Evidence of meeting #45 for Public Accounts in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was office.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Michael Ferguson  Auditor General of Canada, Office of the Auditor General of Canada
Jerome Berthelette  Assistant Auditor General, Office of the Auditor General of Canada
Lyn Sachs  Assistant Auditor General, Office of the Auditor General of Canada
Alex Smith  Committee Researcher

9:40 a.m.

NDP

The Chair NDP David Christopherson

Mr. Allen—

9:40 a.m.

NDP

Malcolm Allen NDP Welland, ON

—to come back to answer that question.

9:40 a.m.

NDP

The Chair NDP David Christopherson

Mr. Allen. I'm sorry, sir. You're way over time.

9:40 a.m.

NDP

Malcolm Allen NDP Welland, ON

Thank you.

9:40 a.m.

NDP

The Chair NDP David Christopherson

Thank you.

Mr. Aspin, sir, you have the floor.

9:40 a.m.

Conservative

Jay Aspin Conservative Nipissing—Timiskaming, ON

Thank you, Mr. Chairman.

Welcome again, Mr. Ferguson. We appreciate you coming back for this second session.

I'm pretty excited about the industrial benefits this whole project will obviously produce for our country. I don't think we can look at this in a myopic form.

You quite clearly pointed out, sir—or it has been pointed out this morning—that some $425 million in benefits has already been extended to Canadian companies throughout Canada. In effect, this basically could do for the aerospace industry what our shipbuilding contract is doing for the shipbuilding industry, although the shipbuilding industry has been concentrated in a few main areas and this is broadly based. It certainly will give us improved technology.

We are among the top three to five members in the world in terms of aerospace technology already, but it will certainly sharpen that ability. It will essentially catapult Canada as a leader in the aerospace industry and of course is in line with our government's objective on jobs, the economy, and long-term economic prosperity.

Mr. Ferguson, I would like to hear your comments relative to that particular opportunity.

9:40 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

I believe that in the chapter we identified that the various departments did handle the participation of Canadian companies well throughout this project, that there were memorandums of understanding that were signed, and that Industry Canada and National Defence did a good job of bringing Canadian companies along into this process. We did, however, as I said earlier, have concerns about some of the estimates that were brought forward about the potential industrial benefits.

9:40 a.m.

Conservative

Jay Aspin Conservative Nipissing—Timiskaming, ON

Thank you, sir.

Sir, this was also an audit on process, not acquisition. As such, when you are auditing a process, you are ensuring best use of taxpayer dollars, which is something this government is of course deeply committed to. What are the benefits of doing this earlier on in the options analysis stage, rather than after the acquisition?

9:40 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Again, this is a long process. This is a long acquisition process, and we felt, particularly given some of the things that we had found in past National Defence procurements, that it was important for us to do the audit at this point in time. We could identify specific milestones to audit against, and that would provide information to Parliament about whether this process was on track, or whether there were issues within the process, without waiting until it was finished.

9:45 a.m.

Conservative

Jay Aspin Conservative Nipissing—Timiskaming, ON

Thank you, sir.

Mr. Ferguson, I just want to reiterate what you told us earlier when you came before the committee. You cited in your testimony that this whole process was indeed unique. It was different. As you pointed out this morning, it was complex, and it basically requires a new set of procedures and a new set of instruments. Could you comment on that? What were your feelings on that?

9:45 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

If you look at the objective of this audit, our objective was to determine whether the departments involved exercised due diligence. You'll see that we define “due diligence” in the chapter fundamentally on the basis of good management practices and the types of information flow and analysis we would expect. We did not design this audit as a strict compliance audit, did the department comply with policy such and such?

The reason we did this is that we were recognizing that this was a unique and complex type of purchase, so it was important that the process to follow would be more one of due diligence, good management practices.

That's why I said a couple of times that we would have expected that Public Works and National Defence would have gotten together very early on in this process to try to identify what steps, procedures, roles, and responsibilities were required to bring this type of complex acquisition to its end.

9:45 a.m.

NDP

The Chair NDP David Christopherson

Thank you.

Sorry, Mr. Aspin, the time has expired. Indeed, the time for discussion on this chapter has expired.

Colleagues, we will now, as seamlessly as possible, transit from this issue to the next issue.

Mr. Ferguson, I know you need to have a bit of a change of staff. While you're doing that, I will entertain a point from Mr. Allen.

9:45 a.m.

NDP

Malcolm Allen NDP Welland, ON

Thank you, Mr. Chair.

Seeing that I have to leave, my colleague has come to replace me.

When I was questioning Mr. Ferguson in the first hour, he said I should ask others that question. So I would look to this committee to indeed allow that opportunity, of me and others, to ask those questions.

I would expect, in part of your planning phase, that indeed you will have additional witnesses. You have a list before you. As I understand from my colleagues, no motion will be put. I don't intend to do that and uphold, even though I wasn't part of it, that agreement. But I would wholly expect and anticipate that this committee will be scheduling additional time to talk to those witnesses.

Mr. Ferguson, under questioning, referred me back to Mr. Fonberg to ask that specific question. Clearly, he's not here. Obviously I need those individuals here to ask that question, as directed by the Auditor General.

I hope the committee will take that under advisement. I thank them for their indulgence, and I thank them for being with us today. It's always a pleasure to be with you, ladies and gentlemen.

Now I take my adieu. My colleague will return to fill in for me. Thank you, all.

9:45 a.m.

NDP

The Chair NDP David Christopherson

Very good. Thank you.

We are ready to move on now to the second hour, and that is of course to deal with the main estimates for 2012-13. Unless there are any interventions or concerns about procedure, we will continue in the same vein.

I'm still looking for the room to settle down a bit, as we make this transition.

Thank you for your cooperation. It's much appreciated.

With that, we will turn back to you, Mr. Ferguson, for your opening remarks on this matter, sir. You have the floor.

9:45 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Thank you, Mr. Chair.

We are pleased to be here and would like to thank you for this opportunity to discuss our 2010-11 performance report and our 2012-13 report on plans and priorities.

With me today are Lyn Sachs, assistant auditor general of corporate services, and chief financial officer; and Andrew Lennox, assistant auditor general and a test audit product leader.

We are privileged to support Parliament's oversight of government spending and performance. We provide objective information, advice and assurance, from the financial audits, performance audits and special examinations of crown corporations that we conduct each year.

All of our audit work is conducted according to Canadian auditing standards and standards on quality control. We subject our system of quality control to internal practice reviews and to external reviews by peers to provide assurance that you can rely on the quality of our work.

During our 2010-11 fiscal year, the period covered by our most recent performance report, we used $86.7 million of the $88.3 million in parliamentary appropriations available to us. In light of the fiscal climate at the time we did not seek additional funding in the 2009-10 and 2010-11 fiscal years. Rather, we sought opportunities to reduce our expenses and redeploy auditors within the office. We employed the equivalent of 629 full-time employees during the 2010-11 fiscal year, a decrease of three from the year before.

With these resources, in 2010-11 we completed 148 financial and performance audits and special examinations of crown corporations, including work done by the Commissioner of the Environment and Sustainable Development. Parliamentary use of our work remained high. The office participated in 46 hearings and briefings. Parliamentary committees reviewed 62% of our performance audits.

Our 2010-11 Performance Report contains a number of indicators of the impact of our work and measures of our operational performance. Our targets and actual performance results are attached to this statement.

For the 2010-11 fiscal year, our performance report shows that almost all of our indicators of impact remained positive. Senior managers in the organizations we audited assessed the value of our work more highly than they had in the past three years.

Our measures of organizational performance also remained generally positive, though we were unable to sustain the significant gains we made in 2009-10, when we delivered more than 85% of our financial audits on-budget.

Our office also continued to be recognized as a workplace of choice, placing on the top employer lists for four major awards. While there were areas for improvement, overall, the office had successful years in 2009-10 and 2010-11 under the leadership of my predecessor, Sheila Fraser.

9:50 a.m.

NDP

The Chair NDP David Christopherson

Excuse me, Mr. Ferguson. My apologies for interrupting.

I want to bring something to the attention of colleagues at this very juncture in Mr. Ferguson's remarks.

Colleagues will recall that for some time now we've been trying to schedule the October 26, 2011 letter from the interim AG at that time, Mr. Wiersema, asking us to review the cuts the department had put forward. Mr. Ferguson is going to be commenting on those from paragraph 12 and on.

There may be an opportunity for us to do both at once. It's part of what Mr. Ferguson is presenting now. If colleagues can satisfy themselves that they have asked the questions they need to—I'm a little worried about our work plan and making sure we stay on top of things—we could effectively deal with estimates today, as well as the October letter.

I see Mr. Saxton saying no.

Would you rather have a separate hearing on the letter and the cuts?

9:55 a.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

I think we're here today to deal with estimates. We discussed that at length last time.

9:55 a.m.

NDP

The Chair NDP David Christopherson

Okay, that's fine with me.

9:55 a.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Lets get through the estimates and see if we have time.

9:55 a.m.

NDP

The Chair NDP David Christopherson

Okay, that's fine with me. That's great. You might have wanted to think that through before you commented.

I apologize. I take it back. We will have a separate meeting on that letter.

Mr. Ferguson, continue.

9:55 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

In planning for the 2012-13 fiscal year, our first priority is to continue to successfully deploy a renewal of audit methodology or RAM project. The adoption of international standards in 2010 and 2011 led to significant changes in accounting and auditing in Canada.

A RAM project was undertaken to respond to these changes as well as to respond to findings from our internal practice reviews, feedback from our auditors, and recommendations from the 2010 international peer review of our office.

The majority of the work on this project has been completed and has met its deadlines and financial budgets. This year we will focus on training, change management support, and monitoring the application of our new audit methodology.

The completion of this project at the end of 2012 will return approximately $2.2 million to our audit operations, which we are including in our budget reduction proposal.

Our second strategic priority is to begin to implement our strategic and operating review or budget reduction proposal. In July 2011 we received a letter from the Minister of Finance encouraging us to adhere to the spirit and intent of this government initiative.

We undertook a thorough and comprehensive review of the office. We have analyzed all of our legislative audit practices with a view to concentrating our efforts where they will best serve Parliament and territorial legislatures.

While we believe that all of our work is valuable, some audits are less critical than others. We have used this review as an opportunity to assess how our resources are best deployed based on risk and value. We have also reviewed all of our internal processes and services to identify opportunities for operational efficiencies.

This proposal will result in a budget reduction of over $6.5 million for the office and a staff reduction of approximately 10% by fiscal year 2014-15. It will not only generate cost savings, but also provide more consistency in our audit efforts across federal organizations. We are working with the government to ensure that the necessary legislative changes to our mandate are implemented.

The proposed reductions in our audit work predominantly affect our financial audit practice and will result in about 18 fewer financial audits. The legislative and other changes we proposed will focus our financial audits on the areas of greatest risk. We propose to continue our work as the financial auditor of the majority of crown corporations and of officers of Parliament, recognizing their unique responsibilities and accountability relationships

The one legislative change we propose outside of our financial audit practice would discontinue our assessments of the performance reports of Parks Canada, the Canadian Food Inspection Agency, and the Canada Revenue Agency.

We were required by legislation to do this work when these agencies were created. Legislation does not require us to do similar work on performance reports of any other government organization.

We believe Parliament requires high-quality performance information from all federal organizations. Therefore, we will continue to include performance reporting as a topic of consideration in our performance audit practice.

The majority of our interaction with Parliament is through our performance audit practice. We conduct audits that examine the efficiency, economy and environmental impact of all major federal government departments, agencies and other organizations. As a result of our strategic and operating review, we are proposing no reductions to our performance audit work in 2012-13.

In conclusion, Mr. Chair, my staff and I appreciate your ongoing interest in and support for our work. We look forward to continuing our work to assist you in holding the government to account for its management of public funds.

Mr. Chair, that concludes my opening statement. We would be pleased to answer your questions.

Thank you.

10 a.m.

NDP

The Chair NDP David Christopherson

Very good. Thank you, sir.

We will begin rotation in the usual fashion. First up is Mr. Hayes.

May 15th, 2012 / 10 a.m.

Conservative

Bryan Hayes Conservative Sault Ste. Marie, ON

Thank you, Mr. Chair.

Welcome.

Mr. Ferguson, you're coming into a new role, succeeding an individual who was in your position for a long period of time. I imagine that given the increasing complexity of issues in government, as well as the greater focus being put on the role of auditing, you will probably want to redefine your own portfolio to a new era.

You've had a chance to work with staff now and get your feet wet. I'm curious as to what your vision is for the Office of the Auditor General.

10 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Thank you for that question.

Certainly I think the most important thing about the Office of the Auditor General is the institution of the office. It is critical that we provide information parliamentarians and this committee can rely on, and that they know we have done the work that needs to be done to make sure that when we bring something forward it is very much evidence-based.

In the office we have a very rigorous process that helps us identify which audits to do and ensures that we do them in a rigorous manner. So fundamentally for me the most important thing is to continue to do the things the office is known for: provide information to Parliament that Parliament can use to hold government accountable, and make sure that services are being well provided to the citizens. There's a whole mechanism and machinery in the office that is geared toward making sure that happens. Part of my role is to let that do its work and not get in its way.

10 a.m.

Conservative

Bryan Hayes Conservative Sault Ste. Marie, ON

Over the course of the next year, the immediate term, even outside of the plans and priorities that have been identified, are there some changes that we can anticipate you sort of have your finger on, some things you've identified that need to change in the immediate future?