Public Accounts Committee on Nov. 28th, 2011

[The Chair, NDP, David Christopherson]

Ms. Cheng, you wanted in on that one too?

Time has expired, Monsieur.

[Nancy Cheng]

Perhaps an example would shed some light on the situation.

I think a typical example people would use to try to explain some of these issues is when you buy capital assets. You could buy assets right at the outset and have a major cash outlay in one year, or you could actually have a financial lease, which is really a financial arrangement over a period of time, so that you acquire the same asset but your payment stream is different.

Under a cash or near-cash appropriation basis, they actually would be coming forward to Parliament asking for very different sums, but in essence it's the same decision you're trying to make.

When you look at that, the two of them are not the same, but if you look at it on an accrual basis, the cash equation or the cost equation would be identical under both cases.

In some of the international experience they're running into a problem whereby if you allocate a ceiling or a certain sum of funds to be used for a particular purpose and not all of that is being expended in that year because it's a capital lease—and lease payments actually get paid out later on—or something of the sort, it's the management and the transparency of how that fund is going to be kept. Is it money kept aside for some other purposes that the government might have in mind?

It causes a lot of confusion in that sense. So those are some of the problems people run into, whereby if we go forward, we need to be careful about how we manage those kinds of issues.

Those are the basic differences between the two approaches, if that helps.

[The Chair, NDP, David Christopherson]

Very good. Merci.

Over to Mr. Shipley. You have the floor, sir.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Thank you, witnesses.

I'd like to go, Madame Cheng, to your report that you gave me. I'm trying to understand for clarification a little bit. This is actually your number seven.

You talked about the financial human resource capacity. It has improved significantly since your last report. I think the last report was 2006. Is that correct?

[Nancy Cheng]

Thank you.

There were two reports. There was one in 2003 and there was one in 2006. The 2003 one was the one that deals with financial management information, which referred to the statistics of the professionalization of the community. The 2006 report was more focused on risk management.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I think that's important also. I'm just trying to understand. You said 82% of the chief financial officers in 22 large government departments held a professional accounting designation. In 2002 this was only 33%.

Does everyone need to have a professional accounting designation? Or if that number were where it should be, what would that 82% be? Would it be 90%? Would it be 95%? Do you have any idea?

[Nancy Cheng]

I'll comment on that, and maybe the Comptroller General would like to express his views on this as well. Essentially, the policy requirement is that we need to have a qualified CFO, chief financial officer.

There are guidelines that the Office of the Comptroller General has promulgated that indicate they should carry an accounting designation, such as CA, CMA, and CGA. Those are the guidelines that the OCG had put forward to help deputy heads to establish what would be qualified CFOs. If you follow that particular guidance, the expectation is that ultimately we would like everybody to be able to demonstrate that they have the financial competency to operate at the level of the CFO and/or the deputy CFO level.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I wonder if you could add and grow on that. I don't know what you're at now. This is 2010. Can you talk to us about any progress or your thoughts on where you should be at this stage and where you are?

[Jim Ralston]

To clarify our expectations, we need to start with a little bit of context. This might be particularly true in smaller departments. Under the same assistant deputy minister, for example, there might be finance combined with IT. In another department, an ADM might be dedicated only to finance. To accommodate both scenarios, we stipulate that either the CFO or the deputy CFO must have an accounting designation. To use the small department example, it might be that the assistant deputy minister comes from a discipline other than accounting, but we would then expect a director general to be a DCFO who is a qualified accountant. Basically, in 100% of the cases we would see a qualified accountant in one or the other of those positions, and often you might see them in both. We don't insist that the person designated as the CFO be an accountant in all circumstances, because of these organizational realities.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

But depending on the department, growth is leading to where it should be, then.

[Jim Ralston]

I'll ask my colleague Mr. Guéranger to comment, but I believe we have pretty much 100% compliance--do we not?

[Gonzague Guéranger, Executive Director, Financial Management Policy, Treasury Board Secretariat]

It is expected that most, if not all, chief financial officers carry an accounting designation, especially when it comes to major departments. If that's not the case, it is expected that the deputy chief financial officer have an accounting designation.

In smaller departments, as the Comptroller General just mentioned, the positions often involve administrative, and not only financial, duties. Therefore, that flexibility, the possibility of not necessarily holding an accounting designation, is maintained for practical reasons.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I want to congratulate you on the progress you've made in working with the departments.

I'd like to go to the comments regarding the seven departments. You've developed a corporate risk profile. A number of the seven departments documented key business process controls. Then there's the testing design. There's only one that is still partially complete. The rest of them are either complete or moderately complete. They talked about a planned date to complete the first assessment. Most of those years are either now or a year or two away.

Mr. Ralston and Ms. Cheng, I'd like some clarification. Those seem to be reasonable dates. Are they?

[Jim Ralston]

We felt that the persons best able to judge the reasonableness of the timelines would be the accounting officers themselves, the deputy ministers. I would also point out that these deputy ministers for the large departments are obtaining advice from their departmental audit committees. We felt that they would be in the best place to judge an appropriate timeline. We can't impose a more informed timeline on them.

[Nancy Cheng]

I think this needs to be understood in terms of what this job represents. There are many steps to be taken before they have good systems of internal control in place. First and foremost, you need to know what they are. That is the documentation step. Then we have to have a view about whether the system as designed is going to be effective. This is testing the design of the internal control. Then we have to make sure that the controls are in place. Remember, we said we don't need more rules, but we have to apply the ones we have. We have to test whether we have them there. We need to know whether the controls are good and that they are functioning. In most cases, it would be extremely unlikely that you would come back and say everything's good. That means there would be gaps. When you identify the gaps, time must be taken to remedy the gaps and get things functioning. This is why we say there's still a fair bit of work involved. We could not sit back and say that those dates are good and we need not keep a close eye on them.

[The Chair, NDP, David Christopherson]

Thanks, Mr. Shipley. That will be the time.

Now over to Mr. Byrne. You have the floor, sir.

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

Thanks very much, Mr. Chair.

And thank you to our witnesses for appearing before us. Congratulations on the many laudable achievements that have been noted within the Auditor General's report.

The impact of this work is to create efficiency, effectiveness, and economical use of public funds. I am struck by a particular government initiative right now to improve efficiency, effectiveness, and economical use of public funds, and that is the whole notion of the program review or budgetary cost-cutting exercise, which all departments must engage in. It strikes me as odd that the very organizations or groups that improve efficiency, effectiveness, and economical use of public funds are also being included for cuts for the sake of efficiency, effectiveness, and economical use of public funds.

The interim Auditor General appeared before our committee not too long ago and outlined very specifically to us, as a committee, exactly what cuts would be made to the Office of the Auditor General. He outlined $6.2 million by 2014-15, and 60 positions.

Mr. Ralston, I gave your office a heads-up late last week that I would ask this question. What the committee would like to know is if you would be able to outline, in a similar fashion, cuts to the Office of the Comptroller General—

[Andrew Saxton, Conservative, North Vancouver, BC]

Mr. Chair, I have a point of order. What does that have to do with this report on financial management? It's a completely different subject. I think it's out of place.

[The Chair, NDP, David Christopherson]

I hear you, I'm listening, and I'm going to allow a little more latitude. I'm going to give a little more discretion on it, but I'm bearing in mind what you're saying.

At committees, as you know, there is a lot more latitude to allow members the opportunity to address questions that are relevant to them. Therefore I'm going to allow a little more along this line.

I'm think you're okay. Keep going.

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

Mr. Chair, I'd like to respond to the point of order without interfering with my time allotment, if I could.

[The Chair, NDP, David Christopherson]

Yes.

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

That's without the clock running on my regular time allotment.

This is about risk management and financial control. The government has indicated on numerous occasions that it has achieved great success in this because they have added additional financial resources to those that conduct this particular activity. For the purpose of responding to the point of order, I'd like to ask those appearing before us now whether the cutback of those resources will indeed impact their future performance.

I think it is very much in order.

[The Chair, NDP, David Christopherson]

Close enough. I'm going to allow it. Go ahead and keep going. You're in order.

Your time will be reinstated.

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

Mr. Chair, if I could get back to my regular time, I will ask Mr. Ralston to outline for the committee the impact of the required government reductions in staffing and financial resources for his department, the Office of the Comptroller General, and also for other departments.

In particular, you're responsible for the internal audit function, which is a centrepiece of risk management, control, and providing good accurate data to the government for performance improvement. Would you be able to provide similar information, as the Auditor General has done, as to the consequences to the internal audit function across government departments?

[Jim Ralston]

Mr. Chair, I trust the member is aware that there is a process in place to consider departmental proposals. That process continues, and the final decisions on what measures will be taken will not be announced, I believe, until the budget. I think it's premature to pose the question.