Public Accounts Committee on Feb. 28th, 2007

[Sheila Fraser]

Mr. Chair, to start, I would remind the committee that those funds were always approved by Parliament every year. The spending was always approved, and with all due respect, I think that raises the broader question about approval and review of estimates by parliamentary committees, the quality of the information that is given to them, the level of detail so that they understand what it is they are actually approving. The way the information was often presented, people couldn't know what the spending was actually for.

So I think there's a question around information to parliamentarians and their ability to review the estimates.

[Wayne Wouters]

I think it's probably a collective responsibility. I would argue that through the cabinet system we can provide more rigour in estimating the overall cost at the front end of a project; I think we can do a better job at that. I think the Treasury Board Secretariat can provide a better challenge function in estimating the costs. I won't go to the gun registry, because I think a lot of things happened there.

Government comes up with estimates, and they're always brought before Parliament to vote on. I think parliamentarians have a role, through the various committees, to challenge us on the various estimates that come before them. If we aren't providing the details, we should be doing it.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

I wasn't expecting a second question, but as a parliamentarian I get professional public servants who are in charge of delivering a program, and they provide their estimates to me. I'm expecting them to be, let's say, 85% or 90% on target. If they say this whole program is going to cost $80 million and it turns out to be $1 billion, I'm scratching my head about that kind of estimate.

But that leads to the other issue too, and I think the auditor raised it. On these new programs, the system that existed from a management standpoint makes it very difficult, I think, to do the planning right to the end and to do things, because every year you don't know what's coming down the tube the year after, and so on. Personally, I wouldn't want to be in that kind of management structure, trying to manage something to its conclusion, with those parameters. I agree with the auditor's concern on that point. I think we should do more to try to get the whole thing sorted out right to the last point and get all the departments working together to get this thing solved.

Those are all my questions.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Fitzpatrick.

I have a few questions myself. I'll just go back to you, Mr. Wouters.

The audit talks about a number of responses from the central agencies saying that the new expenditure management system will cover this. I believe last Monday a question was put to you. I'm trying to get some clarification as to when this is going to be rolled out. I believe Minister Flaherty in budget 2006 said the fall; you're indicating this spring. If it's this spring, it would be, I would surmise, in fairly advanced stages right now.

Can you be more precise as to when we could expect to see it?

[Wayne Wouters]

I guess there are a couple of points. One is that there was more detail provided in the economic and fiscal update last fall. Then in the response to the AG's report the minister indicated again, at the time, how he planned to proceed.

The reason I can't be precise—I'd like to be more precise—is that at the end of the day this will be a cabinet decision on the new system. The minister will be bringing a set of proposals forward, and I don't want to prejudge what the cabinet will decide.

We would like this program up and running in the new fiscal year. We think we can begin to put in place a number of...and we already have. It's not that we're going to start from scratch. The work the departments are doing with their PAAs, the work that we're doing through EMIS, the systems—there are a lot of these tools already being put in place. We are making the point that there are some areas we need to invest in and some areas in which we need to improve the overall capacity.

But at the end of the day that will be a decision of the government and a decision that cabinet will need to make. I'm sorry I can't be more precise, but I don't want to prejudge the government.

[The Chair, Liberal, Shawn Murphy]

But again your responses were quite specific. You talk about the new expenditure management system in response to the auditor's recommendations and you're saying.... Is it ready to roll out? Let me ask you--you'd know that--is it ready to roll out?

[Wayne Wouters]

We're ready to roll out a detailed plan that is subject to overall approval by the government.

[The Chair, Liberal, Shawn Murphy]

So what you're saying to me, if I'm understanding you correctly, is that if we're back here this time next year and it's not rolled out, the entire fault is that of the cabinet?

[Wayne Wouters]

I would never want to say that. They may feel our advice is not solid advice. We are providing advice as to how we think the system should be put in place. They may find in their deliberations that it doesn't work. I hope that's not the case. I think we've worked hard in putting a set of proposals together for the cabinet to consider, but at the end of the day that will be subject to their overall consideration and approval.

[The Chair, Liberal, Shawn Murphy]

The second area I want to talk about, Mr. Wouters, is this. We talked about here the large IT project, EMIS it's called. That project, and I assume you're going to be back before the committee, is subject to a chapter in the last report for the Auditor General. There's even some question as to how well it works.

Is the new expenditure management system dependent upon the fact that EMIS works or EMIS doesn't work? Does one fall with the other?

[Wayne Wouters]

Is it dependent? I think it would make our lives a lot easier if the system was fully operational. Clearly we are going to need a new system for purposes of putting the estimates together. The legacy systems, as David indicated on Monday, are very much out of date. They simply are getting to a point where they won't function well in the years ahead.

So we need at a very minimum to have a new system to put the estimates, both main and supplementary estimates, together. But we want this system to go farther, which is another phase, which is to be able to collect not only the financial information but also all the financial, non-financial, and the performance results. That for us is a real benefit for expenditure management.

We can gather that information now. It just takes a lot longer. What's required is actually the information to be submitted by departments and then we have to put it on to our systems and the like. It's just much more time-consuming and much more difficult to gather the information we think is necessary. It would be very helpful for us if we had that in the system. It's not absolutely necessary; it's just a much better tool for us to do the job.

[The Chair, Liberal, Shawn Murphy]

And of course you're coming back on that issue.

Another area I want to explore, Mr. Wouters, is capacity, and this is an issue that has been before this committee previously. You can have all the systems in the world and they can work, but if you don't have the people in place who have the capacity, nothing is going to work. You need somebody to drive the wagon here. That has been a concern, although I understand things are improving.

But what is the role of Treasury Board? Circumstances have come before this committee where the chief financial officers in agencies or departments don't appear to us to be financially literate. Do you people have an oversight role?

Let's say some agency out there hired somebody with a political background, or a journalist or something, and put him in the role of chief financial officer. Do you just say no, no way, that position has to meet certain minimum qualifications? Of course, one of the minimum qualifications would be that the person is financially literate, knows exactly how the system operates, and knows what is to be done and what is not to be done. And it's a very important part of the overall functioning of the system.

To give you an example, we're going to do a chapter here on the correctional ombudsman. That agency, albeit a small agency, would have a person responsible for financial administration. The first question that some member is going to ask is, who is it, and is the person financially literate, and does he understand the true nature of government finances and expenditure management?

I'm not going to get into that chapter right now, but the point I'm making is, in the capacity of the departments and agencies, what is the role of Treasury Board? The second question is, are you satisfied as the secretary that all departments and agencies have the proper people with the capacity to perform the functions that are required of them?

[Wayne Wouters]

Am I satisfied? I'd say we're moving in the right direction. This is an area we have not invested in to the extent we've needed to over the last number of years. If all of you go back in time to the nineties, as part of the deficit reduction exercise the area where we cut the most in departments was essentially in our corporate overhead—corporate finance, administration, HR. It's only recently that we've recognized the need to reinvest in this area. So, for example, in our audit function we are investing up to $50 million, I believe, to reinvigorate the audit function.

The Comptroller General, as you know, is moving to the senior financial officer model, ensuring that these senior financial officers are accredited and have the appropriate qualifications. At the same time, we're working closely with the school to ensure that we have functional specialists at all levels and that the appropriate training is there. The school was allocated additional resources a year and a half ago to do this. I think we are moving in the right direction. I don't think it's at the level yet that we need, but we are undertaking the appropriate investments.

There is also an issue of finding senior financial officers who are accredited within our system, and so recruitment both inside and outside the public service is going to be really key. We have put in place, under the Comptroller General, a sector that focuses full time on how we enhance recruitment in this community, both for the audit function and the financial officer function, at all levels. They are working with a number of different institutions, both inside and outside government, to find more accredited financial officers and auditors.

We're not where we need to be, but my view is that we have a good plan and are on track.

[The Chair, Liberal, Shawn Murphy]

Thank you.

That concludes the first round. I'm again at the committee's disposal.

Mr. Williams, I understand you have a question or two.

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

Yes, I have just one question, Mr. Wouters, and this is a bit off the topic of expenditure management systems.

Where are we on the accrual budgeting system? Has any decision been made, and when is this going to take place?

[Wayne Wouters]

I'll let my colleague take that question.

[David Moloney]

The government's response is being prepared. It requires cabinet approval, as you'll know, to come back to Parliament and for that proposal. We are well advanced on the proposal, but it does have to go to cabinet.

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

So an announcement is—

[The Chair, Liberal, Shawn Murphy]

He's responded to the report from the Standing Committee on Government Operations on accrual accounting.

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

Yes, but it seems to me it was in 1989 that we made the conceptual decision to move in this direction, and we are in 2007. It's been a while.

I'm glad to hear that some kind of statement might be imminent. That's great. Hopefully it's positive.

[Wayne Wouters]

I would just point out to members that I think there are a lot of advantages in moving to an accrual system.

We just talked about capacity within this community. We talked about the need to improve our overall financial management policies to ensure that we can have departmentally audited statements, to ensure that we have the right financial officers in place to move to a much more rigorous system of accounts to implement accrual accounting.

I would just say to honourable members that this is a huge.... Maybe you would argue that it should have been done 10 years ago; it wasn't. These areas need to be looked at now, but we have to look at all of this, and at what we want to do, in the context of the capacity we have. How do we move forward and achieve all of that better overall financial capacity and get the job done? That is a real issue for us.

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

In summation, Mr. Chairman, the rules of Canada Revenue Agency and Revenue Canada have been that business operates on accrual accounting. For the better part of a hundred years, I would imagine, they have insisted that business do it on that basis. For the government to think they might apply the same simple rigour to themselves at this late date seems astonishing.

I'm just so glad we're there on the accounting, and if we are not there on the budgeting, then I hope this committee has something to say on it, because you can't have one without the other.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Williams.

That, I take it, concludes the questions.

Do you, Ms. Fraser, have any closing comments?

[Sheila Fraser]

I'd just like to thank the committee for their interest in the subject. It's a very important subject and there are a number of recommendations that hopefully will improve the system going forward. We certainly look forward to seeing government's response and the action plan, and I would hope the committee too would look at that when it's available.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Fraser.

Mr. Wouters, have you any closing comments?