Evidence of meeting #17 for Public Accounts in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was departments.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Jim Ralston  Comptroller General of CanadaTreasury Board Secretariat
Nancy Cheng  Assistant Auditor General, Office of the Auditor General of Canada
Gonzague Guéranger  Executive Director, Financial Management Policy, Treasury Board Secretariat
Paule Labbé  Executive Director, MAF and Risk Management Directorate, Treasury Board Secretariat

3:30 p.m.

NDP

The Chair NDP David Christopherson

I call this 17th meeting of the Standing Committee on Public Accounts to order.

I'll be going to Mr. Kramp for a business matter before we begin the meeting, but I would ask the indulgence of colleagues to extend a very warm welcome back to Parliament Hill and to this committee to a former chair and someone who a number of us on this committee consider to be a mentor in the business of public accounts, a hell of a fine parliamentarian, and a good friend: Shawn Murphy has returned here.

Shawn, it's great to have you back again.

3:30 p.m.

Some hon. members

Hear, hear!

3:30 p.m.

NDP

The Chair NDP David Christopherson

His is a happy-ending story. He's not here because he chose not to run, as opposed to not being here because he wanted to come back and the folks said no.

Mr. Kramp, you have the floor.

3:30 p.m.

Conservative

Daryl Kramp Conservative Prince Edward—Hastings, ON

Thank you, Chair.

Chair, I'd like to propose that we break at 5:15 today so that we have an opportunity to deal with future business. Of course it will be setting an agenda item for Wednesday, but that's all that needs to be said now.

I ask the chair's cooperation in ending today's meeting with our witnesses at 5:15.

3:30 p.m.

NDP

The Chair NDP David Christopherson

My understanding is there's been consultation with the opposition parties, and they're okay with that.

With that in mind, I'll accept that we have a motion before us to have an order of the day at 5:15 to do business on the next meeting.

(Motion agreed to)

With that, we'll begin our hearing.

Welcome, Mr. Ralston and Ms. Cheng. I'll ask you to begin by introducing yourselves and your colleagues who are with you.

3:30 p.m.

Jim Ralston Comptroller General of CanadaTreasury Board Secretariat

I'm Jim Ralston, Comptroller General of Canada. With me is Gonzague Guéranger, who is executive director of financial management policy; and Paule Labbé, who is executive director, management accountability framework and risk management.

3:30 p.m.

Nancy Cheng Assistant Auditor General, Office of the Auditor General of Canada

I'm Nancy Cheng. With me is Mr. Michael Pickup. He's the principal responsible for this audit.

3:30 p.m.

NDP

The Chair NDP David Christopherson

I'm going to 'fess up here, folks. I got back late last night from 24 hours of travel, and I'm severely jet-lagged, so we're going to take this nice and easy and careful, if you don't mind.

Having said that, do we have opening remarks? Yes.

Ms. Cheng, please begin with opening remarks. You have the floor.

3:30 p.m.

Assistant Auditor General, Office of the Auditor General of Canada

Nancy Cheng

Thank you, Mr. Chair.

We welcome this opportunity to discuss chapter 1 of our spring 2011 status report, “Financial Management and Control and Risk Management”.

Canadians expect their government to be managed well and to be accountable for the safeguarding of public assets. The government is responsible for stewardship--that is, the efficient, effective, and economical use of public funds.

Financial control and risk management are central to managing any organization effectively, including government entities. These activities contribute to an organization's ability to safeguard its assets, use its resources economically and efficiently, and produce accurate and reliable financial information. Reliable information is key to developing a complete and accurate picture of financial performance.

In this follow-up audit, we examined the government's progress on commitments it made in response to our previous observations and recommendations. We audited the Treasury Board of Canada Secretariat, including the Office of the Comptroller General, and seven large federal departments.

Overall, we found that the Treasury Board of Canada Secretariat and the departments have made satisfactory progress in acting on their previous commitments, in particular, in developing policies, frameworks and relevance guidance on internal controls, and in implementing risk management measures.

Through the Office of the Comptroller General, the Treasury Board of Canada Secretariat has demonstrated leadership by developing a new and strengthened financial management policy suite, clarifying roles and responsibilities, and supporting deputy heads in their role as accounting officers, as set out in the Financial Administration Act. Most of the selected departments told us that they found the secretariat's initiatives and approach to be helpful.

As well, financial human resource capacity has improved significantly since our last report. In 2010, we found that 82% of chief financial officers in the 22 large government departments held a professional accounting designation. In 2002, this number was only 33%. We noted that the Office of the Comptroller General has put in place various measures to enhance its capacity.

All seven audited departments have developed a corporate risk profile that summarizes an assessment of the department's key risks, with processes in place to update these profiles regularly. The integration of risks into planning, reporting and decision making has improved.

We also noted a number of matters that need attention. In particular, we would like to you to focus on the following.

Departments have still not fully assessed their internal control systems to identify and address weaknesses. According to their action plans, this work will take years to complete. Mr. Chair, our audit work was completed in fall of 2010. The committee may wish to ask the Comptroller General for an update, including information on when he expects all large departments to have their internal control systems fully assessed and on how the OCG intends to monitor the government's actions in doing so.

Another issue is accrual-based budgeting and appropriations; it dates back as far as 1998. The former Auditor General, Sheila Fraser, raised this issue previously, as did this committee.

The government has not completed its evaluation of accrual-based budgeting and accrual-based appropriations and has not yet decided whether it intends to fully adopt either or both of these approaches. Accrual-based appropriations would provide Parliament with the same basis for control and approval over voted spending as over the government's overall financial plan and the summary financial statements.

The committee may wish to discuss this matter with the Comptroller General to obtain his current views. The secretariat and the audited departments have agreed with our recommendations. They have also made commitments for action related to their responses.

Mr. Chair, this concludes my opening remarks. We'd be pleased to answer the committee's questions.

3:35 p.m.

NDP

The Chair NDP David Christopherson

Thank you very much, Ms. Cheng.

Mr. Ralston, you have the floor, sir.

3:35 p.m.

Comptroller General of CanadaTreasury Board Secretariat

Jim Ralston

Mr. Chair and members of the committee, thank you for the opportunity to speak to you with respect to chapter 1 of the Auditor General's 2011 Status Report, tabled in June of this year. That chapter is titled Financial Management and Control and Risk Management.

As you know, the Federal Accountability Act and the corresponding action plan were designed to strengthen accountability and transparency in government. The act and the action plan also designated deputy heads as accounting officers responsible for maintaining effective internal controls.

My office supported this plan by strengthening internal controls and financial reporting through the renewal of Treasury Board financial management policies, including a new policy on internal controls. We have also worked closely with the financial management community to support professional development and capacity-building.

Departments and agencies have worked diligently to implement these policies in a timely fashion, thereby strengthening their financial management capacities.

Although there is still work to be done, I am pleased that the Auditor General has recognized the government's significant progress in these areas.

We would now welcome the committee's questions.

3:40 p.m.

NDP

The Chair NDP David Christopherson

Great. Thank you, Mr. Ralston.

Now we'll begin our rotation, beginning with Mr. Saxton. You have the floor, sir.

3:40 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thank you, Mr. Chair. Welcome back. We missed you.

3:40 p.m.

NDP

The Chair NDP David Christopherson

Thank you. That's nice of you to say. I hope you feel that way at the end of the meeting too.

3:40 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thanks to our witnesses for being here again today.

My first questions are for Ms. Cheng and the Office of the Auditor General. It's clear that financial controls and risk management are extremely important in reducing the risk involved in dealing with public assets. In your opinion, are the necessary financial controls now in place?

November 28th, 2011 / 3:40 p.m.

Assistant Auditor General, Office of the Auditor General of Canada

Nancy Cheng

Thank you.

The chapter looked at how the government had taken action to deal with the recommendations we had put in place in the past. What we saw are essentially laying the groundwork and making sure there is good policy and guidance to support the community, professionalization of the community, and also its plans in terms of when it would be able to complete the evaluation of its systems of internal control.

At this point in time, there is an exhibit in the chapter itself. If I may draw the attention of the committee to page 14, exhibit 1.4, you can see that in the case of the seven departments we had looked at, all of them were in a position to document their key business processes, but not all of them have in fact been able to evaluate their systems of internal control. Very little work has actually taken place in terms of actually testing to make sure those controls have been implemented. At this juncture, it would not be possible to indicate all the controls are in place to make sure we have a strong system of internal control.

3:40 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

There are a good number of controls that are currently in place.

3:40 p.m.

Assistant Auditor General, Office of the Auditor General of Canada

Nancy Cheng

They would have been. We certainly do work independent of this particular performance audit. For example, as you are aware, we audit the accounts of the Government of Canada. In there, in some instances, we're able to look at some of the departmental controls and place reliance on them. They are not a comprehensive picture. At this point, I would not have enough information to assure the committee that all controls are in place, nor could I really make that assertion.

3:40 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thank you.

In order to implement strong financial controls and risk management, there needs to be a strong directive in place from the top. There needs to be strong, effective leadership. Can you tell us how the Office of the Comptroller General or the Treasury Board Secretariat are demonstrating this leadership and describe their efforts to improve policy implementation?

3:40 p.m.

Assistant Auditor General, Office of the Auditor General of Canada

Nancy Cheng

Mr. Chair, as the member pointed out, it is absolutely important to make sure there is that central leadership. Starting right from the Federal Accountability Act, designating an accounting officer, placing the responsibility squarely on the deputy head of an agency is very important. The requirement for the deputy head to appoint a qualified chief financial officer is another important step.

Within the Officer of the Comptroller General, we have highlighted some of the work it has been doing to support the community. This is in addition, of course, to the policy suite renewal, whereby they have promulgated four particular policies that are also described in the chapter.

If we turn to page 12, under paragraph 1.19, you see that we indicated how the Comptroller General has been providing ongoing support. That includes having policy centres, which provides guidance and tools to the community. It also includes some efforts of monitoring through what we call the MAF—the management accountability framework. The Office of the Comptroller General will also be conducting some audits to support the information it receives from departments and agencies.

3:40 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

In your opinion, has good leadership been demonstrated?

3:40 p.m.

Assistant Auditor General, Office of the Auditor General of Canada

Nancy Cheng

Yes. We recognize that, and for that reason we are expressing that satisfactory progress has been made since the last audit.

3:40 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thank you very much.

Mr. Ralston, the Auditor General concluded that the Office of the Comptroller General has made satisfactory progress on several items in the audit. Would you be able to summarize the role of the Office of the Comptroller General of Canada in regard to financial management?

3:40 p.m.

Comptroller General of CanadaTreasury Board Secretariat

Jim Ralston

My role is first and foremost to help establish policy. As Ms. Cheng has mentioned, we also do some monitoring of the status of things through the management accountability framework and others. We also support the community through training, networking, and that sort of thing. We are particularly interested in succession planning for the leaders in the financial community.

3:45 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thank you very much.

Thank you, Mr. Chair.