Public Accounts Committee on Nov. 28th, 2011

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you very much for your honesty and forthrightness.

The interim Auditor General did provide us with that information prior to the budget, and I understand that 60 positions will be lost and that $6.2 million will be reduced.

If you can't provide that information to the committee as the Auditor General has done, would you be able to speak to the value of the increase in resources to the Office of the Comptroller General since the implementation of the Financial Accountability Act and its impact on your successes in achieving increased policy effectiveness and the ability to steward or mentor the policy improvements that have been noted by the Auditor General? You have spent a lot of time and energy and you have had a lot of success in that.

Will there be a casualty in any way, shape, or form in your performance as a result of any budget reductions? Is there anything about your organization that is inefficient, ineffective, and uneconomical, and that is deserving of cuts?

[Jim Ralston]

I think the process I go through in my own office each year is that we have a number of goals—implementing different initiatives and implementing some of the things we've talked about, the future-oriented financial statements, etc. These are projects in a way. They may last a while. We resource them, they are completed, and we go on to other priorities. Although I have a baseline of resources, the work we're doing at any point in time—the projects we're undertaking—is in a constant state of change because some are completed and new ones are started. I expect I will continue to have the capacity to do that into the future.

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

Mr. Chair, this is just a suggestion. I understand Mr. Byrne's line of questioning, and he has every right to ask that. My only thought would be that this is the public accounts committee, not the government operations committee. In the public accounts committee we deal with what has happened and the reflection of learning from those examples. The government operations committee deals with the present and/or implications thereof. I would suggest that the chair might consider that in his discussion with both the witnesses and the questioner.

[The Chair, NDP, David Christopherson]

Very good.

Mr. Byrne, you have time for one more question and a short response. Go ahead, please.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you.

I appreciate, Mr. Chair, that your intervention to allow a response to a point of order is not taken off the time of the intervenor at the moment.

I think this line of questioning is very appropriate. I'm investigating whether or not those who were involved in a very positive report by the Office of the Auditor General will have the resources in the future to be able to continue with that standard of performance. I think it's very relevant to the topic we're investigating here today.

To be honest with you, I would like it if we had more definitive information available to us on such functions and the consequence of cuts, in particular to the internal account auditing function, but we don't. We'll probably investigate that in the future as well.

[The Chair, NDP, David Christopherson]

I'm listening to all the points, and let's keep in mind that each person gets five minutes. How they choose to use it or throw it away is up to them in terms of whether they're focused on the matter at hand. There are certain times when comments and questions go across the line. That mostly plays a role when people are clearly running the clock--when they have the floor and they want to hold it, and opposition members are making the points of order to force them to stay in line in the hopes that they can't finish the quasi-filibuster. In this case, it's an individual member's time. I'm not seeing anything overt enough for me to rein in the questioning.

As usual, Mr. Byrne is very skilled at getting close to the line, but in my determination he has not yet crossed it.

You have time for a very short question, sir, and a very brief response from our witnesses. Please go ahead, Mr. Byrne.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you, Mr. Chair.

I ask the Assistant Auditor General, Ms. Cheng, if you would be able to respond to any observations you have made, not only in this audit but in past audits, in your past review of the Treasury Board Secretariat and the Comptroller General, as to whether increased resources to those departments and to those functions have assisted and aided in the successful report, which you've now tabled as of June 2011.

[Nancy Cheng]

Thank you, Mr. Chair.

The important point that I would note is the professionalization of the function of the CFO. It is important to have the right people in place, as opposed to necessarily the quantum of people. The combination between the CFO and the deputy CFO to have the financial literacy and the competency to manage finances is very important.

In terms of resource reduction, when we did the audit we actually interviewed a number of the department heads. Most of them indicated they see the value of the function; it's not going to be one whereby they would strip away the competency they have worked so hard to build, and it does not appear it would be a logical place to cut. That's basically what we heard back from the deputy heads.

[The Chair, NDP, David Christopherson]

Good. Thank you both.

We go over now to Mr. Albrecht.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you, Mr. Chair.

I will thank our witnesses for being here. My apologies for not being here at the first part, but I did read through your opening statements. I won't pretend to understand accrual accounting. I'll leave that to Mr. Kramp and his experts.

Ms. Cheng, in your opening statement you commented on the value of financial control and risk management. I see these as clearly preventive measures that are very important. I want to point out that they contribute to the organization's ability to safeguard its assets and so on. Later in the report, as Mr. Shipley pointed out, you pointed out the dramatic improvement in the number of CFOs who have a professional designation, going from 33% in 2003 to 82% in 2010.

In your fourth point you go on to point out you examined the government's progress in commitments. You indicate in your fifth point that overall you found satisfactory progress has been made in the various areas. I'm just wondering, in terms of risk management specifically, if you could give me and the committee some more specific examples of how these improvements have been made and how we, as parliamentarians and Canadians in general, should take some solace in the fact we're working hard to safeguard their financial resources.

[Nancy Cheng]

Thank you, Mr. Chair.

Risk management is very important and fundamental to how well a department can manage its resources. The observation that was made in the past was that there really wasn't a holistic and integrated risk management approach. While departments might have had some risk elements they managed from a program-to-program basis, there really wasn't something at the corporate-wide level. Since that time, we reported that all departments we've audited have a corporate risk profile. They're able to bring their various risks together so they can see and prioritize at a departmental level.

The other aspect about identifying risk is to assess them to look at their likelihood and then to assess how much risk tolerance we can take, and what kinds of risk mitigation plans we should have. The departments we've looked at have risk mitigation plans. The risk tolerance definition is still a bit weak. While we're saying there has been good progress, it doesn't mean we have wrestled this one firmly to the ground. In fact, if you speak with most of the deputy heads, they indicate the groundwork has been laid, but we really have to get in to make sure we have the right risks identified and the proper risk management plan.

The internal audit function and the departmental audit committee both have a risk focus, and together they help strengthen the risk management ability of the entities.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I'm wondering if Mr. Ralston would like to comment on specific measures that have been taken to address those issues. You go from 2003 to 2006 and then 2011. Clearly, we have made progress. I'm a non-professional accountant. Could you help me understand, with some examples, how you may have achieved the recommendations the Auditor General has been making? You've had to put them in place.

[Jim Ralston]

Mr. Chair, if I may, I would like to ask my colleague Ms. Labbé to speak on this.

[Paule Labbé, Executive Director, MAF and Risk Management Directorate, Treasury Board Secretariat]

Thank you, Mr. Chair.

First, I'm pleased that the findings of the audit recognize a lot of the work that was done by the Treasury Board Secretariat to ensure we gave departments a lot of support and guidance in the context of integrated risk management. That's my area of specialization.

As Madam Cheng mentioned, when we're looking at integrated risk management, we're really looking at the holistic approach the departments take. Risk management is nothing new in the Government of Canada. We've been doing it for a long time in the context of health and safety and national security. In the context of financial risk management and human resources risk management, what was being considered was how a lot of that risk identification and risk management is done on a holistic level at the departmental level.

In the private sector, we talk about enterprise risk management. One of the key elements in that area is the corporate risk profile: departments will identify some of the key risks and determine which of those they are going to be addressing in the context of their strategic and operational priority setting.

In 2003 this was an area departments had been working toward achieving, but they needed some guidance with respect to how best to put those processes in place. The Centre of Excellence on Risk Management was created. We provided guidance and tools for departments. We spent a lot of effort sharing best practices with departments. We're finding that essentially they pretty well all have good corporate risk profiles that are used as part of strategic and operational planning. You'll find the richness of those corporate profiles in the risk analysis and the RPPs, reports on planning and priorities. A section of the RPPs identifies the key risks of the departments and how they are planning on addressing them within the planning framework.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Is there any straight-line correlation between the increased percentages of CFOs with professional accounting designations and the improvement in risk management scores, or is this sort of coincidental, do you think? I mean, it's probably not fair, because you probably haven't had the chance to do an actual examination of that. But it seems to me to make sense.

[Paule Labbé]

In the context of integrated risk management, we're looking at all the risks faced by a department. To the extent that you have a professional chief financial officer who works towards what the financial risk management would be that would feed up into the larger integrated risk management process, there's no question that professionalization of the service is an improvement.

[The Chair, NDP, David Christopherson]

Thank you both very much.

We're now over to Mr. Allen. You have the floor, sir.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

Thank you to our witnesses.

Mr. Ralston, I would go back to page 14 in the lovely chart Madam Cheng has put together. I should say that Mr. Pickup actually put it together, since it's his report and he's the principal, but Madam Cheng gets to be the person who sits here with us and tells us that it's all a good job. I think that reflects on Mr. Pickup, who actually did it.

We can notice the lovely blue coloured circles that say “substantially complete”, which means that it is basically close enough to being complete that people think it's good. You documented the business risk in the process controls and what you intended to do as part of IRM, and that is all done in the major departments. Let's just say that it is done. But when we go to the testing design of the internal part, as wonderful as the document is, we don't know if it works unless we test it. It's like having a car. We think that the engine is in it, but we're not sure until we actually turn it on and see if it works. Then we find out if there's an engine in the car.

There's only one department, Veterans Affairs, that has actually done the testing. They haven't done the effectiveness of the testing, because they quite clearly say that it's partially complete, and then they say that they'll have it completed this fiscal year, 2010-11. Let's answer that one first. Are they done? This is 2010-11.

Mr. Guéranger, you're saying yes. Is that correct?

[Gonzague Guéranger]

They have finished their testing, and it's the same with another department. The other departments, the five other departments, are going to finish as planned, based on the most recent information they provided to Parliament with their DPRs. They provided public reports, the second public reports on their progress, and all the information indicates that the seven departments are progressing as planned, including two that have completed.

[Malcolm Allen, NDP, Welland, ON]

Okay.

The two that are indicated here as departments that should be completed you're saying are completed.

[Gonzague Guéranger]

Pardon me?

[Malcolm Allen, NDP, Welland, ON]

The two listed here as 2010-11 you're saying are completed. Is that correct?

[Gonzague Guéranger]

Yes.

The two departments that have a deadline of 2010-11 have finished, yes.

[Malcolm Allen, NDP, Welland, ON]

Okay, that's perfect.

The next part comes when we're trying to compare departments that are relatively close in size. HRSDC is not something you want to compare with others, because it's mammoth. It's a huge department, so I wouldn't want to try to do that, because that really is the proverbial apple and orange, if you will.

But you can perhaps look at the Department of Foreign Affairs and what is listed--incorrectly, actually--as INAC. I think Mr. Dreeshen would probably correct it, as it's no longer INAC. I know that it has had a name change. Probably when this went to press it didn't have a name change. In any case, it does. We'll note for later that it's no longer INAC.

When we look at them, it says that the testing concerns are moderately complete in INAC, as it's listed in here, just for the sake of using it, and the Departmentt of Foreign Affairs is partially complete. Both have not started as far as testing goes, yet INAC is saying that it will be complete in 2014-15 and Foreign Affairs is saying 2012-13. Can you tell me why there's such a discrepancy between the two departments? They're pretty close in size, I would think, dollar-wise at least, as far as number-wise is concerned. Clearly INAC is ahead of the curve compared to Foreign Affairs, in testing and design, yet it's a year behind at the end of the day.

[Jim Ralston]

In each case the question really needs to be posed to the departments. As I said, the choice was theirs in terms of looking at their understanding of their risks and their capacities and setting a realistic timeline for them, and I don't know enough about the details of the considerations they--