Auditor Generalcan decline an assignment referred by a minister if,in his or her opinion, it conflicts with other duties.Audit ActivitiesTYPES OF AUDITSValue-for-money, attest, and compliance audits arethe three main types of audits carried out by theOffice. The Office generally conducts complianceaudit work as a component of its value-for-moneyand attest audits. The following are brief descriptionsof each of these audit types.Subclauses 12(2)(f)(iv) and 12(2)(f)(v) of theAuditor General Act require that the Auditor Generalreport on any cases observed where money wasspent without due regard for economy and efficiencyor where appropriate procedures were not in placeto measure and report on the effectiveness of programs.In other words, our value-for-money workassesses the administration of programs, activities,and systems by management, including major informationsystems. This value-for-money mandate isexercised through the auditing of various ministryand Crown-agency programs, and starting in the2005/06 audit year, the mandate will also includevalue-for-money audits of selected grant recipients’activities. We refer to the government bodiesand publicly funded entities that we audit as ourauditees. Value-for-money audits constitute abouttwo-thirds of the work of the Office. The results ofour value-for-money audits performed betweenOctober 2004 and September 2005 are reflected inChapter 3.It is not part of the Office’s mandate to measure,evaluate, or report on the effectiveness ofprograms or to develop performance measures orstandards. These functions are the responsibilityof the auditee’s management. However, the Officeis responsible for reporting instances where it hasnoted that the auditee has not carried out thesefunctions satisfactorily.We plan, perform, and report on our value-formoneywork in accordance with the professionalstandards for assurance engagements, encompassingvalue for money and compliance, establishedby the Canadian Institute of Chartered Accountants.These standards require that we employadequate processes to maintain the quality, integrity,and value of our work for our client, the LegislativeAssembly. Some of these processes and thedegree of assurance they enable us to provide aredescribed below.Chapter 6Value-for-money AuditsSelection of Programs and Activities for AuditMajor programs and activities administered bya ministry, an agency, a corporation, or a grantrecipientorganization are audited at approximatelyfive-to-seven-year intervals. Various factors are consideredin selecting programs and activities for auditeach year. These factors include the results of previousaudits and related follow-ups; the total revenuesor expenditures at risk; the impact of the programor activity on the public; the inherent risk due to

3702005 Annual Report of the Office of the Auditor General of OntarioChapter 6the complexity and diversity of operations; recentsignificant changes in program operations; the significanceof possible issues that may be identifiedby an audit; and the costs of performing the audit inrelation to the perceived benefits. Possible issues areidentified primarily through a preliminary survey ofthe auditee and its programs and activities.We also consider the work completed or plannedby the auditee’s internal auditors. The relevance,timeliness, and breadth of scope of work doneby internal audit can have an impact on the timing,frequency, and extent of our audits. By havingaccess to internal-audit work plans, workingpapers, and reports, and by relying, to the extentpossible, on internal-audit activities, the Office isable to avoid duplication of effort.Objectives and Assurance LevelsThe objective of our value-for-money work is tomeet the requirements of subclauses 12(2)(f)(iv)and 12(2)(f)(v) of the Auditor General Act by identifyingand reporting significant value-for-moneyissues. We also include in our reports recommendationsfor improving controls, obtaining better valuefor money, and achieving legislated objectives.Management responses to our recommendationsare reproduced in our reports.The specific objective(s) for each audit orreview conducted are clearly stated in the “AuditObjective(s) and Scope” section of each auditreport—that is, each value-for-money section ofChapter 3.In almost all cases, our work is planned and performedto provide an audit level of assurance. Anaudit level of assurance is obtained by interviewingmanagement and analyzing the information it provides;examining and testing systems, procedures,and transactions; confirming facts with independentsources; and, where necessary, obtaining expertassistance and advice in highly technical areas.An audit level of assurance is the highest reasonablelevel of assurance that the Office can provideconcerning the subject matter. Absolute assurancethat all significant matters have been identified isnot attainable for various reasons, including thelimitations of testing as a means of gathering informationfrom which to draw conclusions; the inherentlimitations of control systems (for example,management/staff often have some ability to circumventthe controls over a process or procedure);the fact that much of the evidence available forconcluding on our objectives is persuasive ratherthan conclusive in nature; and the need to exerciseprofessional judgment in, for example, interpretinginformation.Infrequently, for reasons such as the nature ofthe program or activity, limitations in the AuditorGeneral Act, or the prohibitive cost of providing ahigh level of assurance, the Office will perform areview rather than an audit. A review provides amoderate level of assurance, obtained primarilythrough inquiries and discussions with management;analyses of information it provides; and onlylimited examination and testing of systems, procedures,and transactions.CriteriaIn accordance with professional standards forassurance engagements, work is planned and performedto provide a conclusion on the objective(s)set for the work. A conclusion is reached and observationsand recommendations are made by evaluatingthe administration of a program or activityagainst suitable criteria. Suitable criteria are identifiedat the planning stage of our audit or review byextensively researching sources such as recognizedbodies of experts; applicable laws, regulations,and other authorities; other bodies or jurisdictionsdelivering similar programs and services; management’sown policies and procedures; and applicablecriteria successfully applied in other audits orreviews.To further ensure their suitability, the criteriabeing applied are fully discussed with the senior

The Office of the Auditor General of Ontario371management responsible for the program or activityat the planning stage of the audit or review.Communication with Senior ManagementTo help ensure the factual accuracy of our observationsand conclusions, staff from our Office communicatewith the auditee’s senior managementthroughout the audit or review. Before beginningthe work, our staff meet with management to discussthe objective(s) and criteria and the focusof our work in general terms. During the audit orreview, our staff meet with management to reviewprogress and ensure open lines of communication.At the conclusion of on-site work, managementis briefed on the preliminary results of thework. A draft report is then prepared and discussedwith senior management. Management provideswritten responses to our recommendations, andthese are discussed and incorporated into the finaldraft report. The Auditor General finalizes thedraft report (on which the Chapter 3 section of theAnnual Report will be based) with the deputy ministeror head of the agency, corporation, or grantrecipientorganization responsible, after which thereport is published in the Annual Report.Attest AuditsAttest (financial statement) audits are designed topermit the expression of the auditor’s opinion on aset of financial statements in accordance with generallyaccepted auditing standards. The opinionstates whether the operations and financial positionof the entity, as reflected in its financial statements,have been fairly presented in compliancewith appropriate accounting policies, which in mostcases are Canadian generally accepted accountingprinciples. The Office conducts attest audits of thefinancial statements of the province and of numerousCrown agencies on an annual basis.With respect to reporting on attest audits ofagencies, agency legislation normally stipulatesthat the Auditor General’s reporting responsibilitiesare to the agency’s board and the minister(s)responsible. Our Office also provides copies of theaudit opinions and of the related agency financialstatements to the deputy minister of the associatedministry, as well as to the Secretary of the TreasuryBoard.In instances where matters that require improvementsby management have been noted during thecourse of an agency attest audit, a draft managementletter is prepared, discussed with senior management,and revised as necessary to reflect theresults of the discussion. Following clearance of thedraft management letter and the response of theagency’s senior management, a final managementletter is prepared and, if deemed necessary, issuedto the agency head.Compliance AuditsSubsection 12(2) of the Auditor General Act alsorequires that the Auditor General report observedinstances where:•was not fully accounted for;•accounts were not properly kept or public moneyessential records were not maintained or therules and procedures applied were not sufficientto safeguard and control public property or toeffectively check the assessment, collection, andproper allocation of revenue or to ensure thatexpenditures were made only as authorized; or• money was expended other than for the purposesfor which it was appropriated.Accordingly, as part of our value-for-moneywork, we:•identify provisions in legislation and authoritiesthat govern the programs, activities, agencies,corporations, or grant-recipient organizationsbeing examined or that the management isresponsible for administering; and•perform such tests and procedures as we deemnecessary to obtain reasonable assurance thatChapter 6

3722005 Annual Report of the Office of the Auditor General of OntarioChapter 6management has complied with legislation andauthorities in all significant respects.SPECIAL ASSIGNMENTSUnder sections 16 and 17 of the Auditor GeneralAct, the Auditor General has additional reportingresponsibilities relating to special assignments forthe Legislative Assembly, the Standing Committeeon Public Accounts, or a minister of the Crown. Atthe conclusion of such work, the Auditor Generalnormally reports to the authority that initiated theassignment.CONFIDENTIALITY OF WORKING PAPERSIn the course of our reporting activities, we preparedraft audit reports and management letters thatare considered to be an integral part of our auditworking papers. It should be noted that these workingpapers, according to section 19 of the AuditorGeneral Act, are not required to be laid before theAssembly or any of its committees. As well, becauseour Office is exempt from the Freedom of Informationand Protection of Privacy Act, our reports andaudit working papers, which include all informationobtained during the course of an audit fromthe auditee, cannot be accessed from our Office,thus further ensuring confidentiality.CODE OF PROFESSIONAL CONDUCTfurther describes the Office’s responsibilities to theLegislative Assembly, the public, and our audit entities.The Code also provides guidance on disclosurerequirements and the steps to be taken to avoidconflict-of-interest situations. All employees arerequired to complete an annual conflict-of-interestdeclaration.Office Organization andPersonnelThe Office is organized into portfolio teams—aframework that attempts to align related audit entitiesand to foster expertise in the various areas ofaudit activity. The portfolios, which are looselybased on the government’s own ministry organization,are each headed by a Director, who overseesand is responsible for the audits within the assignedportfolio. Assisting the Directors and rounding outthe teams are a number of audit Managers and variousother audit staff (see Figure 1).The Auditor General, the Deputy Auditor General,the portfolio Directors, and the Manager ofHuman Resources make up the Office’s Senior ManagementCommittee.Canadian Council ofLegislative AuditorsThe Office has a Code of Professional Conduct toencourage staff to maintain high professional standardsand ensure a professional work environment.The Code is intended to be a general statement ofphilosophy, principles, and rules regarding conductfor employees of the Office, who have a duty to conductthemselves in a professional manner and tostrive to achieve the highest standards of behaviour,competence, and integrity in their work. The Codeprovides the reasoning for these expectations andThis year, Ontario hosted the 33rd annual meetingof the Canadian Council of Legislative Auditors(CCOLA) in Niagara-on-the-Lake, Ontario, fromAugust 21 to 23, 2005. This was only the secondtime that the conference was not held in the capitalcity of the hosting jurisdiction. This annualgathering has, for a number of years, been jointlyheld with the annual conference of the CanadianCouncil of Public Accounts Committees. It brings

The Office of the Auditor General of Ontario373Figure 1: Office Organization, September 30, 2005Auditor GeneralAdministrationJim McCarterDeputy Auditor GeneralJohn Sciarra, Executive AssistantChristine Wu, Administrative AssistantNicole Dirickx, Bilingual ReceptionistSohani Myers, Administrative ClerkGary PeallInformation TechnologyPeter Lee, Systems SpecialistShams Ali, Systems OfficerAudit Porfolios and StaffCommunity and Social Servicesand RevenueCrown Agencies and TransportationWalter Bordne, DirectorWendy Cumbo, ManagerDenise Young, ManagerJohn McDowell, DirectorConstantino De SousaMark HancockIsabella HoMaria MolotkovaAngela SchiedaAldora SequeiraNick StavropoulosDominic WunWalter AllanChristina ArnoldJasmine ChenOrianna RagoMary RomanoHealthJustice and RegulatorySusan Klein, DirectorLaura Bell, ManagerNaomi Herberg, ManagerJohn Landerkin, ManagerAndrew Cheung, DirectorRudolph Chiu, ManagerVince Mazzone, ManagerCorinne BerinsteinSally ChangTom ChatzidimosLukasz MarkowskiSheila MistryMichael RadfordEllen SchraaPetronela VoinicuOksana WasylykIzabela BebenTeresa CarelloKim ChoHoward DavyLinda FungRachel HoMalgorzata LucPasha SidhuVivian SinCelia YeungCommunications Human Resources and AccountingAndréa Vanasse, CommunicationsCo-ordinatorTiina Randoja, Communications OfficerMariana Green, Desktop Publisher/Internet Communications AssistantAnnemarie Wiebe, ManagerShanta Persaud, Financial Officer/Payroll and Employee BenefitsElizabeth Derco, Accounts Payable/Accounting OfficerProfessional PracticesDavid Lee, ManagerEconomic Developmentand Government ServicesEducation, Culture, andMunicipal AffairsGerard Fitzmaurice, DirectorVanna Gotsis, ManagerRick MacNeil, ManagerTony Tersigni, ManagerNick Mishchenko, DirectorMichael Brennan, ManagerFraser Rogers, ManagerMark BurnesMaggie DongNatasha DossaKandy FletcherRoger MunroeMyuran PalasandiranCatherine PorterMark SmithEllen TepelenasAriane ChanZahra JafferEmanuel TsikritsisDora UlisseBrian WanchukPublic Accounts, Finance, andInformation TechnologyPaul Amodeo, DirectorGus Chagani, ManagerRita Mok, ManagerSandy ChanSuzanna ChanCherry ChauMarcia DeSouzaAshutosh DuttaGawah MarkGigi YipChapter 6

3742005 Annual Report of the Office of the Auditor General of OntarioChapter 6together legislative auditors and members of theStanding Committees on Public Accounts from thefederal government and the provinces/territoriesand provides a useful forum for sharing ideas andexchanging information. This year’s conference wasan overwhelming success, with a record number ofattendees from across Canada.International VisitorsAs an acknowledged leader in value-for-moneyauditing, the Office periodically receives requeststo meet with delegations from abroad to discussthe roles and responsibilities of the Office and toshare our value-for-money and other audit experienceswith them. During the audit year coveredby this report, the Office received delegations oflegislators/parliamentarians and auditors fromthe Russian Federation and the Republic of Korea(commonly known as South Korea).Financial AccountabilityThe following highlights and financial statementsoutline the Office’s financial results for the 2004/05fiscal year.FINANCIAL HIGHLIGHTSIn the face of increased market demand and compensationfor professional auditors in the privateand broader public sectors, it was a challenge tomaintain our value-for-money output and the qualityof our work. Nevertheless, the hard work anddedication of our staff resulted in 14 value-formoneysections in this year’s report—the samenumber as in last year’s—as well as successful performanceof attest audit responsibilities that, giventhe adoption of accrual accounting for the first timeby many government agencies and offices, requiredsubstantially more audit time.Our overall expenses increased by less than2% over last year and were almost 11% underbudget. The combination of difficulties retainingand replacing experienced staff and the later-thananticipatedpassage of the Government AdvertisingAct, 2004 and the Audit Statute Law AmendmentAct, 2004 contributed to our spending about$1.2 million less than planned. This continued thehistorical trend of under-spending our approvedbudget. Over the past 10 years, the Office hasreturned over $5.4 million in unspent appropriationsdue almost entirely to challenges in hiring andretaining a sufficient pool of qualified professionalstaff in the extremely competitive Toronto job market.Even though our approved staff complementwas increased to 95 from 90 for the 2004/05 fiscalyear, we were unable to fill all positions or to beginto increase our staff numbers to meet our expandedvalue-for-money audit mandate. In fact, this year’saverage number of staff (87) remained about thesame as in 2004. Consequently, our salary and benefitexpenses were almost 14% under budget.In recent years, the market value of qualified,experienced accountants and auditors has increased,partly because several high-profile corporate failuresresulted in new accounting, auditing, and qualitycontrolstandards, which in turn created a greaterdemand for professional accountants and auditors.Our ability to successfully recruit staff in such a marketis severely hampered by the requirement of theAuditor General Act that the salary ranges we canoffer must be comparable to the salary ranges ofsimilar positions in the government. They thereforeremain uncompetitive with the salaries that the privatesector and the broader public sector can offerfor professional accountants. Having the flexibilityto offer salaries that are competitive relative to thoseoffered in the marketplace will be even more critical

The Office of the Auditor General of Ontario375if we are to successfully achieve the goals and expectationsresulting from our newly expanded mandate.Overall, our non-payroll expenses were essentiallyunchanged from the 2003/04 fiscal year, asincreases in the costs of professional services, traveland communications, and supplies and equipmentwere largely offset by reductions in expenses relatingto statutory requirements. Specifically:•Professional services expenses increased over10% because the costs of acquiring contractedaudit services rose due to the increased demandand compensation for experienced auditors inthe marketplace.•Travel and communication costs rose 40%, primarilydue to the more extensive travel requirementsof our value-for-money audits in the 2005audit year relative to those undertaken in 2004,as well as to the increased cost for enhancingsecure remote access to our network for ourstaff.•Statutory expenses were significantly lowerbecause:•they did not include post-employment benefitspaid to retiring Provincial Auditor ErikPeters; and•the Auditor General’s salary became a statutoryexpense only upon the official appointmentof the Auditor General on December 15,2004.Therefore, statutory expenses in 2005include only three and a half months of theAuditor General’s salary, together with someexpert assistance costs associated with implementingour responsibilities under the new GovernmentAdvertising Act, 2004.Chapter 6

3762005 Annual Report of the Office of the Auditor General of OntarioFINANCIAL STATEMENTSChapter 6MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTSThe accompanying financial statements of the Office of the Auditor General of Ontario for the yearended March 31, 2005 are the responsibility of management of the Office. Management has preparedthe financial statements to comply with the Auditor General Act and with Canadian generally acceptedaccounting principles.Management has maintained a system of internal controls including an organizational structure thateffectively segregates duties and provides for appropriate delegation of authority. These controlsprovide reasonable assurance that transactions are appropriately authorized, assets are adequatelysafeguarded, appropriations are not exceeded and financial information is reliable and available on atimely basis.The financial statements have been audited by the firm of Allen & Miles LLP, Chartered Accountants.Their report to the Board of Internal Economy, stating the scope of their examination and opinion onthe financial statements, appears on the following page.Jim McCarter, CAAuditor GeneralGary R. Peall, CADeputy Auditor GeneralJuly 22, 2005

The Office of the Auditor General of Ontario377Chapter 6

3782005 Annual Report of the Office of the Auditor General of OntarioOFFICE OF THE AUDITOR GENERAL OF ONTARIOStatement of Financial PositionAs at March 31, 20052005 2004$ $AssetsCurrentCash 225,864 22,621Due from Consolidated Revenue Fund 340,368 500,126566,232 522,747Chapter 6Capital Assets (Note 3) 278,435 288,700Total assets 844,667 811,447LiabilitiesAccounts payables and accrued liabilities 566,232 522,747Net assetsInvestment in capital assets 278,435 288,700Total liabilities and net assets 844,667 811,447Commitment (Note 5)See accompanying notes to financial statements.Approved by the Office of the Auditor General of Ontario:Jim McCarterAuditor GeneralGary PeallDeputy Auditor General

The Office of the Auditor General of Ontario379OFFICE OF THE AUDITOR GENERAL OF ONTARIOStatement of Operations and Changes in Net AssetsFor the Year Ended March 31, 20052005 2005 2004Budget Actual Actual$ $ $RevenueConsolidated Revenue FundVoted appropriation (Note 7) 10,916,800 10,914,000 9,867,800Less: returned to the Province — (1,200,536) (406,492)Net revenue 10,916,800 9,713,464 9,461,308ExpensesSalaries and wages 6,723,800 5,986,968 5,804,543Employee benefits (Note 4) 1,552,400 1,146,166 1,138,786Office rent 1,020,000 891,105 914,006Professional and other services 873,900 877,415 793,965Amortization of capital assets 187,800 207,234 221,236Travel and communication 188,400 289,964 204,900Training and development 155,500 117,509 116,262Supplies and equipment 48,000 100,016 57,394Transfer payment: CCAF-FCVI Inc. 50,000 50,000 50,000Statutory expenses: The Auditor General Act 117,000 57,352 233,551Chapter 6Total expenses 10,916,800 9,723,729 9,534,643Deficiency of revenue over expenses — (10,265) (73,335)Net assets, beginning of year 288,700 362,035Net assets, end of year 278,435 288,700See accompanying notes to financial statements.

3802005 Annual Report of the Office of the Auditor General of OntarioOFFICE OF THE AUDITOR GENERAL OF ONTARIOStatement of Cash FlowsFor the Year Ended March 31, 20052005 2004$ $NET INFLOW (OUTFLOW) OF CASH RELATED TO THEFOLLOWING ACTIVITIESChapter 6Cash flows from operating activitiesDeficiency of revenue over expenses (10,265) (73,335)Amortization of capital assets 207,234 221,236196,969 147,901Changes in non-cash working capitalDue from Consolidated Revenue Fund 159,758 (224,130)Accounts payable and accrued liabilities 43,485 232,982203,243 8,852Investing activitiesPurchase of capital assets (196,969) (147,901)Net increase in cash position 203,243 8,852Cash position, beginning of year 22,621 13,769Cash position, end of year 225,864 22,621See accompanying notes to financial statements.

The Office of the Auditor General of Ontario381OFFICE OF THE AUDITOR GENERAL OF ONTARIONotes to Financial StatementsMarch 31, 20051. NATURE OF OPERATIONSIn accordance with the provisions of the Auditor General Act and various other statutes and authorities, theAuditor General conducts independent audits of government programs, of institutions in the broader publicsector that receive government grants, and of the fairness of the financial statements of the Province andnumerous agencies of the Crown. In doing so, the Office of the Auditor General promotes accountability andvalue-for-money in government operations and in broader public sector organizations.Additionally, under the Government Advertising Act, 2004, the Auditor General is required to review specifiedtypes of advertising, printed matter or reviewable messages proposed by government offices to determinewhether they meet the standards required by the Act.Under both Acts, the Auditor General reports directly to the Legislative Assembly.Chapter 62. SIGNIFICANT ACCOUNTING POLICIESThe financial statements have been prepared in accordance with Canadian generally accepted accountingprinciples. The significant accounting policies are as follows:(a) Accrual BasisThese financial statements are accounted for on an accrual basis whereby expenses are recognized in thefiscal year that the events giving rise to the expense occur and resources are consumed.(b) Voted AppropriationsThe Office is funded through annual voted appropriations from the Province of Ontario. Unspentappropriations are returned to the Province’s Consolidated Revenue Fund each year. As the approvedappropriation was prepared on a modified cash basis, an excess or deficiency of revenue over expensesarises from the application of accrual accounting due to the capitalization and amortization of capitalassets.(c) Capital AssetsCapital assets are recorded at historical cost less accumulated amortization. Amortization of capital assetsis recorded on the straight-line method over the estimated useful lives of the assets as follows:Computer hardwareComputer software3 years3 yearsThe cost and accumulated amortization of fully amortized assets is removed from the accounts in the yearafter the asset has been fully amortized.(d) Pension ExpensePension costs included in these statements consist of employer contributions for current service ofemployees during the year and additional employer contributions for service relating to prior years.

3822005 Annual Report of the Office of the Auditor General of OntarioOFFICE OF THE AUDITOR GENERAL OF ONTARIONotes to Financial StatementsMarch 31, 20052. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(e) Net AssetsNet assets represent the accumulated cost of capital assets less accumulated amortization and disposals.They represent the carrying value of capital assets that will be used to provide services in future years.Chapter 6(f)Use of EstimatesThe preparation of financial statements in accordance with Canadian generally accepted accountingprinciples requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities at the date of the financial statements, and the reported amounts of revenue andexpenses during the reporting period. Actual results could differ from management’s best estimates asadditional information becomes available in the future.3. CAPITAL ASSETSCost($)2005 2004Accumulated Net Book Net BookAmortization ValueValue($)($)($)Computer hardware 629,630 422,451 207,179 201,596Computer software 223,812 152,556 71,256 87,104853,442 575,007 278,435 288,700The Office’s other major capital assets, including furniture and fixtures and leasehold improvements, wereacquired many years ago and consequently were fully amortized and written off in prior years.4. OBLIGATION FOR EMPLOYEE FUTURE BENEFITSAlthough the Office’s employees are not members of the Ontario Public Service, under provisions in the AuditAct, the Office’s employees are entitled to the same benefits as Ontario Public Service employees. The futureliability for benefits earned by the Office’s employees is included in the estimated liability for all provincialemployees that have earned these benefits and is recognized in the Province’s consolidated financialstatements. These benefits are accounted for as follows:(a) Pension BenefitsThe Office provides pension benefits for its full-time employees through participation in the PublicService Pension Fund (PSPF), which is a multi-employer defined benefit plan established by the Provinceof Ontario. The Office’s participation in this plan is accounted for as a defined contribution plan as theOffice has insufficient information to apply defined benefit plan accounting. The pension expenserepresents the Office’s contributions to the plan during the fiscal year. The Office’s contributions relatedto the pension plan for the year were $472,729 (2004 - $493,169) and are included in employee benefits inthe Statement of Operations and Changes in Net Assets.

The Office of the Auditor General of Ontario383OFFICE OF THE AUDITOR GENERAL OF ONTARIONotes to Financial StatementsMarch 31, 20054. OBLIGATION FOR EMPLOYEE FUTURE BENEFITS (CONTINUED)(b) Non-Pension Post-Employment BenefitsThe costs of any severance and unused vacation entitlements earned by employees are recognized whenpayments are required for eligible employees upon termination of their employment. These costs for theyear amounted to $22,147 (2004 – $76,857) and are included in employee benefits in the Statement ofOperations and Changes in Net Assets. The cost of other non-pension post-retirement benefits was fundedby the Ontario Management Board Secretariat and accordingly is not included in these financialstatements.5. COMMITMENTThe Office has an operating lease to rent premises for an 11-year period, which commenced November 1, 2000.The minimum rental commitment for the next five years is as follows:Chapter 6$2005-06 493,1002006-07 517,3002007-08 527,6002008-09 527,6002009-10 527,6006. PUBLIC SECTOR SALARY DISCLOSURE ACT, 1996Section 3(5) of this Act requires disclosure of Ontario public-sector employees paid an annual salary in excessof $100,000 in calendar year 2004.NamePositionSalary($)TaxableBenefits($)McCarter, Jim Auditor General 172,424 293Peall, Gary Deputy Auditor General (Acting) 128,674 221Amodeo, Paul Director 113,221 195Bordne, Walter Director 112,838 195Cheung, Andrew Director 113,432 195Fitzmaurice, Gerard Director 112,838 195McDowell, John Director 112,717 195Mishchenko, Nicholas Director 112,432 195Klein, Susan Director (Acting) 101,523 173

3842005 Annual Report of the Office of the Auditor General of OntarioOFFICE OF THE AUDITOR GENERAL OF ONTARIONotes to Financial StatementsMarch 31, 20057. RECONCILIATION TO PUBLIC ACCOUNTS VOLUME 1 BASIS OF PRESENTATIONThe Office’s Statement of Expenses and Assets by Program presented in Volume 1 of the Public Accounts ofOntario was prepared on a basis consistent with the accounting policies followed for the Province’s financialstatements, under which purchases of computer hardware and software are expensed in the year of acquisitionrather than being capitalized and amortized over their useful lives. A reconciliation of total expenses reportedin Volume 1 to the total expenses reported in these financial statements is as follows:Chapter 62005Budget*($)2005Actual($)2004Actual($)Total expenses per Public Accounts Volume 1 10,914,000 9,713,464 9,461,308Less: purchase of capital assets (185,000) (196,969) (147,901)Add: amortization of capital assets 187,800 207,234 221,236Total expenses per audited financial statements 10,916,800 9,723,729 9,534,643*The Office’s budget was originally submitted and approved at $11,101,800 ($10,729,000 for operatingexpenses, and $372,800 for capital expenses) which included an amount for amortization of capital assetsof $187,800. Actual expenditures are presented on the modified cash basis in Volume 1.

Chapter 7The Standing Committeeon Public AccountsAppointment andComposition of theCommitteeThe Standing Orders of the Legislature providefor the appointment of an all-party Standing Committeeon Public Accounts. The Committee isappointed for the duration of the Parliament (thatis, the period from the opening of the first sessionimmediately following a general election to the endof a government’s term and the calling of anotherelection).The membership of the Committee reflects proportionatelythe representation of parties in theLegislature. All members except for the Chair areentitled to vote on motions; the Chair’s vote isrestricted to the breaking of a tie.In accordance with the Standing Orders, aStanding Committee on Public Accounts wasappointed on December 2, 2003, for the duration ofthe 38th Parliament. The membership of the Committeewhen the House adjourned for the summerrecess on June 13, 2005 was as follows:Norm Sterling, Chair, Progressive ConservativeJulia Munro, Vice-chair, Progressive ConservativeLaurel Broten, LiberalJim Flaherty, Progressive ConservativeShelley Martel, New DemocratBill Mauro, LiberalRichard Patten, LiberalLiz Sandals, LiberalDavid Zimmer, LiberalRole of the CommitteeThe Committee examines, assesses, and reports tothe Legislature on a number of issues, including theeconomy and efficiency of government operations;the effectiveness of programs in achieving theirobjectives; controls over assets, expenditures, andthe assessment and collection of revenues; and thereliability and appropriateness of information inthe Public Accounts.In fulfilling this role, pursuant to its terms of referencein the Standing Orders of the Assembly, theCommittee reviews the Auditor General’s AnnualReport and the Public Accounts and reports to theLegislature its observations, opinions, and recommendations.Under the Standing Orders, thedocuments are deemed to have been permanentlyreferred to the Committee as they become available.As well, under sections 16 and 17 of the AuditorGeneral Act, the Committee may request the AuditorGeneral to undertake a special assignment in anarea of interest to the Committee.Chapter 7385

3862005 Annual Report of the Office of the Auditor General of OntarioAUDITOR GENERAL’S ADVISORY ROLEWITH THE COMMITTEEIn accordance with section 16 of the Auditor GeneralAct, the Auditor General and senior staff attendcommittee meetings at which the Committeereviews the Auditor General’s Annual Report andthe Public Accounts and assist the Committee inplanning its agenda.Committee Procedures andOperationsin the Auditor General’s Annual Report. This processenables each auditee to update the Committeeon activities undertaken since the completion of theaudit, particularly any initiatives taken to addressthe Auditor General’s recommendations.MEETINGS HELDThe Committee was very active and met 16 timesduring the October 2004–September 2005 periodto review the following items from the Auditor’s2003 and 2004 Annual Reports and to write reportsthereon.Chapter 7GENERALThe Committee meets weekly when the Legislatureis sitting. At times, the Committee also meets duringthe summer and winter when the Legislatureis not sitting. All meetings are open to the publicwith the exception of those dealing with the settingof the Committee’s agenda and the preparation ofcommittee reports. All public committee proceedingsare recorded in Hansard (the official verbatimreport of debates in the House, speeches, other proceedingsin the Legislature, and all open-session sittingsof standing and select committees).The Committee selects matters from the AuditorGeneral’s Annual Report and the Public Accountsfor hearings. The Auditor General, along with theCommittee’s researcher, briefs the Committee onthese matters, and the Committee then requestssenior officials from the auditee to appear andrespond to questions at the hearings. Since theAuditor General’s Annual Report and the PublicAccounts deal with administrative and financialrather than policy matters, ministers rarely attend.Once the hearings are completed, the Committeereports its comments and recommendations to theLegislature.The Committee also follows up on when and howthose ministries and Crown agencies not selectedfor detailed review will address the concerns raisedAuditor’s 2004 Annual Report• Ministry of the Attorney General—Office of thePublic Guardian and Trustee;• Ministry of the Environment—Air QualityProgram;• Ministry of the Environment—GroundwaterProgram;• Ministry of Health and Long-Term Care—IndependentHealth Facilities;• Ministry of Labour—Employee Rights andResponsibilities Program;• Ontario Media Development Corporation andMinistries of Culture and Finance—Media TaxCredits;•Provincial Highway System; and•Ministry of Transportation—Maintenance of theFollow-up of the recommendations contained inthe 2002 Annual Report—Ministry of Health andLong-Term Care—Long-Term Care Facilities.Auditor’s 2003 Annual ReportMinistry of Enterprise, Opportunity and Innova-• Ministry of Education—Curriculum Developmentand Implementation;•tion—Science and Technology; and• Ministry of the Environment—Environet.

The Standing Committee on Public Accounts387REQUEST FOR SPECIAL AUDITOn April 8, 2004, the Standing Committee on PublicAccounts directed the Auditor to examine thegovernment’s Intensive Early Intervention Programfor Children with Autism, including addressingthree specific issues raised in the motion, andto report his findings and recommendations to theCommittee.The Auditor’s report on this motion was thesubject of a hearing by the Committee on November18, 2004.Reports of the CommitteeGENERALThe Committee issues its reports to the Legislature.These reports summarize the information reviewedby the Committee during its meetings, togetherwith comments and recommendations.All committee reports are available through theClerk of the Committee (or online at www.ontla.on.ca/committees/reports.htm), thus providing thepublic with full access to the findings and recommendationsof the Committee.After the Committee tables its report in theLegislative Assembly, it requests that ministries oragencies respond to each recommendation eitherwithin 120 days or within a time frame stipulatedby the Committee.During the period from October 2004 to September2005, the Committee submitted the follow-FOLLOW-UPing reports to the Legislative Assembly:• Air Quality Program;• Curriculum Development and Implementation;• Employment Rights and Responsibilities Program;• Environet;• Independent Health Facilities;• Maintenance of the Provincial Highway System;and• Science and Technology.OF RECOMMENDATIONSMADE BY THE COMMITTEEThe Clerk of the Committee is responsible for followingup on the actions taken on the Committee’srecommendations by ministries or agencies. TheOffice of the Auditor General reviews responsesfrom ministries and agencies and, in subsequentaudits, follows up on reported actions taken.OTHER COMMITTEE ACTIVITIESCanadian Council of Public AccountsCommitteesThe Canadian Council of Public Accounts Committees(CCPAC) consists of delegates from federal,provincial, and territorial public accounts committeesfrom across Canada. CCPAC meets at the sametime and place as the Canadian Council of LegislativeAuditors (CCOLA) to provide an opportunityto discuss issues of mutual interest. The 26thannual meeting of CCPAC was hosted by Ontarioand was held in Niagara-on-the-Lake, Ontario, fromAugust 21 to 23, 2005.The 2005 joint session with CCOLA was onthe subject of a research project on ParliamentaryOversight—Public Accounts Committees and Relationshipsbeing conducted by the Canadian ComprehensiveAuditing Foundation.Chapter 7

Exhibit 1Agencies of the CrownExhibit 11. Agencies whose accounts are auditedby the Auditor GeneralAgriCorpAlgonquin Forestry AuthorityCancer Care OntarioCentennial Centre of Science and TechnologyChief Election Officer, Election Finances ActElection Fees and Expenses, Election ActFinancial Services Commission of OntarioGrain Financial Protection Board, Funds forProducers of Grain Corn, Soybeans, Wheat, andCanolaInvestor Education Fund, Ontario SecuritiesCommissionLegal Aid OntarioLiquor Control Board of OntarioLivestock Financial Protection Board, Fund forLivestock ProducersNorthern Ontario Heritage Fund CorporationNorth Pickering Development CorporationOffice of the AssemblyOffice of the Children’s LawyerOffice of the Environmental CommissionerOffice of the Information and PrivacyCommissionerOffice of the OmbudsmanOntario Clean Water Agency (December 31)*Note:* Dates in parentheses indicate fiscal periods ending on adate other than March 31.Ontario Development CorporationOntario Educational Communications AuthorityOntario Electricity Financial CorporationOntario Energy BoardOntario Exports Inc.Ontario Financing AuthorityOntario Food Terminal BoardOntario Heritage FoundationOntario Housing Corporation (December 31)*Ontario Immigrant Investor CorporationOntario Media Development CorporationOntario Northland Transportation Commission(December 31)*Ontario Place CorporationOntario Racing CommissionOntario Realty CorporationOntario Securities CommissionOntario Strategic Infrastructure FinancingAuthorityOntario SuperBuild CorporationOntario Tourism Marketing PartnershipCorporationOwen Sound Transportation Company LimitedPension Benefits Guarantee Fund, FinancialServices Commission of OntarioProvince of Ontario Council for the ArtsProvincial Judges Pension Fund, Provincial JudgesPension BoardPublic Guardian and Trustee for the Province ofOntarioToronto Area Transit Operating AuthorityTVOntario Foundation388

Exhibit 13892. Agencies whose accounts are auditedby another auditor under the direction ofthe Auditor GeneralMotor Vehicle Accident Claims FundNiagara Parks Commission (October 31)*Ontario Mental Health FoundationSt. Lawrence Parks CommissionWorkplace Safety and Insurance Board(December 31)*Exhibit 1Note:* Dates in parentheses indicate fiscal periods ending on adate other than March 31.

Exhibit 2Crown-controlledCorporationsExhibit 2Corporations whose accounts areaudited by an auditor other than theAuditor General, with full access by theAuditor General to audit reports, workingpapers, and other related documentsAccess Centre for Community Care in Lanark, Leedsand GrenvilleAccess Centre for Hastings and Prince EdwardCountiesAlgoma Community Care Access CentreArt Gallery of Ontario Crown FoundationBaycrest Hospital Crown FoundationBoard of Funeral ServicesBrant Community Care Access CentreBrock University FoundationCanadian Opera Company Crown FoundationCanadian Stage Company Crown FoundationCarleton University FoundationChatham/Kent Community Care Access CentreCochrane District Community Care Access CentreCommunity Care Access Centre (CCAC) – OxfordCommunity Care Access Centre for HuronCommunity Care Access Centre for Kenora andRainy River DistrictsCommunity Care Access Centre for the EasternCountiesCommunity Care Access Centre NiagaraCommunity Care Access Centre of HaltonCommunity Care Access Centre of London andMiddlesexCommunity Care Access Centre of PeelCommunity Care Access Centre of The District ofThunder BayCommunity Care Access Centre of Waterloo RegionCommunity Care Access Centre of York RegionCommunity Care Access Centre Perth CountyCommunity Care Access Centre Simcoe CountyCommunity Care Access Centre TimiskamingCommunity Care Access Centre Wellington-DufferinDeposit Insurance Corporation of OntarioDurham Access to CareEast York Access Centre for Community ServicesEducation Quality and Accountability OfficeElgin Community Care Access CentreEtobicoke and York Community Care Access CentreFoundation at Queen’s University at KingstonGreater Toronto Transit AuthorityGrey-Bruce Community Care Access CentreHaldimand-Norfolk Community Care Access CentreHaliburton, Northumberland and Victoria Long-Term Care Access CentreHamilton Community Care Access CentreHydro One Inc.Kingston, Frontenac, Lennox and AddingtonCommunity Care Access CentreLakehead University FoundationManitoulin-Sudbury Community Care AccessCentreMcMaster University FoundationMcMichael Canadian Art CollectionMetropolitan Toronto Convention CentreCorporation390

Exhibit 2391Mount Sinai Hospital Crown FoundationNational Ballet of Canada Crown FoundationNear North Community Care Access CentreNorth York Community Care Access CentreNorth York General Hospital Crown FoundationOntario Family Health NetworkOntario Foundation for the ArtsOntario Lottery and Gaming CorporationOntario Mortgage CorporationOntario Municipal Employees Retirement BoardOntario Pension BoardOntario Power Generation Inc.Ontario Trillium FoundationOttawa Community Care Access CentreOttawa Congress CentreRenfrew County Community Care Access CentreRoyal Botanical Gardens Crown FoundationRoyal Ontario MuseumRoyal Ontario Museum Crown FoundationSarnia/Lambton Community Care Access CentreScarborough Community Care Access CentreScience NorthShaw Festival Crown FoundationSmart Systems for Health AgencyStadium Corporation of Ontario LimitedSt. Clair Parks CommissionStratford Festival Crown FoundationSunnybrook Hospital Crown FoundationThe Peterborough Community Access CentreIncorporatedToronto Community Care Access CentreToronto East General Hospital Crown FoundationToronto Hospital Crown FoundationToronto Islands Residential Community TrustCorporationToronto Symphony Orchestra Crown FoundationTrent University FoundationUniversity of Guelph FoundationUniversity of Ottawa FoundationUniversity of Windsor FoundationWalkerton Clean Water CentreWaterfront Regeneration Trust AgencyWindsor/Essex Community Care Access CentreWomen’s College and Wellesley Central CrownFoundationExhibit 2Notes:Changes during the 2004/05 year:Addition:Walkerton Clean Water CentreDeletions:Grand River Hospital Crown FoundationSt. Michael’s Hospital Crown Foundation

Exhibit 3Treasury Board OrdersUnder subsection 12(2)(e) of the Auditor GeneralAct, the Auditor General is required to annuallyreport all orders of the Management Board of Cabinetauthorizing payments in excess of appropria-tions, stating the date of each order, the amountauthorized, and the amount expended. These areoutlined in the following table.Amounts Authorized and Expended Thereunder Year Ended March 31, 2005Exhibit 3Ministry Date of Order Authorized ($) Expended ($)Agriculture and Food Oct. 14, 2004 7,500,000 7,500,000Nov. 18, 2004 83,500,000 83,500,000Nov. 18, 2004 20,000,000 20,000,000Dec. 2, 2004 3,584,000 3,584,000Jan. 19, 2005 4,000,000 4,000,000Mar. 15, 2005 79,000,000 79,000,000Mar. 22, 2005 35,000,000 35,000,000Apr. 7, 2005 45,376,000 42,753,900277,960,000 275,337,900Attorney General Aug. 26, 2004 23,860,100 23,860,100Dec. 2, 2004 9,497,000 269,417Feb. 10, 2005 6,795,800 5,671,168Mar. 24, 2005 5,125,600 2,843,54245,278,500 32,644,227Children and Youth Services Dec. 8, 2004 3,900,000 —Jan. 27, 2005 50,000,000 50,000,000Mar. 10, 2005 10,597,900 —Mar. 15, 2005 4,000,000 —Mar. 31, 2005 42,790,100 41,719,415111,288,000 91,719,415Citizenship and Immigration Apr. 20, 2005 2,599,200 2,099,683392

Exhibit 3393Ministry Date of Order Authorized ($) Expended ($)Community and Social Services Oct. 28, 2004 1,500,000 —Dec. 2, 2004 2,500,000 —Feb. 24, 2005 57,500,000 49,963,932Mar. 31, 2005 21,153,100 18,661,314Apr. 7, 2005 2,629,500 —85,282,600 68,625,246Community Safety and Correctional Services July 15, 2004 79,900 —Dec. 2, 2004 1,200,000 —Dec. 2, 2004 2,700,800 1,028,712Dec. 8, 2004 880,000 880,000Jan. 27, 2005 520,000 520,000Mar. 15, 2005 30,000,000 30,000,000Mar. 24, 2005 18,771,500 2,008,579Apr. 20, 2005 1,450,000 —Aug. 17, 2005 3,874,700 2,046,72359,476,900 36,484,014Consumer and Business Services Aug. 12, 2004 6,141,600 1,868,510Sep. 16, 2004 5,560,000 5,560,000Jan. 19, 2005 1,890,000 1,890,000Mar. 31, 2005 2,244,800 1,995,155June 16, 2005 58,500 42,50115,894,900 11,356,166Exhibit 3Culture Mar. 10, 2005 389,900 389,900Mar. 15, 2005 10,000,000 —Mar. 31, 2005 6,535,000 5,952,420Apr. 20, 2005 690,000 —17,614,900 6,342,320Economic Development and Trade Mar. 15, 2005 10,000,000 10,000,000Mar. 22, 2005 16,500,000 16,500,000Apr. 20, 2005 11,480,000 11,207,71737,980,000 37,707,717Education Mar. 31, 2005 25,000,000 21,949,225Apr. 7, 2005 2,884,500 95,74127,884,500 22,044,966Energy Aug. 27, 2004 5,000,000 —

3942005 Annual Report of the Office of the Auditor General of OntarioMinistry Date of Order Authorized ($) Expended ($)Finance Aug. 26, 2004 19,500,000 19,500,000Mar. 10, 2005 200,000,000 200,000,000Mar. 22, 2005 8,000,000 7,410,222227,500,000 226,910,222Health and Long-Term Care Mar. 15, 2005 234,200,000 194,200,937Mar. 24, 2005 615,285,600 525,339,866Apr. 7, 2005 382,276,200 375,056,316Apr. 20, 2005 4,100,000 —1,235,861,800 1,094,597,119Intergovernmental Affairs Dec. 30, 2004 5,000,000 4,471,539Labour Mar. 24, 2005 300,000 56,144Exhibit 3Management Board Secretariat Mar. 10, 2005 133,089,100 —Mar. 15, 2005 19,000,000 19,000,000Mar. 24, 2005 185,389,100 147,038,820Apr. 20, 2005 233,977,900 —Apr. 21, 2005 241,000,000 193,567,748812,456,100 359,606,568Municipal Affairs and Housing July 21, 2004 5,000,000 5,000,000Aug. 26, 2004 3,500,000 3,500,000Oct. 28, 2004 2,680,000 2,680,000Nov. 4, 2004 13,000,000 13,000,000Dec. 2, 2004 701,100 701,100Feb. 16, 2005 5,000,000 5,000,000Feb. 24, 2005 38,792,900 38,637,509Mar. 10, 2005 25,000,000 25,000,000Mar. 10, 2005 15,662,000 3,759,900Mar. 22, 2005 15,000,000 12,781,616Mar. 24, 2005 25,000,000 22,772,333Mar. 31, 2005 10,475,600 9,970,690159,811,600 142,803,148Northern Development and Mines Dec. 2, 2004 630,000 630,000Dec. 2, 2004 400,000 400,000Feb. 10, 2005 4,175,000 2,945,874Feb. 24, 2005 880,700 204,1356,085,700 4,180,009Office of Francophone Affairs Apr. 20, 2005 130,100 —

Exhibit 3395Ministry Date of Order Authorized ($) Expended ($)Ontario Native Affairs Secretariat Oct. 28, 2004 439,300 439,300Dec. 8, 2004 3,452,000 3,451,050Aug. 17, 2005 1,900,000 772,2155,791,300 4,662,565Public Infrastructure Renewal Mar. 10, 2005 134,546,000 —Mar. 31, 2005 18,660,000 —153,206,000 —Tourism and Recreation Dec. 2, 2004 352,000 352,000Feb. 10, 2005 2,000,000 628,636Apr. 20, 2005 1,262,100 1,253,7853,614,100 2,234,421Training, Colleges and Universities Nov. 4, 2004 328,000 —Mar. 15, 2005 175,000,000 174,999,987Mar. 22, 2005 200,000,000 200,000,000Apr. 7, 2005 39,171,300 37,408,226414,499,300 412,408,213Transportation Dec. 8, 2004 2,152,000 1,106,418Mar. 10, 2005 4,635,800 2,769,800Mar. 24, 2005 34,846,400 7,800,000Mar. 31, 2005 44,000,000 44,000,000Apr. 20, 2005 34,000,000 17,285,794Aug. 17, 2005 22,675,600 16,945,173142,309,800 89,907,185Exhibit 3Total Treasury Board Orders 3,852,825,300 2,926,198,787

Exhibit 4Auditor General ActR.S.O. 1990, Chapter A.35This version of the Auditor General Act does not include provisions that were not yet proclaimed as at September 30, 2005, whichprimarily relate to the Government Advertising Act, 2004.Amended by: 1999, c. 5, s. 1; 1999, c. 11; 2004,c. 17, ss. 1-30.Definitions1. In this Act,but does not include one that the Crown AgencyAct states is not affected by that Act or that anyother Act states is not a Crown agency withinthe meaning or for the purposes of the CrownAgency Act; (“organisme de la Couronne”)Exhibit 4“agency of the Crown” means an association,authority, board, commission, corporation,council, foundation, institution, organization orother body,(a) whose accounts the Auditor General isappointed to audit by its shareholders or byits board of management, board of directorsor other governing body,(b) whose accounts are audited by the AuditorGeneral under any other Act or whoseaccounts the Auditor General is appointedby the Lieutenant Governor in Council toaudit,“audit” includes a special audit; (“vérification”,“vérifier”)“Board” means the Board of Internal Economyreferred to in section 87 of the Legislative AssemblyAct; (“Commission”)“Crown controlled corporation” means a corporationthat is not an agency of the Crown andhaving 50 per cent or more of its issued and outstandingshares vested in Her Majesty in right ofOntario or having the appointment of a majorityof its board of directors made or approved by theLieutenant Governor in Council; (“société contrôléepar la Couronne”)(c) whose accounts are audited by an auditor,other than the Auditor General, appointedby the Lieutenant Governor in Council, or(d) the audit of the accounts of which theAuditor General is required to direct orreview or in respect of which the auditor’sreport and the working papers used in thepreparation of the auditor’s statement arerequired to be made available to the AuditorGeneral under any other Act,“fiscal year” has the same meaning as in the Ministryof Treasury and Economics Act; (“exercice”)“grant recipient” means an association, authority,board, commission, corporation, council,foundation, institution, organization or otherbody that receives a reviewable grant directly orindirectly; (“bénéficiaire d’une subvention”)“public money” has the same meaning as in theFinancial Administration Act; (“deniers publics”)“reviewable grant” means a grant or other transferpayment from the Consolidated Revenue Fund,396

Exhibit 4397from an agency of the Crown or from a Crowncontrolled corporation; (“subvention susceptibled’examen”)after consultation with the chair of the standingPublic Accounts Committee of the Assembly. R.S.O.1990, c. A.35, s. 3; 2004, c. 17, s. 5.“special audit” means an examination with respectto the matters described in subclauses 12 (2) (f)(i) to (v). (“vérification spéciale”) R.S.O. 1990,c. A.35, s. 1; 2004, c. 17, s. 2.References to former names1.1 A reference in an Act, regulation, order incouncil or document to a person or office by theformer title of that person or the former nameof that office set out in Column 1 of the followingTable or by a shortened version of that title orname shall be deemed, unless a contrary intentionappears, to be a reference to the new title of thatperson or the new name of that office set out inColumn 2:Column 1/Colonne 1 Column 2/Colonne 2Former titles and names/Anciens titres et anciennesappellationsAssistant ProvincialAuditor/vérificateurprovincial adjointOffice of the ProvincialAuditor/Bureau duvérificateur provincialProvincial Auditor/vérificateur provincialNew titles and names/Nouveaux titres etnouvelles appellationsDeputy Auditor General/sous-vérificateur généralOffice of the AuditorGeneral/Bureau duvérificateur généralAuditor General/vérificateur généralTerm of office4. (1) The term of office of the Auditor Generalis 10 years and a person is not eligible to beappointed to more than one term of office. 2004,c. 17, s. 6.Same(2) The Auditor General continues to holdoffice after the expiry of his or her term of officeuntil a successor is appointed. 2004, c. 17, s. 6.Removal(3) The Auditor General may be removed fromoffice for cause, before the expiry of his or herterm of office, by the Lieutenant Governor inCouncil on the address of the Assembly. 2004,c. 17, s. 6.Salary of Auditor General5. (1) The Auditor General shall be paid asalary within the highest range of salaries paid todeputy ministers in the Ontario civil service and isentitled to the privileges of office of a senior deputyminister. R.S.O. 1990, c. A.35, s. 5 (1); 1999, c. 5,s. 1 (1); 1999, c. 11, s. 1 (1); 2004, c. 17, s. 7.Exhibit 42004, c. 17, s. 3.Office of the Auditor General2. The Office of the Auditor General consistsof the Auditor General, the Deputy Auditor Generaland such employees as the Auditor General mayrequire for the proper conduct of the business of theOffice. 2004, c. 17, s. 4.Auditor General3. The Auditor General shall be appointed asan officer of the Assembly by the Lieutenant Governorin Council on the address of the AssemblySame(2) The salary of the Auditor General, withinthe salary range referred to in subsection (1),shall be determined and reviewed annually bythe Board. 1999, c. 11, s. 1 (2); 2004, c. 17, s. 7.Idem(3) The salary of the Auditor General shall becharged to and paid out of the ConsolidatedRevenue Fund. R.S.O. 1990, c. A.35, s. 5 (3);2004, c. 17, s. 7.

398 2005 Annual Report of the Office of the Auditor General of OntarioExhibit 4Appointment of Deputy Auditor General6. The Deputy Auditor General shall beappointed as an officer of the Assembly by the LieutenantGovernor in Council upon the recommendationof the Auditor General. R.S.O. 1990, c. A.35,s. 6; 2004, c. 17, s. 8.Duties of Deputy Auditor General7. The Deputy Auditor General, under thedirection of the Auditor General, shall assist in theexercise of the powers and the performance of theduties of the Auditor General and, in the absenceor inability to act of the Auditor General, shall actin the place of the Auditor General. R.S.O. 1990,c. A.35, s. 7; 2004, c. 17, s. 9.Qualifications8. The persons appointed as Auditor Generaland Deputy Auditor General shall be personswho are licensed under the Public Accountancy Act.R.S.O. 1990, c. A.35, s. 8; 2004, c. 17, s. 10.Audit of Consolidated Revenue Fund9. (1) The Auditor General shall audit, onbehalf of the Assembly and in such manner as theAuditor General considers necessary, the accountsand records of the receipt and disbursement ofpublic money forming part of the ConsolidatedRevenue Fund whether held in trust or otherwise.R.S.O. 1990, c. A.35, s. 9 (1); 2004, c. 17, s. 11.Audit of agencies of the Crown(2) Where the accounts and financial transactionsof an agency of the Crown are notaudited by another auditor, the Auditor Generalshall perform the audit, and, despite any otherAct, where the accounts and financial transactionsof an agency of the Crown are auditedby another auditor, the audit shall be performedunder the direction of the Auditor General andsuch other auditor shall report to the AuditorGeneral. R.S.O. 1990, c. A.35, s. 9 (2); 2004,c. 17, s. 11.Audit of Crown controlled corporations(3) Where the accounts of a Crown controlledcorporation are audited other than by the AuditorGeneral, the person or persons performingthe audit,(a) shall deliver to the Auditor General forthwithafter completion of the audit a copy oftheir report of their findings and their recommendationsto the management and acopy of the audited financial statements ofthe corporation;(b) shall make available forthwith to theAuditor General, when so requested bythe Auditor General, all working papers,reports, schedules and other documentsin respect of the audit or in respect of anyother audit of the corporation specified inthe request;(c) shall provide forthwith to the Auditor General,when so requested by the Auditor General,a full explanation of work performed,tests and examinations made and theresults obtained, and any other informationwithin the knowledge of such personor persons in respect of the corporation.R.S.O. 1990, c. A.35, s. 9 (3); 2004, c. 17,s. 11.Additional examination and investigation(4) Where the Auditor General is of the opinionthat any information, explanation or documentthat is provided, made available or delivered tohim or her by the auditor or auditors referredto in subsection (2) or (3) is insufficient, theAuditor General may conduct or cause to beconducted such additional examination andinvestigation of the records and operations ofthe agency or corporation as the Auditor Generalconsiders necessary. R.S.O. 1990, c. A.35,s. 9 (4); 2004, c. 17, s. 11.

Exhibit 4399Special auditsGrant recipients9.1 (1) On or after April 1, 2005, the AuditorGeneral may conduct a special audit of agrant recipient with respect to a reviewable grantreceived by the grant recipient directly or indirectlyon or after the date on which the Audit Statute LawAmendment Act, 2003 receives Royal Assent. 2004,c. 17, s. 12.Exception(2) Subsection (1) does not apply with respectto a grant recipient that is a municipality. 2004,c. 17, s. 12.Crown controlled corporations, etc.(3) The Auditor General may conduct a specialaudit of a Crown controlled corporation ora subsidiary of a Crown controlled corporation.2004, c. 17, s. 12.Examination of accounting records9.2 (1) The Auditor General may examineaccounting records relating to a reviewable grantreceived directly or indirectly by a municipality.2004, c. 17, s. 12.Same(2) The Auditor General may require a municipalityto prepare and submit a financial statementsetting out the details of its disposition ofthe reviewable grant. 2004, c. 17, s. 12.Duty to furnish information10. (1) Every ministry of the public service,every agency of the Crown, every Crown controlledcorporation and every grant recipient shall give theAuditor General the information regarding its powers,duties, activities, organization, financial transactionsand methods of business that the AuditorGeneral believes to be necessary to perform his orher duties under this Act. 2004, c. 17, s. 13.Access to records(2) The Auditor General is entitled to have freeaccess to all books, accounts, financial records,electronic data processing records, reports,files and all other papers, things or propertybelonging to or used by a ministry, agency of theCrown, Crown controlled corporation or grantrecipient, as the case may be, that the AuditorGeneral believes to be necessary to perform hisor her duties under this Act. 2004, c. 17, s. 13.No waiver of privilege(3) A disclosure to the Auditor General undersubsection (1) or (2) does not constitute awaiver of solicitor-client privilege, litigationprivilege or settlement privilege. 2004, c. 17,s. 13.Power to examine on oath11. (1) The Auditor General may examineany person on oath on any matter pertinent to anaudit or examination under this Act. 2004, c. 17,s. 13.Same(2) For the purpose of an examination, theAuditor General has the powers that Part II ofthe Public Inquiries Act confers on a commission,and that Part applies to the examination as ifit were an inquiry under that Act. 2004, c. 17,s. 13.Stationing a member in a ministry, etc.11.1 (1) For the purpose of exercising powersor performing duties under this Act, the AuditorGeneral may station one or more members ofthe Office of the Auditor General in any ministry ofthe public service, agency of the Crown, Crown controlledcorporation or grant recipient. 2004, c. 17,s. 13.Exhibit 4

400 2005 Annual Report of the Office of the Auditor General of OntarioExhibit 4Accommodation(2) The ministry, agency, corporation or grantrecipient, as the case may be, shall provide theaccommodation required for the purposes mentionedin subsection (1). 2004, c. 17, s. 13.Prohibition re obstruction11.2 (1) No person shall obstruct the AuditorGeneral or any member of the Office of the AuditorGeneral in the performance of a special audit undersection 9.1 or an examination under section 9.2and no person shall conceal or destroy any books,accounts, financial records, electronic data processingrecords, reports, files and all other papers,things or property that the Auditor General considersto be relevant to the subject-matter of the specialaudit or examination. 2004, c. 17, s. 13.Offence(2) Every person who knowingly contravenessubsection (1) and every director or officer of acorporation who knowingly concurs in such acontravention is guilty of an offence and on convictionis liable to a fine of not more than $2,000or imprisonment for a term of not more than oneyear, or both. 2004, c. 17, s. 13.Auditor General should not be deferred until theannual report, and the Speaker shall lay each suchreport before the Assembly forthwith if it is in sessionor, if not, not later than the tenth day of thenext session. R.S.O. 1990, c. A.35, s. 12 (1); 2004,c. 17, s. 14 (1).Contents of report(2) In the annual report in respect of each fiscalyear, the Auditor General shall report on,(a) the work of the Office of the Auditor Generaland on whether, in carrying on thework of the Office, the Auditor Generalreceived all the information and explanationsrequired;(b) the examination of accounts of receipts anddisbursements of public money;(c) the examination of the consolidated financialstatements of Ontario as reported in thePublic Accounts;(d) all special warrants issued to authorizepayments, stating the date of each specialwarrant, the amount authorized and theamount expended;Penalty, corporation(3) If a corporation is convicted of an offenceunder subsection (2), the maximum penalty thatmay be imposed on the corporation is $25,000.2004, c. 17, s. 13.Annual report12. (1) The Auditor General shall reportannually to the Speaker of the Assembly after eachfiscal year is closed and the Public Accounts arelaid before the Assembly, but not later than the31st day of December in each year unless the PublicAccounts are not laid before the Assembly by thatday, and may make a special report to the Speakerat any time on any matter that in the opinion of the(e) all orders of the Treasury Board made toauthorize payments in excess of appropriations,stating the date of each order,the amount authorized and the amountexpended;(f) such matters as, in the opinion of the AuditorGeneral, should be brought to theattention of the Assembly including, withoutlimiting the generality of the foregoing,any matter relating to the audit or examinationof the Crown, Crown controlled corporationsor grant recipients or any caseswhere the Auditor General has observedthat,

Exhibit 4401(i) accounts were not properly keptor public money was not fullyaccounted for,Proviso15. Nothing in this Act shall be construed torequire the Auditor General,(ii) essential records were not maintainedor the rules and proceduresapplied were not sufficient to safeguardand control public property orto effectively check the assessment,collection and proper allocation ofrevenue or to ensure that expenditureswere made only as authorized,(iii) money was expended other than forthe purposes for which it wasappropriated,(iv) money was expended without dueregard to economy and efficiency, or(v) where procedures could be used tomeasure and report on the effectivenessof programs, the procedureswere not established or, in theopinion of the Auditor General, theestablished procedures were not satisfactory.R.S.O. 1990, c. A.35,s. 12 (2); 2004, c. 17, s. 14 (2-7).(a) to report on any matter that, in the opinionof the Auditor General, is immaterial orinsignificant; or(b) to audit or direct the audit of or report onthe accounts of a body not referred to inthis Act in the absence of such a requirementin any other Act in respect of thebody. R.S.O. 1990, c. A.35, s. 15; 2004,c. 17, s. 16.Attendance at standing Public AccountsCommittee of the Assembly16. At the request of the standing PublicAccounts Committee of the Assembly, the AuditorGeneral and any member of the Office of the AuditorGeneral designated by the Auditor Generalshall attend at the meetings of the committee inorder,(a) to assist the committee in planning theagenda for review by the committee of thePublic Accounts and the annual report ofthe Auditor General; andExhibit 4Opinion on statements(3) In the annual report in respect of each fiscalyear, the Auditor General shall express his or heropinion as to whether the consolidated financialstatements of Ontario, as reported in thePublic Accounts, present fairly information inaccordance with appropriate generally acceptedaccounting principles and the Auditor Generalshall set out any reservations he or she mayhave. 2004, c. 17, s. 14 (8).13. REPEALED: 2004, c. 17, s. 15.14. REPEALED: 2004, c. 17, s. 15.(b) to assist the committee during its review ofthe Public Accounts and the annual reportof the Auditor General,and the Auditor General shall examine into andreport on any matter referred to him or her inrespect of the Public Accounts by a resolution of thecommittee. R.S.O. 1990, c. A.35, s. 16; 2004, c. 17,s. 17.Special assignments17. The Auditor General shall perform suchspecial assignments as may be required by theAssembly, the standing Public Accounts Committeeof the Assembly, by resolution of the committee, orby a minister of the Crown in right of Ontario but

402 2005 Annual Report of the Office of the Auditor General of Ontariosuch special assignments shall not take precedenceover the other duties of the Auditor General underthis Act and the Auditor General may decline anassignment by a minister of the Crown that, in theopinion of the Auditor General, might conflict withthe other duties of the Auditor General. R.S.O.1990, c. A.35, s. 17; 2004, c. 17, s. 18.Power to advise18. The Auditor General may advise appropriatepersons employed in the public service ofOntario as to any matter that comes or that maycome to the attention of the Auditor General in thecourse of exercising the powers or performing theduties of Auditor General. R.S.O. 1990, c. A.35,s. 18; 2004, c. 17, s. 18.employee of the Auditor General, shall take andsubscribe before the Auditor General or a persondesignated in writing by the Auditor General,(a) the following oath of office and secrecy, inEnglish or in French:I, .........................................., do swear (or solemnlyaffirm) that I will faithfully discharge myduties as an employee of the Auditor General andwill observe and comply with the laws of Canadaand Ontario and, except as I may be legallyrequired, I will not disclose or give to any personany information or document that comes to myknowledge or possession by reason of my being anemployee of the Office of the Auditor General.So help me God. (Omit this line in an affirmation)Exhibit 4Audit working papers19. Audit working papers of the Office of theAuditor General shall not be laid before the Assemblyor any committee of the Assembly. R.S.O. 1990,c. A.35, s. 19; 2004, c. 17, s. 19.Staff20. Subject to the approval of the Board andto sections 22, 25 and 26, the Auditor General mayemploy such professional staff and other personsas the Auditor General considers necessary for theefficient operation of the Office of the Auditor Generaland may determine the salary of the DeputyAuditor General and the salaries and remuneration,which shall be comparable to the salary rangesof similar positions or classifications in the publicservice of Ontario, and the terms and conditions ofemployment of the employees of the Office of theAuditor General. R.S.O. 1990, c. A.35, s. 20; 2004,c. 17, s. 20.(b) the following oath of allegiance, in Englishor in French:I, .........................................................., doswear (or solemnly affirm) that I will be faithfuland bear true allegiance to Her Majesty Queen Elizabeththe Second (or the reigning sovereign for thetime being), her heirs and successors according tolaw.So help me God. (Omit this line in an affirmation)R.S.O. 1990, c. A.35, s. 21 (1); 2004, c. 17, s. 21 (1).Idem(2) The Auditor General may require any personor class of persons appointed to assist theAuditor General for a limited period of timeor in respect of a particular matter to take andsubscribe either or both of the oaths set out insubsection (1). R.S.O. 1990, c. A.35, s. 21 (2);2004, c. 17, s. 21 (2).Oath of office and secrecy and oath ofallegiance21. (1) Every employee of the Office of theAuditor General, before performing any duty as anRecord of oaths(3) A copy of each oath administered to anemployee of the Office of the Auditor Generalunder subsection (1) shall be kept in the file of

Exhibit 4403the employee in the Office of the Auditor General.R.S.O. 1990, c. A.35, s. 21 (3); 2004, c. 17,s. 21 (3).this section shall be charged to and paid out of theConsolidated Revenue Fund. R.S.O. 1990, c. A.35,s. 23; 2004, c. 17, s. 23.Cause for dismissal(4) The failure of an employee of the Office ofthe Auditor General to take and subscribe or toadhere to either of the oaths required by subsection(1) may be considered as cause for dismissal.R.S.O. 1990, c. A.35, s. 21 (4); 2004,c. 17, s. 21 (3).Delegation of authority24. The Auditor General may delegate in writingto a person employed in the Office of the AuditorGeneral the Auditor General’s authority toexercise any power or perform any duty other thanhis or her duty to report to the Assembly. 2004,c. 17, s. 24.Benefits22. (1) The employee benefits applicablefrom time to time under the Public Service Act tocivil servants who are not within a unit of employeesestablished for collective bargaining under anyAct apply or continue to apply, as the case may be,to the Auditor General, the Deputy Auditor Generaland to the full-time permanent and probationaryemployees of the Office of the Auditor Generaland the Board or any person authorized by orderof the Board may exercise the powers and duties ofthe Civil Service Commission and the Auditor Generalor any person authorized in writing by the AuditorGeneral may exercise the powers and dutiesof a deputy minister under that Act in respect ofsuch benefits. R.S.O. 1990, c. A.35, s. 22 (1); 2004,c. 17, s. 22 (1).Political activities of employees of the Office ofthe Auditor General25. (1) An employee of the Office of theAuditor General shall not,(a) be a candidate in a provincial or federalelection or in an election for any municipaloffice including a local board of a municipalitywithin the meaning of the MunicipalAffairs Act;(b) solicit funds for a provincial, federal ormunicipal party or candidate; or(c) associate his or her position in the Office ofthe Auditor General with any political activity.R.S.O. 1990, c. A.35, s. 25 (1); 2004,c. 17, s. 25.Exhibit 4Pension plan(2) The Auditor General and the Deputy AuditorGeneral are members of the Public ServicePension Plan. 2004, c. 17, s. 22 (2).Expert assistance23. Subject to the approval of the Board, theAuditor General from time to time may appoint oneor more persons having technical or special knowledgeof any kind to assist the Auditor General fora limited period of time or in respect of a particularmatter and the money required for the purposes ofCause for dismissal(2) Contravention of any of the provisions ofsubsection (1) may be considered as cause fordismissal. R.S.O. 1990, c. A.35, s. 25 (2).Conduct of business and employee discipline26. (1) The Auditor General may makeorders and rules for the conduct of the internalbusiness of the Office of the Auditor General and,subject to this section, may for cause suspend,demote or dismiss an employee of the Office or mayrelease such an employee from employment. 2004,c. 17, s. 26.

404 2005 Annual Report of the Office of the Auditor General of OntarioExhibit 4Suspension, etc., of employee(2) Subject to subsection (3), if the AuditorGeneral for cause suspends, demotes or dismissesan employee of the Office of the AuditorGeneral or if the Auditor General releases suchan employee from employment, the provisionsof the Public Service Act and the regulationsmade under it that apply where a deputy ministerexercises powers under section 22 of that Actapply, with necessary modifications. 2004, c. 17,s. 26.Same(3) For the purposes of subsection (2), the PublicService Act and the regulations under it applyas if the Auditor General were a deputy minister,but the requirement that a deputy minister givenotice to, or obtain the approval of, the CivilService Commission does not apply. 2004, c. 17,s. 26.Grievances(4) An employee whom the Auditor General forcause suspends, demotes or dismisses may file agrievance with respect to the Auditor General’sdecision. 2004, c. 17, s. 26.of a particular matter, for anything he or she maydo or report or say in the course of the exercise orthe intended exercise of functions under this Act,unless it is shown that he or she acted in bad faith.R.S.O. 1990, c. A.35, s. 27 (1); 2004, c. 17, s. 27 (1).(2) REPEALED: 2004, c. 17, s. 27 (2).Duty of confidentiality27.1 (1) The Auditor General, the DeputyAuditor General and each person employed in theOffice of the Auditor General or appointed to assistthe Auditor General for a limited period of timeor in respect of a particular matter shall preservesecrecy with respect to all matters that come to hisor her knowledge in the course of his or her employmentor duties under this Act. 2004, c. 17, s. 28.Same(2) Subject to subsection (3), the personsrequired to preserve secrecy under subsection(1) shall not communicate to another personany matter described in subsection (1)except as may be required in connection withthe administration of this Act or any proceedingsunder this Act or under the Criminal Code (Canada).2004, c. 17, s. 28.Same(5) The provisions of the regulations madeunder the Public Service Act that apply in relationto grievances authorized by those regulationsapply with necessary modifications to a grievanceauthorized by subsection (4) as if the AuditorGeneral were a deputy minister. 2004, c. 17,s. 26.Proceedings privileged27. (1) No proceedings lie against the AuditorGeneral, the Deputy Auditor General, anyperson employed in the Office of the Auditor Generalor any person appointed to assist the AuditorGeneral for a limited period of time or in respectSame(3) A person required to preserve secrecy undersubsection (1) shall not disclose any informationor document disclosed to the Auditor Generalunder section 10 that is subject to solicitor-clientprivilege, litigation privilege or settlement privilegeunless the person has the consent of eachholder of the privilege. 2004, c. 17, s. 28.Confidentiality of personal information27.2 (1) No person shall collect, use or retainpersonal information on behalf of the Auditor Generalunless the personal information is reasonablynecessary for the proper administration of this Actor for a proceeding under it. 2004, c. 17, s. 28.

Exhibit 4405Same(2) No person shall collect, use or retain personalinformation on behalf of the Auditor Generalif other information will serve the purposefor which the personal information would otherwisebe collected, used or retained. 2004, c. 17,s. 28.Retention of information(3) If the Auditor General retains personalinformation relating to the medical, psychiatricor physiological history of the individual orinformation relating to the individual’s healthcare or well-being, the Auditor General shall,(a) remove all references in the informationto the name of the individual and to otheridentifying information;(b) retain the information by using a system ofidentifiers, other than the name of the individualand the other identifying informationmentioned in clause (a); and(c) ensure that the information is not,(i) easily identifiable by a person who isnot authorized to have access to it,Definition(4) In this section,“personal information” has the same meaning as inthe Freedom of Information and Protection of PrivacyAct. 2004, c. 17, s. 28.Examination of accounts of Office of the AuditorGeneral28. A person or persons, not employed bythe Crown or the Office of the Assembly, licensedunder the Public Accountancy Act and appointedby the Board, shall examine the accounts relatingto the disbursements of public money on behalf ofthe Office of the Auditor General and shall reportthereon to the Board and the chairman of the Boardshall cause the report to be laid before the Assemblyif it is in session or, if not, at the next session.R.S.O. 1990, c. A.35, s. 28; 2004, c. 17, s. 29.Estimates29. (1) The Auditor General shall presentannually to the Board estimates of the sums ofmoney that will be required for the purposes of thisAct. R.S.O. 1990, c. A.35, s. 29 (1); 2004, c. 17,s. 30.Exhibit 4(ii) used or disclosed for purposes notdirectly related to the Auditor General’sduties under this Act,(iii) published, disclosed or distributedin any manner that would allow theinformation to be used to identify theindividual or to infer the individual’sidentity, or(iv) combined, linked or matched to anyother information that could identifythe individual, except if the AuditorGeneral finds it necessary to do so tofulfil his or her duties under this Act.2004, c. 17, s. 28.Review by Board(2) The Board shall review and may alter as itconsiders proper the estimates presented by theAuditor General, and the chair of the Board shallcause the estimates as altered by the Board tobe laid before the Assembly and the Assemblyshall refer the estimates laid before it to a committeeof the Assembly for review. R.S.O. 1990,c. A.35, s. 29 (2); 2004, c. 17, s. 30.Notice(3) Notice of meetings of the Board to reviewor alter the estimates presented by the AuditorGeneral shall be given to the chair and the vicechairof the standing Public Accounts Committeeof the Assembly and the chair and the vice-chair

406 2005 Annual Report of the Office of the Auditor General of Ontariomay attend at the review of the estimates by theBoard. R.S.O. 1990, c. A.35, s. 29 (3); 2004,c. 17, s. 30.Money(4) The money required for the purposes of thisAct, other than under sections 5 and 23, shall bepaid out of the money appropriated therefor bythe Legislature. R.S.O. 1990, c. A.35, s. 29 (4).Exhibit 4

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