Public Accounts Committee on Nov. 2nd, 2010

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

So it will cost $300 million also.

[James Ralston]

It has cost, because we're doing it. We've started this effort, so costs have been incurred.

We're no longer talking about $300 million going forward from today. We're talking about $300 million going forward from the time at which that estimate was prepared. Some of that work has taken place. Some of that remediation has taken place. And some of the benefits of that are now going to be disclosed through the statements that will be tabled tomorrow.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

But how can you come up with...? I hear this and on the one hand, people are trying to say that this shouldn't be done, because there are costs associated with these measures, because you're saying that it would take 20 times as many hours to specifically audit a department, versus consolidated statements.

I have a question, Mr. Ralston. When someone says this, it is almost as if he is afraid of something. Are you afraid of something? Are you afraid that a more in-depth audit could uncover some facts? Because if we spend more time on the audit, it's going to be a more in-depth examination. Are you afraid that the Auditor General's office will uncover something you wouldn't like? Please answer me, yes or no.

[James Ralston]

The $300 million costs, I will say again, were the foundation costs. We also need to talk about the costs that would happen going forward, year by year. They are two different kinds of costs--

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

I understand what you're saying, Mr. Ralston.

Mr. Ralston, I understand what you said about the $300 million. I don't need the same answer again.

What I'm trying to understand today is why you are afraid. You've stated your reasons, you've said that certain things shouldn't be done because of the overtime costs that would be incurred. I'll stop at that, because there's something that isn't quite right on that score.

I have a quick question for you, Ms. d'Auray. You said that a different approach was being taken to address fundamental issues, in accordance with new policies and so forth. In the course of developing these new policies, did you consult with the Auditor General's office to ensure that you were complying with the standards and going in an appropriate, interesting direction?

[Michelle d'Auray]

If you don't mind, Mr. Chair, I'd like to respond to the question the member put earlier.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

I would still like an answer to this question first, please.

[Michelle d'Auray]

I'll answer this question as well.

You're asking if the mechanisms or policies developed followed sound control rules?

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

No, that wasn't my question. Did you consult with the Auditor General's office?

[Michelle d'Auray]

Yes, we did discuss the policies that we developed.

May I answer the other question, Mr. Chair?

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Just a second, please.

Could you confirm that, Mr. Wiersema? I'd also like to know the tenure of the comments and recommendations that you subsequently made to the Auditor General's office?

[John Wiersema]

Mr. Chairman, if I may, perhaps I'd make two comments.

Firstly, I don't recall being personally consulted on the Treasury Board policy on internal control--I don't know if Ms. Cheng was consulted--but I think we were aware that the government was working in that direction. I do not recall that the office formally commented on the policy or if any formal consultations took place.

Perhaps I can also comment, Mr. Chairman, just very briefly, on the question posed about the value of an audit of those departmental financial statements. If I could give my one-sentence answer to that question, it would be that the Auditor General has indicated that she will audit departmental financial statements, if this is a government priority, when the departments are ready to sustain a controls-based audit.

So the value in that audit, then, would be the independent validation that the controls in that department are of sufficient rigour and robustness to support a controls-based audit, that the controls are there at a level of materiality relevant to that department.

I think that's the short answer to that question.

Thank you, Mr. Chairman.

[The Chair, Liberal, Joe Volpe]

Thank you.

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

Welcome to our guests.

Going back to Mr. Saxton's point, I guess, one of our biggest concerns here, of course, is cost-benefit analysis. Where do we go? Where do we stop? And at what point does it make sense to spend x amount of taxpayers' dollars to verify what is either a problem or isn't?

Maybe to Mr. Wiersema, how many of our departments are actually audited? Are crown corporations audited, and what about the agents of Parliament? Do they go through the same particular requirement?

[John Wiersema]

Thank you for the question. It's an excellent question.

The Auditor General is in fact the auditor and does an annual financial statement audit of all crown corporations except two. Those two are the Canada Pension Plan Investment Board and the Bank of Canada. But all federal parent crown corporations are subject to an annual financial audit.

What we're talking about today is the audit of the 22 large departments and agencies. The Auditor General does not presently audit the financial statements of those 22 large departments at the level of departmental financial statements. They are, obviously, included in the public accounts of Canada.

With respect to the agents of Parliament, the Office of the Auditor General does do annual financial audits of the financial statements of each of the agents of Parliament.

So yes we do crowns, and yes we do agents of Parliament annual financial statements, but we do not do the 22 large departments, with the one exception of the Department of Justice in 2009.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Okay. And certainly with no disrespect to the Auditor General's office, of course the Auditor General's office isn't audited every year.

[John Wiersema]

Yes, Mr. Chairman, we are.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Under the same standard you're proposing here?

[John Wiersema]

Under the exact same standard we're proposing here. The Office of the Auditor General's annual financial statements—I think you'll find them included in our departmental performance report—are audited annually, and an opinion is expressed by Welch & Company. They audit us as we would audit large departments and agencies.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Okay, fine. Thank you very much. I appreciate that clarification.

Madam d'Auray, could you give us an example of some particular challenges that would exist in order to have all of the departments ready to have their financial statements audited? Are there particular challenges?

In other words, why would there be any hesitation to move toward this direction? Are there internal challenges? Are there manpower challenges? Or is it simply a question of dollars and cents? What would be some of the reasons that you could provide?

[Michelle d'Auray]

Thank you.

The challenges to be ready for a controls-based audit are essentially the same challenges as are embedded in the policies on internal control and the policies on financial management. That is why in the policy on internal control there is a requirement for the disclosure. It requires us to have documentation of controls and evidence of controls. It requires us to make sure that we are consistent and frequent in our reconciliation, so accountancy provisions have to be in place. We have to make sure that we have controls over the computer systems and security and access, that we can do spot-check audits, that we can do post-payment verification, that we have a constant monitoring system in place.

Those are all elements of systems controls or controls that we have to put in place on financial reporting as part of the policy. This is why there is nothing to fear--if I may refer to the previous question--of having an audit done of financial statements, or of a controls-based audit. All we are suggesting is that the measures that we have put in place enable us to achieve a state of readiness in order to be able to undertake or withstand a controls-based audit in whole or in part, should the Comptroller General require that to happen. So all the elements are being put in place for us to do so.

The policies we have put in place were shared informally, and Mr.Wiersema...[Inaudible--Editor]...to say that, but we never require the Auditor General to formally comment on the policies of the Government of Canada because that is not their role and function. They can be aware of and they can be engaged in the discussion and informally receive, but they do not formally comment on the policies that we set out, because those are the policies that the government chooses to put forward.

In that case, we are quite confident about the policies we have put forward and the requirements, which members of Parliament will see from the first disclosures coming out tomorrow, the extent and the depth to which the analysis is done, as well as, again, pointing to the requirements of an action plan of what each organization has committed and is committed to do, in order to get the controls at a level that is required.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Good. It will be good to look forward to this--

[The Chair, Liberal, Joe Volpe]

Sorry, Mr. Kramp. You're way over.

Madame Faille.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Notwithstanding the fact that financial statements are audited, departments invest in ways to improve internal controls. This according to Mr. Ralston.

Is that statement correct?

[James Ralston]

That's correct.