SIFS Committee Meeting

SUB-COMMITTEE ON INTERNATIONAL FINANCIAL REPORTING GUIDELINES AND STANDARDS FOR THE PUBLIC SECTOR OF THE STANDING COMMITTEE ON PUBLIC ACCOUNTS

SOUS-COMITÉ DES LIGNES DIRECTRICES ET NORMES INTERNATIONALES RELATIVEMENT AUX ÉTATS FINANCIERS DU SECTEUR PUBLIC DU COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, February 23, 2000

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[English]

The Chair (Mr. John Williams (St. Albert, Ref.)): Good afternoon, ladies and gentlemen. This is the Subcommittee on International Financial Reporting Guidelines and Standards for the Public Sector of the Standing Committee on Public Accounts.

The order of the day is, pursuant to its mandate dated Tuesday, December 7, 1999, consideration of matters relating to international financial guidelines and standards for the public sector.

We have as our witnesses today Mr. Jean-Pierre Boisclair from the CCAF, the Canadian Comprehensive Auditing Foundation; and Mr. Tim Plumptre, director of the Institute on Governance.

I understand Mr. Plumptre has another commitment at around 4:30. Am I correct, Mr. Plumptre?

Mr. Timothy G. Plumptre (Director, Institute on Governance): I'd be okay until 4:45.

The Chair: Okay.

As I said, Mr. Plumptre is the director of the Institute on Governance, and their activities fall within four broad themes: citizen participation, aboriginal governance, building policy capacity, and accountability and performance measurement.

Mr. Boisclair is from the CCAF, and their objectives are governance information, performance reporting, comprehensive auditing, and public performance reporting.

We've asked these two gentlemen to come before us today to give us their views on the issue. This particular subcommittee is gathering what we feel are best practices for financial information, financial accounting. As you know, we're moving over to the financial information strategy, accrual accounting, so we're trying to absorb the best that's around so that we can perhaps motivate the Government of Canada to adopt these issues.

We also want to disseminate the same to other countries and institutions that are in desperate need of fundamental accounting and reporting structures, because we recognize that bribery and corruption are a major problem around the world. This committee is taking an active interest in seeing what it can do in the area of corruption. If corruption is ever to be wrestled to the ground, a simple thing such as adequate, competent, audited, timely financial statements, which are commonplace in this part of the world, are the fundamental foundation of any system that provides accountability.

We'll turn it over to Mr. Boisclair, who has an opening statement, and then we'll hear Mr. Plumptre. Then we'll have questions and answers and go from there.

Mr. Boisclair.

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Mr. Jean-Pierre Boisclair (President, Canadian Comprehensive Auditing Foundation): Thank you very much, Mr. Chairman and Mr. Harb. It's a pleasure to be here. Thank you for the invitation. I hope I'll be relevant to your deliberations.

I might be a little different from some of the people who've talked with you before who really represent more the financial accounting and auditing perspective. My vantage point is that of an organization that's been trying to build knowledge for good governance and to promote accountability, with a particular focus on the non-financial information side and also on the connection between non-financial information and financial information. That has been a challenging endeavour for well over twenty years, here and indeed in most western industrialized countries.

I brought with me today and left with the clerk a number of things that might be helpful to your committee, so that I don't have to run you through the bramble bushes of all the good things we've done. Basically what we have put out there is a set of principles that we believe, if they are in operation, represent an organization that is being effectively governed.

We have developed and seen to the application in practice of non-financial performance reporting frameworks that take into account the impact of programs, their relevance, as well as a number of other factors, which start to create a set of rules, or at least an understanding or a body of knowledge, that help those in the public sector who want to tell their performance story and who want to be accountable to do it in some kind of realistic, reasonable fashion.

The last thing, which we really started with—

The Chair: If I could just interrupt you, Mr. Boisclair, you're talking about your book Governance Information: Strategies for Success?

Mr. Jean-Pierre Boisclair: Yes.

The Chair: And you're also talking about Public Performance Reporting: A CCAF-FCVI Research and Development Program, and you've given us a folder that contains the same.

Mr. Jean-Pierre Boisclair: That is correct.

The Chair: That's just for the record. Thank you.

Mr. Jean-Pierre Boisclair: Okay.

The third area ties into part of our introductory comments, having to do with auditing. Given that people are trying to tell a performance story, is that a performance story one should have confidence in?

Those are the three areas we've worked in. There's been a large investment of public sector dollars, both federal and provincial, and of private sector money, because they're involved in this. With that investment, over a twenty-year period, we've put out frameworks, guidelines, all kinds of good things.

Twenty years ago, if you had started to engage the discussion about performance reporting, a lot of people would have come back to you—very senior people in the public sector, not just federally, but provincially and elsewhere—and said, “We don't have the means to do it. Figure out the means and then come and talk to me.” So we spent twenty years trying to figure out the means. As with most other things, people who want to make it happen can then make it happen, with that kind of help at hand.

The real issue then is, even with the rules or guidelines and the technical capacity to do things, why don't they happen? Or why don't they happen to the extent that I think you would sit back and feel comfortable that it's happening in the right way or sufficiently? So lately we've turned our eye and our investment to what we happily call the human dynamics behind public performance reporting. I hope I'll be relevant to your deliberations in this sense.

If I could roll back the clock in the sense of where we've spent our time and effort to try to improve the quality of performance reporting in Canada, one of the things I would do differently would be to, right from the first day, spend half of my time in investment and resources on the people side of the equation and the other half on trying to develop the technical solutions, rather than putting it all on the technical, on the wonderful theory that if you crack that nut, all else will follow. It does not happen that way.

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We've been undertaking research recently focused on a number of issues we consider part and parcel of the human dynamic of public performance reporting. This would be true not just in the context of non-financial performance reporting but also in the context of financial reporting. Those issues have involved risk management and how elected people, senior bureaucrats, public servants, and the professionals who audit these things share risk, how they look at risk, how they deal with one another, their relationships, reasonable expectations amongst them, where they place reporting processes in their thinking, and whether they consider reporting something that happens after everything else or whether they start to connect that much earlier in their thinking, at the stage of defining policy and creating programs.

Also, it has included a reflection on the kinds of principles that will, I think, in their view, represent pragmatism in the most positive sense of the word. There's a sense that those game rules have to be in place if people are going to be motivated or if they're going to feel comfortable moving forward.

Having said all of that—and I'm not going to try to take you through all of that—one of the things that came out of this, and the overarching issue, is leadership. Leadership is needed to achieve meaningful performance reporting, be it financial or otherwise. One of the things we've tried to do, coming out of our work, is to characterize what that leadership would look like. It's not an attempt to write a textbook on public sector leadership and management. It is an attempt to focus on some essential characteristics of leadership if you are going to achieve some kind of meaningful reporting.

I'd like to share those with you. They aren't in the documentation you've received, because we haven't really completed our work or published our work. That will happen, I hope, in the course of the next month or two. But I thought it might be relevant to share some of that with you today.

The first notion is that leadership needs to be focused if progress is going to be made in this area. It needs a purpose. It needs to be aimed at achieving and reporting on a manageable number of critical outcomes, be they financial or otherwise.

One of the lessons coming out of the work we've been doing is that trying to aim that leadership exclusively at the issue of accountability does not seem to have been successful. Leadership that considers this issue in the context of the aims, the outcomes, the policies, and the values of their organizations will be leadership that is more focused and perhaps more capable of carrying the reporting issue successfully with their public services.

That leadership obviously is all about moving from what I suppose a lot of people might characterize as a culture of secrecy to a culture of described risks. That's not an easy one, and it means the leadership has to come from the top and live throughout the system, and obviously it needs a measure of political and bureaucratic support.

Having said that, and looking at it in the international context, one of the great joys of the foundation over the last twenty years has been the opportunity we've had to train here in Canada about 150 very senior people from the offices of auditors general from developing countries around the world and to put them through our programs. The observation we have out of all of that is that establishing that baseline threshold of ethics and values is the critical underpinning as to whether or not the auditing and reporting technology is going to be brought to bear successfully in those countries.

The other dimension of the leadership is really manifest leadership. Leadership isn't metaphysical. It has to be reflected in something you can put your arms and your hands around. It has to be reflected in decisions, not just the easy ones, but also the tough ones, in the sense of formulating policy and initiating programs and monitoring them. It also has to be reflected in incentive systems and other practices that foster a commitment and a capacity to report on performance.

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Again, it reflects back to the notion that only the top leaders of an organization are in a position to operate those levers, and it's been very challenging in Canada to get the attention of top leaders around that kind of issue. We live in a country that values peace, order, and good government. When we start to look at these kinds of things in countries that perhaps haven't moved as far along the continuum, there needs to be some higher set of motivations in place than simply having a set of rules we would hold out as appropriate and reasonable. There has to be some real incentive and motivation for them to want to do it and in fact to do it.

Very much coming out of the work we've done is the notion that leadership has to be persistent. Public performance reporting, be it financial or otherwise, is a risky business for public sector organizations, either in the sense of getting it wrong and being seen to have gotten it wrong and being subject to criticism, or in getting it right and telling a performance story, albeit accurately and fairly, but obviously then the people who read that performance story are not satisfied with the results, and criticism ensues. Under those circumstances, organizations need leadership that is persistent and that's willing to stick with it over a long period of time. We've found that to be particularly challenging as well in the developing countries we've had an opportunity to train auditors for. It's the stick-to-itiveness notion.

Another dimension of the leadership—and this goes to the heart of our concern—is that the leadership has to be values-based. The values that are associated have to go well beyond values and ethics that focus on the straightforward legal and probity considerations associated with public business. There has to be a set of values and ethics that extend to the impact of what public sector organizations are doing on the users of their services or the citizens of their jurisdictions. This is perhaps even more challenging. This is extremely challenging to a lot of organizations, and yet it is an essential part of the human dynamics of leadership associated with public performance reporting.

The last one I'd like to reflect on is that leadership has to be supported. It's always delightful when one sees public sector leaders embracing the concepts associated with better financial or non-financial performance reporting, but it really doesn't happen in practice by itself. Embracing the notions has to be accompanied by a commitment to invest human and financial resources in support of that.

As we look at attempts on our part to develop much more sophisticated ways of reporting on non-financial performance and as we look at more rigorous financial reporting systems for public sector organizations, the professional judgment calls associated with that are really tough. It's going to put extreme pressure on public sector organizations in the sense of the kinds of people they have inside and the way they manage those people in order to succeed.

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I've chosen to try to focus on some of the leadership aspects, because that really is the overarching issue. We have to develop meaningful game rules by which to report both financially and non-financially and to connect the financial and non-financial reporting. We have to develop some meaningful game rules that have to do with the human dynamics around it, and in particular the kind of leadership that's going to be provided by the top people and at every level in public sector organizations around that issue.

I'll stop there, Mr. Chairman. I'm happy to take questions on any aspect of this.

The Chair: Thank you, Mr. Boisclair.

Before we move on, he also left with us Comprehensive Auditing: An Introduction, a small booklet, which looks very informative as well.

Now we'll have some opening remarks from Mr. Plumptre, who has also given us a folder with some information on the Institute on Governance.

I'll ask you to make your opening remarks, Mr. Plumptre.

Mr. Timothy Plumptre: Mr. Chairman, as Mr. Boisclair said, it's a pleasure to be here. I am honoured to be called before the committee.

It's also a pleasure to have a chance to talk with my former representative, Mr. Harb. I've moved, but he hasn't.

Mr. Mac Harb (Ottawa Centre, Lib.): I'm sorry to have lost you. You were in the Glebe, right?

Mr. Timothy Plumptre: I was in the Glebe; that's right.

Mr. Mac Harb: See? I knew exactly where he lived.

Voices: Oh, oh!

Mr. Timothy Plumptre: There's no escaping.

Anyway, it's also a pleasure to be here with my friend Jean-Pierre Boisclair, whom I haven't seen for a very long time. He's always very articulate and always better prepared than I am, so I feel a little bit in his shadow. Jean-Pierre of course has come with a well-prepared opening statement, and I haven't. But since I was second, it gave me a chance to arrange my thoughts a little bit, so maybe I can speak in an introductory way.

Frankly, from the material that was sent to me prior to the meeting, I had a little difficulty getting my mind around exactly what the mandate and purposes of the committee were and what might motivate it to be interested in what it's doing. So I thought rather than trying to address myself to what I thought your interests might be, I'd simply talk more generally about the institute and then about some of the work we've been doing related to performance measurement, and then invite questions. I thought that might be more productive, from your point of view.

So I'll say a few words on the institute. We are a non-profit organization with charitable status. We've been in existence since 1990. We have two offices, one in Kuala Lumpur and one in Ottawa, and we have a staff of seventeen people. We have no core funding. Almost everything we do is on some contract basis or other. Essentially what we do is invent things we think it would be interesting to do, and then we run around trying to find people foolish enough to finance it. So far we've been successful for ten years, but we don't take the future for granted.

We do three things. We do research; we do quite a lot of training and conferences, seminars, what we call sharing events, sharing knowledge, learning events; and we do a small amount of consulting-type work, where we apply the knowledge we have in practical situations.

Our revenue derives approximately half from work related to institutions here in Canada, and about half of our work relates to institutions overseas, partly financed by CIDA, partly financed by the World Bank, partly by the UNDP, and to some extent, in a minor way, by other organizations.

We've worked all over the world. Recent work has been in places as diverse as Latvia, Jamaica, Lebanon—Mr. Harb's family roots—Egypt, all the countries of Southeast Asia, and northern Africa. We have quite a wide span of involvement in a variety of different countries.

Why do we do this? I founded the institute, and my motivation for founding it was threefold. First of all, I thought there would be utility in having an organization to try to share Canadian public sector expertise with other countries. I felt that despite our tendency to be Canadian and criticize ourselves, we're actually not bad at running the public sector. Despite what's going on in Parliament at the moment, we don't do a bad job overall.

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Mr. Mac Harb: Could you repeat that, please?

Voices: Oh, oh!

Mr. Timothy Plumptre: This is not a paid political announcement.

Voices: Oh, oh!

Mr. Timothy Plumptre: We have useful expertise to share about how we run public organizations, ranging from Parliament and auditors general and oversight agencies right down to departments and so on. So that was one motivation behind the founding of the institute.

The second was that it was advantageous to Canada to be trying to import interesting ideas from abroad. We've tried in our small way to play a role in bringing in interesting ideas from other jurisdictions and disseminating them in Canada.

And third—and this is a much more minor part of our role as we see it—from time to time we try to take small initiatives in the interests of what we perceive to be good governance. Sometimes, for instance, it's difficult for the public service to take stands on things we think are important, so we might take a stand on an issue. But on the whole we are not an advocacy organization, and to the degree that we do advocate, it's on the issue of, as I say, what we consider good governance.

Why do we do this? We do it because we believe good governance correlates closely with economic and social development. There's a growing body of literature, both in first nations territory and also internationally, that indicates institutional factors and particularly good governance are both very important to economic and social development, and where you don't have it, you tend not to have economic growth and you tend not to have advancement in social conditions.

So we do this not because we think governance is an abstract concept but because we think it ties in directly to what's important to people in society.

If you want, I can go on, but I won't do it now. If you want, I can talk a bit about what governance is, why it's different from government, and why it matters, and I can talk a bit about good governance. But in the interest of brevity, I'll skip over that for the time being and just say a little bit about performance reporting.

We were slightly surprised to be invited to appear before a committee investigating international financial reporting standards, because we didn't think we knew very much about that. But we do think we know something about the issue of performance reporting in the public sector generally. So I have four or five quick things I'd like to say about that.

First of all, I would take it the members of this committee are familiar with the distinctions between probity, efficiency, and effectiveness. If you're not, it's really important to understand that. It's the absolute, basic ABCs of evaluation and auditing in the public sector.

Assuming you've been exposed to that pretty simple but basic conceptual framework, you may or may not be aware that really a lot of work has been going on in public services hither and yon around the world on the question of how to improve performance reporting. If you haven't called the Treasury Board Secretariat, you might be interested in getting them to come in and talk about the work they've been doing on performance reporting in different jurisdictions. They have a lot more horsepower than we do, and I believe they've been engaged in a program of research related to that.

Also, an academic called Paul Thomas I think has been doing some special work on that. You might want to invite him to speak to your committee.

But the problem with performance reporting and efforts by bureaucrats to develop better and better measures.... We had something called part III of the estimates here in Canada. Now we've abandoned that and there are new standards for reporting of the non-financial aspects of the work of government. The problem is there's no demand for this stuff. There's a small bit of demand—I suppose parliamentarians like to get it—but fundamentally, for sustained, thoughtful, in-depth reports related to the performance of government organizations, nobody really has the time to review this kind of stuff in depth.

Our analysis of the reason for this shows it goes right back to the basic structure of Parliament. Members of Parliament themselves are not empowered to exercise a lot of control over the way in which money is expended. The business of Parliament is conducted in such a way that even if members of Parliament have the time and opportunity to analyze this quite complicated kind of information, there's not a whole lot they can do to it.

So in our own work related to performance reporting, we've tended to stress the link between institutional reform that would empower elected representatives of citizens and the availability of information.

The availability of information in itself I'm not sure amounts to very much, and there is a real tendency for well-intentioned efforts conducted in the public service to wither after a while, because nobody makes much use of it. Material is produced by the pound and by the kilogram, and as somebody said about another government report I remember, it makes a good doorstop, but it doesn't serve much practical purpose.

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However, if you're interested more in what is going on in other countries, I do encourage you to talk to the people in the Treasury Board and perhaps Mr. Thomas.

I thought I might mention two other things to you. They're in the domain of providing better information about performance of public organizations. Three initiatives I'm aware of represent quite an interesting departure from conventional methods of measuring performance, and these are initiatives known as Sustainable Seattle, Sustainable Calgary, and Sustainable Penang.

I think the origin of this was Sustainable Seattle. Essentially this was an initiative where a group of citizens got together and said, let's figure out what's important to us about our city, let's involve citizens in trying to identify what they think is important, and let's involve citizens in figuring out how they would measure some of these intangible but very important things that make life desirable in a city to citizens.

Typically in these kinds of initiatives, citizens might say one area that's really important is culture and heritage, another area might be opportunities for employment, another one might be the state of the natural environment, and things like that. Citizens will then get together in facilitated groups and try to figure out how you measure these things. Then if this thing maintains a momentum, they will track the performance over time, so then you begin to get indicators over time about whether these various areas are getting better or whether they're getting worse.

Our institute actually has had some involvement with the Sustainable Penang initiative in southeast Asia, and I could talk to you more about that or leave some material about that in your hands. There are also websites available on Sustainable Calgary and Sustainable Seattle.

So that's quite a different way of thinking about how you get information and who's responsible for it. It's an outside-in perspective, not specifically aimed at government performance but simply directed at the quality of life in a community, which is a somewhat different optic in thinking about performance from the conventional, let's audit a government department and see whether it's doing a good job.

The last thing I'd like to say that may be of interest to the committee is we are involved in two studies at the moment. I'm not completely up to date on the status of these studies. I know one is under way; the other is maybe pending. They're both for the World Bank.

The first study is concerned with the impact of World Bank interventions on institutions of accountability. The World Bank is very interested in corruption. They've been financing various efforts around the world to try to prevent corruption. One of the levers they use to try to get at the problem is what are called institutions of accountability, which can be things such as supreme audit offices, human rights commissions, ombudsmen, and the like.

They've decided to launch a study to try to find out whether or not these organizations are having any impact, and in particular whether their work is having any impact on the issue of corruption, which by the way they define quite specifically as personal malfeasance—abuses of public office for private gain. They don't necessarily define corruption as simply managerial ineptitude in a government department. They're fundamentally concerned with people trying to make off with money and assets for their own personal use. But I think the study will have broader implications.

We're currently involved in the design phase of that study. I don't have material I can leave with the committee, because my understanding is the committee likes things to be submitted in both official languages, and all we have is working documents, and they're only in English, so I can't table those with the committee at the moment. However, that study is now under way, and the bulk of the work will begin on July 1. We're currently working on a conceptual framework and a methodology.

The other study, whose status is a bit less clear in my mind but which might be of interest if and when it comes into being, is a study of how legislatures hold executive branches to account in about twenty countries around the world. This will be a comparative analysis of how that accountability relationship works in a group of different countries.

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With that, I've probably said more than I should, but I hope that's of some help.

The Chair: We thank you for those comments, Mr. Plumptre.

We'll turn it over to Mr. Harb.

Mr. Mac Harb: First I want to thank both of you for the excellent presentations you have made. It's very much apropros that you have appeared before this committee. Your presentations fit exceptionally well with what we are trying to achieve.

From my perspective, we are trying to achieve two things.

First, we want to establish or have international guidelines and standards for governments around the world so that all those governments, on an annual basis, would issue a financial statement using the same sorts of principles. So if any business person or any other government or agencies or crown corporations and so on wanted to inspect those financial statements, they would be able to read and understand what was meant by a particular item. When companies or corporations decided they wanted to go to a country in order to put in an investment, if they looked at the balance sheet of the government, they'd know that was going to be good for them. That's one element of it, and that's the side of the issue that interests me.

The other element is, as my colleague was leading into, the other twin in the mom's tummy. He's interested in the whole issue of corruption and the whole issue of good governance. I suppose we would be able to hit two birds with one stone, because once you had an international standard and proper financial statements issued everywhere, using the same fundamentals, then you'd have transparency, then you'd have clarities, and then you'd have less corruption, because any citizen of those countries could go and inspect what happened to project A, how much it cost, how much money was spent, and where the rest of the money had gone.

So to that extent, both of your presentations fit in exceptionally well with what we are trying to do.

I wanted to ask the clerk if it's possible at all to somehow, when we are doing the final report, incorporate some of the recommendations or comments in the documentation they have given us, with their permission, even though they may not have been read into the record. Would that be feasible, as background information?

The Chair: Since the documents have been tabled with the committee in both official languages, the committee would, unless Mr. Boisclair has any problems, be able to—dare I use the word?—plagiarize.

Mr. Jean-Pierre Boisclair: Use it in any way or to any extent you feel is appropriate to your endeavours.

Mr. Mac Harb: I feel so much in agreement with what you have said, I don't think I even have one single question, except to ask a small question.

In the public sector, sometimes when we want to measure performance, how on earth are we going to be able to measure performance if, for example, the Department of Health initiates a project in a community, an outreach program, for expecting moms to eat proper foods, do proper exercise, and all those sorts of things? In cases like that, how can we measure performance?

I want you to give me just a thought, because I've been struggling with it for quite some time, and the Auditor General has quite often made comment about the effectiveness of government programs. I would be interested in your comments, both of you.

The Chair: By the way, you noted the bells are ringing.

Mr. Mac Harb: Do we have fifteen minutes or half an hour?

The Chair: We have half an hour, so because we have to get to the House, we will adjourn this meeting at 4:35, just so that you know. So please try to keep the answers focused and brief.

Mr. Boisclair, do you have a comment? Then we'll get to Mr. Plumptre.

Mr. Jean-Pierre Boisclair: Yes.

The truth in all of this—and you find this in financial reporting as well—is we use the word “measure”, and the minute we use that word, we associate in our minds accuracy, and high levels of accuracy. The truth is there are aspects of public sector programming, as there are aspects of private sector endeavour, that are not easily measured. On a good day, with creative, analytical, and research techniques, you can start to talk about the performance; you can perhaps start to approximate where that might be. But you will have a reasonably high level of uncertainty associated with that.

• 1620

We have two concerns about public performance reporting. One, we go in with an expectation that everywhere dollars are invested, it's risk-free, so the performance achievement has to be 100%. That's not realistic in the context of how the public sector operates and what it's trying to do. It doesn't really reflect the risks the public sector takes in its programming, and it's certainly not reflective of how the private sector operates.

So, step number one, we're going to try to measure something, but to understand the performance or to draw a conclusion about it, we have to compare it to something else, and that something else is our expectation for what should have taken place. We don't take the time to get that one right, but then we go out and, through a whole variety of analytical techniques—some of them brought in by accountants, some by social scientists, some by just about every discipline you'd like to imagine—we gather some evidence about what's gone on. But we fail to adequately recognize that sometimes that evidential base is going to be less—somewhat less or greatly less—than perfect, or even convincing.

Mr. Timothy Plumptre: I agree with everything Jean-Pierre has said and I'd add a couple of other observations.

The further you move beyond the domain of probity, which has to do with the clarity and the mode of presentation of financial statements, into areas such as efficiency and effectiveness, the more you move from the domain of fact to the domain of judgment.

When the Auditor General Act was amended in this country in, I think, 1978, there was considerable debate among the members of the committee who had been appointed to examine the mandate of the Auditor General at the time as to whether the Auditor General could report on effectiveness. In the end it was decided by that committee, and the recommendations were adopted by the government, that the Auditor General in this country should not report on effectiveness, because effectiveness is such an ambiguous term and because it's so affected by value judgments.

I believe the Auditor General has found a way around that in the exercise of his mandate. In many other jurisdictions—and Jean-Pierre would know this better than I—audit agencies such as the AG's office do have the mandate to report on effectiveness.

To give you an example of how this can be open to interpretation, on the issue of mothers getting supplementary nutrition, I might say that's a great program, because people are getting nourished who weren't nourished. Somebody else might say, “That's a terrible program, because the mothers should be out there earning their own damn money. What's the state doing nourishing mothers? This is an example of the corruption and decay of our society. The mothers have to lean on the state for things they should be doing themselves.” So the glass of water is half empty or half full, depending on the values you bring to looking at a particular program.

It's important to understand that many discussions of effectiveness in the public sector hinge upon what value base you're coming from.

I would make one other point with regard to understanding the performance of government programs. I don't do this kind of stuff much any more, but I used to do a certain amount of evaluation work of government programs. What I tended to find again and again was that the basic rationale and the basic objectives of the program had never really been spelled out properly.

Jean-Pierre said one of the key ways of assessing performance is to compare with something else, and he's right, but there is another way in which you can assess performance, and that's to compare historically. How did it do before and how's it doing now relative to what it did before? But if you never really said why you have the program—and politicians often don't like to say that, because they like to leave it a little loose—

The Chair: I think “fuzzy” is the word.

Mr. Timothy Plumptre: Ambiguous, room to manoeuvre—

The Chair: I think “fuzzy” is the word we've decided on.

Mr. Timothy Plumptre: —opportunities for political influence to be exercised where it needs to be exercised, or may not. There are lots of variations.

In any event, it's often not very clearly articulated, so when you go to assess the performance, you find you don't know why it was established in the first place, and you have different views.

• 1625

It's an art, not a science, this performance evaluation stuff.

Mr. Mac Harb: Thank you, Mr. Plumptre.

The Chair: Thank you.

Both of you talked today about reporting, and I was very interested in your comment, Mr. Boisclair, that if you had to do it all over again, you would devote half of your resources to the human side of the equation. I've spent some time contemplating the issue of accountability and recognized that such things as the Auditor General's performance reporting are things that come after the fact.

Accountability, to me—and I've used the definition—is forces out of your control that cause you to think and act in a certain way, presumably honestly and effectively and so on. So these are motivating factors in front of you, rather than a stick problem coming behind you. The more we can put these motivators in front, so that people know exactly what is expected of them and there is recognition and reward for achievement or better than achievement, and penalties for less successful achievement....

I'm trying to figure out how to move from an environment that doesn't have that to an environment where it's recognized that's just the way things have to be.

We don't have a system, and we'll never have a system, that's perfect. Measurement isn't there to find out we were perfect. Measurement is there as part of the stick concept of saying, “Ah! We found you failed and didn't achieve your objectives. Therefore there is a penalty of accountability for failure, and you have to suffer the consequences.”

I'm trying to find out how we'd make the transition. We know what utopia is, or what seem to be best practices. We're not there today, and many countries around the world are just woefully inadequate. I've heard stories that the auditor general's report is ten years overdue, with no indication it's coming down anytime soon, and financial statements haven't been produced in fifteen years, and so on.

It's a transition. How do you move from where a country is today, which is woefully inadequate or somewhat inadequate—everybody is somewhat inadequate—towards what are perceived to be some management principles?

We'll make that the last question, because we do have to go to the House to vote.

Jean-Pierre.

Mr. Jean-Pierre Boisclair: This may sound so simplistic that you'll run from it, but I think what has to happen is the existence and the adherence to those kinds of values and standards has to be part of the conditions under which those governments succeed in doing business globally and in obtaining international financing and support when they need it.

The Chair: So you're saying we have to have in place the motivators, the cause, the motivation to change.

Mr. Jean-Pierre Boisclair: Yes, sir. They have to be part of the deal.

The Chair: Okay.

Mr. Plumptre.

Mr. Timothy Plumptre: Your focus on incentives is dead-on. The problem of institutional change in developing countries is an extraordinarily complex one.

The Chair: But it's not only there. It's here as well.

Mr. Timothy Plumptre: It's here as well.

Understanding why change doesn't occur often leads you into a host of historical factors, contextual factors, and so on, but fundamentally it does come down to incentives. If there's no incentive to change, then people don't change.

Jean-Pierre has also put his finger on something that's useful to remember, which is that leadership tends to come from the private sector. The problem of measuring performance is much more complicated in government than it is in business, but if one can enhance standards of reporting in governance in the private sector, it does gradually create pressures upon government to improve their performance too. And investors like to invest in countries where there are good standards of public accountability and where there's predictability.

So these things reinforce each other. Better corporate performance tends to lead to pressures for better performance in the public sector.

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The Chair: It's taken us a little while to move from imposition of accrual accounting in the private sector to the adoption in the public sector.

A voice: We are moving.

The Chair: Yes, we are moving.

I get your point, and it brings two maxims to mind. One is if it ain't broke, don't fix it. The other one is necessity is the mother of invention. Sometimes we get too complacent. We say it's working okay. We think because a system is not, for example, open to public exposure, using a contemporary issue, we can continue on; it's okay. But accountability means there are penalties for substandard performance.

The other side is the incentives you talked about. We have to talk about getting these incentives in place.

Anyway, gentlemen, we have to call this meeting to a close, because we have things to do. We're adjourned.