Public Accounts Committee on Nov. 2nd, 2006

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

Thank you for being here.

In response to Boris's question, you say your job is internal control. I'm trying to reconcile the two. I'm of the opinion that John Williams has: I'd love to see an internal audit department in every department, for the reason that if a deputy minister has no financial background and he or she is powerful enough to force a CFO to change a decision, where are your internal controls, and how do you ensure that those internal controls have not been violated? What checks and balances do you have? What protocols do you have?

[Charles-Antoine St-Jean]

There are different ways. For the roles of the various players, you have internal controls. Internal control is the job of the deputy heads, but also of all the senior management executives in a department, to make sure you have good internal controls. The CFO will make sure a department has good internal controls in financial reporting and good internal controls on the management of the financial resources.

The chief audit executive—

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

Just so that I'm not going on the wrong track, we as the public accounts committee need to be sure that we can rely on you in saying things are going fine. How do I know things are going fine when you're not even auditing them? You do not even have the routine.... I mean, you have to have cyclical areas that you go to audit. I just want to see the balance.

[Charles-Antoine St-Jean]

My apologies; I should have said that my role with the internal audit, speaking to Mr. Williams' point, is.... We have decentralized internal audit, so there's an internal audit in every department. All the larger departments have the capacity for internal audit. I'm responsible just for the small departments and agencies, because of critical mass. Otherwise, it's in every department.

I participate in the selection of the chief audit executive; I provide the functional leadership to that community in terms of recruiting, classification, deployment, and in terms of tools, and I have ongoing discussions with all the chief audit executives in the departments. If there are some problems, they tell me, and I have my discussions with them. There's a loop.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Ratansi. Thank you very much, Monsieur St-Jean.

Mr. Poilievre, you'll have four minutes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

On the point Mr. Christopherson raised—I think he was talking about disagreements between a minister and the public service and the comptroller—as I understand it, the minister actually has the final say, according to the Federal Accountability Act, and if there is a disagreement between the minister and his deputy, then that disagreement is put in writing and is provided to Treasury Board, which will make the final decision. That decision and the record of disagreement then also go to Privy Council and to the Auditor General. Those are the new processes that are put in place under the Federal Accountability Act in those circumstances.

I still don't understand, though, your reporting structure. Do you report to the secretary or to the president?

[Charles-Antoine St-Jean]

I have one of those relationships that are dual. As a deputy head I report to the president, and on the machinery I also report to the secretary. By the Financial Administration Act I'm designated as a deputy head, so I can and do report to the president, but on the machinery, I also report to the secretary. It's a matrix kind of reporting.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay. I guess I'm going to go back to the same question: if there's a disagreement between you and the secretary, would the minister resolve the disagreement?

[Charles-Antoine St-Jean]

The secretary reports to the president. I also report to the president—

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Right. So he's the final authority, then.

[Charles-Antoine St-Jean]

Yes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay. Good.

As I see it, the Federal Accountability Act may succeed—we'll find out—in resolving the 70-year-long debate that has gone on in public administration in this country between centralized control of financial accounting and decentralized control that allows the departments to run their own affairs, in that it makes the deputy minister the chief accounting officer, but it also empowers the Comptroller General, underneath the Treasury Board president, at the same time. This, I think, is the first time we've seen both of those things: departmental responsibility increased, along with central control being increased.

Do you think we may finally have resolved the debate that goes right back to the 1930s, when Prime Minister Bennett had to take over the Treasury Board and the finance department and all of those functions himself in order to centralize, and ever since there's been a pendulum swinging back and forth? Do you think we may have finally solved that seven-decade-long debate?

[Charles-Antoine St-Jean]

Thank you very much for the question.

As the Auditor General herself said, there is no magic answer. It really depends on the environment, the circumstances, and the risk involved. However, I think we're getting close.

[The Chair, Liberal, Shawn Murphy]

Mr. Sweet.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

I just want to go back to what Mr. Williams started with. Along with association standards, you have a number of statutes that buttress up against your responsibilities, including the Financial Administration Act, the Federal Accountability Act now, as well as new accounting procedures.

There has to be a desire on your part, particularly from the both presentations that I heard, for some clarity of your role. Is there not a responsibility that you have in this case that we go back to, in which a legal opinion trumped a financial opinion in a financial case? Is there not some responsibility that you have to make sure that we, as Parliament and as legislators, are able to provide you with the tools so that this will not happen again?

[Charles-Antoine St-Jean]

Like I said, I really read the report with great interest, and I thank you for the recommendation. It provided me with a pretty strong sense of direction of the intent of the legislators, in terms of where you want to go. If I may, I appreciate that this might not be satisfactory to the committee, but we are getting close in terms of reporting to the president.

With all due respect, I would like to have that discussion with the president in terms of what the appropriate balances would be, because the president would also probably like to have a discussion with the Prime Minister's Office. I have to defer to the authority of these individuals.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

But I do have it right. You would function better, have better performance, if you had some more clarity around those kinds of things.

[Charles-Antoine St-Jean]

There's no doubt about that, sir.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Are the audit committees that you mentioned from each department made up of the departmental staff in those departments?

[Charles-Antoine St-Jean]

The policy that was enacted as of April 1 this year says that by 2009 all the larger departments—which means about 40 to 45 in total, if I'm not wrong—will have a majority of their members who will be citizens. They will no longer be members of the management team of the department. They will be citizens selected for their competencies in financial management, contracting, logistics, or whatever the business of the department is, to really provide us with a level of independence that is needed for the deputy head.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

So presently they're not independent audit teams, but we're moving in that direction.

[Charles-Antoine St-Jean]

Some of them have started. We have some independent members.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

What is the formula you're going to use? Have you decided, or is it simply going to be by percentage of the total federal budget? What's the formula you're going to use in each department for the materiality of that commensurate department?

[Charles-Antoine St-Jean]

Again, there is no magic formula for that.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

There's not a lot of magic here.