Public Accounts Committee on Sept. 21st, 2010

[David Christopherson, NDP, Hamilton Centre, ON]

That was going to be one of my subsequent questions. What is the rationale for that?

[Sheila Fraser]

We just think it would make the report very heavy if we started to list where our evidence came from. We do indicate in the report the criteria, what the sources of the criteria were, and where they came from. If we were to start sourcing all of our evidence--I mean, we have binders full of evidence. We thought doing that would make the report actually very difficult to understand.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you.

Mr. McPhee, what are your thoughts on your recommendation and the response you've heard from our Auditor General on the issue of footnotes?

[Ian McPhee]

I think it's a matter for the Auditor General at the end of the day.

Certainly in Australia we judiciously use footnotes to refer to key sources of evidence, particularly government documents or matters of that kind, and sometimes we use footnotes just to provide a little bit more background information, rather than cluttering up the main report itself. We use a footnote just to provide a little bit more context sometimes, a little bit more background information.

Sheila Fraser is right to say that undue use of that sort of approach does probably cloud the report. So you do have to be careful, and only in significant cases would we use that to help the reader, to provide more context to the reader.

[David Christopherson, NDP, Hamilton Centre, ON]

Thanks. That's very helpful.

I don't want to belabour this one point on footnotes, but what is the practice in many of the other Commonwealth countries? It sounds to me like it's a judgment call, and if it's a judgment call, then I'm curious as to why you would reference it. If it's entirely up to the discretion of our AG, then why make the point? Obviously there's a reason why you've made the point, so perhaps you could help me understand maybe what they're doing in other Commonwealth countries with regard to the use of footnotes in reports.

[Ian McPhee]

I can respond to part of that question. I'll ask Deb Jackson to assist as well.

I think it is a matter of discretion. When we did the review we provided not only the recommendations that addressed what we considered to be the significant matters that the OAG needed to take into account, but we also made suggestions, which are discretionary, in areas where we believe the OAG should consider approaches that may improve the presentation and communication effectiveness of the reports.

It's an approach we use in Australia. We come across issues that may not be all that significant in the overall scheme of things but are nevertheless important to pass on to the agency we're auditing. There's an area where they might look at whether they can improve a particular approach by taking something on board.

I need to say here that in Australia we've moved from our audit reports containing many recommendations to seriously reducing the number of recommendations, so that we only focus on what we believe to be significant matters of public administration. When you cull something like 30 recommendations in a report we may have produced 10 years ago to something like five or six, it's not necessarily that the quality of administration is improving. As many of my colleagues and agencies say, “Well, look, you've got 30 recommendations last year and now only six. We've obviously improved.” I say, “Well, actually, no. What we're doing is trying to focus on the significant matters now.” We then say, “In the body of the report, we will nevertheless make suggestions that aren't all that significant but are nevertheless useful to improve administration or performance.”

I guess we have taken that philosophy, that approach, across to the report we've done with our colleague, to just raise the issues of tables and footnotes. In some other areas we've made what we call less significant suggestions for the OAG to consider. The pleasing thing is, the OAG, except for the issue of footnotes, I think has agreed to take on what I call the minor suggestions. That's fine, and we're happy. The reason we didn't put it in a recommendation is that we thought it was entirely appropriate for the OAG to make the decision whether they saw a benefit in this approach.

In terms of the specific matter you raised, I'll just ask my colleague, Deb Jackson, to see if she can add any further information about the international experience.

[Deborah Jackson, Senior Director, Performance Audit Services Group, Australian National Audit Office]

Thank you, Mr. McPhee.

What I want to say is actually a product of several of the audit officers--and there were two other audit officers who were involved in the performance audit part of it. We all felt that the recommendation of the 2004 report, as we said here, is still valid. It was common practice, as Mr. McPhee says, in Australia to use footnoting for sourcing evidence from, say, third parties or data from third parties, or from the agency being reviewed. It was also common practice in the other audit offices that were involved in this peer review. That's why we thought it was a valid suggestion in this report. I understand it is more widely also a common practice among audit officers.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much. It sure points to a great summary and a great report when we have to spend so much time on footnotes, so thank you very much. I appreciate that.

Thank you, Chair.

[The Chair, Liberal, Shawn Murphy]

Mr. Saxton, you have seven minutes.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair.

Thanks to our witnesses for being here with us today.

Special thanks to Mr. McPhee and his team for waking up so early so that they could be with us by video conference.

Mr. McPhee, I can't help but notice the object of art that you have on your desk in front of you. It looks a lot like the work of the Haida First Nation from my home province of British Columbia.

My first question is for Mr. McPhee: have you or your team ever done an international audit before?

[Deborah Jackson]

I might just answer that. The ANAO was actually involved in the peer review of the U.S. GAO in 2007. I'm sure Mr. Jarrett can talk about that a bit more. We also have an agreement with the New Zealand audit office. Every second year we do a mini peer review of each other's offices.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Can you tell us how this audit compares and contrasts to those audits you've done?

[Ian McPhee]

I think this one had a much wider focus. It is much broader and more in depth, in the sense that particularly with our colleagues in New Zealand we may do a review of several of their performance audits, but we don't go into the full review of their quality management system for both performance and annual audits. This is the most significant review we've been involved in, because we have led it and because of the breadth of the audit or the review objectives.

Can I just thank you for recognizing the work of art here? We just wanted to have a little bit of Canada here with us this morning. I'm pleased that you have noticed it. Thank you.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you for having it.

My next question is in regard to the scope of the audit. How did you decide on the scope of this review?

[Deborah Jackson]

It was actually a discussion between the OAG and the ANAO. The OAG had two specific areas that they wanted the peer review team to examine and they largely suggested what the objective and the scope would be. We then discussed that. In fact, some of the details were subject to negotiation, such as the timeframe. That was subject to negotiation between the two offices and also in involving other peer review teams.

[Ian McPhee]

If I could just add to that, clearly from my perspective this peer review goes to the core of the OAG's business. It's the heart; it's about audit quality and audit performance. It's absolutely focused on what matters to the reputation of the OAG understanding that the chair referred to earlier. If I could say this, not only are Sheila Fraser and the OAG extremely well regarded in Canada, but I can say that they are extremely well regarded internationally as well.

So I agree with the earlier comments. It just demonstrates the constructive attitude and approach of the OAG to seek this peer review and to have it focused on the essential core business of the office.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you for those comments.

My next question is for our Auditor General.

Madam Fraser, you requested that this particular audit take place. Can you share with us why you decided to do that?

[Sheila Fraser]

Thank you, Chair.

In the past we have had two peer reviews done. One was completed in 1999-2000 on our financial audit practice, and the other one, in 2004, was on the performance audit practice. I thought it important that we have a peer review of all of our practices, not specific practices.

I also wanted to have the peer review done before the end of my term. I thought it was important that a new Auditor General coming in not have the responsibility of conducting a peer review right away. The issues we have to deal with are known now, and hopefully that Auditor General, before the end of his or her term, will also do a similar peer review to assess the state of affairs of the office.

So yes, to me it was very important that we do this. Especially in a time with a lot of change going on in the office, it was important to us to have that independent objective assessment of where we needed to improve and how we could make our practice better.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Can you share with us the progress that has been made with regard to the recommendations, if you've had time, in fact, to make some progress?

[Sheila Fraser]

Yes, we have. We have provided to the committee an update of our action plan, I believe. You will see that there are several actions that have been completed--the ones that were actually relatively easy to put into place.

The major response to the recommendations is this revised audit methodology project we are undertaking, which we plan to have completed by December of next year. We are on track. We're making good progress.

In the practice areas, where we do need that methodology and guidance sooner—for example, in the financial attest practice, which has to be in place for financial statements that we will be undertaking during this next year--we have made very good progress. Staff is being trained and there is methodology that's available to them.

So we are progressing well, and we would certainly be pleased to provide the committee with regular updates on how that is going.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Can you share with us how the executive committee is going to be monitoring the progress made on these recommendations?

[Sheila Fraser]

We have asked for regular updates. We have an update of the RAM project every month at the executive in terms of schedule, costs, and resources, and then we have asked for an update of the whole report and action plan semi-annually, just to make sure we're on track. Responsibilities have been assigned and people will be accountable to delivering on the plan.

[Andrew Saxton, Conservative, North Vancouver, BC]

Finally, can you share with us who makes up the executive committee?

[Sheila Fraser]

The executive committee is composed of myself, the Deputy Auditor General, the Commissioner of the Environment, and all assistant auditors general. We are now 14 people, I think.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.