Public Accounts Committee on Oct. 31st, 2006

[Sheila Fraser]

That is an excellent question.

I think that leadership needs to be political. That, however, is my own opinion. Senior public servants must also provide leadership. Without firm political will, it will be difficult for them to effectively implement initiatives that are spread over several years and that require resources, particularly those pertaining to management.

When the time comes to set the government's priorities, I am not convinced that managerial issues will be at the top of this list, particularly when they are compared to certain public services and other needs that the general public may feel are more pressing.

Firm and strong leadership is definitely needed to follow through effectively on projects that may extend over several years.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

When you say that leadership must come from the top, do you mean the political top?

[Sheila Fraser]

Yes.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Good.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Laforest.

Mr. Williams, eight minutes.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you, Mr. Chairman.

In your opening remarks you made significant reference to the Gomery report. I always thought the Gomery report tinkered around the edges. It talked about changes to the Auditor General and changes to various things, but it never dealt with the heart of democracy being Parliament and strengthening Parliament. I thought that was a serious weakness of Mr. Gomery's report.

Coming out of that, we had the deputy ministers being accountable before Parliament, and this committee recommended a series of correspondence that would become public in the event a dispute could not be resolved. If there was a serious dispute between the DM and his minister, the minister--if he wanted to carry forward with a policy--would write to the DM, saying go ahead anyway. If the DM still objected, then that correspondence would end up with you and the Comptroller General. If you felt it was appropriate, you would report to Parliament and we'd take it from there.

But then, of course, the Federal Accountability Act deems it to be a cabinet confidence that they write to you and therefore that part of it disappears. The deputy minister, in my opinion, is hung out to dry, having put in writing to his minister a serious disagreement on policy or a policy proposal by the minister. If the minister overrides him, we will never hear about it.

Do you have any comments on that?

[Sheila Fraser]

I wouldn't presume that, Mr. Williams.

What is being proposed is if there is a disagreement between the deputy minister and a minister, it would go to Treasury Board and there would be a decision by Treasury Board. We receive all copies of decisions, so we are informed of all decisions.

We are very careful in how we deal with cabinet confidence and how we cite cabinet confidence, but I can assure you we have done several audits where we have presented issues without breaching cabinet confidence.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Okay. On that very point, I'm looking at...this is the Treasury Board Secretariat, tab 4 of the book, page 45. The Comptroller General of Canada, part of the Treasury Board of Canada, reports directly to the President of the Treasury Board. In your last report on the financing of the gun registry, a convoluted legal opinion trumped the opinion of the Comptroller General, who said, “I disagree”, and all of a sudden we have lawyers telling professional accountants how to handle accounting matters.

Now that we have all these professional accountants as chief financial officers, the question begs to be asked, Mr. Chairman: what's the point if lawyers can trump accountants when it comes to accounting matters?

Here's a situation where the Comptroller General disagreed with a policy of the department and yet was overruled, and we heard nothing about it. Would that type of situation come to light in the future, and if so, on what basis?

[Sheila Fraser]

This will have to perhaps be corroborated with them, but I believe the Comptroller General reports to the Secretary of the Treasury Board.

[John Williams, Conservative, Edmonton—St. Albert, AB]

The line here on page 45, tab 4, shows a direct line to the President of the Treasury Board.

[Sheila Fraser]

If you look here on organizational information, there is a reporting line, yes, but he also reports to the Secretary of the Treasury Board.

[John Williams, Conservative, Edmonton—St. Albert, AB]

My point being, here we have the Comptroller General of Canada, a professional accountant like yourself, in charge of the books of the Government of Canada, overruled by...I'll say by another deputy minister who felt they had the capacity to pull rank on him and said legal opinions trump professional accounting opinions when it comes to accounting. It didn't come to light except, thankfully, you brought it to light. What better way...? The Treasury Board has to be faulted here, in my opinion, for not blowing the whistle on this.

[Sheila Fraser]

Well, I would agree with you. I believe there were actually two decisions in that whole process. One was whether to go for supplementary estimates or not. The second decision was then how to record those in the books of account and the financial statements at the end of the year. I guess there can be some disagreement about the role the Comptroller General would play in the decision to go for supplementary estimates. But certainly, how amounts are recorded in the financial statements and charged to appropriations...the Comptroller General should have the final say on that.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you.

You mentioned that departments are, hopefully, going to be producing audited financial statements.

[Sheila Fraser]

There has been an announcement by government to require departments to produce auditable financial statements by 2009.

[John Williams, Conservative, Edmonton—St. Albert, AB]

You say 2009. When I arrived here, Mr. Chair, this was already on the table. We were looking at this new modern technology, and we were going to get cascading financial statements, so that programs would have their own financial statements; a department would consolidate all its programs into a departmental financial statement, which would then be consolidated into a financial statement for the Government of Canada, and, like the private sector, all done in the first fifteen days of the month.

I think this policy was announced in 1989, and now, within twenty years, they just might get halfway there, Mr. Chair. Why doesn't the Treasury Board move things along a lot faster if they're the manager of government?

[Sheila Fraser]

That's something, Chair, you'll have to ask the Treasury Board. The Comptroller General has a plan. We have strongly urged them to do what we call readiness assessments of departments, to see in fact how ready they are to produce auditable financial statements. Like you, I'm a little skeptical on the 2009 date.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Skepticism around here is good, Madam Auditor General. I find with the Treasury Board, they call themselves the manager of government, of the departments, but they don't follow up. They issue all of these regulations, rules, policies and so on, but they don't police them. That's why I believe internal audits should be at the Treasury Board, not hidden away in some bottom dungeon of a department that really, as we found out in the sponsorship scandal, was blown away and ignored even if they wanted to blow the whistle. I think the Treasury Board needs a serious wake-up call so they can really hold government and departments to account, because they're the senior manager. Don't you think that would be an appropriate way for them to act?

[Sheila Fraser]

Obviously, Mr. Williams has a very strong opinion on this, and I know we've had disagreements over the years on the role of internal audit. I don't think you should quite so easily ignore the role of deputy ministers in departments, who are themselves managing billions of dollars and thousands of people.

[John Williams, Conservative, Edmonton—St. Albert, AB]

The CFOs with no accounting experience.

[Sheila Fraser]

It's maybe too easy to blame everything on the Treasury Board Secretariat.

[The Chair, Liberal, Shawn Murphy]

Before we go to Mr. Christopherson, I have a point of clarification,

Madam Auditor General, on the organizational chart that's showing the Comptroller General of Canada, on page 45 of tab 4 of the binder--this is on the Treasury Board of Canada Secretariat's report on plans and priorities, showing a direct line of reporting from the Comptroller General to the Treasury Board president. I believe that's an error. Is that your understanding?

[Sheila Fraser]

I believe the line between the Comptroller General and the president is a dotted line and that there is a straight line to the secretary, but you might want to clarify that.

[The Chair, Liberal, Shawn Murphy]

That's my understanding. We'll clarify that.

[A voice]

It is dotted.