Evidence of meeting #30 for Public Accounts in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was departments.
A recording is available from Parliament.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
Thank you very much, Chair.
Mr. Ralston, we discussed at length the one-time cost associated with the new internal controls that are being put into place. That's why the $300 million keeps on coming up again. Those costs have been incurred; those are one-time costs. You've indicated that you don't have any number on any incremental cost, going forward, for maintaining these internal controls. In particular, when we ask about incremental costs associated with putting forward departmental financial statements, you say they're expensive, but there's no number associated with that.
We have a precedent set by the Department of Justice that has prepared a statement, so it has been done before. It can be done and it has been done. And we have Mr. Wiersema saying that it's up to the government to provide direction. It's not really up to the AG's office; it's up to the government.
I have a response here from the government to a report tabled in the House. It was presented to the House on February 27, 2007, by this government in response to a recommendation made by this committee, indicating that it is the intent of the government to have departmental financial statements audited by the Office of the Auditor General of Canada. Again, the government clearly indicates, in its response in 2007, that it has the full desire to have financial statements prepared by the department.
Why the mixed signals? If there are no costs that can be attributed to it--the government has given direction, it's put it in writing--then why the mixed signals, Mr. Ralston? Why don't you just fulfill the mandate, especially because the government has given you clear direction on it?
Comptroller General of Canada, Treasury Board Secretariat
As I have explained in the past, statements were made in the past about taking a particular direction where we're meant to achieve certain goals. We have not altered our goals, we've altered the means. It's a question of choosing the best tool for the job.
On retrospect, we decided the best tool for the job was not departmental audits...an automatic audit of all departments, but that the better tool for the job was the disclosures route with the ability to selectively audit.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
Who made that decision, then? The government clearly indicates in writing in its response that it has a desire to prepare financial department statements. Who made the decision to change it?
Comptroller General of Canada, Treasury Board Secretariat
The current position is in a policy of the Treasury Board. It is a policy that has been established by the Treasury Board ministers.
Comptroller General of Canada, Treasury Board Secretariat
The Treasury Board ministers.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
Okay: the Treasury Board minister, right? So the government has changed its direction now. In 2007 it had every intent of preparing financial department statements, and now the government is saying, no, that's no longer the case.
Comptroller General of Canada, Treasury Board Secretariat
In 2007, and as early as 2004, there had been public statements made indicating a policy direction, but there had never been a Treasury Board policy, as such, designating the requirement for audits.
Comptroller General of Canada, Treasury Board Secretariat
So what happened was that when an actual policy decision was made as opposed to these announcements, the policy decision is the one that we've been discussing today--
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
I understand, but this is the response I have from the government, and then we have the Department of Justice also preparing financial statements for its department. So we have a written response from the government and we have a department following through on that. So it's very clear there was a desire to do that.
Who made the decision to change this policy, and when?
Comptroller General of Canada, Treasury Board Secretariat
The Treasury Board.
Comptroller General of Canada, Treasury Board Secretariat
In May or June of this year.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
Okay.
I have a quick question for the Auditor General's office. The government indicates that it will cost 20 times as much--on a couple of occasions today--to prepare these financial department statements.
Can you comment on this claim, based on your analysis, based on the current controls, based on the fact we've already incurred the one-time cost? Is this number that they're claiming somewhat accurate? Or where are they coming up with this figure?
Deputy Auditor General, Office of the Auditor General of Canada
Thank you for the question, Mr. Chairman.
I think the comment was made in relation to the fact that the audits, the departmental financial statements, would cost 20 times as much as what we currently spend on the public accounts of Canada. No, I do not believe that is a correct statement. I think it is a significant exaggeration of the cost of auditing the large 22 departments as compared to the cost of auditing the public accounts of Canada.
The Office of the Auditor General has not—I will be totally transparent here—estimated how much it would cost to audit all 22 large departments, because, frankly, that was not a reality we had to deal with in the foreseeable future. The indications we were getting was that most large departments would not be ready until 2015, 2016, or perhaps even later than that.
So given that it is so far out in the time horizon, we have not attempted to estimate the cost of audited departmental financial statements. But I can say with confidence that it will not be 20 times the audit of the public accounts.
Conservative
Earl Dreeshen Conservative Red Deer, AB
Thank you very much.
I'm sure many, as I am, are looking forward to what will come out tomorrow. You speak of the good housekeeping. I'm sure we're going to be wanting to see the details, and we'll have people looking at the effectiveness as well as the ease of communication. I know that when we get things onto a website people will be quite interested in seeing what's taking place.
I have a couple of questions, perhaps to Mr. Ralston first.
I'm wondering if you could expand upon the provisions, on the policy for financial resource management information and reporting...as it assigns to the Comptroller General the responsibility to decide on who requests an audit.
Comptroller General of Canada, Treasury Board Secretariat
As I say, through the consolidated work, all of government is audited today. The policy has said that we're not going to require a blanket drilling down so that all departments would be audited.
By the way, that's all departments, not the largest 22. It would be all. The original statement in 2004 concerned all departments. So in fact it's not, as Mr. Wiersema has referred to, the cost of auditing the largest 22. If we were to actually pursue that earlier direction in its entirety, we would be going down to the smallest of the small departments: all means all.
So in opposition to that idea, we said, no, it makes more sense to be selective. Let's go where we think there are risks, where we think there are particular areas of interest; in the end, that will be far more cost-effective than chasing low-dollar-value departments that maybe are not particularly risky, and this will be a far better use of taxpayers' money to be able to apply that sort of risk lens and be selective.
Conservative
Earl Dreeshen Conservative Red Deer, AB
You also mentioned, in making some of these decisions, that you are setting up professional standards as guidelines for the materiality to be used by the auditors. In some of the earlier discussions as well, you were talking about doing the consolidated accounts of Canada, and the fact that, again, you're also going in looking for different opinions.
Is there a way in which the two can be done at the same time? I'm wondering if there are different types of audits that could make that happen, so that when you are going in and looking at the consolidated accounts you're also doing that with the mindset of also looking for some of these efficiencies.
Comptroller General of Canada, Treasury Board Secretariat
I think that's a great point. The fact of the matter is that the Auditor General has the mandate to audit. The Auditor General chooses the materiality. So if the Auditor General were to choose to drill deeper for any reason at all, even in the context of the consolidated audit of the financial statements, they could drill deeper. They wouldn't have to drill deeper everywhere. They could be selective themselves about drilling deeper, but they could do it today, whether it's due to a signal that we might send about our interest or a signal that you might send about your interest.
Conservative
Earl Dreeshen Conservative Red Deer, AB
Mr. Wiersema, if you could please comment on that as well, I'd appreciate it.
Deputy Auditor General, Office of the Auditor General of Canada
Very quickly, Mr. Chairman, if the Office of the Auditor General was auditing departmental financial statements and giving an opinion on those financial statements, we would not need to do any significant additional work to audit the public accounts. So yes, in fact there is a huge amount of leverage. We do the audit once. If we've got comfort on the numbers at the departmental level, no further work is required except to consolidate those numbers of the public accounts, so there are lots of efficiencies.
As to the point about the standards for the audit, the Office of the Auditor General follows the standards set by the accounting and auditing profession. We do try to do our work efficiently. If we have to audit the public accounts, we audit to the materiality that's relevant there, and do that efficiently. If we're auditing a much smaller financial statement...obviously a great deal more work is required at that level.
Conservative
Earl Dreeshen Conservative Red Deer, AB
And so therefore, you find, if you are able to find the efficiencies, it's sometimes a case of just happening to go into these departments and widening your scope somewhat, then?
