Public Accounts Committee on May 11th, 2010

[Lyn Sachs]

Most of our hiring is external. We try to do outreach and get the students, and at the student level we have some luck in getting visible minorities. Because at the experience level we are looking for a secret clearance, it does require a number of years of residence, and then we would give priority to Canadian citizens. Until we reach the point of having the total impossibility of finding people, then we would have the ability to look for another level. But at this point it does hamper a little bit looking at those foreign professionals.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson.

Mr. Saxton, you have seven minutes.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair.

Ms. Fraser, I refer to the 2010-2011 report on plans and priorities, in which you state that your office hopes to report on the international peer review by the middle of this year. Do you have any comments at this time on the progress of that peer review that you'd like to share with us?

[Sheila Fraser]

Thank you.

In fact we have received a draft of the report, which we are responding to and developing responses to the recommendations and an action plan that we will be making available at the same time.

We hope to have the final report completed and delivered to the committee by mid-June. We are hoping that perhaps in the week of June 11 we will be able to present it to you and to table it then.

[Andrew Saxton, Conservative, North Vancouver, BC]

Do you wish to make any comments on the content at this time, or would you rather wait until June?

[Sheila Fraser]

Well, they should probably be telling you what their audit says, but.... As I mentioned in here, the peer review does raise issues. It does have recommendations, very much in line with our own practice reviews, that there are areas that we need to improve in our methodology, to some degree, but largely in the implementation.

There are issues like documentation, looking at control systems, things like that, which we have to work on and will be integrating into this larger project as Canada moves to international auditing standards. That's quite a significant change for us, so we have to redo all our methodologies. We are using the opportunity as well to address the issues coming out of both our practice reviews and the peer review.

[Andrew Saxton, Conservative, North Vancouver, BC]

That leads to my next question, which is regarding the international financial report and audit standards that you'll be adopting. Could you explain the strategy that you have in place to get yourself ready for that? And how it is proceeding?

[Sheila Fraser]

Some members will know that Canada, for the private sector, has moved to international financial reporting standards, and that affects many of the large crown corporations, particularly corporations that are not appropriation-dependent.

Other crown corporations have a choice to adopt IFRS, or to use the standards that government uses, the public sector standards. So almost of all of the crown corporations are changing their basis of accounting this year. IFRS is quite a significant change. We have been working very closely with the crown corporations to ensure that they have put in place a plan, that they have analyzed what the changes will be, what the impacts are, and that they get their systems ready to do this changeover.

As for our staff, we have done extensive training. We have at least two series of training that we have gone through already. There will also be more specialized training for some of our staff who are, for example, the ones who are tasked with looking after financial instruments. They require more extensive training. And we have a strategic alliance as well with one of the major accounting firms, so we can consult with them on issues. We're also working with our provincial colleagues to provide them training on all of this. So it is a very significant effort and a very significant change.

I want to tell the committee that I'm very pleased with the progress the crown corporations are making. I think they've taken this seriously, and we don't at this point foresee any major problems in the transition to IFRS.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Your office has established three strategic priorities for 2010-2011. Could you elaborate on those priorities at this time?

[Sheila Fraser]

I'd be glad to.

As we talked earlier, the first one is about the adoption of international standards and the training that we need to do for that, and we've actually now combined that with our whole issue of what we call our QMS--quality management system. We have actually combined those two projects together, to a large extent, integrating the changes to professional standards and updating and modernizing and strengthening our quality management system.

Finally, the other one is our resource allocation and project management. We have made progress, I believe, over the last couple of years. We now have a scheduling system that has been in place for about three years, where we know exactly what everyone is working on, what the availabilities of the staff are month by month, which projects are not fully staffed, and we have a team that is dedicated to managing that. Then, of course, there is the individual project management where we have given more training and more tools to staff to better assess budgets.

It is particularly challenging in this period in which we're going through a lot of changes, both to auditing standards and to accounting standards, to try to assess the time that may be required on some of this, but our performance is improving. I hope it will continue to improve over the next year.

[Andrew Saxton, Conservative, North Vancouver, BC]

You mention in your 2009-10 RPP that one way to reduce expenses is to reduce the level of staff through attrition. Do you still intend to reduce staff through attrition?

[Sheila Fraser]

We are pretty much at about the level we want to be. We of course had a surplus of personnel, particularly in the performance audit practice. The way we managed that was by contacting the internal audit departments of various government departments to ask them if they wanted to second some of our staff. I wish I had charged a little bit for that offer--we may have solved our budget problems--because I think within the first two hours we had something like 60 positions available for staff.

We have 18 or 20 people out on secondments to internal audit departments around town, and with our normal attrition, we think we will be able to manage that. They're getting good experience at the same time. It's a way to keep our people busy but also to be able to bring them back when we lose more and more senior people through retirements, in particular.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Saxton.

That concludes the first round.

There are a couple of issues I want to bring up. First of all, on Mr. Saxton's point on the peer review, that's been talked about at the steering committee. The plan now—of course it has to be approved by this committee--is that we will receive it in mid-June. But we are leaning towards having a hearing via teleconference call with the leaders in Australia sometime in September. Of course that presents some time challenges, but that's what we're thinking right now.

Ms. Fraser, in your report you talked about an inability to access information. I take it that you were originally going to table a special report last week. That was the matter, was it?

[Sheila Fraser]

That's correct.

[The Chair, Liberal, Shawn Murphy]

Can you tell me what department you're dealing with? What is the department that's giving you the problem?

[Sheila Fraser]

It really comes to the central agencies--Privy Council Office and the Treasury Board Secretariat--which are the ones that review, largely, cabinet confidence. So when other departments have an issue, they will refer the issue to Privy Council Office and the Treasury Board Secretariat.

[The Chair, Liberal, Shawn Murphy]

Is it one or the other that's providing the problem, or is it both?

[Sheila Fraser]

It is both.

[The Chair, Liberal, Shawn Murphy]

It is both.

What is the level you were dealing with where somebody was giving you these legal opinions? And you said that there were inordinate delays.

[Sheila Fraser]

It would have been largely legal counsel in the mid-manager range.

[The Chair, Liberal, Shawn Murphy]

Okay, then.

We're now going to start the second round.

Mr. McCallum, you have five minutes.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair and Ms. Fraser.

I was interested in paragraph 14, where you say that you will no longer be auditing departmental-level financial statements. You talk about delays in the readiness of the largest government departments to have their statements audited and about the lack of a formal government policy on audited departmental financial statements.

Is this a problem? Presumably you were auditing them before, and you thought they should be audited, and now you're not auditing them. Is someone else auditing them, or is there a gap? Should there be some government policy? You seem to say that there isn't right now a policy on this matter.

Finally, why are these largest government departments apparently so slow to be ready?

[Sheila Fraser]

Members might recall that in 2004 the government announced, as part of the initiatives to strengthen financial management in government, that departments were to have audited financial statements within five years. The departmental financial statements have never been audited. The first and only one to be audited was the Department of Justice, last year. A couple of other departments indicated to us that they felt that they were ready and that they wanted to go through the audit. We had discussions, though, with the Office of the Comptroller General, because this was an initiative that originally came from the Comptroller General's office, as to whether this was still a government priority. There had been no policy ever established on this. Some departments were moving ahead with it and wanted to do this, but others seemed to be quite slow in changing.

It's largely a question of systems issues. Quite frankly, the government does not seem to view this as a priority at the current time. So we asked why we would continue to work on something when obviously we would have to probably reduce our performance audits even more to do this work. We have clearly indicated to government that should they decide that this is a priority, and there is a policy, then we would be quite pleased, of course, to reconsider our position on it. Unless we get an indication from them, we don't think we should be doing it.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

I remember from my time as revenue minister the difficulty of competing with the private sector to hire tax accountants and people of that nature. It was always an issue. I'm sure you face a similar situation. It's difficult in ordinary times, but with budgets frozen it must be even more difficult.

My understanding is that your budgets are frozen but not your salaries. But of course if you raise your salaries then you have to cut other things. If you look forward three years, how are you going to deal with having to compete with the private sector for your key staff? You have a frozen budget, but do you have flexibility on salary levels as required?