Public Accounts Committee on May 10th, 2016

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much for clarifying that. I think that is really the object of this committee here, to examine your audits and take those conclusions and recommendations in order to better serve the Canadian public. That is really the whole purpose, although I agree that departments...wise managers would be very well advised to take those recommendations in their work going forward.

I would like to take this on a completely different tack. Although I will be interested in the financial reporting side, as you bring forward that report in the future, a completely different tack would be the environmental auditor. I had the pleasure of hearing her report while sitting in on the environment committee. Is there not a place, a time, or an appropriate occasion for the environmental auditor to report to this committee?

[Michael Ferguson]

Certainly, I have talked about that in the past. One of our indicators is the number of our reports that have committee hearings. In the past, we struggled to have hearings on any of the audits that were being produced under the mandate of the commissioner of the environment and sustainable development.

I think the environment committee has started to have some hearings, but I would certainly encourage this committee to look at the audits and the work that have been done under the banner of the commissioner of the environment and sustainable development. Again, just so everybody is aware, the commissioner is within our office. All of the work that is done by the commissioner of the environment and sustainable development, either audits or studies, is done according to our methodology. What is produced by the commissioner is audits, just like any of the audits that I have presented.

The commissioner will be presenting a report, a series of three audits, I think, in a couple of weeks, at the end of May. I would certainly encourage this committee to look at those and decide whether the committee is interested in having a hearing on any of those reports.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Just another quick question.... Again, I am trying not to cross committee eyes too much, but it is important for there to be consistency when we are looking at estimates and when we are looking at end results. Do you have any opinion on cash versus accrual accounting methods?

[Michael Ferguson]

I am going to have an opportunity to appear before the government operations committee this afternoon. Certainly, in terms of financial statements, accrual accounting is how financial statements have to be prepared. There is no alternative to accrual accounting for the government's financial statements or the financial statements for crown corporations.

Certainly, in those sets of financial statements, there is always a statement of cash flows. That is as important a statement as the income statement, the balance sheet, or any other statement. That provides the information about cash.

I think the question about cash versus accrual is very much more a question of how the estimates are prepared, and what Parliament is voting on. My preference would be to keep everything consistent—the budget is on an accrual basis; the financial statements are on an accrual basis—and therefore to put the estimates on an accrual basis. However, you have to remember that it would mean that different information would be presented than is presented right now. I could talk about that for a long time, but I think I'd better cut it off there.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

We'll save that.

[The Chair, Conservative, Kevin Sorenson]

Thank you. If you wouldn't have cut it off, I would have cut you off.

Thank you very much.

We'll go back and go to Mr. Doherty, please.

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

Mr. Ferguson, since 2011 how has the organization changed since you've been in place?

[Michael Ferguson]

I can tell you how I think it has changed, but all I know is what the organization has been like since I've been there. Maybe Monsieur Ricard, or Ms. Seally, could provide you with some more information.

There are a few things we have done in particular. One is we have reduced the number of senior assistant auditors general level. At the top level of the organization, we have reduced that. I believe when I started in the organization the executive table was about 16 people. We have a couple of pending retirements, and that will get us to nine. We've significantly reduced that.

We also went through the strategic operating review process. In that process we were able to identify some financial audits we were doing that we felt didn't need to be done, or didn't need to be done by us, so we made that reduction.

We identified that we were not meeting our requirements on official languages at all of our supervisory levels. We put in place a strategy to deal with that.

Again, because we've reduced the number of assistant auditors general, it meant we had to better define the roles and responsibilities of the next two levels in the organization, what we refer to as the principals and the directors. We've had to clearly define what their responsibilities are, who's responsible for delivering audits, and who's responsible for making sure of the quality of audits. Those would be a number of the main things we have done.

The other things we continue to struggle with are that we do promote performance measurement, and we do promote reporting on performance. We constantly struggle with trying to get a good performance measure for understanding the value that is coming from a performance audit, because right now we have that unsatisfactory measurement of just being able to survey people and ask, “Do you think it added value, or do you not?” We also have the follow-up audits, but that might be five years down the road.

We are trying to find additional ways to measure the value we bring from performance audits.

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

I appreciate your comments, and in no way are my questions meant to diminish any of your impact on that organization, but only to get some more information.

My final question is, how can we as Parliament help make you more effective, make your team more effective, and help the process?

[Michael Ferguson]

I think that's interesting. I think there are probably a few things. Some of them might be legislative. There are some requirements in legislation that we have to do. Whenever there are legislative requirements, that indicates to us that Parliament's interested at that point in time, but it also can tie our hands.

For example, in the case of the commissioner of the environment and sustainable development, there's a requirement that we look at the sustainable development strategies of the government once every year, and we do an audit of it.

If we had more flexibility about exactly what types of audits we were going to do, when we were going to do them, that would mean that we wouldn't have our hands tied per se.

Similarly, as I said, we are required to do a special examination of crown corporations at least once every 10 years. Of course, if we think there's a particular crown corporation that we feel it's risky how they're running their operations, we can go in more often than once every 10 years, but there may be crown corporations that are well run. We can look at indicators that say they are well run, and maybe they don't need us in there once every 10 years. Maybe they do, and maybe they don't. Some things that would provide us with a bit more flexibility would be a starting point.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Doherty.

We will now move over to Mrs. Mendès.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

Thank you very much, Mr. Chair.

I'd like to refer to your report of the plans and priorities for 2016-17. You mention, or you alert us to, the possibility that labour negotiations may have an impact on future performance audits, if I read it correctly. Is this something we should be aware of?

[Michael Ferguson]

Mr. Chair, that's just sort of the normal scan of our environment and looking at what possible risks are out there, and of course, whenever you're in a situation of contracts having to be negotiated and put in place, if there should happen to ever be any disruption, that could have an impact on us—not that we are expecting one, but it is a risk we have to be aware of and we have to plan for.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

So it's just one of the elements that you take into account.

[Michael Ferguson]

Right.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

Another question I have is about your periodic external reviews of your own work. Who would be the one who does them?

[Michael Ferguson]

I guess there are a few things. First of all, we are audited by the Institutes of Chartered Professional Accountants in all of the jurisdictions we operate in terms of the work that we do on our financial statement audits. We operate in Vancouver, Edmonton, Montreal, Halifax, and Ottawa. We have offices in all of those areas, so any of those Institutes of Chartered Professional Accountants could come in at any time and audit the work that we've done through those offices and evaluate whether our audit files are appropriate.

Once every 10 years there's also a peer review, and this happens at an international level. Auditor general offices around the world have put in place a mechanism to do peer reviews. It happens once every 10 years, so for us that's essentially once a mandate for an Auditor General. The last one that was done on our office was done, I believe, in 2009-10, about that time period. It was led by the Australian National Audit Office and would also have had participation from some other national audit offices.

We are right now in the process of planning for the next one, which will probably happen in maybe 2018-19, something like that, when we sort of put our name forward and say we're going to want this done. We also actually participate in some of these peer reviews of others. So we will put auditors on peer reviews of other national audit organizations as well.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Mr. Harvey, we'll go to you.

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

I just have one quick question. Earlier you mentioned about the two audits for the reserve force pension plan and the Canadian Forces pension plan that were cancelled, right? Or they weren't conducted?

[Michael Ferguson]

No. They were issued after the statutory date. In terms of the reserve force pension, we weren't able to do that one. I'll ask Mr. Bergin to give you the details.

[Ronald Bergin]

We did the Canadian Forces pension plan about a year late, but we have done it, and we have just issued the most recent one, so it is proceeding. It's the reserve forces pension plan where we have the issue, and right now we are trying to do a smaller audit there. We're in the process of trying to do that, but it's not done yet.

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

What are the inhibiting factors that are leading you to not be able to conduct that audit?

[Michael Ferguson]

The fundamental problem in terms of the reserve force pension is that the quality of the underlying data they have just hasn't lent itself to being audited. It hasn't been up to date. They have been doing a lot of work to try to make sure that the data is clean and appropriate, but that's been the underlying issue.

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

We talked about accountability earlier and these statutory deadlines. It's the same idea. You talk about a statutory deadline and how there aren't really any enforcement tools to go along with that. I would compare that to this. There aren't really any tools in place to make departments accountable for providing the information.

[Michael Ferguson]

Again, I think part of what's important about this conversation is that very often parliamentarians don't know that we issue audit opinions on sets of financial statements. In terms of something like the reserve force pension, our audit opinion might be a denial of opinion or something, but it would not be a regular opinion such as, “This set of financial statements has been prepared in accordance with generally accepted accounting principles.” Because so many federal organizations get a standard audit opinion on their financial statements, they are able to prepare financial statements that can be audited and are fairly presented, I think it's often taken for granted, but every now and then there are some that either are not able to meet their authority, statutory deadline for example, or don't have the information that's needed to be able to produce a set of financial statements that can be audited.

I think that those are very much things that parliamentarians should be alert to. This is sort of right now the one way that we have to let people know about that. If we produced a summary report about our work, that might put a little bit more light on it. Again, I think what it very much comes down to is that all we can do is provide the information and say, “This is what the situation is.” Now, there's nothing else that we can do in those instances.