Public Accounts Committee on April 23rd, 2009

[John Wiersema]

—the one corporation that had a repeat significant deficiency was Atomic Energy of Canada Limited. They had a deficiency in both the previous and most recent special examinations. It is related to some of the strategic challenges the corporation is facing that have yet to be resolved.

[The Chair, Liberal, Shawn Murphy]

Back to Ms. Fraser. I want to get your thoughts and comments on an issue that has been before this committee for many years and on which we have expressed concern. I'm dealing with compensation and benefits. Specifically, I'm dealing with performance pay. As you know, the committee has had a concern in the past about the transparency of it. I have no problem giving a bonus to an employee after an exemplary performance, but what has happened is that in other departments, it has crept into the system so that it is almost universal. In some departments it is 100%. In most departments it is 90%.

In my view, it's just become an additional layer of salary that's not up there as transparent as I, as a member of Parliament, would like to see it. Again, parliamentarians really don't know the criteria used to determined this. Could you take us through how you determine...? On page 43 of your performance report, dated for the period ending March 31, 2008, you talk about the range. Can you give us the percentages and explain how you determine them? Is it just given to everyone, like some other departments of government do? I should point out, as you are fully aware, that the Prime Minister's panel on public service has certainly addressed this issue too.

[Sheila Fraser]

Thank you, Chair.

Our performance pay and performance pay system is different from that in government. The performance pay we give our employees at different categories is in fact less than is given at a comparable level in the federal public service.

Our system provides for every employee to go through a performance evaluation with their supervisor each year. The supervisor will determine a rating. As I mentioned, we have two components to performance pay: one is product management and one is people management. The categories are 80%, 100%, 120%, and 120%-plus. We have set targets as well for the majority of our staff, 60% or 70%—I'm sorry I don't have the number with me, but I can certainly provide it to you—to be at 100%; that is to say, they're meeting expectations. A very few will be at 80%, who are below expectations, and a very few will be in the 120% or 120%-plus category.

Once those initial assessments are done by the supervisors, the executive committee meets and discusses all of the ratings for all of our management category, which represents about 200 people. We make sure there is consistency and fairness in the ratings that are given to ensure that someone is not being overly generous or too punitive, and then we determine the categories and the amounts. You can see the amounts on page 43 of our performance report, and those are paid out to staff.

The professionals are unionized, and we have negotiated with the union for a small percentage, up to 15%, to be able to receive a performance pay bonus of up to $3,000.

[The Chair, Liberal, Shawn Murphy]

On page 43 you talk about 608 staff. What percentage of those would be getting performance bonuses?

[Sheila Fraser]

A little over a third.

[The Chair, Liberal, Shawn Murphy]

Okay. If you don't mind, Madam Auditor, could I get you to give us a memo on that, exactly how that is? It is slightly different from what is experienced in other departments, so if you could—

[Sheila Fraser]

Sure.

[The Chair, Liberal, Shawn Murphy]

—provide us with a memo of exactly how those performance bonuses are determined and the percentages in each category.... I think that's important, because we do run into this.

As you know, over the course of a number of years we've seen a number of problems, and either I've asked the question or Mr. Williams has asked the question of the person that we think, at least, caused the problem: Did you get your performance bonus? The answer has always been, “Of course, I did. Yes, I did.”

The next round is for five minutes each.

Ms. Crombie, five minutes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thank you.

Welcome to the Auditor General and members of your office.

I want to congratulate you all on a very favourable performance report, 152 audits—it's considerable—75% to 90% of them on time and about half of them on budget. I know there's an opportunity for improvement there, but my warmest congratulations in particular are for being voted the top 100 employer and the top 10 family friendly employer. Obviously there's a high degree of satisfaction working for the Office of the Auditor General, and also for being one of the capital region's top 20 employers.

I noted that you had an 86% retention rate, which was below your target, but I wondered why you thought that was not meeting expectations. That sounds like a pretty significant number, 86%. Why was that below your standard?

[Sheila Fraser]

We have traditionally had a turnover rate of about 10%, so that's the reason we've set it at 90%, and I think 10% is kind of normal. We need to have that kind of attrition. I think it's to be expected, either with retirements or simply to kind of regenerate our population.

We were a little concerned at certain levels. We were losing people at certain levels, so there needs to be, probably.... The 86% in and of itself is probably not problematic; it depends where the attrition is occurring.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

I thought it was pretty good, actually.

[Sheila Fraser]

I think we're doing well. Certainly, we're doing well compared with the major accounting firms. It's where it's occurring that is a bit of an issue because we have to ensure that we try to keep those young professionals with us to do all of this audit work.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

I could pursue this line of questioning, but there are some other issues I'd like to address.

First, in the last round of questioning I asked you what happens when departments don't follow your recommendations. I want to go back to that and talk about implementation of performance audit recommendations. It was noted that departments and agencies are responsible for taking their own corrective action. We've established that four years is the reasonable timeframe in which they should implement your recommendations, and that of the 196 recommendations you made, 55% were fully implemented and 29% were substantially implemented.

Our chairman just noted that there had been a significant issue at AECL, Atomic Energy of Canada Limited. You had previously identified that there had been strategic issues and deficiencies at AECL--in particular, strategic challenges that needed to be resolved relating to completion of licensing, dedication of isotope facilities, and securing of long-term funding for replacement of their aging facilities.

Can you talk about what other deficiencies existed at AECL at the time? And if you would, could you talk about the bigger issue, about how you determine which recommendations are implemented and to what degree? How can the Office of the Auditor General improve the rate of implementing your recommendations?

[Sheila Fraser]

Let me start with the last questions first.

The percentage of recommendations implemented is information that is reported to us from the departments. They do their assessment and we review it to see whether it's reasonable, but we don't actually go to them and audit to see whether this is all exact. It's only when we do the follow-up audits that we can assess whether the progress has occurred or not.

One thing I think will be very helpful, and something the committee may wish to consider at some future time, is the departmental audit committees that have been put in place fairly recently, with some very impressive people from outside of government. One of their main responsibilities is to follow up on audit recommendations, be it our recommendations or internal audit recommendations. It might be interesting, perhaps, for the committee to have a discussion with some of these audit committee members to see what they are doing and discover how they see their role and whether they see progress as well.

Concerning AECL, for many years our special examination reports, going back to probably the nineties, have been raising the question of the strategic direction of AECL and its funding. In the last report, we mentioned strategic challenges around the replacement of the reactor that is there. There is a project that had been in place for many years and that was not working, which has subsequently been cancelled by government.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

I'm being cut off, but could you also address the question of how we can better encourage departments to follow your recommendations?

[Sheila Fraser]

I'd say certainly by holding hearings, by asking for action plans, by following up on them, and perhaps as well through audit committees. I think the audit committees will help.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Crombie.

Thank you, Ms. Fraser.

Mr. Saxton, you have five minutes.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair.

Thank you, Madam Auditor General and your colleagues, for coming back once again to our committee.

I note from your earlier comments that you're not asking for any additional funding this year. I want to commend you on running a tight ship during these challenging economic times.

I notice on your website that this week an internal audit was made public on the staffing functions within your office. Can you give us some background on what was found, on who conducted these audits, and on what will be done in the future?

[Sheila Fraser]

Thank you.

Chair, I'll ask Mr. Greenblatt to respond to that question.

[Ira Greenblatt]

The internal audit was conducted by our own audit shop, obviously, and it was completed last year. The major recommendations were as follows.

First of all, we need to make sure that our staffing policies are consistent with the new Public Service Employment Act. We agreed with that recommendation, and we have done that.

The second recommendation is that we need to make sure we involve our management team in the staffing process, that it's not just done by HR. Whether it's staffing for audit or staffing for corporate services, members of the audit team or the corporate services team who are doing the hiring will be involved in the hiring process.

The recommendation was that we should ensure that all those involved are fully aware of their roles and responsibilities, because there is a new delegation instrument in government for delegation of authority for staffing. The HR group has started the process of making sure that everybody is trained on that. We're now at about 75% of all the potential managers who are trained on that; we'll be at 100% by the fall.

There was also a recommendation to ensure there's a monitoring process established to provide Madam Fraser, the Auditor General, with adequate assurance that staffing actions are in keeping with the legislative requirements. We're going to have that in place this year.

There was another one that tied back to ensuring that everybody is aware of their responsibilities.

Those were the recommendations, and that's what we--

[Andrew Saxton, Conservative, North Vancouver, BC]

How regularly will you be conducting these internal audits?

[Ira Greenblatt]

We have a regular internal audit plan, which is in the material that was provided, I believe.

John, do you remember?

[John Wiersema]

If I can, Mr. Chairman, our internal audits look both at our audits, how we audit our own auditors.... We do about 8 to 12 audits of individual audits each year, and then each year we select an additional corporate or administrative function for audit.

Mr. Greenblatt just talked about the audit that was done on HR. Presently there's an audit under way of our implementation of a new financial system. We implemented a new financial system in the office last year. Our implementation and the controls over the new financial system are presently being audited. That audit is being wrapped up as we speak, and it will be on our website this spring.

We do one audit of a corporate function each year, and then 8 to 12 audits of our audits each year.

[Andrew Saxton, Conservative, North Vancouver, BC]

Can you tell me a bit about recruitment plans? Are you planning on hiring more staff, and what qualifications do you look for?

[Sheila Fraser]

Because we are reducing the number of products, we currently have a surplus of staff. We are working on a number of measures. If you're interested, I can certainly tell you what we're trying to do to deal with that.

We are committed to maintaining our entry-level recruitment. We bring in probably--