Public Accounts Committee on Nov. 2nd, 2006

[John Williams, Conservative, Edmonton—St. Albert, AB]

But you still haven't said that the Federal Accountability Act is coming down the pipe and that this is what you are doing. I seem to feel that you're just telling me about normal evolution.

We've known about, and the public accounts committee has been talking about, financial statement audits for a long time. We've been talking about accrual of the estimates for years, long before anybody even heard about the Federal Accountability Act. We've been talking about internal audit for years. As long as I've been on this committee, we've been talking about it.

Tell me what you are doing to be ready for the Federal Accountability Act accounting officer designations. Are you going to be one? Is Parliament going to be better served? What problems have come along because of these debates?

[Charles-Antoine St-Jean]

Will we be ready when the Federal Accountability Act comes in? We will be ready to start the implementation, sir. I would like to tell you that we have everything done down to the last detail. It will not happen. It's going to take time to bring in the people. We're clarifying all the roles and responsibilities. We're putting new people in some of those roles right now, even in advance of this legislation. We're defining CFOs that are in departments. We now have....

[John Williams, Conservative, Edmonton—St. Albert, AB]

Let me ask Mr. Fonberg about this. Is he going to be ready?

Are you going to be ready, Mr. Fonberg?

[Robert Fonberg]

I actually am ready, sir.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Tell me how you're ready. What have you changed to make yourself ready?

[Robert Fonberg]

The Federal Accountability Act, in terms of how it applies, is fundamentally the purview, in terms of its internal changes, its internal audit changes, of Charles-Antoine, so it actually has no kind of direct applicability. It has accounting officer implications, which deputy ministers, as I understand, are getting ready for. I think your question's properly positioned to the Comptroller General.

[Charles-Antoine St-Jean]

In terms of the audit of the financial statement, we've got readiness assessment going on right now. The first department, a tier one department, got their audited statement this year for the first time. We'll have some more this year. It's one by one by one. We're going to get there.

We'll be tough. Some might be qualified to see those statements, but so be it. We're going to take them on one by one. In terms of the audit, we said that we're going to be doing a horizontal audit. Well, we've got two horizontal audits. That's the first time in the Government of Canada that horizontal audits are being conducted by the government. Before that it was only the Auditor General; now it's being conducted by the government. We've got one on delegation of authority; we've got one for the small departments for travel and hospitality.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Then you can answer this question about internal audit. My position has been for years that an internal audit should be under your direction at the Treasury Board--centralized, with internal auditors seconded to departments and moving around every two or three years so they don't become co-opted into the system, as we saw at public works under the sponsorship scandal. Do you agree that this is a good policy? If you don't, why not?

[Charles-Antoine St-Jean]

Well, if I may--

[John Williams, Conservative, Edmonton—St. Albert, AB]

You can criticize me. That's okay.

[Charles-Antoine St-Jean]

As the Auditor General also has mentioned, she begs to differ with your approach.

[John Williams, Conservative, Edmonton—St. Albert, AB]

I know she does, yes. That's why I say you can beg to differ too. Give me your reasons, though.

[Charles-Antoine St-Jean]

I also beg to differ.

When we're looking at the Federal Accountability Act and the accounting officer, we want deputy ministers to be accountable and also to have the tools. It's important that we give them the tools to enable them to give you the assurance that they've got their shop under control.

Their internal auditors will give them the assurance that they're in control. The deputy ministers will be tasking the CFOs. They'll tell the CFOs to put controls in place here and here. They are going to be turning around and saying to their chief audit executives to give them the assurance. They'll tell them they're going to have an audit committee here that will be challenging this; now the deputy has to ask if they'll be equipped to be accountable.

[John Williams, Conservative, Edmonton—St. Albert, AB]

But are we going to find that legal opinions trump accounting advice, as we saw in the gun registry? In this ninth report we recommended that you, Mr. St-Jean, be the final authority on accounting matters. Will the opinion of some lawyer who has only got contract law and no accounting experience trump the Comptroller General? Are we going to see the end of that?

[Charles-Antoine St-Jean]

I read with great interest the recommendation of the committee on that issue. It gives us the intent of the legislator, and I really appreciate seeing the recommendation. It's going to help us in doing our job.

However, as I mentioned in my testimony, I'm also a citizen who must respect the law. In those cases in which you as a legislator tell us to do something and the accounting standards tell us something else, I'm going to be torn, sir. I'm one of those 15 Canadians who sit on public sector accounting boards, but I do not want to usurp the right of the legislators. It is your role to tell us the standards you want us to follow; it is not for a private sector accounting board to tell us that.

In the future, when there's a problem--because there will be some problems--at least the auditing routine will be very clear. If there's a problem, a potential difference of opinion, the Auditor General will be informed at that time, before the transaction is recorded, just as any external auditor would be advised in the private sector so that will not happen.

It will happen in the future, no matter what, sir.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Williams.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Before we close on the accounting, Mr. Chair, I don't think I'm any more enlightened than when I started. I'm blind here. I'm hoping they're not blind, but I'm leading--

[The Chair, Liberal, Shawn Murphy]

Maybe you're a slow learner.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Maybe, but I'm not sure that I am, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

I'm just kidding.

I can appreciate your problems, Mr. Williams.

Maybe Mr. Christopherson will enlighten us all. Welcome.

[David Christopherson, NDP, Hamilton Centre, ON]

You keep talking to John Williams like that and your problems are going to be a lot bigger than that.

Thank you very much.

Just to get this off my chest, I don't quite understand the situation. We were in the House of Commons dealing with Remembrance Day issues and doing a two-minute silence. There were veterans in the House. It blows my mind that committees were started; they shouldn't have.

[Kevin Sorenson, Conservative, Crowfoot, AB]

They should have been postponed until 3:30.

[David Christopherson, NDP, Hamilton Centre, ON]

I came straight from the House and got here as quick as you humanly can. Anyway, I'm not blaming you, I'm just saying that should be clear. The House leaders or somebody should make it clear that, if anything, that's a moment when we all just stop everything, stay in the House in a non-partisan way, and reflect our constituents' respect for our veterans.

Having said that, if ever there was a meeting to be late for, it seems that this may be the one. As I read through this, I gathered there was a bit of a miscommunication in terms of what you thought you were going to talk about and what we thought. So I'm with Mr. Williams. I'm not sure where we go from here. I suspect we just decided to fill in the time, since you were already here, which is a shame, because we have a lot of work and not a lot of time.

The only thing I'll ask is this. You said you had some differences, so I'd like to expand a little on where you left off with Mr. Williams. That was a point we hit pretty hard. I can appreciate the dilemma you raised, and that's why I want to pursue it. It's an interesting point.

Here's how I see it, and you can tell me how you perhaps see it differently. Our discussion, led by Mr. Williams because of his experience, led us to believe that there ought to be a set of standardized accounting procedures that we, as Parliament, tell the sitting government. Regardless of what partisan stripe it is, these are the parameters by which the government will conduct its reporting of the accounts of the people of Canada.

It seemed to make sense to me that we found a standard. It's external. It didn't need to be, but it's one that we accept. We've said that is the standard we will stand by, so there you go. You were suggesting that you might have a different sense of allegiance in terms of where you go. I understand that, but I'd like to hear of it a little further, because the process is meant to deal with that specifically. It sounds like you're creating a problem that we haven't addressed.

[Charles-Antoine St-Jean]

To respond to that, as you know, the accounting standards evolve quite radically. They're still going to evolve pretty radically in the next few years. The private sector in Canada will be adopting the IFRS, which is the international financial reporting standard, in 2011. It is a brand-new standard. The rest of the world goes in a gap for the moment, but many organizations are moving on that basis.

In the federal government, we have an accrual basis of accounting for financial reporting, but for the estimates we have a modified cash basis. That's something we still need to resolve. I think your colleagues in the other committee will be coming out with recommendations on this.

Some of those accounting standards are sometimes difficult to reconcile, and I can give you a perfect example of this: the new accounting standard on reporting entity. This year, we included the four foundations and a fifth element, the St. Lawrence, as part of the accounting entity of the Government of Canada. The accounting standard tells us that if there's an accounting control, we have to put it in. We've seen one interesting debate with the Canadian Forces Personnel Service Board. The accounting standard tells us that we need to put this in the accounting entity, but when you look at the legislation, it tells us it's not public money and we cannot put it in the public accounts.

Things like that will happen. What's important is that when they do happen, we raise the flag, haul the external auditors in, say we have a problem here, and do things transparently. I just want to make sure that we do not create an automatism that might be going against what the legislators would like to do.

[David Christopherson, NDP, Hamilton Centre, ON]

In the example you've given, does that require any direction or guidance from the political side of things, or would you do all of that internally?