Public Accounts Committee on April 21st, 2009

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Over the Easter weekend I had the honour to be an observer on a human rights trip to Pakistan. I met with senior leaders from the Pakistani government and commented on the committee we are in now and our accountability. It was all in English, but they needed a translator. I think they were astonished at what we do, and they welcomed the notion of learning more.

Can you tell us a little more about what we're doing with other countries? Issues come up peripherally throughout this meeting, and I think it's intriguing, as Canadians, that we're world leaders in this. We're so understated that we probably don't hear about that enough.

[Sheila Fraser]

I'd certainly be glad to tell the committee about some of the work we do internationally.

First, there is an association of all the national audit offices or equivalents from all the country members of the United Nations, which is called INTOSAI. The Office of the Auditor General of Canada has always been very active in that. We have led various committees and working groups. We are currently chairing a working group on auditing standards, and many of our staff work on international committees to develop auditing standards and accounting standards. I think the committee's aware that I'm on the international board for public sector accounting. We have led working groups on environmental auditing. We led a very large project on independence of audit offices.

In addition to that, we also work on specific projects with countries, usually in collaboration with CIDA. Currently there's a very large project going on in Mali that established an office of the auditor general there. We are providing training. We are actually in the process of sending one of our staff members there, probably for a year to 18 months, to help them with this, and we give advice and support to the auditor general there. We have worked with Russia in introducing performance audit to Russia. We have given training in China. And we have run a fellowship program, which is funded as well by CIDA, where between five and seven fellows come each year from developing countries and work within the office for nine months. I think close to 200 people have gone through that fellowship program, and actually several of them have become auditors general in their countries.

We do a fair bit of work. We also have a very large number of delegations that come through each year and spend a day or two with us, or we work and give short-term training sessions.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

How would a country apply?

[The Chair, Liberal, Shawn Murphy]

Mr. Weston, I'm going to have to move on. I apologize but your four minutes is up. I'm under a tight time schedule here.

Mr. Christopherson, for four minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Mr. Chair.

We have four minutes. I'm going to put out a few questions, and with whatever time is left, you can do your best to respond, please.

Auditor General, you just mentioned the independence of audit offices. I know you want to be diplomatic and I respect that, but this is the committee you answer to. I would like to know what your thoughts are on the independence of the Parliamentary Budget Officer and whether or not you see.... I see the smile, but it's currently an issue. You're the in-house expert, and your opinion matters.

Hold off, though, while I get my other questions out. It will give you time to think about how you're going to respond. For that matter, I wouldn't mind hearing your thoughts on the future potential, and maybe the benefit, of also rolling out the environmental commissioner as an officer of parliament, again speaking to your issue of the independence of audit offices. I'll give you a little time to think about that.

Mr. Wouters, I appreciate the $3 billion and I understand the reason for it. The finance minister leaves the impression that he's the firefighter; he's got a pail full of water and he's heading over to throw that and put out the fire. Because he's in a hurry, he may spill a little bit of water, and we just have to live with that.

We know the Americans had a similar mindset with Iraq, and to the best of my knowledge they're missing billions of dollars. They literally sent planeloads full of money, cash money bundled up on pallets, billions of dollars in cash, but because of that rush to put out the fire, some of it got spilled. Now, in the harsh, cold light of day, people are saying, “Wait a minute, that's not good enough. Where did that money go?”

I'm wondering what we're putting in place. Beyond what I've heard, is there something to give us a sense that the water that's being spilled is still going to be accounted for? Auditor General, I wonder if you're looking at any kind of special audit, special review, or special procedure to monitor this, given that we are actually putting the cart before the horse in terms of how we normally do things.

My last question is similar to that of my friend Mr. Kramp, who asked questions about risk. I'll reread part: “This will require tolerance for potential mistakes and the ability to learn from them, which will be far outweighed...”.

I get it. There's got to be some room for people to use their discretion, to be creative, to make judgment calls. We keep saying that. The idea is to push decisions down the line. It's the opposite of Taylorism, if you will.

In doing that when we're dealing with an issue, we're an isolated case. We're drilling down and looking at one person's decision alone, without all the pressures of the day. Will you be able to provide us with some tools to help us know when we should be allowing a little bit of give for this tolerance, for the benefits we're looking for, so that we're not pounding people every time they stick their heads out of the shell? I mix my metaphors awfully, I know, but when we pound them for that, we lose. That's the argument.

On the other hand, I don't want to see us lessening off, especially when we've got high-priced, responsible staff who may not be conducting themselves in the best interests as they should. We hit them hard, and that's our job, or we hit systems hard, if you will. Some of that is people's judgment.

Help me understand. I've been here for almost half a decade. Will you be able to talk to us about that? Will you provide us with guidelines so that we can get a sense of the difference between cutting people some slack when we want them to be creative, do the right thing, and take initiative, versus making decisions that are clearly bad decisions and that a little due diligence would have prevented?

[The Chair, Liberal, Shawn Murphy]

Before we get a brief answer--and I'd ask the witnesses to keep their answers brief--I want to mention to the Auditor General that you're under no obligation to get into the independence of the Parliamentary Budget Officer.

[Sheila Fraser]

Well, Mr. Chair, I smile because I've been asked to appear before the committee of the library to discuss this issue on Thursday, so I've been giving some thought to this matter. Shall I save my answer until then?

[David Christopherson, NDP, Hamilton Centre, ON]

Try out your answer.

[Sheila Fraser]

“Independence” means independence from government. It means that when we do our audits, we are independent from government. When the Parliamentary Budget Officer does his analysis, he is independent from government. The Library of Parliament is independent from government, so by de facto being an officer of the library, he is independent from government.

We could go into a longer discussion about that, but I don't think institutions have to be.... The environment commissioner does not have to be a separate institution to be able to be independent. They have independence by being part of the Office of the Auditor General.

With regard to the economic stimulus, yes, we are planning to do an audit of that. We will begin shortly and we will be looking at the spending as it occurs. We are hoping to report in fall of 2010.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Go ahead, Mr. Young, for four minutes.

[Terence Young, Conservative, Oakville, ON]

Thank you, Mr. Chair.

I was hoping someone would not ask Mr. Christopherson to repeat that question, so we're moving forward.

I don't want to belabour this issue, but Mr. Smith, I want to explain it to my constituents, if I can, in plain language.

Let me just back up. Due to the recession, there's an extraordinary need for expenditure of $3 billion from April to June of this year and for other spending related to stimulus. My constituents need to know, as all of us on this committee need to know, that this money will bear the same high level of scrutiny all government spending does. During the past government's spending scandal, the sponsorship scandal, we know that the money did not go through a formal process. It didn't have the scrutiny. That was the source of the problem.

So can you please explain in plain language, if you can, how this critical stimulus package will meet the highest level of public scrutiny?

[Alister Smith]

Mr. Monette might want to add comments too.

These items are not treated with any less due diligence than any other items that would go through supplementary estimates. They require Treasury Board approval; indeed, they're subject to audit. There's an internal audit and an external audit. The Auditor General has mentioned that an audit by her office is under way or will be under way shortly. There's a great deal of scrutiny. In fact, I'd say there's more scrutiny of allocations under this mechanism than under any other mechanism.

[Terence Young, Conservative, Oakville, ON]

Thank you very much.

Madam Fraser, in 2006 you were given new powers to follow the dollars in any organization that got around $1 million a year. How does that help you do your job better? I've always been fascinated with that.

[Sheila Fraser]

Our main concern was with regard to the foundations that had been set up by the federal government. Over $10 billion had been transferred into them, and the accountability provisions around that were not sufficient.

A number of changes were made so that those foundations would be more accountable to government, one of which was to allow us to do performance audits in the foundations. We have done a number of them now. We actually have fairly positive results. We have looked at the Millennium Scholarship Fund and the Sustainable Development Foundation, and the Health Infoway is one that's under way right now. As a result, we are able to give additional information to parliamentarians.

When the limit on the spending was reduced to $1 million over five years, we made it quite clear that it was not our intention to go out and start auditing all of these thousands and thousands of recipients of grants and loans, that it was really the job of departments to put systems and practices in place to make sure money was being spent for the purposes intended, and that we would continue to audit those systems and practices.

[Terence Young, Conservative, Oakville, ON]

Thank you.

Mr. Monette, you're doing strategic reviews on 20% to 25% of program spending. You said here that you'll have an additional $586 million available by 2011-12 because you found other priorities. Can you give us some examples of the kinds of programs and processes that didn't meet the standard and for which you're going to suggest other priorities?

[Rod Monette]

Thank you for that question. It's actually Mr. Smith who was doing the strategic review.

[Alister Smith]

The examples from the first two rounds of strategic reviews are laid out in the 2008 budget and the 2009 budget. We reviewed $25 billion worth of spending in the last set of strategic reviews. A number of items were identified in terms of reallocating funds to other initiatives, and indeed reinvestments were made in departments and elsewhere as a result of those strategic reviews.

There's a long list of examples that I'd be happy to provide to you for more information. It's in the budget--

[Terence Young, Conservative, Oakville, ON]

So it's a lot of little things that add up to a lot of money?

[Alister Smith]

It is. In fact, we ask the departments to put forward 5% of a particular spending base for reallocation, so we tend to have a lot of smaller items.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Young.

Please go ahead, Ms. Ratansi.

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

Thank you, but I'm giving my time to Mrs. Crombie.

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

We just want to go back to the line of questioning that we hadn't completed previously. In this round I'm going to go back to the Auditor General, if I may.

You talk about the criteria for audits being risk based, and Mr. Kramp brought up the notion about acceptable risk as well, but audits are always done after the fact. What is the timetable for conducting an audit on vote 35, please?

[Sheila Fraser]

Actually, we will be doing vote 35 specifically as part of our audit of the public accounts this summer. Even though it obviously isn't part of the March 31 financial statements, because we will be in there, we will be auditing it this summer. We're beginning now to look at the rest of the economic stimulus package and we will be conducting the audit over the next year and a half.

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

Second, in your letter to the government you asked whether they have modified any normal processes in delivering the economic action plan. Have you received a response?

[Sheila Fraser]

No. We would be doing that as part of our audit process. If any of the processes have changed, we would expect to see the documentation around that, and it would be part of the audit.