Public Accounts Committee on May 4th, 2015

[The Chair, NDP, David Christopherson]

I now declare this 58th meeting of the Standing Committee on Public Accounts in order.

Colleagues, we are here today pursuant to Standing Order 81(4), main estimates 2015-16, vote 1 under Auditor General. It was referred to us on Tuesday, February 24 of this year.

The three components of what we'll be dealing with today from the Auditor General's office are his 2013-14 departmental performance report, the 2015-16 report on plans and priorities, and the 2015-16 main estimates. Within those main estimates is the budget for the Office of the Auditor General. As this Auditor General knows, at some point during all of this we do ask flat out, publicly, if the Office of the Auditor General has sufficient funds to carry out their mandated responsibilities. I expect that to happen in due course.

That sets it up. It's fairly straightforward. We've done this every year. Unless there are any interventions, I think we're ready to go. We'll begin by asking our Auditor General to read his opening statement.

Mr. Ferguson, you have the floor, sir.

[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 2013-2014 performance report and our 2015-2016 report on plans and priorities.

With me today is Sylvain Ricard, Assistant Auditor General of Corporate Services and Chief Financial Officer, Lucie Cardinal our Comptroller, and Kimberly Leblanc, Director of Human Resources Services.

Our financial audits, performance audits, special examinations of crown corporations, and the work of the Commissioner of the Environment and Sustainable Development serve Parliament by supporting its oversight of government spending and performance.

In the 2013-2014 fiscal year, the period covered by out most recent performance report, we completed 100 financial audits, 2 special examinations, and 29 performance audits, and we began work on the audit of senators' expenses.

All of our audits are conducted in accordance with Canadian auditing standards and Canadian standards on quality control. We subject our audits and system of quality control to internal practice reviews and monitoring, and to periodic external reviews to provide assurance that you can rely on the quality of our work.

In the 2013-14 fiscal year, we used $84.3 million of the $88.3 million of parliamentary appropriations available to us. We had a budget of 576 full-time equivalent employees and employed the equivalent of 573 full-time employees.

With these resources, we completed all planned audit work except for one performance audit, on workforce adjustment measures, which was cancelled. In addition, we completed a previously unplanned performance audit, a follow-up on child and family services in Nunavut.

Our 2013-2014 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 are attached to this statement as appendix A.

We followed up on 10 performance audit recommendations and found that entities had made satisfactory progress in implementing five of them, or 50%, which is below our target of 75%. In our 2013-14 performance report, we noted that 21% of our performance audits were reviewed by parliamentary committees, compared with 30% in the 2012-13 fiscal year and 48% in the 2011-12 fiscal year. Recently a hearing about one additional audit is taking place, bringing the result for 2013-14 to 24%.

Although our measures of organizational performance remain generally positive, we did not meet our on budget targets for performance audits and special examinations. Our results for performance audits were significantly affected by three audits with relatively small budgets. The one special examination that was over budget had a more decentralized operational management than anticipated, leading to increased audit effort.

Our practice reviews serve as a key quality control in our audit methodology. In all cases, these reviews found the audit reports we issued to be appropriate and supported by proper evidence. However, our reviews also identified a need to improve the documentation of the nature and extent of oversight by senior auditors in some of our files.

Looking forward, we are always seeking opportunities to improve our products and operations. In the 2015-2016 fiscal year, we will continue activities to maximize the value of our audits and will seek further efficiencies in our audit processes. We will focus most of our improvement efforts on the following three priorities.

First, we will implement new senior management roles and responsibilities for our audits. This implementation will lead to more streamlined decision-making and ensure that decision-making can occur at the most appropriate level in the organization. We will also be completing a review of the office's governance framework to allow us to implement one better suited to support the new roles and responsibilities and our operational needs.

Second, in support of the new roles and responsibilities, we will be updating our professional development and official languages plans. Updating our professional development plan will ensure that we provide our staff with the training and development opportunities they need to meet their new responsibilities. Updating our official languages plan will ensure that we support our staff in their efforts to maintain or meet the language requirements of their positions.

Third, to ensure that decision making is occurring at the most appropriate level in the organization, we must empower our employees to make decisions about their work. We have surveyed our employees to assess their level of empowerment, and we will be developing actions to respond to their feedback.

Having completed the review of our strategic plan and objectives, we are well into our review of the related performance indicators that we will use to manage the office and to report to you on our performance. Many of the indicators remain unchanged, although we have added some important new ones in the areas of our independence, financial management, audit selection, internal service standards, and development and management of our people. Tables containing our renewed performance measures have been attached to this statement as appendix B.

For the 2015-16 fiscal year we are requesting parliamentary appropriations of $78.3 million in our main estimates. Our planned number of full-time equivalent employees is 557. With these resources, we expect to complete more than 95 financial audits, 21 performance audits, and five special examinations and to report on our audit of senators' expenses.

In conclusion, Mr. Chair, my staff and I look forward to providing you with valuable assurance, information, and advice in the coming year. We thank you for your ongoing support of our work.

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

Thank you.

[The Chair, NDP, David Christopherson]

Very good. Thank you, Mr. Auditor General. Proof positive that in a democracy all is transparent and accountable, here you are today. In your role, usually you're helping to hold others accountable and making sure they are transparent, and today is the day we look at the Office of the Auditor General in that same light. Thank you very much for your presentation.

We will begin the rotation in the usual fashion, kicking things off with Mr. Albas.

You have the floor, sir.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Thank you, Mr. Chair.

Thank you, Auditor General, and your staff. I appreciate all the work you do for Canadians.

In regard to your budget, Auditor General, you said in your opening statement that you are asking for $78.3 million through this vote. Where would the majority of that money be going in your organization?

[Michael Ferguson]

There are different ways to break down how our budget is allocated. About half of our total effort goes toward performance audits and the other half goes towards our financial statement audits.

Within that, we have an organization, or a group, called our professional practices group that supports both our financial and performance audit groups. There are different ways of looking at it. You can look at it from the point of view that about 50% of our effort goes toward performance audits and 50% of our efforts goes toward financial audits, or you can break out some of the administrative and methodology support for the office as well. Overall, I think it is about 50-50 in terms of the two main products that we're known for.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Great. Thank you.

In your opening comments on page 3, on paragraph 12, you talk about some implementations to changes to senior management roles. Could you please go into a little more depth as to what changes that you've implemented and what that might mean?

[Michael Ferguson]

Certainly. This is really about a few things. It's about looking at ways to be more efficient. It's about looking at.... As I've said, one of our strategic priorities is about empowerment and making sure that the decision-making authority within the organization is done at the level of people with the skill and the experience to make those decisions.

We are moving to a model where we expect the principals—the group in our office that are referred to as principals—to be responsible for delivering the audits. The assistant auditors general will now be much more responsible for strategic initiatives.

When I first joined the office, I'm not exactly sure how many people we had in our executive group. I'm going to say 16. Our goal is to move that to nine, to make our assistant auditors general more strategy-oriented about what the office should be doing and how we provide value, and to make it the responsibility of the principals to deliver the product that we deliver.

It's very much about trying to align all of those roles and responsibilities where they should be within the organization.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Good.

On paragraph 13, you also speak about training and development, and also official language training. Could touch upon that and what that will mean for the organization?

[Michael Ferguson]

To do our work, we've identified in our strategic planning exercise that we need to have a skilled, engaged, and bilingual workforce. We are putting a lot of emphasis on making sure that we do those things. In order for us to deliver on our mandate, we need to make sure that our people have the competencies that they need both in terms of their professional practice and in terms of their linguistic competencies.

We have under way right now in the office an exercise of determining where we feel training gaps might be, whether it be for the auditors or for the people that support the auditors, so that we can then fill in any of those gaps that we identify.

Similarly we are in the process right now of updating our official languages strategy because we feel there's more that we need to do in order to support our staff to both maintain or obtain their language skill level. It's one of our focuses for the upcoming year.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

How much time do I have, Mr. Chair?

[The Chair, NDP, David Christopherson]

Ten seconds.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Thank you. I appreciate it. I'm sure many other good questions will come up. Thank you.

[The Chair, NDP, David Christopherson]

I appreciate it too. Thank you, Mr. Albas.

Over now to Monsieur Giguère. You have the floor, sir.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair.

Mr. Ferguson, it is interesting to note that you have been able to considerably reduce your budget in order to comply with government directives. I am wondering about a problem the two of us have previously discussed, mainly, Canada Post and the Conference Board report on its future.

I spoke to you about a special examination, since according to information provided by the Parliamentary Budget Officer and the Library of Parliament, the Conference Board report contained some serious inaccuracies. I had asked you to investigate that situation. You replied that it would not be possible to do so before 2016.

Is is true that because of budget cuts, you have lost your freedom to conduct immediate investigations of urgent issues?

[Michael Ferguson]

Fundamentally, in terms of the audits we've done, we always plan out three years' worth of audits. Certainly when budgets are tighter, it means we have less flexibility, but we have always planned out three years. The result is that we've always tried to make sure all of our staff are assigned to audits that are coming up. In that process, we have to let the entities we are auditing know that we are going to do an audit on them.

We've never really had a lot of flexibility in terms of being able to change those plans midstream. Certainly when budgets are tighter, there is less flexibility, but we've always been in a process of trying to plan out. We've never made a practice of changing things a lot midstream. We want to make sure our auditors know what they're working on and they can do that preplanning. We also need to inform the organizations we're auditing that we will be coming in and doing an audit on them so that they can be prepared to receive our auditors when they come on site.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

It's excellent in that respect, but organizations such as the Senate and Canada Post might require more freedom and flexibility from you. However, as you have indicated, you have lost part of your flexibility.

Regardless of the nature of the file that is submitted to you, would it not be beneficial to have greater flexibility so that you are able to react quickly to a major problem with an immediate effect on government management?

[Michael Ferguson]

I think having a budget with flexibility, a budget where we could have more flexibility to respond, would obviously be ideal. Remember, though, the flexibility would have to be not only on our part; the flexibility would have to exist within the organizations that we would be doing audits of. If there were an immediate need to do an audit on something, again, the organization we were going to do that audit on would have to be prepared and ready to have our auditors come in and do that. Being ready for an audit takes some preparation, takes some time and planning, on the part of the entity being audited as well.

Certainly having a larger budget would give us more flexibility and let us cover a wider range of topics, always remembering that we're never totally in control of exactly when we do an audit. It does take some planning, both on our part and on the part of the organization we are auditing.

[The Chair, NDP, David Christopherson]

Mr. Giguère, you're in the same boat as Mr. Albas. You have 10 seconds.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

In the case of the Senate, you reacted quite quickly, almost at a moment's notice. As the saying goes, you were able to turn on a dime.

[Michael Ferguson]

That certainly is the case. There are situations where we are able to do that. In the case of the Senate audit, while it's a large audit in terms of time and transactions, it's a fairly simple audit in terms of what we are auditing. We are auditing expense claims, payments, these types of things. From that point of view, it's a simple audit. There's not the complexity that might be involved in bigger audits. It's just an audit that takes time and effort because of the number of transactions involved.

[The Chair, NDP, David Christopherson]

Very good. Thank you. Time has expired.

Vice-Chair Carmichael, you have the floor, sir.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Mr. Chair.

Auditor General, in your report, under “Planning Highlights by Product Line”, you have a section on strategic outcome and expected results. It opens with the following:The long-term strategic outcome of the Office of the Auditor General is to contribute to better-managed government programs and better accountability to Parliament through legislative auditing.

We would all agree that you've accomplished that. Obviously, to continuously improve on that would be something that is at the root of everything you do each day.

In your short-term and medium-term objectives, though, I noticed the objectives for both the short term and long term speak to engaging “Parliament, territorial legislatures, and federal and territorial organizations in the audit process”. Then on the medium term, you talk about “holding governments to account”. I think for those of us who had the privilege of attending last summer's conference on auditing and the procedures across the country, we work toward that with our colleagues provincially and territorially. I think that works very significantly to help benefit us in our jobs.

In the medium term you talk to ensuring “that the public is well informed about our work”. I wonder if you wouldn't mind talking to us a little about that and how you might hope to make that a reality. How do you intend to make that happen?

[Michael Ferguson]

Sorry, I'm just trying to find—

[John Carmichael, Conservative, Don Valley West, ON]

It's on page 11.

[Michael Ferguson]

The question, again, was...?