Public Accounts Committee on March 31st, 2014

[The Chair, NDP, David Christopherson]

You're very welcome.

Moving along, Ms. Jones, you have the floor again, ma'am.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you very much.

The question I have is regarding the territorial financial audits that you do.

This year we just went through a devolution agreement with the Northwest Territories. I know that they're maintaining the audit process that was in place before devolution. I guess my question is this. Does this require extra work or any additional audit work that normally would not come under the current practice that you have in place?

[Michael Ferguson]

What we do in terms of the territories is that we essentially act as the auditor general for each of the three northern territories. We audit the public accounts of each of the three northern territories—the financial statements of the government—and present those findings to the territorial legislature. We audit the various crown corporations in each of those territories as well, and we try to do at least one performance audit a year in each of the three territories.

Our plan is that this work will continue, and we don't have any reason right now to suspect that there's anything that would cause us to have to reduce that work.

[Yvonne Jones, Liberal, Labrador, NL]

I don't know if this question is appropriate or not, but I'm a little new to the committee. I'm just wondering, are there aspects of the federal government or the Government of Canada or any of the crown corporations that the AG's office is not permitted at this stage to do auditing practices on, which you may have made requests to do in the past or even may have not made requests to do? I'm just wondering if there are any particular aspects that are not included.

[Michael Ferguson]

Nothing is particularly coming to mind in terms of anything that we have asked to do. There are certain restrictions. One that's coming to mind is the Bank of Canada where we don't have an audit mandate, but we haven't asked to have an audit mandate at the Bank of Canada.

The other, again, isn't something that we have pursued to date, but something that we might have to spend some time thinking about is that there are sometimes some organizations that are established that have.... The ownership is the federal government as well as provincial governments, all represented on the board of some organizations. Whether we would have the mandate to do a performance audit in that type of organization or not, I'm not sure. It's not really a question we've explored very far, but at some point it's one that we may want to explore.

[Yvonne Jones, Liberal, Labrador, NL]

If I can just take it a little bit further, obviously one of those groups that I would be familiar with is the Canada-Newfoundland and Labrador Offshore Petroleum Board, which is jointly shared between the federal and provincial governments. I wonder if that is part of the auditing docket that you guys would have now or if it would be one that is still excluded.

[Michael Ferguson]

Through the work of the Commissioner of the Environment and Sustainable Development sometime over the last two years, we did an audit that looked at the offshore petroleum boards both in Newfoundland and Labrador and in Nova Scotia. I've forgotten the actual title of that particular chapter, but it was within the last two years and was done as a report issued by the Commissioner of the Environment and Sustainable Development. We were able to get into both of those boards to the extent that we needed to in order to perform those performance audits.

[Yvonne Jones, Liberal, Labrador, NL]

Have there been any other particular audits that have been done like that more recently and would not have been done in the past that have been added to the work of your office?

[Michael Ferguson]

Again, I think one place where it has always been a bit of an issue as well in terms of how much access we have is with Parliament itself, either the House of Commons or the Senate. So I think the fact that we have access now to do the audit of the Senate is the type of audit that we have done only periodically rather than on a regular basis.

[The Chair, NDP, David Christopherson]

You have 10 seconds.

[Yvonne Jones, Liberal, Labrador, NL]

I'm good.

[The Chair, NDP, David Christopherson]

You're good? Great. Thank you very much.

Moving along, Mr. Aspin, you have the floor, sir.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Chair.

Welcome, both of you, to our committee.

I'm looking at page 3. Under “Report on Plans and Priorities”, you have indicated in your remarks, Mr. Ferguson, that, “Looking forward, we have articulated a new set of strategic objectives for the Office and identified four areas where we believe we can make improvements” in your planning.

That's good. That's notable, but my question is really on activity. When making appropriations in the estimates process for the coming fiscal years, how do you really prioritize your office activities? Do you set quotas of audits and schedule different departments, agencies, and programs accordingly to meet that quota? Also, how does your office account for the unexpected needs of Parliament in the estimates?

[Michael Ferguson]

When we are determining our work plan, we start with the financial statement audits that we do, because we have to do those and we have to do them every year. They are regular work, so the first part of our budget is carved out to complete those financial statement audits.

Then we also have a mandate that requires us to do the special exams on crown corporations. For most crown corporations, we have to do a special exam at least once every 10 years. We have a schedule that looks out over a 10-year period for each crown corporation as to when we have to do the special examination. That's the second piece that would come into our budget.

Meeting those legislative requirements to do financial audits and special examinations would be the first things we take into account. With regard to the balance that's left over, that's what we can devote to our performance audits.

When we are deciding what we can do in terms of performance audits, we do risk assessments of various government-type activities. We do risk assessments to decide what areas we should be doing performance audits in, and we settle on that. For planning purposes, we try to do that over about a three-year period. We look out over three years to say maybe not exactly what the subject of the performance audit will be in each of those three years but in what area it will be. We do that type of planning.

Very much, our planning is focused on those three activities: financial statement audits, special examinations, and then the performance audits.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Okay.

Do you consider factors less quantitative than whether your audits are on time or on budget when measuring your office's performance?

[Michael Ferguson]

Sorry, I missed the first part of that.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Do you consider factors less quantitative than whether your audits are on time or on budget?

[Michael Ferguson]

I think that's why what we're trying to do as well is understand the value we bring in the audits we do. That's why we do the surveys of our stakeholders on whether they believe we are adding value. That's how we are trying to understand what is the less quantitative aspect of these audits.

We do financial statement audits of various organizations every year. We can issue a clean opinion on those organizations year after year, but the fact that you do those types of financial audits can have a deterrent effect, right? Doing those audits can cause an organization to say, “You know, we need to make sure we're always doing this right.” You don't notice from year to year the issues coming out of those financial audits.

So understanding that there is value to doing financial audits every year, even if they aren't identifying specific problems, is the type of non-quantitative value assessment that I think you're talking about.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Okay.

Just briefly, because I only have about half a minute left, could you describe your relationship with the rest of government and how that impacts your financial report processes?

[Michael Ferguson]

We have to work very closely with departments in making sure that they understand what we're doing the audit of, making sure that they understand what information we need and that they can provide us with that information. We spend a lot of time making sure that we have good working relationships with the departments that are the subjects of our audits. That's a very important piece of our business.

[The Chair, NDP, David Christopherson]

Very good. Thank you.

Mr. Thibeault, you have the floor again, sir.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Chair.

I guess I'll start with some comments. I will get to a question, so just bear with me.

I was looking at section 12 in your report, page 3. I'll quote what it says here:

First, we want to ensure that our audits are adding value for parliamentarians, territorial legislators, Crown corporation boards of directors, and audit committees.

I think everyone of every political stripe would agree that this is important, so we congratulate you on that.

You go on to say that, secondly, you will be “working to make our governance and decision-making practices and processes as efficient and economical as possible.” Again, I think that's all something we can agree with.

You continue:

Third, having completed the updating of our audit methodology last year, we will be looking at opportunities to implement our audit methodology as efficiently and economically as possible. Finally, we have begun talking with our staff about ensuring that we operate in an environment where our employees feel more empowered to do their work.

Again, that's something that I think we would all, as all parliamentarians, agree is great.

The Office of the Auditor General has been getting great results. If you go back to your predecessor with the G-8 spending and then of course your taking over that file, the report and the study into the F-35s, of course the senate audit, and then of course more and more I think we're needing to look at defence procurement in general, there have been great results coming from your office time and time again. It makes us wonder, I think, as parliamentarians, or at least the opposition on this side, what we would be able to accomplish if you were fully funded and fully resourced. If we'd been able to have the G-8 spending looked at, had the results in relation to the F-35, and the senate audit from previous, and now the ongoing senate audit....

I believe the number of staff is being reduced by 69 employees. From 2010, when the number was 629, it will go to 560 by 2016-17. Of the 69 being reduced, how many of those employees will be actual auditors who will no longer be employed by the Office of the Auditor General?

[Michael Ferguson]

I'll ask Ms. Sachs to answer that question.

[Lyn Sachs]

Out of those numbers, half are administrative efficiencies, reducing the hours that the reception is open, reducing the library services, so the 69 are not auditors. Thirty were auditors, and allow me to say that five in that third year are because we will be losing an international audit, so it has nothing to do with this work.

So let's deal with 60. It's 30 administrative. It's 30 audit, 10 of which were actually producing this methodology so they were not doing audits. Now we're down to 20, and we've reduced the number of audits. We reduced those 25 financial audits that we felt were not adding value, so our actual audit complement is actually not dropping the active work that is being done. Other than those 25, financial audits are still going on. Those 30 performance audits that we've done historically are still going on. So the numbers look worse than they actually are in the way of reduction of audit power, if you wish to say so.

[Glenn Thibeault, NDP, Sudbury, ON]

Well, I would state that with all due respect, if you move the goalposts, it's easier to make the numbers look like you're fulfilling your mandate. We need to ensure, especially in this time of transparency and accountability that all parties are saying.... I think all parties want to see more of this. So how can we tell Canadians to rest assured that the Office of the Auditor General is able to do the audits it needs to? Because to quote what Mr. Ferguson said, there is “no shortage” of doing performance audits. That was his quote. There's no shortage of doing those. But what we have right now according to the statistics is a shortage of resources and a shortage of staff.