Public Accounts Committee on April 29th, 2008

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

Thank you very much, Mr. Chairman.

Welcome, Madam Fraser and Madam Sachs. It's great to see you both here, and of course it's always a pleasure to be able to sample your work.

I just have a few questions, and I'll just go to your opening remarks.

You mentioned, in point number 4, that your work is guided by rigorous methodology and a quality management framework, and it is subject to internal practice reviews and external reviews. When was the last external review?

[Sheila Fraser]

Our last external review of our performance audit practice was the report released in early 2004. We do have reviews by the provincial institutes of chartered accountants on the financial audit practice almost every year, because we are accredited to have students for the various professional accounting organizations. But the last one was in 2004, and we're actually preparing.... I would like to have an external peer review done before the end of my term, which would not be practice-specific--up until now it's been financial audit or performance audit--and it would cover the whole office. So we are working to get that under way.

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

That was going to be my next question, so that's good.

Will that review be of the same magnitude and complexity that your departmental performance audits are on other departments?

[Sheila Fraser]

Essentially. What has happened in the past when we had the review done of both the financial audit practice and the performance audit practice is that the teams of auditors reviewed our quality management framework to assess if it was adequate and complete, and then they assessed if it was actually operating as intended.

So it would be the same kind of thing, yes. But this time it will be broader, because it will cover all the practice areas, and it could get into more of the issues, like human resources or finance or those kinds of issues as well.

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

Okay. On the same subject but going to a different document to talk about it, on pages 26 and 27 of your performance audit—congratulations, by the way, on your quality management framework, that it is working—I would be delinquent if I didn't ask you this question. There were three internal audits that were slated and then cancelled. What was the reasoning behind that?

[Sheila Fraser]

It was a question of resourcing. The priority goes to reports to Parliament, and when we have staff turnover or people leave, other things have to be cancelled in order to complete the audit work we have scheduled.

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

Okay.

I was going to ask you a different question, but now that you've answered in that way.... Again in your opening remarks you were talking about substantial changes that are going to be required in order to meet international standards, and you already have quite a full slate.

You've asked simply for $1.5 million. I take it you've taken it into account, but it concerns me—and a quick look at $1.5 million alone, when there's already been a couple of other issues discussed where there's a lack of resources—that you may find yourself running tight again.

[Sheila Fraser]

I should remind the committee that last year we did ask for additional funding in order to increase what we call our professional practices group, which is methodology and quality review. We have staffed up that group and are actually still in the process of increasing the staffing in that area.

The other thing we have to do is, of course, wait to see what the impact of all of this is going to be. It's not affecting us right now. We have begun discussions with some of the national firms and are considering going out for a request for proposal to have a strategic alliance with one of the national firms that would provide us with training in methodology development, because quite honestly, we're too small to do it all ourselves. That is in the works and will be under consideration this year. That will be a major initiative. That is, if you will, for the auditing standards.

The accounting standards that are coming in are going to involve our staff, but are really much more of an effort on the part of the crown corporations, who are going to have to adopt all of this. We have already begun information sessions with them to try to sensitize them to the fact that they have to be moving on this quite quickly.

I do see that we will be needing additional resources going forward. There is another initiative, too, that is going to begin this year—it's very small—and that is audited departmental financial statements.

There will be a pilot this year. If all goes well, that department will be audited and an opinion will be issued next year. But we see the number ramping up quite significantly. So what we want to do is get a sense of it this year to be able to better assess what this will entail from us, and then we will come back with I think a more reasoned and articulate request for additional funding for that.

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

Okay. Does your department do the surveying on follow-up for departments in implementing your recommendations? Is it staff in your office who do that?

[Sheila Fraser]

We actually ask the departments to indicate to us what they have done, and then our departmental audit team assesses that for reasonableness, but we don't go out and audit, for example, if those responses are correct. We use the information we have, either from our follow-up audits or from just the knowledge of the department as to how they're going about that.

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

Do you ask them directly from your department, or is it a paper survey? When you're asking them about the value of your audit for their purposes, do you do that directly? Do you have a third party do that?

[Sheila Fraser]

We do that directly, though that is a specific group in the office. The responses come to me directly.

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

Have you ever had a third party do it, just to audit whether there would be a significant difference between having an independent organization asking the questions compared to having your office do it?

[Sheila Fraser]

I would certainly be glad to look at that. We haven't done that yet, but we could certainly consider doing that.

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

I'm just wondering if their responses might be somewhat different if we—

[Sheila Fraser]

The responses are not always positive, as you can imagine. Departments can be pretty blunt in their assessment of our work at times—

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

I can't imagine.

[Sheila Fraser]

—so I don't know that it would be very different.

We, of course, use an outside firm to do the surveys of parliamentarians, because we think we need to have that objective, independent person doing that review, but for the departments and all the crown corporations, we do it internally. But that's something we could consider for sure.

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

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Sweet.

Mr. Christopherson, you have seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

Thank you very much, Auditor and Assistant Auditor. For the record, let me just say that I, as the NDP representative, continue to respect and support you, as does our caucus. You do an excellent job, and as opposition members we need the tools that you provide us. I think there's a good relationship there, and I just want to compliment you again on the work you do. I think you're serving Parliament and Canadians well.

Having said that, let's look at where we can make some improvements. I note in your opening statements that you said, “Departments reported they had fully implemented 46 percent and had substantially implemented 26 percent of the performance audit recommendations”. That means that 54 percent haven't been fully implemented, and over a quarter have not even been substantially implemented. I have to tell you, Auditor General, that's not a good number. I don't find that over half failing at what we've set out to do is anything to brag about.

I know that this committee, for the first time in the history of Parliament, has taken the initiative to put in place an accounting procedure whereby we now have staff people report back to us over a period of time on who is making gains and recommendations and who isn't and why not. In the past, as you know, those recommendations were made and they just went out there into the darkness, and they might or might not--and probably not--come back ever to be seen again.

So we both have an interest in ensuring that we have a better uptake, but I don't see this as anything to say that we're there. So in light of this failure on both our parts, where half the recommendations have not been fully implemented, what else do you think we can do? Or are you expecting that our new tracking mechanism and some changes you've made are going to give us some results in the next couple of years? We really can't go around continuing to pretend that half a failure is anything to be happy with.

[Sheila Fraser]

I agree, Mr. Chair, that the number should be much higher. I must admit I was a little disappointed, because the Treasury Board Secretariat at one point did a whole analysis or supposedly conducted a review as to why the numbers were not higher. We never saw a copy of that review, nor, I believe, did this committee.

Yes, it's in part our responsibility and in part the responsibility of the committee, but it really is up to government to be asking, if they agree with these recommendations, why departments aren't doing them. I would have expected the Treasury Board Secretariat, quite frankly, to have been more active in that.

I am hopeful, going forward with the introduction of departmental audit committees with independent external people on them, that they will also be tasked with looking at implementation of recommendations and following up with departments. That too might bring more focus to this. But to be quite honest, there are some departments that are very difficult, which do not put recommendations into practice, even though they have agreed to do so.

We have tried, at least in one of our audits, to focus on why some recommendations are put into practice and others are not. In many cases, it's simply senior management's attention. It can also be resources and changing priorities.

I guess I'm at a bit of a loss to say what more we can actually do. We are going to try to work very closely with the departmental audit committees to raise this as an issue and to ensure that they do the follow-up that we would expect.

[David Christopherson, NDP, Hamilton Centre, ON]

Good.

I know certainly this makeup of the committee is determined that the number is going to go up. You go to all that work, we spend all that taxpayers' money, we do all that work, and we hold all the hearings. I think we do some good, non-partisan work here. We have our moments, but mostly we try to be non-partisan. And then nothing happens. So I'll remain positive that we'll get there, but it's going to be a continuing challenge.

Chair, could I ask the clerk to make a note that at the appropriate time I'd like to make a motion that we request that particular Treasury Board report that the Auditor General referred to? That will come up at the end.

Next, congratulations on being the official representative—I love the name of this organization—of the International Organization of Supreme Audit Institutions. You would be their representative to the International Public Sector Accounting Standards Board of the International Federation of Accountants. Wow. It's a good thing you don't have to wear that on a re-election button, let me tell you. And then, further, you've been named as another chair, and I won't get into that acronym. But you do acknowledge that you'll be away a little bit as a result of that, which twigs my question.

Number one, I'm pleased you're there. I think that's important, not so much for you personally, although that's a part of it, but more importantly Canada needs to be there. How we interact with the world is different from the rest of the world in terms of our needs because of our geography, our economy, and the fact that we have people from virtually everywhere on the planet. And Canada tries to be seen as a country that is helpful to the world in terms of developing civil society, etc., so I'm big on our being there. We need to be out in the world, if Canada is going to be as successful as it can be.

Having said that and having served at three orders of government, I do know that from time to time senior managers join so many provincial, national, and international organizations that their main job starts to become a smaller and smaller part of the work they do; they're out there doing great, grandiose things, but they're not ambassadors, and they've sort of become that.

You have a unique position in that there is no one individual you report to, being an officer of Parliament. May I have your thoughts not on you personally but on how we gauge this, as the accountable body to the person in your position? And I would extend this even to deputies and senior managers, although they have ministers responsible. But what kinds of criteria do you think there should be in terms of how a senior person like yourself divides up their time between their main responsibilities and some of these more external ones, recognizing that as politicians we do that all the time, too, as we're delegates to various bodies? What are your thoughts on that, please?

[Sheila Fraser]

I can only speak for myself and the office. And certainly any activity that we undertake internationally, or even within Canada, has to clearly align with our international strategy. We have developed an international strategy—

[David Christopherson, NDP, Hamilton Centre, ON]

I'm sorry, when you say “our international strategy”, do you mean of your department or the country?