Public Accounts Committee on May 4th, 2015

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

In the medium term, you talk about ensuring “that the public is well informed about our work”. How do you, in your capacity, intend to make that happen?

[Michael Ferguson]

In terms of making sure people are well informed about our work, that's all about us having strategies to make sure our reports are accessible.

I think you will have seen that we have started to make some changes in our performance audit reports, for example. We have a document that we call “Audit at a Glance”, which is to help people understand the audits. Also, the format of those reports has changed. We are focusing more on what we found in the performance audits and trying to make that clearer to the reader. We have an exercise under way now to improve our Internet site so that people can have better access to the information we're providing.

I think it's all about trying to make the audits more accessible and trying to make them information dense, so you get to the main messages in the audit very quickly.

We also have a new product that we're working on. We haven't finished it yet and it's not something we're ready to roll out. We're looking at a report that helps people understand the work we do on financial statement audits because it's not something that people know us for.

As I said to the opening question, about 50% of our work is doing financial statement audits and the other 50% is doing performance audits. Of course, everybody knows us for the performance audits because we have hearings on them and they get that type of attention. The other half of the effort in the office is all around the audits we do on financial statements, whether it be of the Government of Canada, or of various crown corporations and agencies.

We don't have a way yet of communicating to Parliament exactly.... Other than an opinion on a set of financial statements, we don't have a way of communicating results of that practice as a whole. We're trying to come up with a way of doing that, so that we can better inform Parliament about that 50% of our effort.

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

Mr. Chair, what's my time?

[The Chair, NDP, David Christopherson]

Ten seconds again.

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

Thank you. I'll be back.

[The Chair, NDP, David Christopherson]

Thank you.

There we go, following the Albas standard.

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

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

Thank you, Mr. Ferguson, for being with us today.

In your opening remarks, bullet 8 is about your performance report, which is not really auditing, in a sense, your department, it seems, but somewhat auditing this committee. Albeit welcome, the difficulty I have with it isn't the fact that it's factual; it's the fact that it is factual. It shows that in 2011-12 we actually looked at 48% of the audits you brought before us. Then of course a year later it dropped to 30%, and a year later it dropped to 24%. The trend line is not necessarily going upward, it's actually going downward—at least the performance is, shall I say, and it is a performance report.

I don't know, sir, if you want to comment on that or not, or on how you would...not necessarily on us specifically as the group, because it would be unfair to ask you to do that. I guess the question I have is with regard to the standard you set in other areas. In the bullet above, you talked about recommendations. You looked at 10 of them and only five of them were completed. You said that was only half, but you had a target of 75%.

Do you have an internal target of a certain number of reports you'd like to see this committee actually study? You're not asking us, and I'm not asking you to tell us, about which ones you think we should do, albeit I think we've tried to do that from time to time. But internally does the department say it would be nice if the committee got to...?

I know that you would like us to look at them all. I think that would be obvious. They're that important, but time constraints don't let us do them all. Do you have an internal number as a target that you would like to see us work towards?

[Michael Ferguson]

I'm just double-checking exactly how we have stated that in our report. We'll find that for sure, to see what exactly we've stated on that in terms of a target.

Fundamentally, we have noticed that it has gone, as you said, from 48% to 30% to 24%. The target percentage of performance audits to be studied by parliamentary committees is 65%. Again, we know that this is not something we are totally in control of, so we present the audits.

As I go back further, just looking at the schedule I have in front of me—this is not something that was given to the committee—in 2008-09, it was at 57%; in 2009-10, 68%; in 2010-11, 62%; and then 48%, 30%, and 24%. As well, we had established a target I think a few years ago, when it was back in that 50% to 60% range, and we established it at 65%.

So it's concerning, I guess, for us, trying to understand this. Does it mean that we are producing reports that are of less interest to parliamentary committees? Does it mean that we are producing more reports than the committees can handle? It raises a number of questions like that, and I think that's simply the reason why we put that in our opening statement, just to remind the committee of the percentage of reports that are getting a hearing. The committee can take that as information for its own deliberation.

[Malcolm Allen, NDP, Welland, ON]

I appreciate the standard, or at least what you'd like us to see as that, which is an internal performance number of 65%. It seems to me we're striking out at less than half over the last couple of years. If you were actually doing a performance rating of us, you wouldn't give us a very good grade on that, it seems. It might be followed with a recommendation that would say something like....

Again, sir, I recognize that you're not going to do this, and nor would you dare to, but I can quite happily say that I think the recommendation would be, “You ought to do more.” I think the committee ought to say what the departments usually always say to you, sir, which is, “Agreed. We ought to do more.”

Even at 48% we were below the standard. I do remember being at 60%, because I was here then, albeit filling in for my friend, the chair, who was down at the other end at one point in time. I've been here the entire time. I think we need to find a way to get to the standard, it seems, which is 65%. I thank you for bringing that to our attention as a committee.

We're probably at 10 seconds or less.

[The Chair, NDP, David Christopherson]

Let's call it done.

We'll go back over to Mr. Hayes.

You have the floor, sir.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you, Mr. Chair.

Mr. Auditor General, because we as a committee might not study one of your reports, does that make it and the hard work of your staff any less valid?

[Michael Ferguson]

We present the report to the departments, present the recommendations to the departments, and get the response of departments as well as their action plan. Of course all of that happens. Our job, however, is to report to Parliament, so we do present the reports to Parliament. Obviously when I present reports, such as for example, the recent spring report, there's a hearing and there's an opportunity there for the committee to ask questions about every one of the audits that has been put in place. But that's not the same as the opportunity to have a full hearing on a report, and to include departmental representation at the hearing.

There is still a lot of value, obviously, in the audits that we do, even without a hearing, but I think we maximize the value of those audits by fulfilling that part of our role, which is to report to Parliament and to help Parliament understand, through committees, the significance of what we have found, and to give Parliament the opportunity to hear the perspective of the departments we have audited with regard to those audits. So I think there's more value from the audits when we have a hearing.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

As a committee and as parliamentarians, we rely on your absolute objectivity and non-partisanship. I notice that within your planning and priorities, one of your strategic objectives is in fact to be independent, objective, and non-partisan. That being said, when Mr. Giguère questioned you today, he actually, I understand, asked you to conduct an audit, which I think would be on the Wheat Board, and you informed him that you wouldn't even be able to do that until 2016.

I've asked about this before, but I really need to understand the criteria you choose for determining an audit. How transparent are those criteria? Is there a weighting scale? Are these criteria in writing somewhere so that we as parliamentarians can really clearly understand what it is you look at and how you weight it, and again have a better sense of the non-partisanship? Because to us as parliamentarians, non-partisanship is imperative.

[Michael Ferguson]

The work that the member asked us to do was relative to Canada Post, and our response was that we have a special examination of Canada Post scheduled, as per normal. We will be able to start that work some time later in 2016, so it fit within our normal process. We are required under the Financial Administration Act to do a special examination of the crown corporations once every 10 years, so that would fit within our schedule. We had a scheduled special examination of Canada Post in the works. I just want to make sure you understand what that whole conversation was about.

In terms of how we select audits, we do what we refer to as a strategic audit planning process. During that process we have a lot of conversations with departments and organizations, and we try to identify the risks that those organizations face and assess those risks to determine if there is something we should audit, relative to those risks, and bring to the attention of Parliament.

We will from time to time, as mentioned in the previous conversation about flexibility, react or try to react if there is a particular topic we feel needs to be audited and needs to be audited quickly. The problem with that is that we can't drop everything we are doing. We always have work under way, work that we have to finish. It takes some time to prepare an audit. The other thing is that for us to do a performance audit or a special exam from start to finish usually takes about 18 months. So if people are looking for a particular issue to be looked at right now to try to get to that fulsome understanding within a short period of time, we're not geared up to do that.

We will react from time to time, but we will react within our normal process for selecting and conducting audits. When we select something, even if we've decided to put it on our schedule, we still have to do the planning, execution, and reporting on it, and that whole process will usually take us 18 months.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you, Mr. Chair.

[The Chair, NDP, David Christopherson]

Thank you, Mr. Hayes.

Now over to the second vice-chair, Madam Jones, you have the floor, ma'am.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you, Mr. Chair. Thank you, Auditor General, for your presentation.

My question is regarding the number of performance audits that are being conducted each year. We're seeing that the number of audits is going down each year. It's going to go down again this year. I'd like to ask why that is.

[Michael Ferguson]

There are a few reasons for that. The first one is that for the coming year 2015-16 we have five special exams scheduled, whereas in the other year, when we were reporting on 2013-14, we had two special exams.

Special examinations are things that we are required to do under the Financial Administration Act. We're required to do them of crown corporations at least once every 10 years. We have a schedule of when we are doing those special exams and sometimes we have to do more of them in a given year. When we have to do that, it means we have to do fewer performance audits.

Again, remember that all of our financial audits and all of our special examinations are legislated. We are required to do them. We're required to do them, in the case of the financial audits every year, and in the case of the special examinations over that 10-year rotation period. When they fit into our schedule, we have to do them. That can have an impact on the number of performance audits we do.

The other thing that is affecting the performance audits is the audit of the senators' expenses. That work has ended up taking more than we originally anticipated it would. It has had a bit of an impact as well.

By the time you put those things together, we were at 21. If you add another three in for special exams, that's 24. The Senate—it depends on how many you want to say that is—has two or three, which gets me to 26 or 27, as opposed to the 29 the year before. I think that is probably an indication that we're always going to fall within that 27 to 30 range. We're now starting to fall down toward the lower part of that. It's showing that, in terms of the budget reductions, we're now right at that edge, where any other implication in terms of our budget would certainly cause us to fall below our normal production in terms of performance audits.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you for the explanation.

That brings me to my second question. What we have seen is a significant reduction in budget, but also a significant reduction in staffing. Between 2011 and 2016, the calculation we have here is a staff reduction of about 88 employees.

What impact has this had on the Office of the Auditor General? Will there be an impact going forward on the number of audits or the performance of the office, based on those reductions?

[Michael Ferguson]

I think one of the ways that the budget reduction and the staff reduction were achieved was—a couple of years ago, I don't remember the exact year that it happened—when we put forward for approval the right to have legislation amended to not require us to do some financial statement audits. I've forgotten the exact number, but it was probably 19 financial audits. That legislation was changed, meaning we did not have to continue to do those financial audits. In some cases they were small organizations that didn't really need a financial audit. In other cases they were organizations that had the wherewithal to get that audit from somewhere else, to pay for that audit, and to have an external firm come in and do that audit, so we reduced some of our financial audits.

The other thing that we did was make some fairly significant reductions in terms of some of our support services. I don't have all of the details of that, and many of those decisions were made before I joined the office, but we made some significant reductions also in our support services. We have recently been going through a process of rationalizing the senior management in the office. It was 16 people at the executive table a few years ago, but we're now going down to nine. Making sure that we have the right number of people in those senior management positions has been another part of our strategy. As I think I mentioned earlier, I believe right now we are right at the level and other reductions, or any other requirement for us to fund something from within, is going to start to have an impact on what we produce and start to bring us below our historical levels of production.

[Yvonne Jones, Liberal, Labrador, NL]

Okay.

[The Chair, NDP, David Christopherson]

Thank you.

I'm sorry, ma'am, time has expired.

Moving over now to Mr. Aspen.

You have the floor, sir.

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

Thank you, Chair.

Welcome, Mr. Ferguson, and to your officials.

For the 2015-16 fiscal year, your office identified three strategic objectives as priority areas for improvement. Could you tell me how you determine which areas require improvement?

[Michael Ferguson]

Where I'll start—this is on page 6 on the report on plans and priorities for 2015-16.... We have there the list of all of our strategic objectives. In the office we went through a strategic planning exercise using a balanced scorecard approach. We looked at the office from the point of view of how our customers view us, the financial perspective of what we do, the internal perspective, and the learning and growth perspective. We looked at our organizations through various lenses. Through that exercise we identified a number of strategic objectives. I believe in total there are 12 strategic objectives.

Obviously we can't work on improving all 12 of those strategic objectives every year. We have to prioritize what it is we're going to work on in any given year and for 2015-16 we identified three priorities. That was really an exercise of getting input through the organization and having our executive group meet to determine where we felt we needed to make the most improvement. It was things like needing to reduce and make more efficient the senior management layers of the organization. We needed to make sure that we were letting people with the capability, skills, and experience to make the decision make those decisions. We needed to empower those people, so we needed to put a focus on how we govern and how we empower people. We also needed to put priority on making sure that our people were receiving the training they needed and were getting the support they needed to obtain or maintain the language skills they should have for their positions.

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

How do you plan on making progress in these particular areas?