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.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
Ms. d'Auray, earlier you were asked some questions about adopting a new approach. Judging from your remarks, the goal of auditing departmental statements to improve controls has been met.
We've held three meetings to discuss this topic and I have been asking myself some questions. Why did you decide to change directions? How did this decision come about? What documents were drafted and what analyses were carried out beforehand?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
When we first turned our attention to this matter, Mr. Chair, we focused on two objectives, as Ms. Faille so aptly pointed out. We wanted to strengthen control systems and increase the reliability, so to speak, of financial information. As these mechanisms and policies were developed, we completed phase one of the process, as Mr. Ralston said, which was the production of financial statements. These statements were first produced in 2005-2006.
We then focused on developing an internal audit policy. We struck committees, made up of independent members, for each department.
We then turned our attention to control measures, because to sustain the audit process, we also require control mechanisms. Hence a policy on controls was drafted.
These various measures were taken to sustain the audit process. The need to be audit-ready is reflected in the policies adopted. We asked ourselves what the value added would be if we put in place all of these mechanisms which, getting back to the Auditor General's comments, are designed to help us achieve our true primary objectives, namely better controls and transparent, reliable financial statements.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
If I were to ask you where this information comes from or when the decision was made, would you say the decision to change direction was made in 2005-2006?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
The decision stems from the policies in place and the latest policy was released in 2010.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
The decision was made further to the development and release of the policy, which sets out a new approach to conducting controls-based audits.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
Can you assess the situation for us at the Office of the Auditor General? We're talking about policy changes over a period of six years. Are you in fact seeing any net improvements in internal controls in the different departments?
Has Treasury Board missed the mark here? Are there shortcomings to the proposed approach? Much was made of costs earlier, but what is really going on in the different departments?
Another issue is that we are being told today that new information will be posted on the Internet as early as tomorrow. We're finding this out at the very last minute. I think we should have been informed of this last spring when we first broached the subject of internal audits. I don't know when the decision was made to go forward with this initiative, but can you tell us if the Auditor General's office had an active part in the decision to post on the Internet information about internal control audits.
Deputy Auditor General, Office of the Auditor General of Canada
Merci, monsieur le président.
Yes, I am able to confirm that the controls were strengthened in the Department of Justice, because the Department of Justice was able to successfully sustain a controls-based audit. Beyond that, no, I'm not in a position to comment on the strengthening of internal controls in government, because we have done limited work in that area.
Just to be clear, Mr. Chair, the Office of the Auditor General has no shortage of things to audit. There's a big government, and we can audit, we can conduct more performance audits. There's an awful lot of work we can do in auditing in the government.
What we had pointed out initially, on May 11, when we appeared here, before the DPR, was that in response to a change in government direction, we were changing our priority. Since government was no longer pushing or encouraging audited departmental financial statements, it didn't make sense for us to continue to audit them.
I absolutely accept that it's the government's decision, and ultimately Parliament's, whether or not you wish to have audited departmental financial statements. If the decision is no, the Office of the Auditor General will accept that decision.
What we have been pointing out to this committee in our discussions is that what you will not be receiving as a result of not auditing those financial statements is some form of independent validation that the controls are there at the departmental level, relevant to the department, to sustain a controls-based audit. You will not be getting that independent validation from the Office of the Auditor General.
If Parliament chooses—
Liberal
The Chair Liberal Joe Volpe
Sorry, let me interrupt you there, because now we're going, again, way over time.
I see that Madam d'Auray would like to have an intervention as well, and I've already said no to her once. Mr. Ralston wants another one--no--and I know that Mr. Shipley wants in.
I think all committee members are anxious to hear the responses. We're really good at asking questions, but if I could limit you to about 20 seconds, and you, Mr. Ralston, to another 20, I think I would satisfy everybody's curiosity about where this conversation is going.
Please keep your response brief, Ms. d'Auray.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
I have two answers, Mr. Chair. Thank you.
One is that the policy on internal control took effect on April 1, 2009, so the disclosure as requested by Madame Faille is not a surprise: this policy has, in fact, been in place since 2009.
I'll stop at that.
Comptroller General of Canada, Treasury Board Secretariat
Mr. Wiersema continues to say that readers of departmental financial statements will get assurances from the Auditor General about the improvement in controls. I want to just repeat my statement from the last time, which is that the auditor's standard opinion on financial statements does not give assurance on control. In fact, the engagement letters will caution organizations not to expect that.
Therefore, it is, in my mind, a bit irreconcilable how the readers are to take assurance from something that is explicitly not mentioned.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Mr. Chair, thank you very much.
Thank you, witnesses, for coming out.
Just in comment, if we go back to 2004, actually, when the government of that day committed to department financial audits, I understand clearly why they would want to do it at that time. There had been corruption; there had been a sponsorship scandal. So in order to try to cover themselves, they would want to say, “Listen, everybody is wrong. We need to do financial statements on everyone.”
I think now, clearly, in six years...and the question was asked, for clarification, whether the difference that has happened over the last five or six years. I think you have to lead in anything, whether it's a business or whatever, by example of accountability and transparency. That's why there's been the Federal Accountability Act and other legislation brought in, so that this sort of leadership is evident.
We talked about the consolidated audits. We talked about having the cost of controls-based audits of each of the departments. I'm just not clear that it could be up to 20 times higher for controls-based ones, but it's substantial dollars.
My question is should we dig deeper at these types of costs, but is there acknowledgement of any reason, Mr. Ralston and Ms. d'Auray, that you have had brought, or you would see, for the need of that expenditure?
Comptroller General of Canada, Treasury Board Secretariat
No, not at this point in time, and the policy allows me, if I do see something, to request an audit. The audits are selective, not automatic, but were I ever to have a concern, the policy allows me to request an audit.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
The other element, if I may comment, Mr. Chair, is the fact that at the request of Parliament, departments will also start producing quarterly financial statements, starting in 2011. The first financial statements will be produced in August 2011. So there is an additional requirement to produce information in terms of the transparency and the reliability of financial information, which is an added element that was not in place when the original commitment was made.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Thank you.
We have just, I believe, received what we would call in audit terms a “clean audit”, which I believe is number 12 for Canada. Can you tell me what other countries have had a clean audit that are asking for, that would need to have, a controls-based audit of all their departments?
I mean, we're doing the 22, and that actually looks very positive for coming out just in general terms tomorrow. But what other countries that have those clean audits--first of all, are there others--are also demanding of all the departments to have what we would call a controls-based audit?
Mr. Wiersema.
Deputy Auditor General, Office of the Auditor General of Canada
Mr. Chairman, I do not have complete information with me today.
The member is absolutely correct. The Auditor General issued last week, and it was tabled in Parliament last week, an unqualified opinion on the consolidated financial statements of the Government of Canada.
That's something the government could quite rightfully be quite proud of. I know there are very few other jurisdictions of sovereign governments around the world that can make a similar claim.
I don't have precise information with me, but as an example, the Government of Australia—some committee members will recall the discussion with the Auditor General of Australia in the context of the peer review—does a pretty good job of reporting on its financial statements as well. It has probably received some clean opinions. But you also hear the Auditor General of Australia indicate that in Australia departmental financial statements are in fact audited.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
In fact, I wanted to signal that Mr. Matthews had the information.
Bill Matthews Assistant Comptroller General, Treasury Board Secretariat
Just to add to the global context, Australia does receive clean audit opinions. As Mr. Wiersema said, they require departmental financial statements, but there are two important clarifications: they're not controls-based; secondly, in Australia they physically transfer cash to each department, which then holds the cash, so they have a very good reason for having departmental financial statements. They don't have the same level of control we have here. It's a very different environment.
The U.K. cannot get a clean opinion on its audited financial statements; the U.S. cannot get a clean opinion on its audited financial statements; nor can the Government of France. The only other one I'm aware of that does is the Government of New Zealand; it is smaller in scale, but they can achieve a clean opinion on the consolidated financial statements.
The other point I will add is that no other government, except that of the U.K., requires the annual disclosure related to internal control that we are now requiring. The U.K. has had that practice for some years, and there's really good activity in monitoring the action plans and the improvements made.
Liberal
The Chair Liberal Joe Volpe
Thank you.
I'm going to go to Mr. Allen.
Mr. Allen, just before you begin, you ended with a series of questions. This is just a reminder that if you so wish you can ask them to answer those, or we could leave it with their sending us the answers in writing.
NDP
Malcolm Allen NDP Welland, ON
I appreciate the reminder, Chair, that I posed those questions. Since it's five minutes that I have, let me get short answers to the particular questions I posed when my time ran out.
To remind you, it was an issue of a score that the Auditor General sets, not the comptroller's department. I appreciate the fact that it wasn't something you established, Mr. Ralston, or the department, but that the AG set. But there is a dialogue between the two as to a score being set and not being met.
So the question is for both of you--if you could keep it within a couple of minutes, because I have one other question about that issue.
Deputy Auditor General, Office of the Auditor General of Canada
Mr. Chairman, I'm prepared to provide a one-minute answer to the question.
The Office of the Auditor General basically undertakes two forms of audits: the performance audits that this committee is used to, as well as the financial audits, in particular of crown corporations and the public accounts.
The number the member referred to, the 65% target, relates to our performance audits, the value-for-money audits.
With respect to the financial audits, in our 2009 DPR our target for “Our work adds value” on the financial audits was 75%; the actual was 83%. So we've exceeded the target for large departments and the public accounts audit, as well as for the crown corporations.
The feedback we are getting from the recipients of those financial audits as opposed to performance audits is that we are adding value, and we've exceeded our target.
Thank you, Mr. Chairman.