Annual Report 2017 of the Office of the Auditor …

1 Office of the Auditor general of OntarioA nnual Report 2017 Annual Report 2017 Volume 1 of 2 Office of the Auditor general of OntarioTo the Honourable Speaker of the Legislative AssemblyIn my capacity as the Auditor general , I am pleased to submit to you Volume 1 of the 2017 Annual Report of the Office of the Auditor general of ontario to lay before the Assembly in accordance with the provisions of section 12 of the Auditor general Lysyk, MBA, FCPA, FCAA uditor GeneralFall 2017 Toronto, OntarioCover photograph credits: top left: top right: Ammentorp Lund bottom left: bottom centre: bottom right: 1719-2609 (Print) ISBN 978-1-4868-0868-7 (Print, 2017 ed.)

2 (Volume 1 of 2) ISBN 978-1-4868-0858-8 (Print, 2017 ed.) (Set)ISSN 1911-7078 (Online) ISBN 978-1-4868-0869-4 (PDF, 2017 ed.) (Volume 1 of 2) ISBN 978-1-4868-0859-5 (PDF, 2017 ed.) (Set)An electronic version of this Report is available at 2017, Queen s Printer for OntarioCe document est galement disponible en fran of Contents Reflections 5 Chapter 1 Summaries of Value-for-Money Audits 14 Chapter 2 Public Accounts of the Province 29 Chapter 3 Reports on Value-for-Money Audits 80 Section Assessment Review Board and ontario Municipal Board 81 Section Cancer Treatment Services 130 Section Community Health Centres 180 Section Emergency Management in ontario 224 Section Farm Support Programs 270 Section Independent Electricity

3 System Operator Market Oversight and Cybersecurity 327 Section Laboratory Services in the Health Sector 375 Section Ministry Funding and Oversight of School Boards 428 Section ontario Public Drug Programs 476 Section Public Health: Chronic Disease Prevention 527 Section Real Estate Services 570 Section School Boards Management of Financial and Human Resources 615 Section Settlement and Integration Services for Newcomers 656 Section Social and Affordable Housing 697 Chapter 4 Toward Better Accountability 74 8 Chapter 5 Review of Government Advertising 778 Chapter 6 Standing Committee on Public Accounts 788 Chapter 7 Office of the Auditor general of ontario 792 Exhibit 1 Agencies of the Crown 819 Exhibit 2 Crown-Controlled Corporations 820 Exhibit 3 Organizations in the Broader

4 Public Sector 821 Exhibit 4 Treasury Board Orders 826iv5 IntroductionServing all members of the Legislature and the taxpayers of ontario as an independent Office of the Assembly is a privilege and a trust. It requires vigilance in balancing objectivity and productive relations, as well as in gathering information for our work. It also requires the fortitude to address significant issues without fear of push-back and reprisal, and to not walk away from them. On the one hand, establishing overly cordial relationships with our auditees can result in issues being missed and not fixed.

5 On the other hand, antagonistic relationships can prevent people from working together productively and agreeing on what improvements should be made, and how those improvements should be implemented for the benefit of Ontarians. This is a balance that continually has to be considered and adjusted as we conduct our work assessing transparency, account-ability and value for money in the public and broader public sectors. This, my fifth Annual Report as Auditor general of ontario , comes at a critical time following our October 2017 Special Report regarding certain government accounting practices.

6 Specifically, we raised in the Special Report that we have serious concerns about the way the government is planning to finance and account for the costs of its electricity rate reduction policy decision. As well, my Office continues to have strong reservations about the way the government claimed certain pension assets on its consolidated financial statements. These are important issues on which our objectivity and independence require us to maintain an uncompro-mising we have noted in this year s value-for-money audit reports areas where planning for ser-vice delivery, program implementation, oversight and public reporting needs action, we also have highlighted areas where things are working well, thanks to the solid efforts of thousands of dedi-cated, hard-working civil servants in reflections review our serious concerns in the following section.

7 Present some themes arising from this year s value-for-money audits and outline some areas that are working s Accounting Distorts ResultsWe continue to disagree that the government is presently entitled to unilaterally use assets in the ontario Teachers Pension Plan, so we believe it does not currently have a pension asset worth $ bil-lion. We continue to disagree that the balances relating to transactions between power generators and electricity distributors should be reported in ReflectionsBonnie LysykAuditor general of Ontario6the Province s consolidated financial statements.

8 Finally, we continue to disagree with the govern-ment s proposed accounting for its 2017 electricity rate reduction that will keep billions of dollars in real costs of its policy decision from impacting the Province s deficit and net debt inappropriate accounting treatments are not in accordance with Canadian Public Sector Accounting Standards (Canadian PSAS). As such, they obscure, or will obscure, the true state of the Province s Annual deficits and net debt reported on its consolidated financial statements at a time when ontario already has the highest sub-sovereign debt in the world.

9 The government uses these incorrect accounting treatments to claim it has balanced the Province s books, but in reality, legislators, the financial com-munity and all Ontarians will be misled as to the true condition of the Province s finances. These concerns led us to issue a qualified opinion on the Province s consolidated financial statements for 2016/17 regarding the impact of its accounting on the Annual deficit the first time in the 24 years since ontario adopted Canadian PSAS for governments that we have issued such an opin-ion. ( ontario s qualification in 2015/16 was not for an Annual deficit misstatement.)

10 A qualified opinion is not to be taken lightly; it signals that the Auditor believes the statements contain one or more material misstatements or omissions resulting from the misapplication of Canadian continue to encourage the government to do the right thing and account for the electricity rate reduction and pension assets in accordance with established Canadian Public Sector Accounting Standards. This is discussed further in Chapter 2 of Volume From Value-for-Money AuditsThis year s Annual Report contains 14 value-for- money (VFM) audit reports. Five of these reports address health care, a sector that accounts for more than 40% of all provincial spending and affects every single Ontarian.