Public Accounts Committee on May 13th, 2015

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

Thank you, Mr. Chair.

I would also like to thank our guests for being here with us today.

You are likely aware of the reports of the OECD and other international organizations that compare the public service of different countries. Are you familiar with those documents?

[Roger Scott-Douglas]

Yes.

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

In general, the Canadian public service gets excellent marks for its integrity and professionalism.

Have any of you made a connection between these excellent results and the very nature of the reports that federal organizations are required to submit? With regard to the cost of such reporting, we also need to consider that, by lowering our standards, we also risk reducing the quality of our services, which are world renowned.

[Roger Scott-Douglas]

That's a terribly important question, Mr. Giguère. Nancy might have other things to add to this.

At no time do I want to suggest that any effort at reducing a reporting burden should put at jeopardy the important requirements to mitigate risks, to ensure that we have the appropriate compliance, and to ensure that deputies within departments, the Treasury Board Secretariat, Treasury Board ministers, and indeed, parliamentarians, have the right kind of information they require in order to run their programs efficiently and hold people appropriately to account.

The work of OECD generally, and indeed, the thrust of the work within the secretariat at the moment, is on how you develop reporting requirements in a way that ensures you have an appropriate sense that the right risks are being mitigated and the right kind of excellence is being pursued where it ought to be, without unnecessarily burdening departments and agencies. It's really getting the balance right between ensuring that you're maintaining a proper oversight on departmental performance without unnecessarily burdening anybody in doing their jobs.

[Christine Donoghue]

If I may, Mr. Chair, it is basically the same for the Public Service Commission. By working with the organizations, we become familiar with their activities. We may be talking about large organizations or small ones, but if the smaller departments are asked to produce the same reports as the large ones, it requires a lot of time and effort on their part since they likely conduct fewer staffing procedures.

However, just because these small departments have less capacity does not mean that they are immune to the risk. As a result the PSC adapts its services and provides additional assistance to small departments that may need more expertise and advice on the policies that are in place. Rather than asking them to work on reports that may take them more time, we are asking them for fewer reports but we are more involved with them in real time to help them meet the requirements set out in the law and in the PSC's policies.

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

Ms. Cheng, do you have anything to add?

[Nancy Cheng]

I don't believe I have too much to add.

I think essentially what we're not looking for is to lower the bar. It's trying to make it more efficient so that we continue to provide the same value those reports are supposed to provide, which is to help with monitoring, to help with making sure that compliance with policy is being adhered to, and that the central agency has the information to serve an accountability relationship with Parliament. It's not to lower the bar, but trying to understand what the cost and the effort might be, so then, where it's appropriate, trying to find ways to lower the reporting burden for those organizations because they have other matters to attend to and resources are tight.

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

I assume that the fact that you want to maintain these excellent standards and that you do not want to jeopardize the quality of the work means that every change takes time.

[Christine Donoghue]

Absolutely.

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

That means we have to be patient. The goods will be delivered at some point.

[Christine Donoghue]

Yes.

The important thing for the PSC is to see that the staffing system is sound, that it is being used properly and that it is consistent with the legislation. It is very important to the PSC to maintain the standards and to be aware of the activities that are taking place in the departments so that it can report to Parliament about them.

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

Thank you, Mr. Chair.

[The Chair, NDP, David Christopherson]

Thank you.

Now it's over to Vice-Chair Carmichael. You have the floor, sir.

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

Thank you, Chair.

Thank you to our witnesses again today.

I want to thank the Auditor General's office for this report. I'm one who comes from the private sector where reporting is very important, which I tended to live with in my past. This is helpful information and I like the direction that we're going in here.

I'd like to direct my questions to Treasury Board specifically, and I have a feeling probably they're for Mr. Matthews, but Mr. Scott-Douglas, jump in if it's for you.

I wonder if you could just walk us through the content of a quarterly financial report as you're able. I know there's tremendous data and usefulness to these reports, but perhaps you could also explain how departments' quarterly financial reports are somewhat different from those in the private sector where I've come from, and how we might benefit from them.

[Bill Matthews]

Sure. Thank you for the question.

I'll start with the broad similarities and then go into some specific differences.

The actual idea for quarterly financial reports from departments originated in the Senate with a private member's bill by Senator Segal, if I recall correctly. His whole notion was that the government should be like the private sector from an investment perspective. If you hold stocks in the private sector, investments, you look to see the quarterly results of that company. When he looked at the federal scene, what he saw was a federal budget, which is planning information, financial statements at the end of the year, plans for each department to start the year, and results at the end of the year, but nothing in the middle of the year, except a monthly report from the Department of Finance. It was whole of government. When you were looking for information on department by department during the year, you couldn't find anything.

That was the whole premise. The government picked it up in a piece of legislation and put the requirements for quarterly reports right into legislation.

The similarities are that basically you have a financial report and a narrative or discussion and analysis that explain what's going on in that quarter. It explains the current quarter versus the same quarter in the previous year. It also looks at year-to-date numbers, current year versus previous year. Those are the similarities.

The difference is that in the government, Parliament votes on department funds. When we're preparing the quarterly financial statement requirements, we thought it would be more relevant for Parliament to know how departments are spending the funds that Parliament had voted to it, so they're appropriation-based. That's the big difference.

If you go to the private sector, you would see a full set of full accrual financial statements, balance sheets, statements of revenue and expenses, comprehensive income. It's more onerous, to be honest. The other more onerous piece in the private sector is, because there are investments riding on the line, there is a degree of assurance provided from the auditors; whereas in the federal government these quarterly financial statements are made public, they are not looked at by the Auditor General in terms of any types of insurance.

That's the quick answer.

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

Would that give you the opportunity to be more efficient in the way these quarterlies are constructed?

[Bill Matthews]

If I were to compare the private sector versus the public sector, we know that the public sector reporting requirements are less onerous, largely because the reports are less, number one, and two, there's also no requirement for assurance.

If I look to our crown corporations, they follow a private sector accounting model. They spend more effort on theirs than the departments do because they're following the private sector model, with the exception of the assurance piece, I believe. The crowns are spending, on average, roughly twice as much time as departments are in preparing their quarterly financials.

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

I know that these quarterly financial reports clearly represent only a tiny segment of the information that the government releases each year.

I wonder if you would mind walking us through some of the other resources that are available to us as parliamentarians and Canadians, and how this made our government, frankly, more transparent.

[Bill Matthews]

I'll think about the whole cycle.

I've mentioned the budget already, which is your starting point. It's a planning document for the whole of government. You have that followed by the estimates, which is what Parliament is being asked to vote on for departments. That gives you the cash resources for each department. We accompany those with each department's report on plans and priorities, which is their annual planning document. Those documents are followed up with actual documents. That's a tenet of our system: a planning document followed by an actual document. The actuals would be the departmental performance reports on a department-by-department basis.

You have the public accounts, which this committee is very familiar with. Then through the year you have something called the “Fiscal Monitor”, which the Department of Finance produces on a monthly basis. That gives the whole-of-government financial results, and a few years ago that was supplemented by these quarterly financial reports that are done on an appropriation basis.

The one other thing I should add, Mr. Chair, is that since the advent of quarterly financial reports, there has been a database that the Treasury Board Secretariat produces. It contains much of the same information as is contained in the quarterlies, but also some other statistics. That's updated every quarter. It's open to the public. You can get spending data, appropriation data, and a number of personnel data. What you don't have is the narrative, but you have all the data there. That has come along since these quarterly financial reports were legislated.

[The Chair, NDP, David Christopherson]

Very good.

The time has expired. Thank you.

Over now to the second vice-chair, Madam Jones.

[Yvonne Jones, Liberal, Labrador, NL]

I thank all of you for appearing before the public accounts committee today to discuss the reporting of federal departments, and I thank you for your presentations.

I'm going to start with paragraph 2.25 of the Auditor General's report on federal organizations. In the report, it mentioned that Treasury Board Secretariat and the Public Service Commission of Canada would provide guidance and support to federal organizations to help them meet the reporting requirements. In paragraph 2.26, it was mentioned that Treasury Board had been aware since 2013 that guidance on the reporting requirement for department investment plans needed attention.

I'd like you to explain what changes have been made to address this in the last two years. Are you confident that the corrections have now been made on a go-forward basis?

[Bill Matthews]

Thank you for the question.

There are a couple of things I should highlight.

Number one, since the investment plan was finalized, the key changes that were made were really to help the small organizations by requiring less documentation. Instead of going to Treasury Board for approval, they could submit their investment plan via a letter to Treasury Board Secretariat pro forma. There are some nuances, depending on the size of the organization. That's one change.

Lots of information sessions and guidance have been given on how to best produce these things. Still a fair comment is whether we have the balance right between large and small. That's something we'll look at as we go through the policy reset that my colleague Roger Scott-Douglas talked about.

We will likely make some additional changes as we reset the policy.

What I will say is that I pulled together a group of chief financial officers about three months ago to talk about the investment planning policy. The first question I put to them was whether they found this useful and did they think that we still needed a policy. The answer was a resounding yes. We had a follow-up conversation and we have the headlines right. We probably have some thinking to do on the details, but grosso modo we think it's working quite well.

[Yvonne Jones, Liberal, Labrador, NL]

In paragraph 2.35, it was also noted that the Public Service Commission reduced the number of staffing management accountability framework indicators used in departmental staffing, from 29 to 12, I think it said.

Can you tell me how this will have an impact on the reports going forward? What types of indicators were removed?

[Christine Donoghue]

Thank you for the question.

Yes, we have reduced the indicators from 29 to 12. What we noticed is that as part of the 29 there were some that were actually overlaps and some that were somewhat duplicative, which made the reporting much more burdensome for departments. The 12 that have been put forward were some of the key ones, and they've been used as is indicated in the report.

What we've now noticed at this point is that we have received very good data and very good reports from departments, which indicates that the staffing system is extremely mature. What we're seeing is that even if we continue to ask on a regular basis for the reporting, the activities demonstrate that the levels are being maintained.

In the context of the monitoring we do and as well in the context of the fact that we receive other forms of information through our different oversight mechanisms, such as audits or investigations, we're able to see that there is stability within the system. Therefore, depending on the size of the department and the number of activities, we can actually take a bit of a step back.

We're even considering at this point whether or not some of the burden can be reduced in certain departments. Small and micro departments may have two or three staffing actions a year, so it's a bit ridiculous to ask them to do really big reporting on 12 indicators.

We're looking at what's happening horizontally in the system to see whether or not we're seeing signals that the system probably needs to be reviewed in certain aspects. Instead of forcing departments to perform on 12 indicators, in the past two years we've been going to six indicators a year to make sure that we have a full cycle, and to see what was happening with the indicators. Actually, this year we've asked departments to report on three.

The reason we chose three is that we knew things were going well in the other areas of activity, and we needed to have further data on what was happening with official languages. Also, we always ask departments, if they've been audited, to report on the audit conditions or whatever observations we've put forward to them. We also ask that they report on the priority system, because we noticed through our different mechanisms that certain activities in the priority systems were not quite up to par in all departments.

More and more, as we're doing an integration of our policies and our oversight tools, we're looking to see this through different signals and also through the accountability that is exercised by the delegation to deputies. They best know their operations. They best know their activities. Therefore, what we're going to be thinking about as we're moving forward is for deputies to ask their systems or their departments to report to them and to share that information with us. The problem with going with a set of indicators is that it may not be pertinent to everybody that year, so deputies are in the best position to know what they need to be accountable for in the context of their staffing system. Sharing that information with the commission will give us the right data that we need to compile through the cycle.

I don't know, Michael, if there's anything I've missed that you want to add.

[The Chair, NDP, David Christopherson]

No, we don't have time for adding. I'm sorry. We're well over, but I appreciate that fulsome answer.

If you have something there, sir, you can get it in later.

Mr. Hayes, you have the floor, sir.