Public Accounts Committee on May 11th, 2006

[The Chair, Liberal, Shawn Murphy]

Thank you.

Mr. Christopherson.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair.

Well, I don't know Mr. Casey, but I certainly have learned he is tenacious.

I want to raise something, Chair, that is possibly very problematic. I've got a little birdie telling me that there are a number of items coming up in your report that is about to be tabled that are actually going to be referred from this committee to another committee. The rumour mill has it being the government operations committee, but it could be another committee. This is very problematic if it's true; if not, then fine, and I'll shut this down and acknowledge that it's wrong. But until I hear that, it's problematic on a number of fronts, the first being that this committee is custom structured to ensure the greatest amount of oversight; i.e., the chair, by the Standing Orders, has to be an opposition member. This is the only committee where that's the case.

[The Chair, Liberal, Shawn Murphy]

No.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm sorry, that's not the only committee?

[The Chair, Liberal, Shawn Murphy]

No, there are other committees.

[David Christopherson, NDP, Hamilton Centre, ON]

All right, but it is specifically mandated here for this committee because of the nature of the work. I think that's fair to say.

So that's problematic.

The second one is that in the incident case at the last steering committee meeting, we actually discussed—and I know this, because I raised it—waiting until we actually got the initial report so that we could have some sense of the substance that was in it, and then determine which ones we wanted to.... For new members, we'll pick two or three chapters, or maybe more, and we'll go in depth on those and invite ministry representatives—maybe the minister—and get right into it. So we decided we'd wait until we had the initial report, so we'd know what the big issues were.

So hearing some possibility of this being moved out of here, I'd like to ask the Auditor General, the chair, and members of the committee if anybody has heard anything about this. If not, I'd still like to hear how the Auditor General feels about the possibility of some of the functions of this committee going somewhere else.

[Sheila Fraser]

All I can say, Chair, is that it has been very common practice in the past that even.... I guess I should start by saying that all of our reports are automatically referred to the public accounts committee, so this committee is the committee that we view as being the one we work with primarily. But we do advise other committees of audits we have done that might be of interest to them or that fall within the domain of the departments they are responsible for. It has been very common practice for other committees to also review reports; so it's not, in most case, “instead of” the public accounts committee, but in addition to public accounts.

[David Christopherson, NDP, Hamilton Centre, ON]

That would be my question, Madam Fraser. If it is in addition to the committee, I don't see that as a problem, but if somebody were to suggest that it would be instead of it, would that be problematic?

[Sheila Fraser]

We have not received any indication that other committees will be reviewing reports instead of public accounts.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay, that's what I wanted to clarify. That's fine. I hope there is no truth to it and that this will be the end of that. If so, then—

[The Chair, Liberal, Shawn Murphy]

Mr. Christopherson, if I could address that—and I'll not use your time—I am not aware of any standing order or other authority that would take business away from the committee. Whatever we want to do, we're entitled to do, so it could be a situation where another committee of the House has a parallel process and wants to create a certain report, or a certain aspect of the report. But again, nobody is going to tell us that we cannot investigate any chapter that comes onto our agenda.

[David Christopherson, NDP, Hamilton Centre, ON]

Can I ask about a procedure then, Chair?

For that to happen, would it be a permissive thing from this committee, or can any committee see a report that's here and say they're going to look at it also, regardless of what we're doing? Is that correct?

[The Chair, Liberal, Shawn Murphy]

They can do that, yes.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay, good. I hope that's the end of it.

If I have any time left, I have one question. We had talked about reducing the number of reports you bring forward--and I believe it was the former chair who raised this, but I could be wrong--simply because we were starting to become overwhelmed. Again, it was a non-partisan committee, and some members felt we weren't doing justice to the reports because there was an avalanche of them. If you recall, it was getting a little silly. I think we were backed up a couple of calendar years, which was partly understandable because of the minority elections we don't normally have. But I wonder what the status of that is. I can't recall. Did we make a final determination? If not, where are we? Or at least, where were our deliberations in the 38th Parliament?

[Sheila Fraser]

Perhaps I could provide part of an answer. For example, in the current year, because of the election, we had planned to table a report in February and then another in April. We have obviously readjusted our schedule because we thought that for you to arrive and have two reports would be a bit much. Essentially we moved the February report to May and the work in April into the fall. Other work has moved out, so we adjusted our schedule for that as well.

We have not looked at reducing the overall number of reports because over the years we reduced them from over 40 to 30 or 25. Currently we are looking at different reporting options, which we are studying in the office. We would appreciate being able to meet either the steering committee or perhaps selected members of this committee to get views on the various options we are considering. So perhaps we will be coming back to discuss some of these options with the chair and the steering committee to get your input.

[The Chair, Liberal, Shawn Murphy]

Thank you.

Your time is up, Mr. Christopherson.

Mrs. Ratansi, five minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you, Mr. Chair.

I'll be asking questions because I'm new here.

It says here that the role of the House's committee on public accounts occupies a central position in accountability. Being an accountant and auditor by trade, I seek your guidance on some issues.

I see that lots of checks and balances were put in place through Bill C-43, that you had an expanded mandate, that the Comptroller General was a re-establishment, and that internal audit departments were there. Then I looked at the peer review of the performance audits you did--and you got accolades for that--and your financial audits.

The reason I give you this is that I want a perspective. When you give your audit opinion, do you feel that your audit is taken out of context and sensationalized? This goes back to my question of materiality: within the concept of $186 billion, what is material? Being in the province of Ontario, I used to say to the provincial auditor, what is material? Not a single taxpayer dollar should go astray, but what is materiality?

The premise of the introduction of the Federal Accountability Act was that somehow we are a very corrupt country—it reminded me of third world banana republics, and I thought, are we really?—and that the legislation being brought forward is the most anti-corrupt legislation.

So number one, what is materiality? Number two, is your report being sensationalized? And number three, are we really a corrupt nation? That goes against the grain of what Justice Gomery said.

[Sheila Fraser]

The concept of materiality is one that is used largely for financial statement audits, and it assists an auditor in making a judgment when an auditor has to give the opinion on the financial statements, as I'm sure the member will know.

For example, when we do the audit of the financial statements of the Government of Canada, our materiality is $1 billion, which means that if there is an error in the financial statement of $1 million, we will not qualify the opinion. If there is an error of $1.5 billion, we will qualify. So it assists the auditor in giving the opinion and to say what extent of testing we have to do and when we would actually qualify the financial statements.

When we get to the performance audit, the question of materiality--I don't want to say it doesn't exist--is very different. It's more a question of what is significant, what is important in the management of that program. There are many areas that actually can't be quantified in terms of dollars. In many of the audits, we will say that there aren't sufficient performance measures, that departments don't know what they're achieving, that there isn't a financial notion attached to that.

In some of the recent audits we've done, we've talked, for example, in regard to the RCMP, about staffing problems and recruiting problems. It's not always related to dollars. So the performance audit has a different notion.

Obviously there have been certain audits that have gotten a lot of public attention. In my five years, there have probably been three that have received a significant amount of public attention and attention from the media. That has to be put into perspective, because over that period of time we've probably issued 100 or 150 performance audits. Because three have become causes célèbres, is that unusual or not? I can't really judge that. I believe, though, in all those cases, the issues were serious, and we can't always judge the issues by the amount of money involved. It goes beyond money.

I've had people question, saying, well, the sponsorship program was only $100 million. I say, yes, but the issues in the sponsorship program weren't about the money but about what was done and how that was allowed to occur. So we can't always equate everything in terms of money.

I do agree with you that these cases are, for the most part, the exceptions in our management. We have said in numerous reports that we should be proud of the public service we have; that the vast majority of people are ethical, come to work each day with great integrity, and work very hard for their fellow citizens; and that we should not generalize these cases to all the public service. They really are exceptional cases, and that's perhaps why they receive so much attention, because they are so exceptional.

[The Chair, Liberal, Shawn Murphy]

Your time is up.

Mr. Lake, you have five minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

I just want to start by saying I'm new to Parliament and new to this committee as well. The main reason I got involved in the first place is my concern about stewardship over tax dollars, so I want to join the others in thanking you for the very important work you do.

In regard to performance audits, you say you conduct about 30 of those per year. I'm just curious, being new, how do you decide which performance audits to do? You used to do more, and now you do less. There has to be a priority. How do you make those decisions?

[Sheila Fraser]

We go through an analysis of the risks of the department. It's an exercise that we conduct probably about every four or five years in the departments, presuming that there aren't major changes, obviously, in their mandates and their organization. It is a very extensive exercise, where we interview people within the department, but also stakeholders outside as well, to try to assess what are the major risks to them to achieving their objectives. Then we determine which ones of those are subject to audit, because there could be some that are policy-related issues on which we can't comment. Then we develop a plan for three to five years.

The selection of the departments and agencies that we will audit is largely dependent on the overall risk involved, and as well the...[Inaudible--Editor]. So for departments like the Department of National Defence, there will always be audits going on in there because of the scope and the size of it. Other departments, like the Department of Justice, we will maybe only audit once in 10 years. So we have a bit of a schedule of rotation as well based on how often we think we should be in certain departments. There is, of course, the work of the Commissioner of the Environment and Sustainable Development, which is part of the Office of the Auditor General, and there is usually a minimum of six to seven audits a year that have more of an environmental focus.

So we try to map it all out. We have a planning session every year where we put up the proposed audits, and then we try to see if there are themes, for example, that are coming out of that. We'll go back to the focus areas and look at that. Then we do our planning for the next.... We usually have a plan for about three years out. It takes us anywhere from 12 to 18 months to do an audit. So the audits that we will be reporting, say, next November will be starting shortly. So it's a long process.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I have, I guess, a curiosity question. Do you receive any kind of information, anonymous or otherwise, from people from within departments, asking you to look into certain situations? If you do, if the answer is yes to that, do you have any kind of mechanism to act if you see a pattern within a department? Is this a way that might influence?

[Sheila Fraser]

Yes. Occasionally we do get letters—the famous brown envelopes—from people within departments but also at times from the public or other people. I wouldn't say we get an enormous amount of them, but we do get them.

We have a group of forensic auditors. It is not large; probably there are five to ten people who work in forensic audit. They will conduct the investigations. If we see that there is something untoward, it will generally show up in a report to Parliament.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

How long does it take?

[Sheila Fraser]

It depends. We try to do these things fairly expeditiously, but at times if we see a situation that is really serious, we will in fact often refer the file to the RCMP. So depending on all of those procedures, and how long it takes to interview people concerned, it could take the normal time of our performance audits—a year to a year and a half.