Public Accounts Committee on April 5th, 2017

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

Thank you, Chair, and thank you to Mr. Ferguson and the Office of the Auditor General for being here with us today.

I just want to refer to your comments in paragraph 8. I find that very interesting because it has certainly been part of the work that we've been trying to do here on public accounts, improving performance and improving management practices so that our citizens can get better service at the end of the day.

Can you comment further on this statement, “To address the concerns they raised, we are now communicating our findings and recommendations earlier in the audit process”?

You are dealing with senior management earlier. It's not a surprise when you give them the final report.

[Michael Ferguson]

That's one change that we are trying to make, particularly, again, in our performance audits, not waiting until we get a draft of the audit to present what we are finding to the department, but trying to get the key findings in front of them as early as we can, so that if there is a disagreement about them, they can bring more evidence early on.

Maybe we've had a bit of a misunderstanding. Maybe we just need to reword the way that we have identified something. The earlier we can bring the findings to the departments, start to have a conversation about exactly what we find, and either get agreement on it or access to all of the evidence that exists, then the easier it will be to prepare the report.

The worst situation is when we are trying to resolve an issue right at the very end, trying to prepare a report when everybody is under a time crunch. We're trying to move those types of conversations to earlier in the process, to allow people enough time to understand exactly what we're saying and to bring whatever evidence they feel they need to bring to us. That way, they don't feel like they're under a time crunch.

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

Thank you. It's very much appreciated.

Another issue you brought to our attention in the past, which we need to be looking at down the road with organizations, is the whole idea of data collection, information technology, and the quality around IT systems. Here I see that, for your office, this is one of the key risks you've identified. Could you expand on that?

[Michael Ferguson]

Yes. We have some systems that have been around for a while. We do put a lot of effort into making sure that the data we are collecting is of quality, but we have, perhaps, some systems that don't talk to each other and that are collecting similar data.

In terms of our main systems, for example, the systems in which we collect and store the evidence that we use in audits, we spend a lot of time making sure that those systems are properly maintained, that they're properly updated, and that the information we have in them is accurate. There are some of our supporting systems that are older. Some of the systems we use to track our time, for example—because we track all of the time we put on audits so we know how many hours we have put on every audit—are older and harder to maintain, and perhaps they don't talk to other systems in the office. We are having a bit of a challenge in terms of some of our older systems.

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

Now I'm going to ask you a last question, which you have told us yourself, Mr. Ferguson, that we're to avoid asking departments when it comes to audits. Do you have sufficient financial resources to meet your mandate?

[Michael Ferguson]

Again, that's something we are looking at very seriously at this point. We are concerned that at the end of this year, we will not have any carry-forward anymore, and we are going to have to use our carry-forward as part of our operations. We're looking at that very seriously and are starting to have some conversations within the machinery of government to try to establish what our level of budget should be. We're okay for the short term, but I'm not exactly sure yet what our situation's going to be for the longer term.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll now go back to the opposition side, to Mr. McColeman, please, for five minutes.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Ferguson, I know you've been involved, and I'm wondering if you can update Canadians watching this regarding your audit of the Phoenix pay system.

[Michael Ferguson]

That's an audit that is under way. What I should say is that we are actually doing three different pieces of work related to the Phoenix pay system.

As part of preparing an audit opinion on the financial statements of the Government of Canada, one of the big expenditure items in there is payroll, of course. We have to audit the results of the payroll calculations that come out of the Phoenix pay system to know whether the amount recorded by the government as pay expense is accurate or not.

In the past we were able to rely on the controls around the pay system, which meant we didn't have to look at as many individual transactions to make sure those transactions were right. Now we can't rely as much on the controls around the system, so we're having to look at more individual transactions, which means that's increasing the amount of work we have to do on the audit that we have of the financial statements of the Government of Canada.

In addition to that, we have one performance audit under way, and we have another performance audit that is in the planning stage. The performance audit that is under way right now, which we plan to report on in the fall, is essentially about what the departments are doing to manage the situation and get things back on track. The other audit that is in the planning stages, which I think we would report in the spring of 2018, will be backward-looking. How did this happen? How did the situation roll out? How did it get to where it was? That would be the second performance audit. The first performance audit is more looking at what the departments are doing to get the system back on track.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Do you have any idea of the timing of that first part?

[Michael Ferguson]

In terms of the first performance audit, that should be released this fall. That's our target.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Okay.

[Michael Ferguson]

The second one, the one that's looking backwards, would be released in spring 2018.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Okay.

Mr. Chair, I'm going to yield to my colleague Mr. Jeneroux.

[The Chair, Conservative, Kevin Sorenson]

Mr. Jeneroux, you have two and a half minutes.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Great.

Mr. Ferguson, I want to get two quick questions out there. If you could answer them both that would be wonderful.

First, this is just following up on a line of questioning from Mr. Maloney, maybe put more bluntly. Can you explain who audits you? Do you essentially audit yourself? Is there a third party that audits you? Would you just clarify that?

Also, I'll go back to my line of questioning. It seems like that 80% target for “independent, objective, and non-partisan” for your office is set to be met, essentially, as opposed to identifying any problems. It seems like there's a 20% buffer there. It says where deputy ministers.... I imagine deputy ministers don't want to be audited by you, but it's part of your role and part of the role of the deputy minister.

Perhaps you can comment again in a bit more in depth on those two questions. Thanks.

[Michael Ferguson]

In terms of who audits us, as you will see in our performance report, we prepare a set of financial statements every year and there is an external auditor who comes in and audits our set of financial statements. We have an audit committee that oversees that process, made up of three external members; they're not employees of the office. We prepare a set of statements. We have an external auditor come in and do that audit.

We are also subject to investigations by other agents of Parliament. On anything related to information, privacy, official languages, they can come in and look at what we're doing at any time. We're subject to examination by provincial accounting institutes as well. We train accounting students. They can get their accounting designation through our office. In order for us to be able to do that, we have to meet the standards of the chartered professional accounting bodies across Canada, so they will come in from time to time and review our work.

We have an internal practice review process, so we have our own group of internal audit and practice review, and they go and look at the files of our auditors to make sure they are complying with professional standards. Then, once within the mandate of every Auditor General—so about once every 10 years—we are subject to what's referred to as a peer review. The last one was completed in about 2010. It was led by the Australian National Audit Office, and it looked at how we conduct our work. We're in the process now of planning the next one, and we have three or four countries, I think, that have agreed to be part of the peer review team. One is the Government Accountability Office, from the United States. Another one is the national audit office of South Africa. I think there are a couple of others that will come in and review what we do. We do subject ourselves to quite a bit of external review on how we conduct our work.

In terms of the 80%, I'm going to take that as a very useful suggestion for us to go back and see whether it's time to re-establish where we've set that target. Perhaps we should be increasing that. Maybe we have set that too low to make it too easy for us to meet it.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Good. Thank you, Mr. Jeneroux.

We'll now move to Ms. Mendès, please.

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

I have only one question. Mr. Ferguson, let's say the committee wanted to conduct a special examination of one of the departments, or of one the programs in a particular department, and it asked you to conduct an examination at a very specific time, such as in the last six months or the last quarters. Given the current circumstances, could you and your team respond positively to this type of request?

[Michael Ferguson]

Of course. If the committee requests this type of audit, we consider the request important. However, it's a bit difficult to adjust our audit plans because our employees are assigned to specific audits. It's a bit difficult to adjust our staff.

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

You make plans for the year.

[Michael Ferguson]

Yes. However, if the committee requests a specific type of audit, it's important. We'll try to arrange to conduct the audit, but we can't change all our plans right away. We need time to respond to this type of request.

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

I have a secondary “motive”, if you wish, in asking this question. Following our trip to Britain and seeing how their public accounts committee has the opportunity of asking the equivalent of the Auditor General's office to do these spot checks on certain departments and certain ministries, we thought it could be useful for us, as the public accounts committee, to have the possibility of requesting your assistance when we would like to dig into something more specifically. I totally understand what you are telling us, that in terms of planning you have to have 10% or 15% of your overall resources for the year planned for these kinds of things and right now it's not a practice. Maybe we could discuss it further for next year. You could perhaps start looking at reserving resources for something like that, if we actually agree as a committee to go into that.

I believe that would improve our work as a committee too, to be able to do some of these spot checks when necessary. It's more just a wishful, aspirational thing that I'm putting out there, but I'm glad you answered us for now.

[Michael Ferguson]

Quite frankly, we would like to be able to do it, whether the request came from the committee or other places, to have a team that could look at these types of issues. Of course, to have a team that can be that flexible and that nimble, we would have to make sure that anything they were looking at would have to be of short duration.

Our performance audits tend to take us 18 months to complete, so it would be a whole different type of product and report for us. We would have to carve out a certain number of employees to be able to do that, and again, right now all our auditors are scheduled throughout a whole year.

We have a scheduling piece of software. We know who all our people are. We know all the audits we're going to do. We have people scheduled across all of that, and once we've done that, there isn't a lot of flexibility. We would have to figure out essentially which audits.... We would have to cut back on some audits so we could set aside a team of auditors who would be able to react in that way.