Public Accounts Committee on May 21st, 2013

[The Chair, NDP, David Christopherson]

Sorry, Mr. Aspin, the time has expired.

Moving on to Mr. Byrne, you have the floor, sir.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thanks, Mr. Chair.

Thank you, Mr. Ferguson and Madam Sachs.

To the average Canadian concerned about government oversight and ensuring the efficiency and effectiveness of government spending, it might seem a little counterintuitive that one would be proposing an increase in surveillance, or increasing the efficiency and effectiveness of government spending as a general program or strategy or goal, while at the same time cutting the budget of the Office of the Auditor General. Would you be able to comment on the role the Office of the Auditor General can provide, as well as on the internal audit function, about ensuring effectiveness and efficiency of taxpayers' spending?

[Michael Ferguson]

Mr. Chair, one thing we've noticed over the last number of years is that there has been a change in internal audit, an increased focus on internal audit within the federal government. That has also altered how we do performance audits. We take into account very much the work that happens in internal audit so that we are not going in and duplicating an area, unless for some reason we feel that needs to be duplicated.

That's something that certainly has impacted us. I think it shows that in terms of overall accountability there's a role for internal audit and a role for external audit, which is what we do. Those two complement each other, but they are both important components of the overall government accountability picture.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

That seems to be one of the reasons why the Office of the Auditor General is now stopping doing financial audits on 25 different departments, agencies, and organizations. Is it because there's a certain body of expertise within the private sector on the financial auditing and you want to focus more on performance legislative auditing? Would that be fair to say?

[Michael Ferguson]

No, our financial audit practice is very important to us. It's robust. We have a lot of expertise in terms of government accounting systems and that type of thing.

Where we were moving away from some of the financial audits, where we identified some, it was more on the end of.... We were doing some of these financial audits, but we either didn't feel we were adding a lot of value in them or it was a case that these are perhaps organizations that are regulating the private sector and they could recover their audit costs as opposed to getting the service free from us. That was another consideration.

Also, there were three organizations whose performance reports we were supposed to evaluate. There were many other government organizations whose performance reports we were not mandated to review every year. For those three, their performance reports were getting looked at every year and others were not.

We can still look at the performance reports of those three organizations, but now we can choose which ones we want to look at, as opposed to being directed that it has to be these three, which meant they were always being looked at and the others were not being looked at.

It was a number of those types of things that went into our decisions.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

From a parliamentary oversight point of view, one of the factors that does limit the capacity of Parliament to look into matters related to crown corporations, in particular, is that many crown corporations—but not all of them—are not covered under the Access to Information Act. That's part of the role or value that the Office of the Auditor General may be able to provide: being able to shine some light into some pretty opaque corporations, in that there's not a whole lot of information that gets shared or not much capacity for Parliament or parliamentarians to be able to look into crown corporations.

Do you take that into consideration in terms of which financial audits or which crown corporations you do special examinations on? Is that part of the mix?

[Michael Ferguson]

Certainly, it's our special examination practice that gets to a lot of those types of questions. We are required by legislation to look at most crown corporations. I won't say all because there are a couple of exceptions, but over a 10-year period we are mandated to do a special examination, looking at their systems of internal controls and that type of thing and reporting to their boards on those special examinations. We have to get into each crown corporation at least once every 10 years. Certainly, the special exams allow us to take a bit deeper dive into the practices of the crown corporations. That is the main part of the practice where we do that.

[The Chair, NDP, David Christopherson]

I'm sorry, time has expired.

Moving along to Mr. Hayes, you have the floor, sir.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you, Mr. Chair.

I want to get some clarity with respect to the process for determining the mix of financial audits versus performance audits. It is pretty clearly understood in terms of cost. Performance audits are significantly more expensive, and in terms of ratio, it's 4:1 financial audits versus performance audits.

I'm looking at value for money. There's a part of me that says it would be nice to do 60 performance audits to 80 financial audits, as a ratio, because there is a part of me that thinks performance audits are much more valuable than financial audits.

Can you give me your thoughts on how you determine the ratio?

[Michael Ferguson]

Again, it starts from the fact that we are required to do financial audits, so in most cases—I don't know if it's all cases, but it's probably pretty close to all cases—we actually have no choice about doing the financial audits. The organizations exist. They have to have financial audits. We've been named the auditors.

With regard to hours, as I look at 2012-13, financial audits were about 257,000 hours. Our performance audits, including chapters and including the strategic audit plans we do, were about 208,000 hours. So even though the number of audits looks very skewed, the fact of the matter is it takes a lot more effort to do many of the performance audits we do. There are a number of financial audits that are smaller and don't take the same amount of effort.

The hours are more toward financial audit than performance audit, but it's not as big a difference as the number of audits make it appear.

The other thing, though, is that to an accountant, financial audits are extremely important. It's important to look at organizations to make sure that their financial statements are properly presented. I think the fact that most organizations can get clean audit opinions speaks to the maturity of financial audit preparation, financial statement preparation, now in Canada. That is a good thing, but having those financial audits is very important in making sure that the financial statements are presented fairly. That is a very important activity.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Can you talk a little bit about ensuring that your audit reports are reliable? Can you speak specifically as well to staff qualifications and whether you have a need to bring in consultants?

You mentioned earlier that some of your auditors are classified as performance auditors and some are classified as financial auditors. I'm curious about the industry expertise you have, because some of the things you are auditing are highly complex. Could you enlighten our committee with regard to the reliability factor?

[Michael Ferguson]

With regard to qualifications of our performance auditors, Mr. Chair, most of our performance auditors come to us with a different background, not necessarily an accounting background. We will have engineers, economists, lawyers—people with training in different areas, not only accountants.

We put them all through training to make sure they have the necessary skills to conduct audits. On many of our performance audits we will also engage advisory committees. We will bring in two or three people on contracts, not to do the work, but we can tell them the types of things we are finding, the types of places in which we are looking or want to look, and we can get their advice as people who have expertise.

If we get into a situation in a performance audit where something is very specific and we feel we need expertise that we don't have to do a piece of work, then we would contract for that expertise.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

I went online to look at your performance summary. I think it was your most recent one. It spoke to the fact that you completed all of your audits on time with the exception of two performance audits and one other audit. The two performance audits that were referred to were eventually completed, certainly; one was for the administration of the Senate of Canada and one was for the administration of the House of Commons. Those were the two reports that were mentioned.

I don't ever recall this committee seeing the administration of the House of Commons, for example. I don't recall that as being a report that came before this committee. This kind of speaks to page 18 of your report on planning and priorities, where it was mentioned that 42% of performance audits are reviewed by committees and your role is to make that greater.

I therefore have two questions. Would this committee see the administration of the House of Commons report, and are we the only committee that is tasked with the responsibility of reviewing your reports, or are other standing committees also tasked with that responsibility, in terms of trying to increase your 40%?

[Michael Ferguson]

Mr. Chair, in terms of the audit of the administration of the House of Commons and the audit of the administration of the Senate, as I recollect, those reports were submitted to different organizations. For example, I believe the Board of Internal Economy was where the report on the House of Commons was submitted. The Senate report was submitted to the Senate committee—I'll get the name wrong. Those two were different audits, done under an understanding originally that was laid out, and the audits were submitted to those different bodies. That's why they were not submitted to the public accounts committee, as per our normal practice.

In terms of other standing committees, certainly whenever we release a performance audit, we will write to the chairs of other standing committees and let them know which chapters we have released that we believe might be of interest to their committees. If they choose, they can have a hearing on some of those chapters, which does happen from time to time.

[The Chair, NDP, David Christopherson]

Thank you. We're well over time, but it was an important question.

Again, colleagues, I want to remind you, as the letter was before the committee, it's still before the committee. The committee has simply not chosen to do anything with it.

Another outstanding issue is exactly the audit report. A copy of that report was tabled with us. The committee has the option of holding a hearing or not. Like this correspondence, it's sitting there in limbo, where the committee has not taken a decision to get rid of it or to hold a hearing. It simply sits there.

Both of those important items are in that limbo land. I knew you'd appreciate that tidbit of information.

We will now move to Mr. Giguère. You have the floor, sir.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair.

I want to thank the officials from the Auditor General's office, the Auditor General, himself, and his assistant for taking part in these proceedings.

For a few years now, the Parliamentary Budget Officer and the Information Commissioner have been talking about the difficulty in obtaining information from the government. The Parliamentary Budget Officer even had to take the government to court to obtain information that the government was bound by law to give him. Now I'm being told that staffing levels at the Office of the Auditor General will be cut rather significantly.

If those people spend most of their time on obtaining the government's cooperation, on compelling it to provide the information they need, does that mean this staffing reduction will undermine the quality of the work? This makes me wonder whether it has anything to do with the government's reluctance—reluctance that has been witnessed in a legal context and noted by judges—to provide you with the information you need for your reporting.

[Michael Ferguson]

Mr. Chair, I think I've spoken in general terms...or fairly specifically about the impact of the reductions in terms of our audits. I think in terms of obtaining information, each audit that we do is done according to a rigorous methodology, and we will continue to do that for each and every audit we do. The way we go about an audit isn't changing, and in fact, as I said, we've put in place this new methodology to make sure that what we are doing is quite rigorous.

Our experience is that we do get cooperation from government departments when we are trying to obtain information. There was the recent court case where the judge made reference to the fact that there were cases where individuals did not necessarily provide us the information that was requested. That certainly, of course, is a concern to us, but we do find that is very much the exception rather than the rule. Again, if you go back over a number of years, you will find that there have been those types of incidents in the past. However, in general, we do get good cooperation.

We do have an understanding in place with the government about access to very sensitive documents and that type of thing. In general, we do obtain the information we need. If we didn't obtain information that we needed, we would bring that to the attention of this committee. We would say it quite clearly in our audit report if we came across an incident where we felt we were not getting the cooperation we needed. We would put that right in an audit report.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

As you mentioned yourself, in your report, you have little wiggle room, an estimated $4 million. With that, you can carry out special projects as needed. You can give me more insight on this, but I worry about your ability to respond swiftly to a specific event that clearly involves the government.

Will you still be able to do that kind of thing, a Senate investigation, for example?

[Michael Ferguson]

Mr. Chair, again, when we do a piece of audit work, it is very much a rigorous process we go through. In order for us to react quickly...even when we do react quickly and say we're going to look at something, it will take us probably 12 to 18 months to complete that work, because we have to go through all of that sort of rigorous process: evidence-gathering, vetting the information we're getting, writing reports, clearing facts, and that type of thing. That's our process. We are never in a position where we can look at something and come back very quickly with an answer on it. It has to go through all of that process.

Again, the number of performance audits we are planning to do over the next number of years is very consistent with the number of performance audits that we have been doing over the last couple of years. So we're not anticipating a significant reduction in the level of performance audits we're doing.

[The Chair, NDP, David Christopherson]

Thank you.

Time has concluded.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Chair, if I may, I would just like to thank the Auditor General for meeting with us today and for sending me a letter in response to a request I had regarding the Canada Revenue Agency.

Thank you, Mr. Chair.

[The Chair, NDP, David Christopherson]

Very good.

My pleasure, Mr. Giguère.

Over to Mr. Williamson. You have the floor, sir.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you, Chair.

It's good to see you both back again.

I don't have too many questions, just a couple. The budget reductions are optional for your office; you could opt in. That's my understanding, that for your office and for the offices of all the officers of Parliament, it was a request from the government that you undertook. Is that correct?

[Lyn Sachs]

Yes. We received a letter from Minister Flaherty, I guess, at the time encouraging us to do as the other departments have, but it was definitely our decision to proceed.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Right.

My follow-up question is this. Do you feel the budget is adequate for you to discharge your duties as required?