Public Accounts Committee on May 21st, 2013

[The Chair, NDP, David Christopherson]

I now declare this 92nd meeting of the Standing Committee on Public Accounts in order.

Colleagues, you'll note that today we have with us the Auditor General, and Lyn Sachs, assistant auditor general.

Colleagues, our main duty is oversight of government expenses and reviewing the audits of the Auditor General. Today we will be performing our duties as the oversight of the actual department of the Auditor General.

You have the opening comments from Mr. Ferguson, our Auditor General, before you. You will also find the Auditor General's 2011-12 performance report and the report on plans and priorities for 2013-14. We're looking in the past to see what was done last year and we're looking forward to see what is being proposed this year.

When we've concluded our discussions, colleagues, I will have two questions to put to you in terms of estimates votes, to determine whether or not we agree with the estimates that have been tabled by the Auditor General, and then forward that vote to our colleagues in the whole House.

Unless there are any questions as to procedure, I will have us move ahead. I'm not seeing anyone indicate any need to interject, so with that, Mr. Auditor General, I would turn the floor over to you.

Mr. Ferguson, you now have the floor.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you.

Mr. Chair, we are pleased to be here and would like to thank you for this opportunity to discuss our 2011-12 performance report and our 2013-14 report on plans and priorities.

With me today is Lyn Sachs, assistant auditor general of corporate services and chief financial officer.

Parliament has given us the mandate to support its oversight of government spending and performance with our financial audits, performance audits and special examinations of crown corporations. We are privileged to serve Parliament by providing the objective information, advice and assurance that result from this work.

All of our audits are conducted according to Canadian Auditing Standards and Canadian Standards on Quality Control. We subject our system of quality control to internal practice reviews and monitoring to provide assurance that you can rely on the quality of our work.

During our 2011-12 fiscal year, the period covered by our most recent performance report, we used $89.8 million of the $94.6 million in parliamentary appropriations available to us, resulting in a lapse of $4.8 million. We had a budget of 633 full-time equivalent employees and employed the equivalent of 640 full-time employees, an increase of 11 from the year before.

With these resources, we completed all but three of our planned 145 financial and performance audits, special examinations of crown corporations, and the work of the Commissioner of the Environment and Sustainable Development.

In addition, we completed three performance audits that were not planned in our 2011-12 report on plans and priorities. We also completed the majority of our renewal of audit methodology project on time and on budget, with the final components completed a few months ago.

Our 2011-12 performance report contains a number of indicators of the impact of our work and measures of our operational performance. The tables containing our targets and actual performance results in relation to those indicators and measures are attached to this statement.

Our performance report shows that we met many of the targets for our indicators of impact. It indicates that the office participated in 29 committee hearings and briefings, compared with 46 the previous year, and that parliamentary committees reviewed 43% of our performance audits, compared with 62% in 2010-11. It also shows that departments made satisfactory progress in addressing 62% of the 42 recommendations we made in the original audits.

Our measures of organizational performance remained positive, with our on-budget performance for most of our financial audits improving over the previous year. Our 2012 employee survey indicated that employee engagement remained high, with 95% of employees feeling proud to work for the office.

In planning for 2013-14, our first priority is to complete the renewal of the office's strategic plan. We are undertaking a comprehensive review of what we do and how we do it. We are looking to identify areas where we can make meaningful improvements to better serve Parliament and build on the strengths of the office.

We would appreciate your input and will be looking to engage you in this process. The results of this review will be presented in our 2014-15 report on plans and priorities.

This year we will also continue to implement our strategic and operating review plan that we submitted to Parliament in October 2011. This review helped us to focus our audits on the areas of greatest risk. We are on target to discontinue all of the federal and territorial financial audits that we had identified.

The majority of our interaction with Parliament is through our performance audit practice. We conduct performance audits to examine the efficiency, economy and environmental impact of all federal government departments, agencies and other organizations. We had made reductions to our performance audit practice over the past couple of years. As a result of our Strategic and Operating Review plan, we proposed no further reductions to our performance audit work in 2013-14. We have attached to this statement a list of our planned audits.

The overall result of this review will be to reduce our budget by over $6.5 million, which will be somewhat offset by additional funding for economic increases, and to reduce our staff levels by about 10%. We plan to reduce our staff for 2013-14 to 590 from 615 last year, on our way to our target of 576 in 2014-15.

In conclusion, Mr. Chair, my staff and I appreciate your ongoing interest in and support for our work. We look forward to continuing our work to assist you in holding the government to account for its management of public funds.

Thank you, Mr. Chair. We would be pleased to answer your questions.

[The Chair, NDP, David Christopherson]

Very good. Thank you, Mr. Ferguson. I appreciate your opening remarks.

Now, colleagues, we'll begin our discussions in the usual rotation, beginning with Mr. Saxton.

You now have the floor, sir.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair, and my thanks to the Auditor General and the assistant auditor general for being here today, and for your report.

I'd like to ask you, Auditor General, what are your main priorities for this year?

[Michael Ferguson]

For the year 2013-14?

[Andrew Saxton, Conservative, North Vancouver, BC]

Yes.

[Michael Ferguson]

The priorities are laid out in the report on plans and priorities for 2013-14. They include all of the performance indicators and measures. On page 8, we have said that we are going to continue to implement our strategic and operating review proposal, and also to renew our strategic plan. Those are our two priorities for 2013-14, but the document also lays out all of our performance measures.

[Andrew Saxton, Conservative, North Vancouver, BC]

Last year when you came before committee, you were asked whether as a new Auditor General you had any plans to make any changes to the Office of the Auditor General. I think at that time you mentioned that if there were any changes they would be more evolutionary than revolutionary, so to speak. They would be smaller changes, rather than big changes. I want to ask what has evolved over the last year, and whether you anticipate any changes to the Office of the Auditor General.

[Michael Ferguson]

Over the last year, a number of things have happened. We have completed the implementation of our updated methodology, and the approach we use in audits is to make sure that we're staying abreast of best practices. That's been significant.

The other significant thing that we have started is our whole strategic planning exercise for the office. I've been told that it's been about 10 years since the office has undertaken a complete strategic planning exercise, and that is something that is under way. There have been some changes within the office, but they are on the margins. I probably interact a little differently with performance audits than my predecessor. So there have been some changes, but they've been internal and on the margins.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

When it comes to performance and financial audits, you're doing both. But don't you think it is hard to conduct a performance audit without taking a critical look at the numbers as well?

[Michael Ferguson]

In a performance audit, what we do is set the objective of that audit. We determine what we want to look at. We then establish criteria. We establish what the benchmarks are, what we can measure against. Certainly, in a performance audit, we attempt to look at indicators, whether they be financial or performance indicators, and include those in the audits. Some performance audits focus more on numbers than others, whether they be performance numbers or financial numbers. Some performance audits lend themselves less to that type of review, but it's a consideration we have every time we're planning a performance audit.

[Andrew Saxton, Conservative, North Vancouver, BC]

In the past, your office has conducted peer audits, that is, audits of other auditors general around the world. You've also been audited by other auditors general. Do you have any of those planned over the next year?

[Michael Ferguson]

To the best of my knowledge, there are no peer audits planned for our office. We will be participating in a peer review of the GAO in the U.S. and perhaps one other one as well over the next year. But we are participants in those; we are not the leads on them.

[Andrew Saxton, Conservative, North Vancouver, BC]

You mentioned your budgeted figure versus your actual expenses, and that there was a $4.8 million saving, I believe it was. Can you share with us how you were able to achieve those savings?

[Michael Ferguson]

It's all been a result of our strategic and operating review. During the year, one of the things we were looking at doing was reducing some of the financial audits or some other audits that we were required to do but we didn't feel were of much value. We managed to reduce some of those. Actually, we managed to reduce some of those earlier than we anticipated. We have also made, I suppose, various administrative changes in the office that have helped us get there as well.

It's been a bit of both, a bit of a reduction on the actual audit side as well as on the administrative side, but all of the reductions we've made were consistent with the plan we put together.

[The Chair, NDP, David Christopherson]

Time has expired.

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, and thank you, Mr. Ferguson and Madam Sachs, for being with us.

In your comments, Mr. Ferguson, you talked about a reduction of $6.5 million coming up in the projected budget of 2013-14 and a reduction in staff by about 10%, down to 590 from 615, on your way to a target of 576, according to the notes you have here. You said the effort will be made to do this through attrition, I'm assuming, where possible.

Can you give me a sense of what that attrition might look like? If folks in one area or another are on the cusp of leaving, shall we say, whether by retirement or simply moving on, what kind of impact does that have on the flow of people leaving to get to this target, vis-à-vis having to let someone go, if you will, through redundancy?

[Michael Ferguson]

I think the fact that we've had a couple of years to implement this does mean that we will be able to manage most of the reduction through attrition. I would actually say that the impact on us is more at the recruitment end.

Again, for the most part, the attrition is going to happen, and that will help us get down on the numbers. But the other thing it means is that we can recruit fewer people at the entry level. That has a bit of an impact on some of the audit work we do. Work that we would normally assign maybe to somebody at an entry level—if we have fewer of those folks—perhaps has to be done by somebody who is in their second year rather than their first year.

I think the challenge in the reduction for us really is more perhaps at the entry level rather than at the level of the folks who are leaving.

[Malcolm Allen, NDP, Welland, ON]

That would lead one to conclude, as you do human resource planning, which I'm sure an organization of that size needs to do because you need certain expertise.... If there is a reduction at the front end, if I can use that term, of new folks coming in who you're looking to keep over a longer period of time, obviously to gain experience and to become seniors in the department.... I'm sure folks in your human resource sector are looking at your planning forecast.

Do they see that as a potential...and I don't want to call it “danger” because that's a strong word, but is that a real potential for a department that isn't firing on all cylinders? Maybe I can phrase it that way.

[Michael Ferguson]

Certainly, we do a lot of resource planning, and looking at the whole mix of our employees is something we do keep an eye on. We do have fairly regular turnover in staff. We have a number of staff in the middle level of the organization who will leave. Many of them go to work in other government departments, which actually, from our perspective, is a good thing—to have people in departments who have been through the office, understand what we do, and that sort of thing. So that's a good thing.

Certainly, though, one of the main challenges we have on the human resource side is monitoring that mix of employees, making sure we have the right mix, at the entry levels, at the mid-levels, and at the senior levels.

[Malcolm Allen, NDP, Welland, ON]

Perhaps I can take you to a different place. Some statistics have come forward that your engagement with this committee has actually shrunk, from 62% back in 2009–10 to 43% in 2011.

Do you have any sense of how we can improve that engagement? We'd truly like to see you here more often, Mr. Ferguson. We actually enjoy the information you bring to us, in addition to your personal company, which I always find heartwarming, to be truthful.

Do you have any suggestions for this committee on how we can work more collaboratively to allow you to be here more often?

[Michael Ferguson]

When I look at the numbers of chapters we produce that have hearings—and in our numbers, we look at all of the work of the office and whether it goes before a committee, and it doesn't really matter what committee—what stands out the most for us is on the side of the Commissioner of the Environment and Sustainable Development.

During 2011–12, I believe there were seven or eight chapters produced by the commissioner and none of them had a hearing in front of any committee.

There were 15 chapters produced under the Auditor General's side of things and 10 of them had at least one hearing. But on the commissioner’s side, it was zero out of eight. That's probably what concerns us most.

The section that's devoted to the commissioner does performance audits, under the same type of methodology, but in that year there were no committee hearings on those chapters.

[The Chair, NDP, David Christopherson]

Thank you very much.

Before I go to our next speaker, I welcome Mr. Harris, who has joined us today. It's good to have you with us, sir.

Mr. Kramp, you have the floor, sir.

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

Thank you, Chair.

I welcome the Auditor General and Ms. Sachs.

Auditor General, what percent of your budget is salaries?

[Lyn Sachs, Assistant Auditor General, Office of the Auditor General of Canada]

We spend about $72 million of our $85 million in salaries, however that works out.