Public Accounts Committee on May 10th, 2016

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll move to Mr. Christopherson, please.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Mr. Chair.

I'll just pick up on the last point. This reserve pension still troubles me.

Through you, Mr. Chair, I would ask if perhaps the analyst would consider doing a check back. I seem to recall dealing with this. The issue at the time was that they were dragging their heels on setting up this plan. It was quite scathing in terms of the things they were supposed to do and hadn't done.

It's pensions, and it's always worrisome when anything to do with pensions is a problem. Number one, it's big money, as a rule. Secondly, we're talking, at the end of the day, about people's ability to survive when they're retired. It's kind of a big issue these days.

Perhaps the analyst would be kind enough to check that. I could be totally wrong—I don't trust my memory well—but I seem to recall that.

Second, it needs to be said, and I don't think it has—if it has, it can be said again—that it's an excellent, excellent report, actually. If you look at it, “target met” is in here far more than anything else, and certainly more than most. Of course, you always put yourself in an unusual position when you come here, because you spend all year pointing out where everybody else is not running things quite the way they should be. Then you're on the line once a year in terms of your operation, and you run the risk of being a hypocrite. But in fact it's quite the opposite. I think you're showing stellar leadership. We know there have been surveys about how your department is one of the best, if not the best, to work in, and that's consistent.

So credit where credit's due: it's an excellent report in terms of the areas you've met. We appreciate that. We know you're serious about getting things up to speed in a couple of the areas that aren't quite where we'd all like them to be.

I also want to give a quick shout-out to my friend Daryl Kramp. I'm sure he's not watching, but if he's out there...or if anybody knows Daryl, let him know that accrual finances and auditing are right back again. That was his thing for over 10 years.

I want to tell colleagues that I've been on this committee, as you know, forever and a day now, and it still is a challenge to understand accrual accounting. At some point, we do need to have a bit of a briefing on it, because I think we still have the issue of purchasing not being in accrual, although that may now be resolved.

At any rate, I just wanted to give a shout-out to Daryl, who invested a lot of time and effort, and who cared about this committee in a way that I think reflects the gold standard of what this committee is about. Daryl, wherever you are, man, accrual is still with us.

That said, I do have a serious question. Under your performance measures and results for 2014-15, you state, “Build and maintain relationships with parliamentarians and key stakeholders.” That's a big statement. Then, under your indicators, you state, “Development of a relationship management plan and related objectives.”

I see that it's in development, but I'm curious as hell as to what a structured “relationship maintenance plan” looks like, especially when you're dealing with types like us. I'd just like some thoughts on how that work is going, and where it's going.

[Michael Ferguson]

Again, I think that's relevant to the conversation we had before with regard to the indication of how the people we are auditing are perceiving the value of our audits. In a relationship management plan, essentially at a very high level, what we will do is first identify who the key people are that we need to have the relationships with, and who on our side of the fence should be maintaining that relationship. It can be to understand the issues and to understand issues around audit. It can be various stakeholders. It's not just the people we audit. It could be representatives of the department; the crown corporation; chairs of audit committees, particularly on crown corporations; audit committees of departments, because departments have internal audit committees; and parliamentarians.

So it's identifying all of those different people we need to have relationships with. Then it's making sure that periodically we are making the contacts we need to make with them to understand how they perceive our work and our value. We're trying to put some structure around that, and it's primarily around who we should be making the contact with, then who should be making the contact, and what types of things we need to make sure we are discussing in those conversations.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

I'm not certain if there's anyone more on the government side, but we do have Monsieur Godin for cinq minutes.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chair.

Mr. Ferguson, you said that the departments are audited and that you submit your report after that. When your report raises several questions, department officials must spend a couple of difficult hours before our committee—the time it takes to answer our questions. After that, it's on to the next audit, and the next report.

Through your experience and your many dealings with other legislatures, have you discovered any methodology that could equip us with better tools? You check into things, you share your findings with us, and the department officials come and testify before us. What disappoints me is that, after that, we don't seem to have the teeth to hold the people in authority to account for their actions, with the appropriate consequences.

The topic of the reserve force pension plan came up a bit earlier. There is still no resolution in that file. Things continue as before, and it's not your fault. Perhaps you don't have the necessary tools to bring pressure to bear in cases like that and impose requirements.

Could you recommend some specific measures that could be used to correct such situations? We could then see whether Parliament could adopt measures that would equip us better. It seems to me that there's a step missing after the work we do.

Based on the experience you've acquired, could you suggest measures that we could put in place so we can be even more effective?

[Michael Ferguson]

A few indicators could potentially be used. During an audit, we often carry out various analyses. The analysis reveals some indicators—some numbers that point to the problems.

We are seeking a way to use the indicators. We need to find a way to keep the indicators up to date following an audit. In our audit preparation process, we identify the data needed to carry out the analysis and establish a percentage for a specific program-related aspect. In the future, perhaps the same information can be used for the same analysis. It would not be another audit; rather, it would simply be an update of the indicators identified during the exercise. These indicators might enable us to see whether the improvements requested have been put in place and whether the results are conclusive.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

That could work with organizations that comply with your recommendations. But what about cases like the reserve force pension plan? Do you not have the legal power to require people in positions of authority to comply with your recommendations?

What should be done with that type of organization, which is not delivering the goods, is not cooperating with you, and is not meeting the deadlines?

[Michael Ferguson]

The issue with the reserve force pension plan was not a lack of collaboration. Rather, it was about problems related to the data in the system. We have already carried out an audit concerning that issue. We might find a way to revisit the analyses done in the past.

I do not have a precise answer for you on this subject, but I might be able to identify a few steps that can be taken to resolve the issue with the reserve force pension plan.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Mr. Ferguson, what my colleague was trying to get at, using the pension reserve as an example, was that for those other organizations that are not compliant or that are challenging for your organization, what are the things we can do here to make it easier so that they are compliant?

[Michael Ferguson]

Again, I think it's the same answer. We do have good co-operation from the departments and organizations we audit, so I don't want to leave any impression that we're saying people don't collaborate with us, because they do. Oftentimes, we will find that as soon as we go in and do an audit, the departments are trying to correct the problem before the audit gets out, because when the audit gets out, they want to be able to say they've already dealt with it. But from time to time, there are issues we raise that take a long time, and because we can't go in and do a follow-up on every audit, or because by the time we do a follow-up audit it takes a while, some of the audits and the results we brought forward can be forgotten.

Today, the focus has been around this question of the reserve force pension. We can use that as an example. Yes, we can go back to identify if in fact there was a performance audit and if there was a piece of work that was brought to this committee. Then the committee can decide whether there's something they can do about that, given the fact that we still can't provide an audit opinion—there was a piece of work done a while back. Is that something the committee could think about doing?

To me, the role of the committee is very much about helping to keep the departments to their commitments, right? I think it's changing now, but I think unfortunately the world had moved into what I'll call a “one and done” situation with these types of audits. A department would have to come here, they would talk to the audit for a couple of hours, and then they would know that they would never have to come back and talk about it again, unless we were going to do a follow-up audit.

I think it will keep the pressure on departments if this committee is keeping more of an eye on specific issues and specific items that have been brought forward and saying, “Okay, you're coming in, you're going to have a hearing, and then you're going to come back in a year or a year and a half, even if there isn't another audit, to tell us about what you've done.”

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We'll go to Mr. Harvey, please.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

I have another one quick question and then I'm done.

We used the reserve force pension as an example, and you've just referenced that again, but is that a common issue among departments? Is it a situation you can find yourself in on more than one occasion where a department is unable to provide the information you need in order to perform your audit, due to their data management or their lack thereof?

[Michael Ferguson]

I think we talked about that in the context of the performance audits I released last week, but in the context of financial audits, it's actually very unusual to find ourselves in a situation where the underlying information is not sufficient for us to be able to provide an opinion on a set of financial statements. On that side of the work we do in the financial audit side, the data is usually managed in such a way that the quality is there for us to be able to express an opinion on a set of financial statements. It is not usually a problem that we have there.

In terms of the performance audits, as we talked about last week, certainly there we see a lot more problems with the way the administrative data is captured. We talked about the problem with addresses at Citizenship Canada and the problem with the information about the preparedness of reserve force soldiers at National Defence. On the administrative side, which is what we tend to look at in our performance audits, there are a significant number of problems with data. On the financial audit side, it's much rarer to have those types of problems, but the one instance where we have it is the reserve force pension.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

That said, we're talking specifically right at this moment, I guess.... I mentioned the reserve force pension. For me, I'm way more concerned about the inability of that department to have accurate financial data for the reserve force portion than I am about their ability to give us the data about who is going to be affected by the drug plan. It's not that I'm not concerned about that, because I am, but I think it's a real big problem if that department can't provide the data in order for you to do a proper audit on that pension plan.

[Michael Ferguson]

That is certainly a significant problem, a problem, again, that we identified a number of years ago, and I believe Mr. Christopherson is correct, although it was before my time so I'm just going by a vague memory of what I've been told. I believe that we did prepare a report on the issues around the reserve force pension and we stopped doing audits on them for a period of time because there just wasn't any sense. Then we've gone back in to try to see whether the information is auditable yet, and it still isn't. I think you're right to be concerned about that particular situation.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

And in closing, from my point of view, what does that say about us as government? We're saying the data is not auditable so we're going to leave it for a while and then we're going to come back, and if it's still not auditable, then we'll worry about it later.

That doesn't make any sense to me, especially when you're talking about fiscal accounting on an ongoing basis. To me, this is a very grave problem so I just wanted to highlight that.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Harvey.

Mr. Doherty, you had a final comment?

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Absolutely. I echo my colleague from across the way. In today's time it is absolutely troubling that an organization does not follow the general accounting practices and cannot provide this data, and the fact that our Auditor General can't get this information from them is troubling for me. I would expect something to be done rather than waiting another six or seven years for us to follow up on it.

Mr. Ferguson, what is the percentage of audits that you do, that your organization does do follow-ups on?

[Michael Ferguson]

In terms of the performance audit, I don't think I can give an exact percentage. What we do in our planning is two ways of potential follow-up. One is to consider whether we want to do a specific follow-up on exactly what we did sometime in the past. So we will just make a decision. We'll look at audits we've done in the past and we'll ask our auditors to identify any they feel are in need of follow-up. Also though, the other way that a follow-up might happen is sometimes we will go in and we will look at a program, and the program may be similar to a program we've audited in the past, and we may be able to follow up on some of the recommendations we made in the past because of that overlap.

It wouldn't be called a specific follow-up audit but it may follow up on some recommendations. In the last series of audits that we released, we did a specific follow-up audit on the Governor in Council appointments. We changed slightly the way that we did it. We identified that there were still vacancies on administrative tribunals that make decisions for people, that there were still backlogs in some of the decisions those tribunals were making, so we identified the same types of issues. That was a follow-up.

In the audit on a prescription drug program for veterans, we followed up on one aspect. We had done an audit in the past on prescription drug programs across multiple departments. This time we just went in and looked at Veterans Affairs and we talked about what they were doing the last time we audited in terms of monitoring the information they have on prescription drug usage by veterans, and we provided a bit of follow-up this time about the progress they had made on that.

So in terms of the percentage, I can't give you a definite percentage. It's simply a decision that we make in each planning cycle.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Can you tell me why you don't follow up on all of the audits?

[Michael Ferguson]

If we were to follow up on all of the audits, what would end up happening is at some point all of our work would just become follow-up, right? So if we do 10 audits this year, in three years' time if we then have to follow up on all 10 of the audits, then it doesn't give us much room to audit new programs. That's why if we can find some ways to provide some indicators, to look for some indicators of whether departments have been making progress in the meantime, then we would be able to reduce that work and maybe provide the committee with a little bit more information on whether it looks like departments are on the right track, without necessarily having to come in and do another audit.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Perfect.

[The Chair, Conservative, Kevin Sorenson]

Thank you. I would also say that I think all of our committee have hit on part of our responsibility here. Yes, we can ask the question of the Auditor General, “Why aren't you following up on more? Why aren't you...?” The question really comes back to this committee, that we have the opportunity to hold these folks accountable as well. I think even today we've maybe been given a little prodding towards the reserve pension plan may be coming. We should at least be sitting down and asking how we can hold them a little more accountable, so that the books can be open, so that there's transparency, so that Canadians know, and as Mr. Christopherson said, pensioners will have a certain degree of confidence in what's going on.

Maybe at the next subcommittee, the steering committee, we will discuss this.

Is there any way of knowing which audits are ongoing or under way right now? I know that all of a sudden we get your reports and we know what's coming down, but is it a secret? Is there a way to know what you're reporting on now?

[Michael Ferguson]

Certainly, Mr. Chair, in the 2016-17 report on plans and priorities, at the back, in section III, we provide all of the planned audits for 2016-17. That includes the fall 2016 reports that we are planning to bring to you.

First, there's the spring report of the commissioner of the environment and sustainable development that I mentioned. That doesn't actually come through this committee. That will be on safety of consumer products, federal support for sustainable communities, and federal support to mitigate the effects of severe weather.

In fall 2016, reports of the Auditor General of Canada are there. Then the fall report of the 2016 report of the commissioner of the environment and sustainable development is there, as well.

Our website also has the spring 2017 reports listed now, which are there. In this report, it goes up to the end of fall 2016, and on our website, the audits that we have planned for spring 2017 are there.

[The Chair, Conservative, Kevin Sorenson]

However, you will conduct an audit should, all of a sudden, there be a massive issue in the media or in Parliament, where there is a high question as to practices within a certain department. You also have the ability to perform an audit on those that may come up that are outside the planned audits that you have.