Thank you, Mr. Chair. We thank you for this opportunity to meet with the committee to discuss chapter 2 in our December 2008 report entitled “Governance of Small Federal Entities”.
As you mentioned, I'm accompanied today by Richard Flageole, assistant auditor general, and Tom Wileman, principal, who were responsible for this audit.
Small entities are typically organizations with advisory, regulatory, or quasi-judicial functions. They have fewer than 500 employees, or annual expenditures below $300 million. Despite their relatively small size, these organizations can have a significant impact on the health, safety, and quality of life of Canadians.
We looked at the arrangements by which the Treasury Board of Canada Secretariat oversees small entities. We also asked the heads of 51 small entities for their views, focusing on six in particular. We looked at oversight and coordination, reporting requirements, and shared services.
Mr. Chair, the two long-standing problems that need to be addressed are the reporting burden and shared services. Your committee could play an important role in ensuring remedial action.
Small entities face a reporting burden. With limited capacity, they have to meet the same central agency and statutory reporting requirements as do large departments. Reporting requirements in areas such as financial and human resources management play their part in ensuring prudent and effective management and accountability. However, the number of required reports is high--in fact, over a hundred per year--and filling them out is a complex and labour-intensive activity. Over the last five years, the Treasury Board Secretariat has acknowledged the need to reduce the reporting burden. When we completed our audit in May of last year, the secretariat's response to our recommendation was that they had developed action plans. The committee may want to ask about the progress that has been made since then.
Another key issue is shared services. Small entities do not have the systems available to large departments and may have only a few people responsible for key administrative functions. They often lack the capacity for internal services such as finance, human resources management and information technology. Sharing services is a way to address these problems.
The Treasury Board of Canada Secretariat has undertaken a number of studies since 2001, and has recognized the need for shared services in small entities. Yet little has been done. A major initiative on shared services proposed by the Secretariat over the next three to five years has not included small entities.
We found that several small entities are sharing services, but face serious risks in the absence of a framework from central agencies. These risks include unclear roles and responsibilities and a lack of agreed-upon standards.
Last May, the Secretariat was developing a service strategy intended to address the issues facing small entities. The Committee may wish to ask about the strategy and what has been done to date.
Our audit also found that mechanisms for oversight and coordination need attention. In particular, the Privy Council Office and the Treasury Board of Canada Secretariat have not issued practical guidance to ensure effective coordination between the activities of a department and the small entities in its portfolio. Small entities told us that communication and interaction with the portfolio department has been inadequate.
In contrast, the recent creation of a central internal audit function is a positive step, potentially allowing for better monitoring by the secretariat.
That concludes our opening statement, Mr. Chair. We would be pleased to answer any questions the committee may have.
Thank you.