Public Accounts Committee on May 21st, 2013

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

A large proportion, naturally.

How would you break down the other expenditures? Just give me a—

[Lyn Sachs]

For travel and contracting, we have 5% in travel and probably another 5% in professional services. The rest, which is 5%, is miscellaneous.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

I mention that because a number of members of this committee have just returned from an international responsibility where we worked with another government, basically a third world country needing a little bit of assistance. We discussed the issues of governance and accountability and oversight, and we met with their auditor general and a lot of their financial people and senior ministers. There is no doubt that, yes, they do need help.

Obviously, our main focus has to be on what we do here. That's your principal role. But do you have a particular focus internationally when you do reach out? Do you focus on key countries, or unions, or geographic areas?

[Michael Ferguson]

Mr. Chair, we do a number of things on the international front. For example, we have a Fellows program, funded through CIDA, that brings in auditors from different countries.

Right now in the office we have an auditor from Cameroon, one from Ghana, one from Tanzania, and one from Vietnam. They stay with us for about nine months and work on various audits as part of the teams. That’s a very hands-on way we do things.

We also provide some funding to the CCAF, the Canadian Comprehensive Auditing Foundation. They do a lot of training on performance audits and financial audits in audit offices around the world. That's another way we get involved.

A little differently, we are also the auditor of the International Labour Organization, one of the UN organizations. We do the financial audit of that, and some performance audit work paid for entirely by that organization.

We have a number of different areas where we are doing international work.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

We've found a common theme just in a brief discussion with a few of the countries. I'm wondering if you have shared the same observation. Most of their focus, regretfully, was on compliance audits rather than on performance audits. Quite obviously there's a huge difference in benefit to that country. Have you found that to be a bit of a constant theme with some of the developing countries? Obviously here your focus is not solely but largely on performance audits. Could you comment?

[Michael Ferguson]

Yes. It's certainly very fair to say that a number of developing countries are working their way through, trying to do performance audits. Performance audits are different from financial audits. The underlying concept is the same in that you're essentially trying to answer a question. You're trying to gather enough evidence to draw a conclusion.

Financial audits are much more structured. From year to year they are pretty similar, and you do financial audits of the same things every year.

Performance audits are different in that every time you're looking at something different. It may be something that's never been looked at before, or if it has been looked at before, that was maybe five or ten years in the past. So they're very different.

I think a lot of developing countries struggle to understand that difference and get to the point where they can do good performance audits.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I think one point is very important. You're moving forward with short-term strategic outcomes—what you're looking for from Parliament from this. At what point in the process do you see yourself engaging Parliament—government and/or opposition? How do you see yourself engaging us in that particular area of achieving the strategic outcomes you're looking for?

[Michael Ferguson]

In terms of our strategic outcomes, we do things such as survey members of committees. I believe we recently sent out a survey to all members of committees in order to get feedback. As I mentioned, we are also in the process of putting together our own strategic plan. One thing we intend to do is meet with members of this committee, to get input from this committee on the work we do—how we do it, what we do, and what is of value to the members of the committee. That's something we intend to do over the next number of months.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Great. We look forward to that opportunity.

[The Chair, NDP, David Christopherson]

Good. Thank you, Mr. Kramp. Time has expired.

We now go over to Madame Blanchette-Lamothe. You have the floor, ma'am.

[Lysane Blanchette-Lamothe, NDP, Pierrefonds—Dollard, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Ferguson. Thank you for joining us today.

At the risk of making you repeat yourself, I want to pick up on the number of audits done. When you appeared before us on May 15, 2012, I asked you about your planned audits. You told us that you intended to conduct 30 performance audits of federal and territorial institutions in 2011-12. That surprised me given that, the previous year, you had completed 26 audit reports. You told me that, despite the budget cutbacks, you did not think the number of audits would go down.

Today, the 2011-12 performance report shows that 23 performance audits and 2 studies were completed. Isn't that a decrease from the previous year and from your own estimates or targets for that fiscal year?

[Michael Ferguson]

Mr. Chair, I don't have all of the specific numbers right in front of me.

Again, the thing to remember is that in the office there are the audits we do and release as the Auditor General. There are also the audits we do as the Commissioner of the Environment and Sustainable Development.

I guess we were saying that in 2011-12 there were 23. I'm not quite sure about the 33. I don't have those numbers in front of me to actually do a specific comparison.

I can say, though, that we haven't seen any marked reduction in the number of performance audits we are doing. I would have to go back to try to figure out exactly when we had 33 and when we had 23, to give you a comparison of those numbers.

[Lysane Blanchette-Lamothe, NDP, Pierrefonds—Dollard, QC]

It was actually 30 and 23 audits, respectively, but it's no problem. I understand you don't have those numbers with you. We would be grateful if you would be so kind as to look for them and follow up with us on that.

You said the 10% or so reduction in your staff levels would not have an impact on the number of audits, and I believe you. I have trouble, however, believing that a 10% reduction in staff will have no impact at all, because everyone working in your office right now is surely making a significant contribution and doing a good job.

Could you tell us what that 10% reduction will affect and how?

[Michael Ferguson]

Mr. Chair, in terms of the impact on the audits we do, there are a couple of things. First of all, as part of our strategic and operating review, we did identify a number of pieces of work we were doing that we felt we didn't need to do anymore. We've been going through reducing those. Those were audits we were doing, but we felt they really weren't adding a lot of value. I think we spoke to that last time. So there has been a reduction in the number of audits we do on the financial audit side.

On the performance audit side, I think the impact has been...a few years ago the office reduced the number of performance audits it was doing. Part of that was to put resources towards what we've referred to as the renewal of audit methodology project. We've redone how we do performance audits. In order to staff that project up, we had to take some performance auditors and put them on that project. At that time, the number of audits were reduced. It's my understanding that the original intention was that when the project was finished, it might allow us to have people to put back into those audits. That won't be happening.

[Lysane Blanchette-Lamothe, NDP, Pierrefonds—Dollard, QC]

Thank you, Mr. Ferguson.

I have another quick question.

In your opening statement, you said that departments had made satisfactory progress in addressing 62% of the 42 recommendations. That means the departments did not address 18 or so of the recommendations. Is that normal? Do you believe they will address them in the future?

How do you explain the fact that the departments have not addressed 18 of your recommendations?

[Michael Ferguson]

When we do performance audits, when we do a follow-up performance audit, that's what we're looking to do. We are saying here's what we recommended in the past, and on each recommendation that we're looking at again, we ask if the progress was satisfactory or not satisfactory. It may be the case that even though the progress was not satisfactory on certain recommendations, departments may have made some progress.

If we are doing a performance audit, it may not be a follow-up audit, but if it includes in there something that we have looked at before, we will do the same thing.

So it's something we are always looking at. It's the focus of our follow-up audits. It's to determine the degree to which departments are implementing the recommendations. We obviously would like to see a better percentage of the recommendations being implemented when we do this. I'm not sure exactly what our target is for that particular measure. I'm sure it's listed in the report. It's probably close to 100%, if not 100%.

Certainly we want to see departments implement our recommendations, and that's why we do the follow-up audits, so that we can report back to this committee in fact on whether the departments are satisfactorily implementing our recommendations.

[The Chair, NDP, David Christopherson]

Thank you. Time has expired.

Just before I go on, however, and far be it from me to come to any kind of rescue of the Auditor General, I want to remind colleagues that we did receive a letter dated October 26, 2011, from the interim Auditor General, John Wiersema, advising that these cuts were coming and affording the committee an opportunity to meet with the Auditor General to discuss that impact. The committee in its wisdom has not chosen to date to do anything with it.

In rotation, Mr. Aspin, you have the floor, sir.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Chair.

Welcome, Auditor and Madam Sachs.

You alluded previously, Mr. Ferguson, to your strategic plan. I know that you've launched a renewal of the strategic plan, which is a review, I guess, of what you do and how you do it.

Can you share with us specifically why you chose to do this exercise?

[Michael Ferguson]

Certainly, Mr. Chair.

I think probably it was for a few reasons. One, as somebody coming new into an organization, I wanted to make sure I understood our strategy, so I felt it was important to undertake a review of our strategy. As I said, it's something that from a top to bottom perspective has not been done in a number of years. It was due.

We're undertaking the exercise by what's called a “balanced scorecard” approach. We're looking at the work we do from various different perspectives, trying to understand the work we do from various different perspectives.

I think it was simply a matter that it was due and I was new to the organization, and I felt I needed to understand our strategy.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

I understand that the renewal of audit methodology project, or the RAM project, responded to changes in international and Canadian auditing standards, renewing the office's audit methodology and updating the design and documentation of your quality management system.

How does your current project differ from the RAM project, and what are the expected outcomes?

[Michael Ferguson]

Mr. Chair, the difference is that the RAM project was specifically looking at how we do audits: the process, the training, the manuals, the documentation, and all of the details of how we do audits, making sure that the way we do audits is rigorous and conforms with Canadian auditing standards. That was the RAM project. The project we are doing now is looking at the office's overall strategy and what we do as an office.

So the first one was very much drilling down into the details of the aspects of how we go about it. Now what we're doing is looking at the broader picture of our strategy.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Do I have any more time, Chair?

[The Chair, NDP, David Christopherson]

You have a couple of minutes. Go ahead.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you.

When making appropriations in the estimates process for the coming fiscal years, how do you prioritize your office activities? Do you set a quota for audits and schedule different departments, agencies, and programs accordingly, to meet that quota? And how does your office account for unexpected needs of Parliament in the estimates?

[Michael Ferguson]

When we put our budget together, Mr. Chair, the first thing, of course, is the financial audits we have to do. The financial audits are audits of financial statements. We do roughly 120 of them, including the Public Accounts of Canada, and then financial statements of various crown corporations and agencies. Those have to be done every year. That's the first chunk of our budget.

Then we look at the resources we have in order to do performance audits. We go through a very rigorous planning process, which looks out probably three or four years, to determine where we are going to put our resources on the performance audit side. That is done using a risk-based approach.

Part of our activities are to do what we call “strategic audit plans”. For different pieces of the government's business, we will go in and do risk assessments, and then determine which areas we think we want to do performance audits on. We will look out over a three- or four-year time period to determine which audits we want to do.

Certainly, in that, if parliamentarians have things they want us to look at, we are always happy to receive that input. We'll take it and we'll put it into our whole planning process to determine whether those specific items are things that we should be looking at versus what we had already planned to look at.