Report of the Auditor General of Québec to the National Assembly for

Transcription

1 Report of the Auditor General of Québec to the National Assembly for Value-for-Money Audit Highlights Spring 2014

2 Cover photo Parliament Building, Daniel Lessard, National Assembly Collection

3 Report of the Auditor General of Québec to the National Assembly for Value-for-Money Audit Highlights Spring 2014

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5 Table of contents Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Observations of the Acting Auditor General, Mr. Michel Samson Implementation and Operation of Service Areas Special Audit Acquisitions of Goods and Services Commission scolaire du Chemin-du-Roy: Management of the Complexe sportif Alphonse-Desjardins Ferry Routes and Maritime Services Operated in Partnership Prescription Drugs and Pharmaceutical Services Unclaimed Financial Assets: Provisional Administration by Revenu Québec Selection of Qualified Immigrant Workers The name of the entity in Chapter 8 was up-to-date as of April 22, 2014.

6 Highlights Observations of the Acting Auditor General, 1 Mr. Michel Samson 1 Introduction 1 The Québec National Assembly has entrusted the Auditor General with the mandate of facilitating, through audit, parliamentary control over public funds and other public property. This mandate comprises, to the extent deemed appropriate by the Auditor General, financial audits, audits to ensure the compliance of operations with statutes, regulations, policy statements and directives, as well as value-for-money (VFM) audits. The Auditor General s field of jurisdiction mainly encompasses the government and its agencies and also includes funds paid in the form of subsidies. 2 In the annual report that the Auditor General submits to the National Assembly, he draws attention to any topic arising from his work that deserves to be brought to the attention of parliamentarians. The document is published in several volumes. The current volume is devoted to the value-for-money audits carried out over the last 12 months. It contains, among other things, the related findings, conclusions and recommendations. 3 The first chapter gives the Auditor General the opportunity to establish a more personal contact with the reader. This chapter provides an update on the entry into force of the recent legislative amendments to the Auditor General Act concerning VFM audits. In addition, it summarily presents each of the other chapters. 2 Report of the Auditor General of Québec to the National Assembly for

7 Observations of the Acting Auditor General, Mr. Michel Samson Chapter 1 2 Expanded Mandate for Value-for-Money Audits 4 On June 14, 2013, the National Assembly adopted the Act respecting mainly the implementation of certain provisions of the Budget Speech of 20 November This act amended the Auditor General Act and enables the Auditor General to carry out value-for-money (VFM) audits among government s enterprises without the prior agreement of the board of directors (with one exception, namely the Caisse de dépôt et placement du Québec). 5 This amendment to the Act was repeatedly requested over the years by my predecessors and me. In fact, we have always considered it necessary for parliamentary control to be exercised to the same extent and with the same effectiveness in all entities covered by the Auditor General Act. It should be understood that the state exercises a considerable influence on the entities in which it has a majority interest. It is therefore normal that the more than 20 entities concerned are subject to the same rules of governance and control of public funds as are the government s other agencies. This recent amendment to the Auditor General Act is a positive element, because it makes it possible to increase the effectiveness of parliamentary control over large-scale enterprises, such as Hydro-Québec, Loto-Québec, the Société des alcools du Québec, the Commission de la construction du Québec. 6 I adapted my short-term work plan in order to intervene as soon as possible with certain state-owned enterprises and, thus, to meet the wish expressed by parliamentarians. Therefore, at the beginning of 2014, I incorporated into my work planning a general review of activities of Hydro-Québec and Loto-Québec. 7 In accordance with the expectations of parliamentarians, the decision to choose Hydro-Québec imposed itself right away. In fact, it is the largest of the state-owned enterprises if we consider its value and size. In 2013, it collected revenues of $12.6 billion from electricity sales, and it managed assets of over $73 billion. In addition, Hydro-Québec relies on a labour force of about 20,000 employees. The general review of activities makes it possible to acquire adequate knowledge of the areas or activities that could be the subject of value-for-money audit engagements. It serves to plan future interventions pursuant to the Auditor General Act. 8 Loto-Québec is also among the large-scale state-owned enterprises. For the fiscal year ended in 2013, its revenues reached $3.6 billion, while its operating expenses were close to $1 billion. It relies on about 6,500 employees to fulfill its mission. That is why I deemed relevant to undertake work in this state-owned enterprise on a priority basis. 9 In the months that followed, I also announced to the concerned responsibles the start of a general review of activities of the Société des établissements de plein air du Québec and the Société des alcools du Québec. Value-for-Money Audit Spring

8 Observations of the Acting Auditor General, Mr. Michel Samson Chapter 1 10 In order to create a climate of respect, trust and collaboration, my staff discussed with the responsibles of each of the entities the conditions that must be met to ensure the efficiency, effectiveness and rigour of my work. This is essential so I may identify the most relevant subjects and carry out the related value-for-money audit engagements, for the benefit of parliamentarians. These conditions apply to each of the engagements that I head in all sectors of government activity. They include the following: I must obtain diligently a copy of any document that I deem useful to carry out my engagement without having to justify the reasons for my request and regardless of the period in which the document was produced. I must be able to communicate freely with the entity s employees to plan and organize the meetings necessary for my work; of course, I inform supervisors of those meetings beforehand to demonstrate transparency and favour the best possible collaboration. The entity s employees must collaborate fully by being available and providing the requested information as my work advances. 11 I am aware that the presence of an Auditor General team can sometimes raise concerns, given the nature of my mandate and the additional effort required of employees whose work schedule is often quite loaded. That is why my staff always remains very receptive toward the issues and constraints of entities to minimize the impact of our work on current activities. In the end, I remain convinced that the additional effort required is amply compensated by the increase in transparency in the management of public funds and the accountability of officers. 12 Almost six months have passed since I started my interventions among the state-owned enterprises that are now unconditionally subject to the valuefor-money audit. Pursuant to the requirements of the Auditor General Act, I must inform the National Assembly of the extent to which I received, in the discharge of my duties, all the information, explanations and reports required. To do so, I address below the enterprises that are currently the subject of my work. 13 To date, Loto-Québec has offered me its collaboration and has concretely demonstrated its willingness to comply with the prescribed conditions. My staff also held first meetings with representatives of the Société des établissements de plein air du Québec and those of the Société des alcools du Québec, who enabled to lay the groundwork for upcoming interventions. 14 The situation is different at Hydro-Québec, which interprets in a restrictive and constraining way the powers entrusted to me. The enterprise proposes to me ways of doing things that do not respect my methodology, which has proven effective and is based on the Auditor General Act and professional standards. 4 Report of the Auditor General of Québec to the National Assembly for

9 Observations of the Acting Auditor General, Mr. Michel Samson Chapter 1 15 To date, Hydro-Québec has not agreed to all my requests for documents. It argues, among other things, that it is not required to provide me with the documents produced before the date on which the Auditor General Act was amended, that is, June 14, This interpretation, which I do not share, significantly limits the scope of my work. 16 In addition, it insists on the fact that the subject of a value-for-money audit must necessarily be defined before it can make available to me certain documents that I deem necessary to the initial familiarization. Besides that, it claims that I must justify the relevance of my requests in relation to the subject of the audit. This goes against my constitutive act and the objective of a general review of activities, which consists precisely in familiarization with an entity s activities to then determine a subject that could lead to a value-for-money audit. 17 In the other hand, I favourably welcomed Hydro-Québec s proposal to offer training sessions to my collaborators on topics it will have chosen. While I am convinced of their usefulness, these sessions cannot be a substitute for the work that I consider necessary in order to complete my engagement. 18 Hydro-Québec s position is incompatible with the aim of greater transparency and increased efficiency in the public administration. The constraints that the enterprise imposes on me compromise the efficiency of my work and threaten the indispensible independence of my value-for-money audit engagement of this enterprise. Furthermore, the execution of my work plan risks of being considerably delayed. 19 I understand that conducting a first value-for-money audit engagement in a state-owned enterprise requires an adaptation period. That is why my collaborators have had exchanges on different occasions with representatives of the entity to explain the way we do things. 20 Despite our divergent points of view, I hope to be able to develop a collaboration with Hydro-Québec, one of the objectives being to favour greater transparency in the management of public funds. Therefore, I contacted the chief executive officer and the chair of the audit committee to make them aware of the impact of this restrictive approach. In this regard, I received a letter from Hydro-Québec on June 2, which notifies me that some documents I requested for will be provided shortly. I am confident that it will be the beginning of an effective working relationship between the two organizations. 21 My goal is to obtain from Hydro-Québec a collaboration similar to the one I established with the other entities in which I carry out work. Of course, I will keep parliamentarians informed of the situation, as required by the Auditor General Act. 22 The objective of the legislative amendments in relation to the value-formoney audit of the government s enterprises is clear: carry out without difficulty, in those enterprises, the work that I deem useful to perform in order to adequately inform parliamentarians who exercise control over those enterprises. Value-for-Money Audit Spring

10 Observations of the Acting Auditor General, Mr. Michel Samson Chapter 1 3 Summary of the Content of this Volume 23 One of the objectives that I pursue is helping parliamentarians meet the major challenge posed by the sound management of public finances. That is why I put my knowledge and my work to their service. Over the past year, several subjects have caught my attention. In this volume, I give you the results of my work for some of them. The next paragraphs provide an overview of each of the subjects covered. 24 Following a request by the Conseil du trésor in April 2013, I carried out a special audit concerning the public-private partnership (PPP) agreement for the implementation and operation of seven service areas on Québec s highways. The results of my work are found in Chapter 2. I explain how the deficiencies noted at each step leading to the signing of the partnership agreement contributed to weaken this project, which is one of the first PPPs signed in Québec. I also expose the weaknesses in the management of the agreement. In addition, I present measures for improvement in the event the government would have to manage another partnership agreement of this type in the future. These measures notably deal with the guarantees granted, the control of risks and the monitoring of the partner s performance. 25 In Chapter 3, I address the activities related to the acquisition of goods and services accomplished by the Centre de services partagés du Québec (CSPQ). The creation of this organization in December 2005 was supposed to make it possible, among other things, to take advantage of economies of scale and productivity gains. However, in my opinion, it has not yet become, after eight years of existence, the centre of excellence it should be, and it is still not the reference in its area. In a context where the management of public finances proves to be difficult, I mention the importance for the CSPQ to review its service offering with regard to acquisitions in order to tie it to the priority needs of its clients and orient it toward the best potential economies from the government s point of view. 26 Chapter 4 is devoted to the management of the Complexe sportif Alphonse- Desjardins by the Commission scolaire du Chemin-du-Roy. Following my audit of the financial statements, I had certain concerns related to the management of this complex. I therefore decided to take a deeper look into it. I believe measures are necessary to avoid the school board being in a situation that would lead it to invest more public funds in the project. I really wonder about 6 Report of the Auditor General of Québec to the National Assembly for

11 Observations of the Acting Auditor General, Mr. Michel Samson Chapter 1 the relationship between the project and the school board s educational mission. The business model under which most of the risks are assigned to it and the follow-up that it conducts of the complex s management, which it entrusted to a mandatary, are among the other elements that caught my attention. 27 The ferry routes and maritime services operated in partnership are managed by the Société des traversiers du Québec (STQ). My statements about this, which are found in Chapter 5, deal with the organization of services and the follow-up conducted with partners who are awarded contracts for the operation of maritime transportation services for persons and goods. I also took an interest in the entity s governance. I underline, among other things, the difficulty the STQ has in clearly establishing its overall vision for the operating method to favour for transportation services related to each ferry route and maritime service. The choice of operating by itself ferry routes, that were previously operated in partnership, is not supported by a complete analysis, and it is not demonstrated that this is the most advantageous operating method. The monitoring of the performance of partners as well as the information provided to the board of directors and the Ministère des Transports du Québec are other aspects for which I express certain reservations. 28 In Chapter 6, I address the management of prescription drugs and pharmaceutical services in health and social services institutions. To carry out my work, I visited five hospital centres as well as the Ministère de la Santé et des Services sociaux. I mention in this chapter issues related to the procurement of drugs, including their price, drug shortages and the content of drug formularies in institutions. I also highlight the lack of a posteriori controls over drug use, which does not allow for the control of their optimal use. The management of pharmaceutical services in institutions is also the subject of findings and recommendations. 29 I present the result of my work with Revenu Québec in Chapter 7. I specifically looked at the way it carries out its mandate with regard to the provisional administration of unclaimed financial assets. I explain that adjustments are needed to facilitate the recovery of these assets by their right-holders and ensure the remittance to the state of the assets for which the right-holders remain untraceable. For example, I mention that a small percentage of holders make remittances of unclaimed financial assets and that Revenu Québec makes little use of the means of intervention available to it to improve the situation. Among other things, it conducts few audits, and when it does conduct audits, the procedures used are insufficient. Furthermore, the search for right-holders is not always conducted as provided by its policy. Value-for-Money Audit Spring

12 Observations of the Acting Auditor General, Mr. Michel Samson Chapter 1 30 I conclude this volume by making public the results of a follow-up on a value-for-money audit published in May 2010, which dealt with the selection of qualified immigrant workers. Chapter 8 shows that the Ministère de l Immigration et des Communautés culturelles made significant efforts by following most of the recommendations made at the time. Progress was deemed satisfactory for six of the seven recommendations (86%) that we made as well as for the four recommendations that the Committee on Public Administration addressed to the Department following the hearing of its Deputy Minister. In order for its progress to be deemed satisfactory, the Department will have to make additional efforts concerning the quality of information presented in its reporting. 31 Following the elections held last April, new members sit on the Committee on Public Administration. I believe those members will find in this volume interesting points for reflection as input into their work. It will be a pleasure for my team and me to explain in greater detail to parliamentarians each of the subjects and thereby contribute in my way to parliamentary control and the sound management of public funds. 8 Report of the Auditor General of Québec to the National Assembly for

13 Implementation and Operation 2 of Service Areas Special Audit Highlights Highlights Work Objective This special audit was conducted at the request of the Conseil du trésor. The audit is related to the financing and risk sharing and responsibilities between the Minister of Transport, the partner and the lenders in relation to the public-private partnership (PPP) agreement for the seven service areas on Québec s highways. This project is part of the first PPP signed in Québec. The audit had the following objectives: to ensure that the agreement entered into rests on recognized best practices in the awarding of publicprivate partnership contracts; to ensure that the Ministère des Transports du Québec (MTQ) conducts an adequate follow-up of the partnership agreement with the private partner. The Report is available at Audit Results The following are the principal findings of our special audit concerning the implementation and operation of seven service areas. The MTQ has not demonstrated that the services required in each service area are linked to needs. Service area locations were based on the principle of establishing one every 100 km, but the MTQ has disregarded the existing services near highways exits. The analysis conducted to demonstrate that the PPP is the best solution is incomplete. The government has not obtained sufficient information to assess the project concerning the seven service areas, in particular information on cost-effectiveness and risks that each implementation method involves. The soundness of the sole tenderer s financing plan has not been demonstrated. Given the large margin of error possible in the assumptions and the financial model of a 31-year project, more rigour and cautiousness during the assessment of the proposal would have been necessary. Negotiations allowed with the selected candidate resulted in notable modifications of the financial model. The addition of bonuses paid by the MTQ for tourist offices would represent, according to our assessment, more than $13 million over 20 years. Despite a higher-than-expected public financial participation, the financial model remains fragile. The large uncertainty that surrounds the key assumptions and the sensitivity of the project s cost-effectiveness to small variations in those assumptions explain this fragility. The guarantees that were granted limited the partner s and the lenders risks and increased those of the MTQ. The fact that the MTQ guaranteed the repayment of the debt and the indemnities in case of cancellation of the agreement modified the sharing of risks that was initially established. The risks related to construction permits and environmental requirements were not the subject of a rigorous follow-up. The MTQ did not take the necessary steps in a timely manner to mitigate the risks of cancellation of the agreement. Starting work was delayed by several months, and the MTQ had to pay indemnities of $4 million. Despite the significant consequences of partner s default, the Department made no follow-up of its financial situation. It did not asses the consequences on the partner s financial health nor on its own situation due to the fact that it paid the partner almost no performance bonuses and bonuses related to tourist offices. Value-for-Money Audit Spring

14 Highlights Recommendations The Auditor General has made recommendations to the MTQ. All of them are shown to the right. The audited entity had the opportunity to comment on the report; its comments can be found in the Commentaires de l entité vérifiée Section. We want to point out that it accepted the recommendations, excluding the one related to the services linked to needs and the one concerning the optimal distribution of the risks by providing for measures in the agreement such as financial rebalancing. As such, the reader will find our reaction following the comments of the entity. Recommendations to the Department 1 Ensure that services deployed in each service area are linked to needs by considering in particular the services already available nearby. 2 Present a complete analysis of the infrastructure projects to decision makers, including the cost-effectiveness of each project, the comparison of the different methods, the costs related to each method, the risks and the sensitivity analyses. 3 Limit negotiations allowed with the selected candidate in order to increase the efficiency of the call for tenders process. 4 Carry out a rigorous analysis of the tenderers proposals in order to identify all the risks related to the financial model and assess their effects on the project s self-financing. 5 Assess the impact of public guarantees on risk distribution related to the project and their future repercussions on public finances and, where necessary, use these guarantees as an incentive to attract a larger number of tenderers. 6 Ensure an optimal distribution of the risks by providing for measures in the agreement such as financial rebalancing, should the project prove to be more cost-effective or less cost-effective than anticipated. 7 Carry out a rigorous follow-up of the partner s performance and risks that the MTQ assumes in order to identify potential problems early to limit their impact and clearly define the responsibilities and actions to be accomplished in this regard. 8 Favour a relationship of trust through by having recourse to a prevention and dispute settlement procedure that includes, among other things: the use of independent expert services to facilitate the understanding of each party s objectives and to reconcile competing interests during long periods of negotiation; the use to mediation and arbitration to favour a quick settlement of disputes. 10 Report of the Auditor General of Québec to the National Assembly for

15 Highlights Acquisitions of Goods and Services 3 Highlights Work Objectives The mission of the Centre de services partagés du Québec (CSPQ), established in December 2005, is to provide or make available to public bodies the goods and the administrative services they require in the exercise of their functions. As part of its mission, the CSPQ must, among other things, ensure that public bodies can acquire quality goods and services, at the best price possible. The objective of our audit was to obtain the assurance that in terms of acquisitions, the CSPQ: takes into account essential factors for effectively fulfilling its mission; acquires goods and services in an efficient and economical manner; has management information, assesses its performance and reports on it. The Report is available at Audit Results The following are the principal findings of our audit concerning the acquisitions of goods and services. The CSPQ does not have the assurance that free competition is exercised effectively. The degree of precision and clarity of certain calls for tenders is insufficient. In addition, the lack of knowledge of the markets and of questions by purchasers can lead them to costly management of the call for tenders process. Insofar as it relates to the assessment of calls for tenders, the insufficiency of directives and the lack of rigour in the execution of tasks do not facilitate the fair treatment of suppliers. In addition, the CSPQ sometimes places itself in situations of non-compliance with the regulation in force. For example, an inadequate analysis of tenders led to the awarding of a contract to the wrong supplier. The organization of work does not facilitate the optimal processing of acquisitions. Deficiencies in relation to planning result in several breaks in the service offering with regard to consolidated procurements. The CSPQ has only little management information, and the information available is not always reliable. In addition, the lack of information on the history of acquisition files deprives it of an organizational memory that is essential for the development of a continuous improvement culture. The CSPQ s strategy for carrying out its vision and its mission in terms of acquisitions is not clearly established. Therefore, the development of actions needed to refocus the service offering still remains to be done. The CSPQ has not succeeded in applying a management method based on a client-centred approach. After more than eight years in existence, it has not established a service offering that is tied to the priority needs of departments and bodies and oriented on government savings. In addition, its reflections for the purpose of increasing the use of its services by public bodies were focused more on the expansion of mandatory adhesion than on the methods to be put in place to improve the quality of its services. The CSPQ has not taken sufficient measures to develop and conserve the organizational expertise needed to implement best practices with a view to offering quality service delivery. The CSPQ does not adequately measure its performance. It has not defined objectives related to the quality of services it wishes to offer, nor has it defined related targets or indicators. Therefore, it cannot know or analyze its performance or demonstrate the progress made. Value-for-Money Audit Spring

16 Highlights Recommendation The Auditor General has made recommendations to the CSPQ. They are shown in part to the right. The audited entity had the opportunity to comment on these recommendations; its comments can be found in the Commentaires de l entité vérifiée Section. We want to point out that it accepted all of the recommendations. Recommendations to the Centre 2 Put mechanisms in place so that the preparation of calls for tenders is done in a way that: maximizes free competition; takes into account sustainable development issues and the regional economic impact. 3 Take steps so that the assessment of calls for tenders facilitates the fair treatment of suppliers, in accordance with regulatory and eligibility requirements. 4 Put tools in place to facilitate the optimal processing of acquisition files, in particular by: the planning of interventions; the supervision of purchasers; an effective quality assurance process. 5 Adopt systems that make it possible to obtain reliable and sufficient management information to support managers in their decision making with respect to acquisitions. 6 Establish a purchase history with a view to developing an organizational memory and to performing an effective and efficient follow-up of files. 7 Establish a strategy for implementing its vision and its mission in the acquisitions sector in order to develop a common understanding of the means necessary to making it materialize and to ensure that actions are consistent over time. 8 Improve, in the acquisitions domain, the quality of its service delivery and increase the satisfaction of its clientele, in particular by: a better understanding of clients expectations; better communication on the follow-up of files and terms of service, in particular concerning its role and delivery times; the establishment of a service offering that responds to clients needs; the development, strengthening and maintenance of the expertise and know-how of its staff. 9 Determine the goods and services having the best savings potential and adjust its service offering consequently. 10 Establish, in terms of acquisitions, objectives, targets and indicators that will enable it to regularly assess its performance, in particular with respect to the quality of its services, its efficiency and the savings generated by its operations. 12 Implement integrated risk management in order to ensure that risks related to acquisition activities for goods and services are adequately managed throughout the acquisition process. 12 Report of the Auditor General of Québec to the National Assembly for

17 Commission scolaire du Chemin-du-Roy: 4 Management of the Complexe sportif Alphonse-Desjardins Highlights Highlights Work Objectives In 2003, the Commission scolaire du Chemindu-Roy, the Ville de Trois-Rivières and the Fondation Les Amis des Estacades formed the non-profit organization Complexe multidisciplinaire les Estacades (CMDE). The mandate of this organization is to manage the activities and buildings related to the Complexe sportif Alphonse-Desjardins project. The project consists of nine phases. The first four phases are mostly complete and the fifth is starting up. The Commission scolaire du Chemin-du-Roy owns the facilities of phases 1 to 3, and it is expected that it will also own those of phase 5. The objective of our work was to obtain the assurance that the school board manages the buildings it owns as part of the Complexe sportif Alphonse-Desjardins project according to sound management practices and that it adequately controls the use of the public funds invested. The Report is available at Audit Results The following are the principal findings of our audit concerning the Commission scolaire du Chemin-du-Roy s management of the Complexe sportif Alphonse- Desjardins. The school board should question the relevance of its participation in the project, considering that its primary mission is related to educational services and that it is assigned the key financial risks under the business model. The sports complex is a major investment for the school board, while the main user of the facilities is Académie les Estacades, a school with about 600 students registered in sport-study programs. For phases 1 to 3, the actual costs were $35.3 million, while the expected costs prior to the start of construction were estimated to be $24.9 million. Contrary to the information provided to the Société québécoise des infrastructures, the actual costs are not equal to the estimated costs. For phase 5, the costs are estimated to be $60.2 million. The sports complex generates large annual deficits for the school board, ranging from $700,000 to $1.2 million in the past five years. This makes the school board allocate, on a continual basis, amounts that could have been used for purposes more directly related to its educational mission. There are risks that the costs for the school board will be even higher. Among them, note the CMDE s fragile financial health and construction problems, such as premature wear of certain elements at the Olympic ice pavilion and the presence of pyrrhotite. The school board does not perform adequate supervision of the management of the sports complex that it has entrusted to the CMDE. It has disbursed sums of money to the CMDE on several occasions without being able to demonstrate to us how the payment was justified. This increases risks of error or fraud. Members of the Council of Commissioners were not adequately kept informed with respect to the sports complex. Until the fall of 2013, the information conveyed was that the project paid for itself. The two employees on secondment received higher remuneration from the CMDE than they would have under the salary conditions at the school board, which is not in compliance with the applicable regulation. Value-for-Money Audit Spring

18 Highlights Recommendations The Auditor General has made recommendations to the Commission scolaire du Chemindu-Roy. All of them are shown to the right. The audited entity had the opportunity to comment on the report; its comments can be found in the Commentaires de l entité vérifiée Section. We want to point out that it accepted all of the recommendations. Recommendations to the Commission scolaire du Chemin-du-Roy 1 Demonstrate, based on a rigorous analysis, the relevance of the school board acting as the main partner in an infrastructure project of this scope, as well as the project s relationship with its educational mission. 2 Analyze the financial situation of the Complexe sportif Alphonse- Desjardins, based on complete and relevant information, to develop an action plan that ensures the viability of the project and minimizes risks for the school board. 3 Review the content of agreements with the partners to ensure they promote a fair sharing of revenues and expenditures, based on the services provided and risks incurred by each of the parties. 4 Put in place controls to allow an adequate follow-up of the sports complex s management by the Complexe multidisciplinaire les Estacades and sufficient reporting of its part, especially for the following components: revenues and expenditures managed by the mandatary; approvals prior to the completion of certain transactions; the amounts paid to the mandataries. 5 Provide the Council of Commissioners with management information that allows them to draw a complete and accurate picture of the sports complex s situation, in a timely manner. 6 Ensure that, in the event of secondment, the remuneration of school board personnel on loan to the Complexe multidisciplinaire les Estacades complies with the regulation in force. 14 Report of the Auditor General of Québec to the National Assembly for

19 Ferry Routes and Maritime Services 5 Operated in Partnership Highlights Highlights Work Objective The mission of the Société des traversiers du Québec (STQ) is to ensure the mobility of persons and goods through quality, safe and reliable maritime transportation services. At March 31, 2013, the STQ manages 13 ferry routes and maritime services. It directly operates 6 ferry routes, including one in partnership for cargo transportation. The others, namely 5 ferry routes and 2 maritime services, are operated by partners under a contract. The objective of our audit was to obtain the assurance that the STQ conducts in total transparency an efficient follow-up of the operation by partners of ferry routes and maritime services, and that it respects government orientations in this regard. The audit was articulated around three axes: the organization of ferry routes and maritime services operated in partnership, the followup exercised over partners, governance and reporting. The Report is available at Audit Results The following are the principal findings of our audit concerning ferry routes and maritime services operated in partnership. The STQ has not clearly established its overall vision for the operating method to favour for the transportation related to each ferry route and maritime service. There has been no analysis of the different possible service organization models. Therefore, the STQ does not have the assurance that it uses the most optimal model. In addition, it did not adopt in a timely manner a global plan to guide the integrations of the ferry routes and maritime services operated in partnership. For the three ferry services in partnership that the Société decided to operate itself starting in , the demonstration is not made that this operating method is the most advantageous one. The prior analysis neglects important aspects. It does not state the advantages and inconveniences of the possible solutions and does not take into consideration, namely the long-term financial implication and social acceptance. In fact, the integrations made have resulted in an overall cost increase, but considering the incompleteness of the analyses, it is difficult to judge the extent to which this increase is justified. The follow-up of contracts signed with partners is neither systematic nor sufficient. The STQ does not perform a structured analysis of the data it receives: the process for following up on and documenting the results has not been defined. In other respects, the follow-up conducted by the STQ for the amounts paid to partners has deficiencies. The verification of elements used to establish the compensation that the Société pays to partners, namely declared operating costs and ticketing revenues, is not sufficient. With regard to contracts, the documentation related to the contract award process and management of amendments has deficiencies. The measures implemented to monitor the performance of partners do not enable the STQ to adequately assess it. These measures are not implemented for all partners, and their use has deficiencies. The expected level of performance and quality of services has not been established, and there are no clear directives to provide a uniform and objective evaluation. The partners are not informed of assessed elements or the results they should obtain. The STQ has not provided to the board of directors and Ministère des Transports du Québec (MTQ) a complete analysis of its completed and upcoming integration decisions, and of their budgetary repercussions. Value-for-Money Audit Spring

20 Highlights Recommendations The Auditor General has made recommendations to the STQ, one of which must be implemented in collaboration with the MTQ. All of them are shown to the right. These entities had the opportunity to comment on the report; their comments can be found in the Commentaires de l entité vérifiée et de l entité concernée Section. We want to point out that the audited entity accepted all of the recommendations. Recommendations to the Société des traversiers du Québec 1 Rigorously analyze the organization of maritime transportation services to choose the best mode for each ferry route and maritime service operated in partnership, and make appropriate decisions in a timely manner. 2 Develop and implement, in a timely manner, a global plan for the integration of the ferry routes and maritime services operated in partnership, which plans the steps to follow, the related schedule and the actions to take. 3 Demonstrate the advantageous character of integration decisions based on a complete analysis that takes into consideration the advantages and inconveniences of the different possible solutions, the multi-year financial implication, which illustrates the additional costs or savings to be achieved, as well as the social acceptability and subsidiarity principle. 4 Adopt a contract framework that specifies and standardizes the important requirements partners must adhere to, such as those related to regulation, supervision and planned controls. 5 Rigorously follow-up the partners contracts through a structured process that includes formal feedback to ensure they respect them. 6 Systematically analyze the operational data submitted by partners to ensure that services are provided in an optimal way. 7 Verify all the elements, such as the operating costs declared by partners and ticketing revenues, used to establish the compensation to be paid in return for services rendered. 8 Analyze the profitability of services provided by maritime services operators to support decision making in a timely manner. 9 Ensure that the contract award process and management of amendments respect best practices. 10 Regularly assess the performance of partners through clear guidelines that specify in particular the data that will be used, the desired level of performance and the level of services to be offered, and inform the partners of this in a timely manner. 11 Conduct in a timely manner appropriate reporting, especially, on the organization s strategic choices with regard to partners and the long-term budgetary repercussions of these choices, and send it to the board of directors and to the Ministère des Transports du Québec to support decision making. Recommendation to the Société des traversiers du Québec to be implemented it in collaboration with the Ministère des Transports du Québec 12 Ensure, in collaboration, the respect of government orientations that provide for the signing of an agreement between the Department and the Société which concerns, among other things, the costs of ferry services borne by the government, as well as the development and approval of a five-year business plan. 16 Report of the Auditor General of Québec to the National Assembly for

21 Prescription Drugs 6 and Pharmaceutical Services Highlights Highlights Work Objectives The cost of prescription drugs and pharmaceutical services, influenced by the medical specialties of institutions and users diseases, represented $865 million in , which is 5.3% of current expenditures by public institutions with a hospital centre mission. The audit work had the following objectives: assess to what extent the Department supports health and social services institutions in managing resources related to prescription drugs and pharmaceutical services; obtain the assurance that the audited institutions manage medication-related resources efficiently and economically; determine whether the audited institutions have established controls that ensure pharmaceutical services are delivered safely and prescription drugs are used appropriately. The Report is available at Audit Results The following are the principal findings of our audit concerning the management of prescription drugs and pharmaceutical services in health and social services institutions. The group purchasing organizations scarcely integrate their actions. Important differences exist in the prices paid for [844] prescription drugs [from the same manufacturer], including differences of over 10% for nearly one third of them. The Department does not conduct a systematic follow-up of these prices to find the causes for the differences. The audited institutions have implemented few measures to minimize the effects related to drug shortages. There is no standard indicating minimum stock levels to maintain, especially for critical drugs. In addition, during shortages, no actor is made responsible for informing the stakeholders or proposing alternative treatments. Some drugs that are not recommended by the Institut national d excellence en santé et en services sociaux or that are not approved by Health Canada are listed on the local formulary of the audited institutions. Although the conseil des médecins, dentistes et pharmaciens approves of this way of functioning, the use of these drugs is not authorized for each patient, as determined by regulation. The institutions complete few controls following drug administration. They do not ensure the optimal use of drugs and do little sharing of decision-making tools. In addition, the control exercised over stocks is insufficient, and few drug utilisation reviews are done. The drug use process management (procurement, prescription, preparation, distribution and administration) has deficiencies. There is insufficient integration and no continual improvement process. The institutions have few indicators, such as delays between steps, to assess the cycle s performance. The Department has not set out orientations concerning the workforce. Level of services offered and pharmacists assignments have not been defined. The institutions cannot assess whether the services offered are aligned with needs. Value-for-Money Audit Spring

22 Highlights Recommendations The Auditor General has made recommendations to the Ministère de la Santé et des Services sociaux and the five audited institutions. All of them are shown to the right. The audited entities had the opportunity to comment on the report; their comments can be found in the Commentaires des entités vérifiées Section. We want to point out that they accepted all of the recommendations. Recommendations to the Department 1 Implement mechanisms to ensure the follow-up of prices paid by institutions for their prescription drugs. 5 Take action to promote sharing by the institutions of tools regarding decision making and monitoring of drug use. 9 Establish orientations concerning pharmaceutical workforce in institutions, especially with regard to services provided and prioritization of pharmaceutical services based on needs, and ensure follow-up. Recommendations to the audited institutions 2 Comply with the regulatory framework regarding the awarding of contracts to two suppliers. 3 Develop mechanisms to minimize the effects of drug shortages. 4 Standardize the decision-making processes related to drugs not listed on the local formulary, in accordance with regulation, improve the transparency of these processes toward the public and respect the regulatory framework concerning the local formulary. 6 Implement a posteriori controls regarding drug use and share the tools developed for this purpose with other institutions. 7 Monitor drug stocks to be able to identify differences, determine their key causes and take action to reduce them. 8 Continue implementing medication reconciliations by emphasizing ties with private pharmacies and ensure follow-up. 10 Determine an optimal offering of pharmaceutical services based on activity level, specialties and patients cared for, which notably indicates the prioritization of pharmaceutical services to be offered, necessary workforce and their distribution. 11 Define indicators and performance targets regarding the drug use process and pharmacy departments, and conduct a periodic follow-up, including comparisons with other institutions. 12 Make sure that measures implemented to reduce the risk of conflicts of interest and the possibility of being influenced by the pharmaceutical industry are applied, and ensure follow-up. 18 Report of the Auditor General of Québec to the National Assembly for

23 Unclaimed Financial Assets: Provisional 7 Administration by Revenu Québec Highlights Highlights Work Objectives The purpose of the Unclaimed Property Act is to facilitate the recovery of unclaimed property by right-holders and to ensure that property without an owner or property in respect of which the right-holders remain unknown or untraceable is delivered to the state. We wanted to obtain the assurance that Revenu Québec: has adopted an efficient and equitable management strategy with regard to the receipt and recovery of unclaimed financial assets; promotes the search for right-holders and, when they are untraceable, oversees and manages the liquidation of unclaimed financial assets in an efficient and coherent way so as to promptly remit the amounts to the state; manages the risks associated with the project concerning the implementation of an application for the management of unclaimed property in an efficient and economical way so as to meet operational and management needs. The Report is available at Audit Results The following are the principal findings of our audit concerning the provisional administration by Revenu Québec of unclaimed financial assets. A small percentage of holders make remittances of unclaimed financial assets. Despite this, Revenu Québec has not developed a strategy or set objectives to optimize the recovery of such assets. It has not identified or assessed the risks related to the recovery of unclaimed financial assets so as to be able to mitigate them. Revenu Québec makes little use of the means of intervention that would enable it to ensure that holders comply with the Act. Among other things, it does not communicate regularly with them to make the Act known, it almost never collects interest on arrears, and it does not institute penal proceedings that could lead to fines. Revenu Québec conducts few audits, and these do not cover all categories of holders subject to the Act. For the ones it does conduct, the audit procedures are insufficient, and it does not assess their efficiency. In fact, the amounts recovered following audit work are limited, and several audits have resulted in no recovery. Processing delays and the time invested by auditors are very variable, and in the majority of cases, the audits extend over several years. Revenu Québec does not always search for right-holders as provided by its policy. In some cases, it is unable to act, given that it does not obtain from the holders all the information required by the Act. Even when it is obtained, it does not always take the necessary actions. Financial assets that have been liquidated are delayed in being remitted to the state. Furthermore, Revenu Québec has not determined the length of the provisional administration for certain financial assets. The implementation of a new management computer system has experienced several delays, which has caused an increase in costs when compared with initial estimates. The anticipated benefits supporting the choice of the application were poorly assessed in The update of that assessment in September 2013 remains very optimistic and considers certain benefits that are not related to the implementation of the computer system and over which Revenu Québec has no control. Value-for-Money Audit Spring

24 Highlights Recommendations The Auditor General has made recommendations to Revenu Québec. All of them are shown to the right. The audited entity had the opportunity to comment on the report; its comments can be found in the Commentaires de l entité vérifiée Section. We want to point out that it accepted all of the recommendations. Recommendations to Revenu Québec 1 Identify and assess the risks related to the recovery of unclaimed financial assets and implement an intervention strategy to be able to mitigate them. 2 Increase the use of means available to it in order to optimize the recovery of unclaimed financial assets. 3 Review its audit strategy: by ensuring that all sectors under its responsibility are covered; by developing a structured audit methodology that determines the scope of the work to be performed and the appropriate and required evidence; by performing a regular follow-up, in terms of effectiveness and efficiency, that makes it possible to guide audit efforts and assess its performances on the basis of measurable targets. 4 Obtain from holders the information required by the Act and by the regulations in their annual statements in order to find right-holders more easily. 5 Search for right-holders in accordance with its policy. 6 Assess the efficiency of the means used to search for right-holders and adjust its search strategy based on the results obtained. 7 Determine the length of the period of provisional administration for registered financial assets referred to in the Act. 8 Remit to the state the value of the financial assets not remitted to rightholders at the end of the established period. 9 Carry out an assessment of the project to implement the computer system by examining whether the delivered processes meet the current needs and make the necessary corrections, if appropriate, in order to optimize its operating potential. 10 Assess the possible options for maintaining this new system in order to minimize the risks of dependence on the supplier. 20 Report of the Auditor General of Québec to the National Assembly for

25 Highlights Selection of Qualified Immigrant Workers 8 Highlights Work Objective After a few years, we carry out a follow-up on our audit work. Our objective is to ascertain if the recommendations have been taken into account and if the entities have remedied the underlying deficiencies. This follow-up covers the selection of qualified immigrant workers. The initial audit involved the Ministère de l Immigration et des Communautés culturelles. Audit results were published in Chapter 3 of Volume I of the Report of the Auditor General of Québec to the National Assembly for We also evaluated the application of the recommendations made by the Committee on Public Administration to the Department in 2010 after the hearing of the Department s Deputy Minister. The Report is available at Follow-up Results Our work covered the seven recommendations made in May We also evaluated the application of the four recommendations made by the Committee on Public Administration to the Department. The initial audit objective was to obtain the assurance that the Department guided and coordinated immigrant selection activities in such a way as to meet Québec s needs. We also wanted to ensure that it carried on qualified immigrant worker selection activities in accordance with the applicable regulations and on the basis of sound management practices. Finally, we wanted to ascertain whether the Department evaluated its performance regarding qualified immigrant worker selection activities and reported on this performance. Conclusions. Our work led us to conclude that six of the seven recommendations (86%) resulted in satisfactory progress (Table 1). Progress was also deemed satisfactory for the four recommendations made by the Committee (Table 2). Satisfactory Progress. Significant progress has been made with regard to the recommendations concerning the improvement of the qualified worker selection system and the development of performance indicators and targets concerning this system. In terms of the management of immigration applications, the Department implemented means to increase the degree of compliance and fairness of decisions made. It also implemented others means to lessen the subjectivity of decisions and improve the detection of false or misleading information or documents. Furthermore, the Department improved its current strategic plan by including more objectives and indicators on expected results than it did in its previous plan. In addition, it now evaluates its programs and the satisfaction of its clientele. Unsatisfactory Progress. The Department will need to make additional efforts regarding the quality of the information presented in its annual reporting. It still places too little emphasis on the key risks that could impact the achievement of results and on the measures implemented to reduce them, the efficiency of its activities, as well as comparison with similar organizations. Value-for-Money Audit Spring

26 Highlights Table 1 Recommendations of the Auditor General Selection system Continue to improve its qualified worker selection system, notably by evaluating this system in comparison with foreign practices, to ensure that it meets the objective of attaining a better match with Québec s manpower needs. Acquire performance indicators and targets concerning the selection of qualified workers. Management of immigration applications Improve the supervision of the selection of qualified workers, notably through the implementation: of measurable guidelines for the evaluation of candidates in order to promote a processing that complies with the regulations and the procedures guide; of directives promoting the detection of false or misleading information or documents. Implement the necessary processes to ensure the compliance and the fairness of the decisions made. Performance and reporting Improve its strategic plan through the addition: of objectives linked to the expected results; of result indicators making it possible to evaluate its performance. Improve the quality of the information presented in its annual reporting to permit a better assessment of its performance. Make sure of the implementation and of the close follow-up on its three-year plan regarding the assessment of the program and of the expectations relating to the satisfaction of its clientele, notably concerning the qualified worker program, and report on the results. Satisfactory progress Unsatisfactory progress Total of recommendations 6 1 Percentage 86% 14% 22 Report of the Auditor General of Québec to the National Assembly for

27 Highlights Table 2 Recommendations of the Committee on Public Administration That the Ministère de l Immigration et des Communautés culturelles, in order to strengthen the accountability of its executives, issue clear expectations to them concerning the rigorous application of the qualified immigrant worker selection process. That the Ministère de l Immigration et des Communautés culturelles use various forms of prior control to improve the quality of the immigrant selection process, such as staffing and appropriate personnel training, or the use of modern promotion techniques to attract a larger number of immigration candidates that correspond to the desired profiles. That the Ministère de l Immigration et des Communautés culturelles ensure that the adaptability factor on the selection grid is assessed according to the most objective criteria possible and that the guide to immigration procedures is updated to that end. That the Ministère de l Immigration et des Communautés culturelles submit to the Committee, no later than March 31, 2011, a status report on the implementation of its action plan and a follow-up on the recommendations made by the Auditor General and parliamentarians. Satisfactory progress Unsatisfactory progress Total of recommendations 4 Percentage 100% Value-for-Money Audit Spring

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29 Significance of the Logo An easy-to-recognize building, the Parliament, where the National Assembly sits. It is this authority which has entrusted the Auditor General with his mission and to which he reports. Three dynamic lines, illustrating: the three types of audits carried out by his staff, namely financial audits, audits of compliance with statutes, regulations, policies and directives, as well as value-formoney audits; the three elements that are examined during value-for-money work: economy, efficiency and effectiveness; the three fields social, economic and environmental related to the stakes concerning sustainable development. A truly distinctive sign, the logo of the Auditor General clearly illustrates that this institution, which is in constant evolution, aims to assist elected members in their desire to ensure the sound management of public funds, for the benefit of the citizens of Québec.

30 Acting Auditor General On November 29, 2011, the President of National Assembly appointed Mr. Michel Samson as Acting Auditor General of Québec. Since January 1, 2008, Mr. Samson held the position of Assistant Auditor General. He was responsible for several teams of experts in charge of carrying out value-for-money audits with government entities, whose scope and vocation were highly varied. The projects that he conducted mainly concerns such areas as education, transportation, culture and finance. Moreover, since 2010, he supervised the general directorate that offers value-for-money audit advisory services for its staff. It was in 1990 that Mr. Samson joined the staff of the Auditor General. He began by working as a professional for six years in Québec City, being mainly assigned to value-for-money audits. He went on to accept a senior management position at the Montréal office; the files on which he worked concerned both financial audits and management audits. His commitment and versatility bore fruit. In 2003, he returned to Québec City where he would serve as senior director, overseeing some thirty employees up until He is credited with numerous reports, which take stock of the practices used in, and the financial information produced by the Administration. He was entrusted with key sectors, which allowed him to demonstrate his ability to successfully complete particularly demanding assignments. The main components of his mandate were related to education, justice, modernization of government management, and computer systems. Over the last few years, Mr. Samson heads four auditing directorates specializing in valuefor-money audits. He carried out a significant share of the audit engagements completed on behalf of the National Assembly. Moreover, since being hired, he has often participated in special audits or overseen their completion. As for his other professional activities, this experienced manager has contributed to the efforts made by all Canadian legislative auditors to promote the quality of information on performance published in the public sector. In addition, he has hosted training sessions on value-for-money auditing (Institute of Internal Auditors, Morocco Audit Institution, etc.) on many occasions. Finally, he has been a member of numerous in-house committees, including the one responsible for the organization s strategic planning from 2000 to Before joining the ranks of the Auditor General, Michel Samson worked for two accounting firms. As a partner, he carried out financial auditing work for small and medium-sized businesses in the manufacturing sector. A member of the Ordre des comptables agréés du Québec since 1984, which was brought into the Ordre des comptables professionnels agréés du Québec in May 2012, he holds a bachelor's degree in business administration and a licence in accounting sciences, both of which he received from Université Laval in In other respects, the Ordre des CPA du Québec awarded in May 2014 the CPA Award of Excellence to Mr. Michel Samson. He also was presented on May 29th 2014 the CPA Émérite Award, bestowed by the Chaudière-Appalaches and the Québec City Groups.