Public Accounts Committee on March 26th, 2009

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Mr. Secretary, can you describe some of the mechanisms the Treasury Board Secretariat uses to ensure effective oversight of small entities?

[Wayne Wouters]

As I said, we do that in a number of ways. Speaking more broadly, government has undertaken a number of measures to improve overall financial oversight management. We created the Office of the Comptroller General back in 2004. Every organization must have a chief financial officer, as already noted. Those are now up on the website for all to see. Also, 80% of the chief financial officers in large departments now have professional accounting designations. That's compared to about 33% for both chief financial officers and deputy financial officers as assessed by the Auditor General in 2002, so we've made tremendous progress in terms of getting highly qualified chief financial officers in these organizations, including the small organizations. In the small organizations we have 35 CFOs or DCFOs who have a designation.

As well, in terms of oversight accountability, all of these agency heads have been designated as accounting officers under the Federal Accountability Act. They are required, therefore, to take on those responsibilities as accounting officers.

Reporting is one way of providing oversight, and that's why it's such an important initiative. As we reduce and remove policies at the centre, it means that the centre has somewhat less oversight. As we reduce reports, we want to do so in a way that still allows some measure of oversight. The worst thing that could happen would be to remove all these reports. Then if something went wrong, the question would be why we didn't know about it. It's finding that balance.

Again, I want to emphasize that we recognize the burden being placed on these organizations. However, I think Frank is right: it does take some time to ensure that we have the right set of policies and therefore the right set of reports. In my view, that is coming together.

[Andrew Saxton, Conservative, North Vancouver, BC]

Specifically, can you tell us what you're doing to help lessen the reporting burden on the small entities?

[Frank Des Rosiers]

We spoke on the policy renewal process earlier on. It might be worth describing a little of what has been done with the MAF.

In the case of the oversight tools that the secretary spoke about, the ones that were described were critical ones. MAF is also a very important tool for us to track how well the departments are actually managing the enterprise. I don't know to what extent the committee members are familiar with it, but through 21 areas of management we track all the key lines of activities that a department or agency would be expected to perform, and perform well. In doing so, we set out what the expectation is from the centre, from the Treasury Board perspective.

In doing that, we were engineering along the way very much in response to what the small agencies network has been telling us. They said they totally recognized the importance of improving public sector management. They are all aware of the events that happened early in 2000 and they don't want to be caught in that situation. We work with them to find a way to get to that desired outcome by getting back to the balance the secretary was discussing and by minimizing meaningfully the amount of work that is required of them.

We came up with three levels of requirements that have to be performed.

Large departments and agencies above 500 FTEs and $300 million budgets have to go through an annual assessment and through all those various stages.

Smaller ones, those below 500 FTEs, go through an assessment only every three years. In the years between, they're free to do some self-evaluation or have ongoing dialogue with the Treasury Board, but they don't have to publish a report to the centre over and above what they would normally do for legislative or parliamentary purposes. Right there is a very significant time saver from their perspective.

Micro-agencies used to be those with under 15 employees, but we cranked it up to 50. Below 50 employees, an interview of two hours or so does the job. We have a conversation with the heads of those organizations. There may be some follow-up discussions if some issues warrant extra attention, but we felt overall that this was actually a very good example of striving to achieve the balance we were talking about. Certainly that's the feedback we've been getting on MAF particularly.

As we renew TB policies, we're trying to do the same thing by having this gradation. We don't want to lose sight of what's going on there, but we want to do it thoughtfully and deliberately and address those concerns in a meaningful way. In our view, these are meaningful and impactful ways to get at it.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you Mr. Saxton.

I have just a couple of points I want to cover.

First of all, to you, Ms. Fraser, as you pointed out in your comments, we have had a couple of horrendous situations involving the Office of the Correctional Investigator and the Office of the Privacy Commissioner, where there was no semblance of any type of financial control, and questionable behaviour went on—in one case, I think, for 20 years. One of the reasons given for why there was no financial oversight was that these bodies were quasi-administrative, or had adjudicative responsibilities, and people were scared to go in and exercise any form of due diligence.

Has all of that been corrected?

[Sheila Fraser]

I don't know if I could actually respond on whether it's been corrected or not. I certainly hope those audits and the actions taken subsequently have made it very clear to the quasi-judicial bodies that they are accountable for their management. The fact that they might need independence to render their decisions does not mean they are not accountable and shouldn't be accountable, for example, to the Treasury Board Secretariat or to other central agencies as to how they're managing. I think the introduction of the MAF, for example, with their now having to present on the management of their agencies, is an indication of this as well.

I think that was perhaps more of an explanation when it was dealing with the officers of Parliament than perhaps with the ombudsman. The issue, if I recall, with the ombudsman was in part that the processing and the transactions were going through a department and that the department was accepting what came in without challenging it. The people within the agency, moreover, weren't always necessarily aware of what was going through until after the fact. So there was confusion, too, around roles and responsibilities, and the fact that people just didn't speak up.

[The Chair, Liberal, Shawn Murphy]

Another issue I wanted to talk about is what I consider to be a fundamental change in the way financial management operates here in Ottawa with the institution of the accounting officer concept—and of course, the protocol issue by this committee. In this case, each of these small agencies have, for some time now, been designated with accounting officers. As such, these officers are responsible for the proper administration of the resources of their department or agency. They are also responsible for developing and maintaining proper systems of internal audit and, of course, personally responsible for signing the accounts at the end of each year, so that the consolidated fiscal statements can be prepared.

In preparing for this audit, Ms. Fraser, and interviewing the heads of these agencies, is it your view that they're certainly aware of their responsibilities, their roles, and their obligations? These are very serious. They are accountable to Parliament.

[Sheila Fraser]

I would say yes, very much so. I would also make the comment that in the report we're tabling next week on Governor in Council appointees, we have looked at the question of the training provided to them as they come into their functions.

[The Chair, Liberal, Shawn Murphy]

Do you, Mr. Wouters, or you, Mr. Morgan, have any comment on that particular issue?

[John Morgan, Assistant Comptroller General, Financial Management and Analysis Sector, Treasury Board Secretariat]

One of the key things we've just done is to issue a new policy on internal control that will require deputy heads to sign off on their assessment of their internal controls over a period of time. We'll be phasing that policy in over a period of three years. And one of the things we're doing with respect to small agencies is giving them a bit more time to come up to speed in terms of assessing their internal controls.

So we've done quite a bit in terms of putting in place chief financial officers who are qualified. Furthermore, the policy on internal controls will also go a long way to raise the awareness of deputies and departments or their knowledge of internal controls and what they're doing to close the gaps where there are some weaknesses.

[Wayne Wouters]

If I could comment, I do think the accounting officer model does reinforce their management responsibilities.

The other thing, as I said, that we've been doing is having these one-on-one briefings with the new deputy heads who are coming into these small agencies to make it very clear to them that these are their responsibilities under the Financial Administration Act and as accounting officers. So in my view, they're much more aware now of their overall role and responsibilities when it comes to management generally.

[The Chair, Liberal, Shawn Murphy]

Last, I have a comment, not a question.

I certainly want to agree with your comment, Mr. Wouters, on some of the reports that are designated by Parliament, particularly the departmental performance reports. My own view is that they're probably not read that much by parliamentarians and not used that much by parliamentarians. It's probably an issue that is ripe for change. We all should have a look at that, because I know it takes a lot of time for these departments to prepare these reports. There's a lot of work, a lot of effort, put into them. I think sometimes things could be done with not as much paperwork and not as much onerous responsibility.

However, we'll start the second round.

Mrs. Crombie, five minutes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thanks to all of you for joining us today.

I'll address my questions to Mr. Wouters and then to the Auditor General, Ms. Fraser.

I was, at one point in my life, the principal of a small Canadian start-up. We had 12 employees, but as we grew, we doubled that. We were still pretty small, and we were pretty good at creating and manufacturing a product and then getting it out to market and marketing it. But there were a lot of things we weren't good at. We didn't have legal expertise; we didn't have HR or IT expertise. I thought, wouldn't it be terrific if there were a pool of specialized talent and expertise? So my questions are going to be around shared services.

I notice that the Office of the Auditor General recommended that you address the issues of shared administrative services in small entities. I was one and I recognize that there's a need for this. Would you agree, as well, that the needs of small entities are vastly different from those of the larger organizations, and that they can't often attract or afford specialized talent or expertise like the kind I described with HR, IT, finance, legal, contracting, etc.? Is it your intention to develop a shared administrative services strategy? If so, when? How will that strategy address the concerns of small entities in regard to sharing their administrative services?

Is there a plan? When do you plan to put it in place? Let's start there.

[Wayne Wouters]

Thank you for the question.

I couldn't agree with you more that this is also an area where I think some of our small agencies are struggling. I have to say my personal view is that we have not moved along on this as quickly or as far as we can.

I would argue that it's perhaps not only for small agencies, but also for shared services more broadly across the public service. I think there are some real opportunities to provide better service at a lower cost if we start to combine some of our back office HR, finance, and the like. I think there's clearly room for improvement.

In fact, I felt that this whole area was an area where we have not progressed far enough, so a year ago I created a new sector, called the service sector, within the Treasury Board Secretariat to give this more emphasis and more profile. That sector basically has been mandated to develop an overall internal service delivery strategy to look not only at the major departments across the public service but at small agencies.

There, we've essentially created a number of councils to look at materiel management, financial management, and HR management. We have small agencies on those organizations. That is to determine where we need to go. I think there are a couple of different models. One is where we can actually share the services among these agencies by having a number of the agencies come together and share their back office services. Some of those agencies are doing that now. It's their own initiative to do that. Some progress is being made, but not as much as we need.

I think the second area is where we can perhaps find a larger provider for the smaller organizations. There, for example, Public Works right now is actually delivering HR shared services for about 26 smaller agencies. This is in the area of compensation, staffing, and the like. Some of that work is being done for the small agencies now, and other agencies are looking at moving in that direction.

A third possible area is outsourcing.

So for the work on developing the overall strategy, we hope to have it completed by the fall and go to ministers at that time to see, in fact, if we can move forward in this area. We are part of the small agency administrative network. We're working with them to see which of these models works for these organizations. The fact is that they're so unique and so different that, again, one size doesn't fit all.

But I do agree with the Auditor General again on this one. I agree fully. Collectively, we haven't made the progress that we need to in this area.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Can the Auditor General respond?

[The Chair, Liberal, Shawn Murphy]

She can if she wants to.

[Sheila Fraser]

I would just reiterate, as we have said in the report, that we think this is a really critical area. A lot of these agencies are very small and are not, as the member mentioned, able to afford or even attract the kind of expertise that's often required, be that financial, human resources, or IT, and so shared services are obviously a really important solution to addressing many of the issues they have had.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Crombie.

Mr. Shipley, go ahead for five minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Thank you, Ms. Fraser and the rest of the panel, for being here.

I was going to follow up a little bit, Mr. Wouters. We had Public Works in, and actually you referred to Public Works. Ms. Crombie talked about shared services. That is a very significant issue, and I very much appreciate the example that she used. Those of us who have been in business recognize some of those areas for which we are responsible but that are actually very difficult to manage because of the resources in smaller businesses.

You talked about putting together a new sector. I didn't catch the name of that. How many people are involved with that? Could you tell me just a little bit about that? How many people do you actually have to help with doing this? I always get concerned, when we start to build, that we are building in another layer of bureaucracy, quite honestly.

What are the benchmarks, and how are they going to be working?

[Wayne Wouters]

Thank you for the question.

In this particular area there are about 15 to 20 public servants actually working on the service strategy. We also have our service policies, like all other policies that they are responsible for. Part of their responsibility in bringing this strategy forward is actually to develop those benchmarks, those milestones, that we need to achieve over the next number of years. So it's very much part of their work, and it's not simply their work. As I said, we've created councils with departments and small agencies, so it's a collective effort to determine where we need to go.

In this area we have moved out on a number of different fronts to look at shared services. There are some models out there, but I don't think it has been done within an overall framework of where we think this can go or how far we can move on that. That is the work we need to do now, but that doesn't stop us from moving forward with some early adopters where we think that's possible. There are some opportunities to do that.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I'll just follow up again.

One of the other things you talked about was transparency. You brought up the comment about the Federal Accountability Act, an act that was brought in when we came into government. I'm just trying to find out what impact that has had, if any, on the transparency and the accountability that might be effected by you. If not, what changes should be made or what are some things that should be looked at that would help improve those two issues--transparency and accountability?

[Wayne Wouters]

I think the Accountability Act has clarified the accountability of ministers and deputy ministers, as was already noted, through the accounting officer provision.

On transparency, if you look at OECD countries and what the government has done through the Federal Accountability Act and other measures, the transparency requirements when it comes to travel, hospitality, contracting.... All of this now has to be made available to Canadians. I have to report on my website once a quarter on all my hospitality and travel. All contracts over $10,000 are now fully transparent as well on the goods and services side. There is a fair bit being done in this area of proactive transparency.

Within the Federal Accountability Act, one thing that helps the overall accountability regime is that we did increase protection for whistle-blowers. We also increased penalties for fraud. There are a number of areas that have helped to define or redefine accountability and also clarify reporting. From our point of view, those areas have made a real difference.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Could the Auditor General comment also? We're trying to learn as much as we can.

[Sheila Fraser]

The introduction of the accounting officer has had an impact just in the fact that the deputy ministers now are clearly responsible and accountable before Parliament for the administration of their departments. Even though it may have been there in bits and pieces previously and even though they obviously assumed that responsibility previously, to have it written into a law somewhere has made it even more obvious to people. I think even the relationship with this committee has changed because of that act.