PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 24, 2001

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[English]

The Chair (Mr. John Williams (St. Albert, CA)): Good afternoon, ladies and gentlemen.

Today we have orders of the day pursuant to Standing Order 81(4), the order of reference dated Tuesday, February 27, 2001, being as follows: main estimates 2001-2002, which is vote 20 under Finance, Office of the Auditor General, and part III, report on plans and priorities relating to the year 2001-2002; and also, pursuant to Standing Order 108(3)(e), consideration of the annual performance report of the Office of the Auditor General of Canada for the period ending March 31, 2000.

Our witnesses today are, from the Office of the Auditor General, Ms. Sheila Fraser—and we welcome Ms. Fraser in her capacity as acting Auditor General, which she has been appointed to upon the retirement of Mr. Desautels.

Our congratulations, Ms. Fraser, on that appointment.

We also have as a witness, Mr. Michael McLaughlin, the Deputy Auditor General, Corporate Services.

These are our witnesses today, so without further ado, we'll turn it over to Ms. Fraser for the opening statement.

Ms. Sheila Fraser (Interim Auditor General of Canada): Thank you, Mr. Chair. I am pleased to be here as interim Auditor General, and I want to thank you and your committee for the opportunity to discuss with you our report on plans and priorities for 2001-2002 and our performance report for the year ending March 2000. We welcome your views and suggestions on the orientation of the office and ways that we can improve our performance.

The Office of the Auditor General is committed to making a difference for Canadians by encouraging positive changes in our federal institutions. Over the last five years, we've focused on the following priorities: improvement of the government's financial position; accountability; financial management; public service renewal; and the environment.

In February 2001, the Auditor General, Denis Desautels, tabled his final report, which assesses the progress made in relation to these priorities. The office will continue to focus on these priorities this year; however, they will be reviewed when a new Auditor General is appointed.

[Translation]

This year, we plan to publish the Annual Report of the Commissioner of the Environment and Sustainable Development in October and the Annual Report of the Auditor General in December. These two reports will contain some 20 chapters.

We have provided you with a handout that shows the list of chapters in our 2001 and April 2002 reports. The work for these reports is well under way, but there is room for adjustment to our plans for the latter part of 2002. We would appreciate the Committee's suggestions on issues that we could consider in our audits planned for 2002.

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I would like to take a few minutes to outline certain chapters in our December Report. The management of grants and contributions was an area of concern in 2000 and is the focus of much of our work in 2001. In response to a request from your committee, we will report on a government-wide audit in this area in December 2001.

We will continue our work in tax revenue administration. One chapter will discuss how the Canada Customs and Revenue Agency administers the tax legislation related to income earned in Canada by non-Canadian residents. Another chapter will review Customs operations related to commercial traffic. We will also report on National Defence's management of in-service equipment and on the adoption of new governance arrangements.

The Report of the Commissioner of the Environment and Sustainable Development will focus on environmental issues affecting the Great Lakes and the St. Lawrence River basin and will provide an assessment of the sustainable development strategies tabled in February 2001.

In addition to these reports, we will complete two special reports: one in response to a request from the government on the Export Development Corporation's sustainable development strategy and a second one on the Canadian Wheat Board, at the request of its Board.

We also conduct statutory audits, including the audit of the summary-level financial statements of the federal government. The implementation of the government's Financial Information Strategy will have an impact on our audit of Canada's financial statements. We will have to perform a substantial amount of additional audit work on new financial systems and amounts not previously recorded in the government's financial systems and financial statements amounts such as tangible capital assets, inventories, and environmental liabilities.

[English]

We are also responsible for auditing the annual financial statements of over 100 government organizations, including crown corporations, other entities, and territorial governments. We have just in fact recently provided our first audit opinion on the financial statements of the Nunavut government.

We also carry out special examinations of crown corporations once every five years, and we plan to start the fourth round of examinations in 2001-2002. We are also the auditors of two international organizations, UNESCO and the International Civil Aviation Organisation, and the costs of these two audits are recovered from the organizations.

Last year we told your committee that our current level of funding was not sufficient to provide the level of service we believe is expected by Parliament in the medium and longer term. Over the last decade the office has voluntarily participated in government restraint programs, and at the same time has accepted expanded audit responsibilities, with the creation of the Office of the Commissioner of the Environment, the new agencies, and Nunavut. The result is that the office now has significantly fewer resources available for value-for-money auditing than we did a decade ago.

Government changes, such as the introduction of the government's financial information strategy and the modernization of the comptrollership function, have further increased pressures on our resources and resulted in strains throughout our office. We have been striving to maintain adequate audit coverage of government entities and programs.

To address this concern, the office has requested from the Treasury Board Secretariat a significant increase in our base budget for 2001-2002. This proposed increase would also support our plans to invest in the training and development of our people and renew our audit techniques and technology. These changes are necessary to ensure that our auditors are well equipped to audit in today's changing government environment.

In March 2000 your committee asked us to clarify our performance expectations, refine our performance measures, and improve our performance reporting. You also asked us to keep members of Parliament involved in our strategic planning process. We have told you that we intend to implement all these recommendations. Our second handout for the committee shows our progress in this regard.

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We have revised the office's performance measurement and reporting framework. The revised framework, which appears on pages 12 and 13 of our report on plans and priorities, describes a cascade of results that flow from our work and lead progressively to the adoption of best management practices, better accountability, and sustainable development. We have described four of these results in our 2001 report on plans and priorities and set expectations for three of them.

These three results tell only a part of our office's performance story. Work on implementing other measures and setting expectations is ongoing. We expect that our next performance report will respond more fully to the committee's recommendations, and we intend to continue meeting with members of Parliament to discuss issues of interest to them. We are also working through the Canadian Council of Legislative Auditors to develop comparable performance measures for legislative audit institutions.

And now, Mr. Chairman, with your permission, I would like to ask Mr. McLaughlin to take us briefly through some of the charts in our report on plans and priorities.

The Chair: Thank you very much, Ms. Fraser.

And now, Mr. McLaughlin, we'll turn it over to you.

[Translation]

Mr. Michael McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General of Canada): Thank you, Mr. Chairman. I would like to refer to the Report on Plans and Priorities of the Office of the Auditor General. The page numbers are the same in English and in French.

[English]

First, to highlight some of the financial aspects of our report, if you would turn to page 10, we provide a table that talks to the planned spending of the office. The first line of the table does in fact give us the spending line of what we put into our main estimates. You can see that this particular line is now showing as fairly steady, with a drop of $1 million from the planned 2001-2002 into the future. This was because we were temporarily funded for some FIS work, and we expect to increase that funding in the future for auditing FIS.

We believe some additional amounts will be necessary at the time of future audits of the public accounts due to the decentralized nature of the financial records and in accordance with the financial information strategy. We don't have estimates of that right at the moment because the government is still in the process of setting up the FIS framework within the departments.

In section 3 of the report, on page 15, we show the planned spending by component of legislative auditing. It is here that we show our figures on a fully loaded basis. In other words, all our overheads have been factored into the costs of our audits, the outputs of the office. So there are no other costs being shown than the audits themselves.

Mr. Philip Mayfield (Cariboo—Chilcotin, CA): Excuse me, Mr. McLaughlin, what page is that, please?

Mr. Michael McLaughlin: Page 15.

Mr. Philip Mayfield: Thank you.

Mr. Michael McLaughlin: This is exhibit 3.3, on page 15.

In particular in this exhibit, you will see in the first line, on value-for-money audits of departments and agencies, there's an actual decrease being shown, from $31 million planned in 2000-2001 to $30.6 million. It's actually more significant than that because the costs per unit hour have gone up, so there is less money available.

On assessments of agency performance reports, we originally did the assessment of the CFIA. We now must do Parks Canada and the revenue agency as well. So that's why the number goes from $0.5 million to $1 million.

On the financial audit of the financial statements of the Government of Canada—again this is FIS work—we're projecting an increase in cost. We've seen it starting to happen this year, and we would project into the future a $1.2 million increase.

The financial audits of crown corporations stay fairly steady. The special examinations will start to rise as we move into the fourth cycle of special examinations, and our work on environment and sustainable development strategies will remain fairly steady in terms of those amounts.

We'd have to say that we try to manage carefully all of these audits and make sure that we bring them in on schedule.

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On page 16, paragraph 3.17, we point out that the average cost of our value-for-money audits is now rising to $800,000. We had been predicting these at around $700,000 to $750,000. So the average cost is rising to $800,000. This means fewer value-for-money audits when the total amount of money available for value-for-money work is less than in the past. The cost per audit goes up.

The reason we tend to target around $800,000 is to make sure these audits are coming in in chewable chunks that the committees can deal with in an effective fashion. The Financial Administration Act requires that we do special examinations of crown corporations every five years. In our third round, we are showing a decline of $60,000 on average for special examinations, so we are trying to make savings on that side.

Section 4, which starts on page 21, deals with the sustainable development strategy of the office, and this was originally tabled in 1997. Our primary focus for the coming year will be continued improvement in integrating environmental and sustainable development concerns into our audit work.

Section 5, on page 23, provides a summary of financial information. These are extracted from the main estimates. It highlights the contribution to the CCAF, formerly known as the Canadian Comprehensive Auditing Foundation. We do this on behalf of the Government of Canada, in total, plus an estimate in table 5.2 of the revenues we plan to receive. These are non-respendable, but we are provided with funds in our estimates to carry out these audits. These are audits of UNESCO and ICAO.

Finally, in table 5.3, on page 24, we then capture services received without charge, which are primarily shadow rent costs associated with the premises we occupy, and that is an additional $6.5 million, to bring the total cost to $61.4 million.

My last comment will be on pay equity. It's not in the text, but I raise this because last year we indicated to your committee that the terms of the recent settlement that the government made with employees of certain designated groups did not apply to separate employers like ourselves.

We think this is a question of fairness to our employees, and it still has not been resolved. It is currently before the Federal Court. The Public Service Alliance of Canada has filed a claim in the Federal Court to achieve pay equity for separate employers. The hearing is scheduled for May, and we do not expect this dispute to be resolved quickly, but at this point, we're taking no further action on this particular issue of pay equity for our employees in the clerical and secretarial groups.

The Chair: On that issue, Mr. McLaughlin, am I correct in saying that you support the payment of the pay equity settlement to the employees?

Mr. Michael McLaughlin: Our employees were working under essentially the same collective agreement as the employees of the federal government, the same working conditions—

The Chair: Yes, but my question is, are you supporting the notion that your office pay?

Mr. Michael McLaughlin: We believe our employees should receive an equivalent amount.

The Chair: So why are you in court?

Mr. Michael McLaughlin: We are not in court. We cannot pay them. There are laws that prevent us from paying them. In particular, the Public Sector Compensation Act froze the wages of employees for a period of time, and we cannot make payments because of the existence of that act.

The Chair: When was this section of the act put in, and on what basis does it preclude you, as an independent employer in an independent office of government, from making a payment on salaries to staff under pay equity?

Mr. Michael McLaughlin: The pay equity legislation requires that a case be made that there was a pay equity problem. In our case, because we are a separate employer, Treasury Board is saying the pay equity case does not apply to the separate employers. We were arguing on behalf of our employees that it is a case of relativity and that because they were working in the same conditions and were in fact quite deployable between the various agencies, and Treasury Board controlled us on our salary and our negotiations with our employees, in fact they were part of the larger question.

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The Chair: Are you saying the legislation says that unless you are taken to court and lose, you cannot pay, even if you voluntarily want to pay? You cannot pay on a voluntary basis, but you can only pay if taken to court and you lose your case.

Mr. Michael McLaughlin: The Treasury Board would have to agree that the merits of the case would warrant us paying and then we could go ahead and pay. But without the Treasury Board's concurrence, we have no authority to pay on our own volition.

The Chair: I'm very confused here. We have a policy in this country that says there should not be gender discrimination.

Mr. Michael McLaughlin: Yes.

The Chair: We have a policy that says we pay people appropriately.

Mr. Michael McLaughlin: Yes.

The Chair: You want to pay people appropriately and you want to ensure there is no gender discrimination in the salary scales you pay.

Mr. Michael McLaughlin: Yes.

The Chair: Yet you're trying to tell me that you're prevented by the Treasury Board from making the payments.

Ms. Sheila Fraser: If I may, Mr. Chair, it's an issue that Mr. Desautels raised in his capstone report concerning the independence of the office, and we must obtain authority from Treasury Board to negotiate with our employees. So we cannot negotiate salaries directly with our employees, and pay equity is part of that broader issue.

The Chair: Yes. I knew you didn't have it, but I thought you had actually received that authority. So until such time, Treasury Board is doing all the negotiations for salaries on your behalf, and they are not willing to compromise their lawsuits for somebody else.

Ms. Sheila Fraser: Not exactly.

Mr. Michael McLaughlin: I can be a little more concise than that. We do the negotiation. They give us a mandate to negotiate that we cannot exceed.

The Chair: So it's not in the mandate. The mandate does not include giving you the authority to negotiate pay equity.

Mr. Michael McLaughlin: It does not give us that authority.

The Chair: Have you asked for it?

Mr. Michael McLaughlin: We have been in discussion with Treasury Board in advance of this to explain the case as to why we felt it was fair and the proper thing to do, and the basic hang-up point is that as a separate employer under the human rights legislation the Treasury Board employees are one establishment, the separate employers' employees are separate establishments, and the action that was taken by the union at the time was against the Treasury Board establishment and not to the other employers' establishment.

So for us to be able to accord it on our own we would have to have been able to demonstrate at the time there was a pay equity problem within our establishment. When you're dealing with a small establishment, it doesn't take into account the reality of the workplace.

The Chair: It's complex, Mr. McLaughlin.

Mr. Michael McLaughlin: Very complex.

The Chair: Does anybody have any questions on this pay equity issue specifically before we move into our question rounds?

Mr. Philip Mayfield: I have a question, but not specifically in the way your questions have been directed.

The Chair: But is it on pay equity, Mr. Mayfield?

Mr. Philip Mayfield: What I wanted is to get a picture. For instance, we've been talking about pay equity as applied to the AG's people. What I was wondering is could you give an update to the committee on the ongoing pay equity issue? Are you in a position to do that?

Ms. Sheila Fraser: I'm afraid, Mr. Chair, that we are not prepared to do that for today's meeting. I'd be glad to come back at some point in time in the future to give an update, but we haven't done any audit work recently in that area.

The Chair: Mr. Shepherd, you had a question on pay equity.

Mr. Alex Shepherd (Durham, Lib.): I don't know that I have an actual question. Presumably the theory is that your employees are somewhat different from the regular employees who are covered under collective agreement with the public civil service. Indeed, it seems that we try to do both things. We come here and we argue that we should have more independence and then turn around and say our employees should be treated like the public service. Therein lies the issue, I suspect, and I suspect it's not just the Auditor General's department. There are many other agencies of governments that would fall into it.

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Ms. Sheila Fraser: I agree with Mr. Shepherd's comments, and this suit that is being launched by the Public Service Alliance will resolve that issue as to whether those employees are part of this establishment that has a right to pay equity. That's the basis of the suit.

The Chair: As I'm aware of it, the lawsuit basically is about the union wanting to broaden the decision to include all federal government employees. Is that correct?

Mr. Michael McLaughlin: No, that's not quite correct, Mr. Chair. What they're trying to broaden it to is to include all employees who were covered under the similar collective agreements with that particular union. So it includes seven additional separate employers and—

The Chair: Including you?

Mr. Michael McLaughlin: Including us. So we are named in that suit in terms of where things are at. Again, the issue is one that the collective agreements were essentially the same. There were no particular differences in the collective agreements and the control of how much money was being put into those collective agreements and what people were being paid. If they were a CR-5 in our office and a CR-5 in government—a clerk level 5—they would be paid exactly the same amount.

After a period of ten years or more of trying to determine pay equity issues, the people who were in government at the CR-5 level received a settlement; the people who were in our office did not get anything.

The Chair: As I said, Mr. McLaughlin, it's complex. Here we have you being named in a lawsuit, being sued, because you're failing to deliver on pay equity. You're making a voluntary commitment to deliver on pay equity, yet the lawyers are going to have their day in court—many days in court—at great expense to the taxpayer to resolve something that you have voluntarily offered to resolve.

Mr. Alex Shepherd: Mr. Chair, I have a point of order. The reality is if a court decision is the other way, there are significant savings to the taxpayers of Canada.

The Chair: I suppose that's true, Mr. Shepherd, except that they were voluntarily willing to pay, and we've already paid out $3.5 billion on this file. As Mr. McLaughlin says, the cases are virtually identical, so—

Mr. Alex Shepherd: Are you prejudging the court decision, then?

The Chair: I do that all the time. We departed a little bit from the norm here, so now we'll just turn it over to our normal routine of questions.

Mr. Mayfield, eight minutes.

Mr. Philip Mayfield: Did you finish your statement, Mr. McLaughlin?

Mr. Michael McLaughlin: Yes, I did. Thank you very much.

Mr. Philip Mayfield: Just looking at the issue of the amount of money you have to do your work—you spent some time bringing that to the committee here. I notice that in the Auditor General's response to the standing committee's recommendations under recommendation 3, which is about performance reports providing additional detail in format, it says your initiatives in this area had not progressed enough to enable you to provide this type of information. Was that due in part—or maybe in whole, I don't know—to a lack of resources, funding you need to do this kind of stuff that the committee asked you to do?

Ms. Sheila Fraser: Yes, in part, I would say it was due to a lack of resources. In part, we established a data bank of all the recommendations, so there was a certain amount of work and research we had to do just to establish that, and additional resources might or might not have made it go quicker.

Where the greatest level of effort is required, though, is to go back and see the actual progress that has been made on all of the recommendations, and where our progress has not been satisfactory, the reasons for that. During the last year the priority with an end of mandate was to try to conclude on some of the priorities the Auditor General had at that time set. There was a significant focus paid on producing those reports for him, and I must admit that this had a lesser priority.

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Mr. Philip Mayfield: So it was a number of things you need, including resources.

Mr. McLaughlin, I'm not necessarily addressing this as a question to you, but in the part of the report you covered, you do point to areas of increased responsibility. In one point you mention the mandate of the Financial Administration Act, for example. You've also pointed out your increased costs of providing these audits. I'm wondering what means you have of inducing the government, or whoever is responsible for providing these funds, to make available to you what you need to do the job. It's difficult to have a legal mandate and then not have the resources to fulfil that mandate. If you call that being caught between a rock and a hard place, maybe you'd like to describe how you get out of that.

Ms. Sheila Fraser: We have presented a business case to the Treasury Board Secretariat for a substantial increase in our funds. They are presently studying that. I am hopeful that we will get, if not all, at least a significant portion of the additional moneys we have asked for and that will be part of our base funding for this current year. I'm also hopeful that shortly we will receive approval of those funds so that we are able to actually undertake some of the actions in the current year.

Mr. Philip Mayfield: Is the Auditor General in a position to refuse to provide an audit where there are not the resources to do that, or are you somehow compelled to go forward?

Ms. Sheila Fraser: It would be difficult, I believe, Mr. Chair, to refuse to do statutory work. The audits of financial statements where we would obviously have to cut would be in our value-for-money work. That is somewhat more discretionary, and there is no statutory requirement to produce any number of audits during the year. So that's where the direct reporting to Parliament would be cut if we didn't have sufficient funds.

Mr. Philip Mayfield: Value-for-money work means that you actually recover some of the costs for—

Ms. Sheila Fraser: No. That's our jargon, if you want, for the reports we table in Parliament, as opposed to the audit opinions on financial statements. Parliament doesn't necessarily see all the audits we do of the crown corporations and the territories.

Mr. Philip Mayfield: If we look at a worst-case scenario where the statutory work must be done, are there areas where you would be forced to look at cutting back in carrying out your statutory mandate?

Ms. Sheila Fraser: Mr. Chairman, I would hope that we would not have to envisage that possibility, so I don't perceive that as being an option. I think we have to get the additional funding. I think the Treasury Board Secretariat is sensitive to and aware of our concerns, and it is supportive of what we've presented so far.

Mr. Philip Mayfield: I would like to say personally—I won't speak on behalf of the committee but rather as a member of the committee—that I would not be happy to see your work diminished because of a lack of resources. Without speaking for them, I'm sure the committee members see the value of what you do in providing a transparency that Canadians need to have in the work and spending of government and in providing services.

Thank you, Mr. Chairman. I'll come back later.

The Chair: Thank you very much, Mr. Mayfield.

[Translation]

Mr. Perron.

Mr. Gilles-A. Perron (Rivière-des-Mille-Iles, BQ): Thank you, Mr. Chairman. I apologize for my late arrival. I was detained elsewhere and I apologize to our witnesses.

I was struck by something you said, specifically that certain audits, such as private audits and those of Crown corporations, would not be available to Members. Did I in fact hear you correctly?

Ms. Sheila Fraser: Mr. Chairman, reports issued on the financial statements of Crown corporations are presented to the boards of directors. I believe they are nevertheless available to Members, but unlike our periodic reports, they are not tabled as such. To my knowledge, the only reports that are directly available to Members are those on the special examinations of Crown corporations conducted once a year. Some of these reports are made public, while others are not.

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Mr. Gilles Perron: Why are they not automatically made available to Members?

Ms. Sheila Fraser: This is in accordance with the mandate set out in the Financial Administration Act.

Mr. Gilles Perron: I have another question. I realize that Mr. Desautels and your group have worked very hard on the Financial Information Strategy which was supposed to be implemented in April, if my memory serves me correctly. Well, it's April now. Will the FIS make your work easier? Will it help you, yes or no?

Ms. Sheila Fraser: Mr. Chairman, we hope that it will help us in the long term. Obviously during the transition years, our audit work will increase since accountability will be decentralized to departments. Therefore, we need to review the departmental systems in place. Another component of the FIS is the method of accounting for certain assets on the government's financial statements. For instance, tangible capital assets, inventories and environmental liabilities are items that have never been previously recorded or audited in the financial statements. An effort will have to be made to audit these figures as well. Therefore, for the next two or three years, I expect an increased effort to audit public accounts and I do hope that subsequently, if the systems in place prove adequate and the controls sound, this effort can be reduced.

Mr. Gilles Perron: I hope it won't be as complicated as pay equity.

Thank you, Mr. Chairman.

The Chair: Thank you very much, Mr. Perron.

Mr. Shepherd.

[English]

Mr. Alex Shepherd: First of all, I'd like to clarify the money side of this. You keep using the words “substantial increase”. Are some of the figures missing from all of this? I see basically a $55 million budget for 2001-2002 compared to the original main estimates of $54 million. Is that the end of the story?

Ms. Sheila Fraser: No, Mr. Chair. The report on plans and priorities only includes estimates that have been voted by Parliament. That's, I must admit, one of the difficulties in going through these reports. Any additional moneys we receive through supplementary estimates are not included in here.

Mr. Alex Shepherd: So what are you asking for?

Ms. Sheila Fraser: We've asked for an increase of $8 million, roughly 15% of our budget.

Mr. Alex Shepherd: So a 15% increase over the previous year.

Ms. Sheila Fraser: Actually, not quite over the previous year. The previous year would have been around $56 million. So we're asking for about $6 million more than last year.

Mr. Alex Shepherd: Let's go back to the performance report. I'm looking at this schedule here where you go through all your audits and show the number of hours and so forth. Many years ago when I was involved in auditing and so forth, it was common to have such things as time budgets. Why wouldn't your analysis of your department show your budgeted hours compared with your actual hours expended on a per-line basis?

Ms. Sheila Fraser: Mr. Chair, I think that's an excellent suggestion. We do have budgets for all the audits we do. We do a comparison of budget to actual and the differences. We were remarking that we should probably also be putting in comparisons with previous years. So I think there are improvements we could make and we could put budgets in.

Mr. Alex Shepherd: So the next time I see your performance report, it will show the line budget...

Mr. Michael McLaughlin: Mr. Chair, perhaps I could add a comment. It seems that I'm going to be saying today that everything is very complicated.

The table you're looking at, Mr. Shepherd, is an annual table. It is not the cost of a particular audit. The budget we would be setting against a particular audit would be for the products. We manage on a product basis. In this particular case, because we're reporting on a fiscal year basis, we're showing the costs that have been incurred in the fiscal year. It's not showing the cost of the actual product that was produced. It may by happenstance show that.

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A better presentation, obviously, would be to show a product presentation—that we needed to do a financial audit of a particular crown corporation; the audit cost was this much, or the plan cost was this much; the actual audit cost was another amount, and there would be a variance and an explanation of significant variances. Obviously that would be a better report, and we would like to move towards a better report.

In this current configuration, because we have a year-end, there's an opportunity to play with the costs against budget. If somebody was being targeted on a cost to budget, then they could play around the year-end. We aren't presenting that, so there's no sort of play around the year-end.

So if we do present it, as I say, it gets a little complicated, but it's not that bad.

The Chair: Mr. Shepherd is a chartered accountant.

Mr. Michael McLaughlin: What I would prefer to show is the cost of the audit and the budget for the audit. What is shown here is an annual cost incurred against a particular entity for that line of work. It does not deal with a specific cost.

Mr. Alex Shepherd: Be that as it may, it's possible to present it in that fashion.

Mr. Michael McLaughlin: Yes.

Mr. Alex Shepherd: Getting back to the importance of plans and priorities, and performance reporting, which the Auditor General spent many, many hours lecturing us on, wouldn't it be more appropriate for the Auditor General's office to actually include that kind of an analysis so members of Parliament would have some kind of an idea of the budgets that you prepared for your own internal system, and possibly those ones that you didn't make?

Mr. Michael McLaughlin: Yes.

Mr. Alex Shepherd: Then we could ask questions about why, and we can reward you for those things where you're positive.

Ms. Sheila Fraser: If I might interject, Mr. Chair, I think as we improve our performance reporting, efficiency indicators would be one of those. That would be a way to represent an efficiency indicator well. We'll be looking at that. I commit to looking at that in the next year.

Mr. Alex Shepherd: And reporting it that way next year?

Ms. Sheila Fraser: Yes.

Mr. Alex Shepherd: Okay that's great. That's excellent.

I want to get back to the whole idea of why this report, which is basically plans and priorities, should somehow bear some resemblance to a performance report. In other words, the performance report we have today should be reporting on what happened to the plans and priorities of yesterday. That doesn't fit very well. They don't fit together very well. So I think we should find some way to do that. I think you people should be the leaders in this field in showing government how to do it.

Secondly, as I observe performance reports of departments of government, they invariably say everything's fine—we've met all our objectives; we've satisfied all our budgets, and we're all really happy. It wouldn't be much of an evaluation report if there weren't something that in fact didn't meet expectations. So I guess I'm looking for a better system, and I'm relying on your office to show us how to do it.

Ms. Sheila Fraser: Thank you, Mr. Chair.

I agree that it is difficult to look at these two reports in the same hearing. Normally we would look at the performance report in the fall, and the plans and priorities we look at in the spring. But because of the election, we're looking at both of them together. It gets very confusing because one is a performance report of the year ended March 2000, and the other one is the report—

The Chair: I think Mr. Shepherd's point is that there be a similar style of presentation so that what you project you're going to do can be compared with what you actually did do, and so that we as parliamentarians can see some correlation between the two.

Mr. Alex Shepherd: My point is that this performance report should ideally include estimated figures from the same performance report of March 31, 2000. These two aren't related at all because of different fiscal years; they don't mean anything. In other words, we should encompass the plans and priorities from the year 2000 in here and measure it against them.

Ms. Sheila Fraser: I agree.

I agree, Mr. Chair, and one of the things that we're trying to do in improving our framework for performance reporting is to have better indicators to set clearer expectations. We admit that we need to set better expectations for our own office.

The Chair: But also that parallels with the plans and priorities, so we as parliamentarians can look at both and see that this is what you planned; this is what you did.

Mr. Sheila Fraser: I agree.

The Chair: Thank you, Mr. Shepherd.

Mr. Bryden.

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Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Lib.): Mr. Chairman, I have just something to say on an unrelated matter, if I may, but the witnesses would probably be interested in it.

Yesterday CBC's The World at Six aired a very disturbing program pertaining to deaths on a Saskatchewan Indian reserve involving the abuse of prescription drugs. The reason why I feel that is relevant to this committee, Mr. Chairman, is that in the last session we had prior to the break, we heard from the ADM of the first nations Inuit health branch who informed us that there are no real controls. No one has taken real responsibility for looking after this problem of people who abuse the non-insurance health benefits plan to the point of death.

Mr. Chairman, this isn't a time to discuss this particular issue, but I would ask if you would mind, or if the committee would agree, that we translate this report and distribute it to all members so that perhaps we can have a very brief discussion of it at our next meeting. I think it is certainly an issue and an event that falls very much within the purview of this committee and these witnesses.

The Chair: Okay, I'll accept the report. We'll have the clerk translate it; we'll bring it back to a subsequent meeting, and we'll discuss it with the steering committee to see if we can get something on the agenda for you, Mr. Bryden.

Mr. John Bryden: Thank you very much, Mr. Chairman.

Mr. Philip Mayfield: Mr. Chairman, may I make a comment on the same issue?

The Chair: Yes.

Mr. Philip Mayfield: I appreciate what Mr. Bryden has suggested, but I'm wondering if there should be other people in the room when we discuss this to add some meat to the content of what is being said. I don't know the value of the committee members hashing this.

It's a matter of great concern, I agree with you, but I would like to have the best way possible of dealing with this, and maybe you have some other suggestions, Mr. Bryden.

The Chair: Thank you. We're not going to get into a debate. Your points are valid. We're planning a steering committee for Thursday. Perhaps you could make some submissions for the steering committee to consider on Thursday.

Mr. Philip Mayfield: Agreed.

The Chair: At that time the steering committee can make a recommendation to the full committee.

A final word, Mr. Bryden.

Mr. John Bryden: Very briefly, Mr. Chairman, that would exactly be my intention. I think it is an issue that this committee should look at in depth, with witnesses if necessary, but it is a decision of the committee, not a decision of mine.

The Chair: Okay, thank you very much. Thank you for that intervention, Mr. Bryden. It's appreciated because I heard the same radio broadcast and thought it was most apropos and timely in relationship to the hearings we had. Perhaps the researchers will hold off writing the reports until we have dealt with this particular additional information.

Okay, are there other questions?

Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Mr. Chairman, I just wanted to get the comment of the acting Auditor General on the whole issue of—and this is a general comment—the modernization of the whole financial reporting system in government and also the modernization of your audit standards... just generally, the whole audit industry. I know you're doing more audits. You're asked to do value-for-money audits, which you weren't doing 10 years ago. The issues of sustainable development and environmental issues are now on your plate where they weren't 10 years ago, so you have a lot more.

But in this whole area of electronic audits, do you see that assisting you greatly in reducing the amount of time, energy, and resources required to do an audit? I am mainly talking about your general audit, your test audit. Do you see that helping you?

Ms. Sheila Fraser: Mr. Chair, as Mr. Murphy may know, there has been quite a change in the audit profession in audit techniques, and that's one of the things we want to introduce to the office. Especially, I would say, in our financial attest work—the opinions on the financial statements—we need to make better use of technology to do that.

We have to date... Because the government's accounting system was a centralized accounting system, and all the transactions went into one repository, if you will, the approach that was used was largely substantive. We would pick transactions to look at and verify them.

Now, with the accounting being decentralized into departments, we can't operate that way any more, and we want to look more at systems and controls that are in place in departments. So we're changing the focus of our audit work.

• 1630

As many of the large accounting firms have done, we're going more to what they call business processes and risks, better risk analysis. It's a different way of approaching the audit.

I would hope that over time we will be able to reduce the costs and the time we spend on the financial attest work and yet spend, perhaps, more time in producing recommendations on systems and how to improve procedures, so that we get more output from our audit than perhaps we currently do.

The other area we're trying to work on, too, is that when we do our value-for-money work in departments, we spend a lot of time learning about the department, and we'd like to integrate that better into our financial attest work to make better use of that knowledge in the financial attest work we do.

Those are the two main...

Mr. Shawn Murphy: Do I have time for one more? I have perhaps a phrase or two also.

What is the present situation in your department with respect to your whole human resources? In this Ottawa market, is it becoming more difficult? Is that a real problem with your department, and does it in fact increase costs substantially?

Ms. Sheila Fraser: Thank you, Mr. Chair.

We do have a significant challenge in our human resources, as do all government departments. We are going to be facing a very large number of retirements in the years 2003-2008. We have to replace a lot of the talent in the office. We also have to try to capture as much of that knowledge as we can before they actually walk out the door.

The other difficulty we are facing... As you mentioned, in the Ottawa market there's great demand for financial people and people in technology. Those are the kinds of people we are looking for. Just generally across the country, it's becoming increasingly difficult to find accounting expertise, and the cost of that is increasing. It's the same, be it for government or be it for the accounting firms.

There's a lot of competition for the students coming out, so we've had to change the way we recruit and spend a lot more effort on recruiting. We are bringing in more students at a lower level and rebuilding our recruiting.

For many years the office, like I think many government departments, was fairly stable in its staff complement and didn't have a lot of recruiting coming in. We have increased that significantly, but we are facing the same challenges as many employers in the market.

The Chair: Thank you very much, Mr. Murphy.

Mr. Mayfield.

Mr. Philip Mayfield: Yes.

Ms. Fraser, in your report on plans and priorities, you mention that some of the changes in government organization have brought strains to your department. I wonder if you could characterize those strains, describe them, and perhaps just give the committee a picture of what challenges you're facing in that.

Ms. Sheila Fraser: Thank you, Mr. Chair.

I guess the best example is probably the last two years that we have undergone in the office. The office has had a phenomenal output of audit products. We have published in the last year over 40 audit chapters, which have been filed in addition to all performance assessments on new agencies. We're involved in FIS and new accounting policies. We've done over 100 crown corporations and other entities. We had a significant push, I would say in the last two years, to deliver audit products because of an end of mandate, which I think is probably normal. In addition to that, and I think we can all recognize, we had the HRDC audit, which was far more involved and more extensive than we had imagined originally.

We have cut back, I would say fairly significantly, in our development of methodologies, in our training, and in time for people to be able to go out and learn. People have been very focused on delivering a product, and we can't continue that momentum. We are going to have very unfortunate results in the office. We've already started to see some signs of burnout and people under great pressure working very long hours to produce the products, and we can't sustain that.

• 1635

We also need to have time to look at our methodologies, how we do our work, and to think a little more proactively about some of the things we're doing. That's why, with this additional money, we're hoping we can do some of those things and relieve some of that pressure.

Mr. Philip Mayfield: Do I have time for another follow-up question?

The Chair: Yes.

Mr. Philip Mayfield: You introduced the element of training. I believe you also mentioned in your report that the office exceeded the amount of training recommended by the Canadian Institute of Chartered Accountants, but that the current level of training is no longer adequate to meet the challenges you're facing, and this is probably part of what we've just been talking about. I'm wondering how you intend to deal with this. Are you planning to increase the training to your staff? I guess you're doing more than the institute suggests, but it's not enough for your needs. I'm wondering, where are you in this?

Ms. Sheila Fraser: Thank you, Mr. Chair.

There are two issues, I think. One is the number of days of training that we offer, which we believe in the short term has to be increased because of issues like FIS and new systems that are going in, and our auditors have to be familiar and comfortable auditing those systems. Some of them are very complex; SAP and Oracle are not easy systems to understand, and yet everybody in our office should have at least a familiarity with how to do that.

The other issue is also the shift in training. We need to spend more time on technology. We need to spend more time on some of the accounting issues that we really haven't had to deal with before because government wasn't recording, for instance, fixed assets. We need to spend more time on how to do that, so it's more of the hard training.

The last element, I think, is that many of our people are fairly senior and have been in the office for a long time. They need to go to outside courses and have outside development. Those courses, as I'm sure you are aware, are becoming very expensive to do. We've had to cut back significantly on the number of courses that our people can attend just because of the cost of that.

We try to be selective and try to do a development plan for our people and say which courses should they be going to for their own development. But we've found in the last couple of years that the courses have been too expensive, and we haven't been able to afford them. So we'd like to put some money back into that as well.

Mr. Philip Mayfield: I have more questions. How long do you want me to continue, Mr. Chairman?

The Chair: Why don't we come back to you, Mr. Mayfield?

Mr. Philip Mayfield: That would be fine.

The Chair: Mr. Shepherd, please.

Mr. Alex Shepherd: Back to the performance report. I don't know if you're going to tell me that these are year-end adjustments or something, but I'm looking at the last page here, and I'm just interested in the area of financial audits. Why is it that it costs twice as much money to audit the Government of the Northwest Territories as it does the Government of the Yukon?

Ms. Sheila Fraser: Mr. Chairman, the Government of the Northwest Territories has a very decentralized accounting system and has accounting records in many locations throughout the territory, which involves a lot more time on our part to have to go out to each one of those locations to get the information, whereas the Yukon is much more centralized. I think it's actually centralized into two or three places, so it's a much more efficient audit for us, if you will.

Mr. Alex Shepherd: So a lot of this is travel and—

Ms. Sheila Fraser: Travel, yes.

Mr. Alex Shepherd: Okay, fair enough.

There's a big line here—provincial income tax, opinion to the minister, $675,000. What was that?

Ms. Sheila Fraser: That, Mr. Chair, is an opinion that we give to the provinces on the tax collection agreements. So the government collects taxes and redistributes them to the provinces, and we audit that agreement—

Mr. Alex Shepherd: Distribution?

Ms. Sheila Fraser: If you want, distribution.

Mr. Alex Shepherd: And they, invariably, don't believe they're getting the right amount. Isn't that correct?

Ms. Sheila Fraser: I don't know that I could comment on that.

Mr. Alex Shepherd: But aren't there some provincial treasurers who don't believe that, that you're giving them the assurance that...

Ms. Sheila Fraser: We audit it two or three years after the fact—I think it's three years after the fact—and we give them an audit opinion on the revenues that have been collected on their behalf by the federal government.

Mr. Alex Shepherd: So that's $675,000 for 10 provinces? Is that what it works out to?

Ms. Sheila Fraser: That's right, except Quebec, obviously.

Mr. Alex Shepherd: Okay. The unemployment insurance account, $337,000. What's that about?

Ms. Sheila Fraser: Mr. Chair, we audit the employment insurance account and give an opinion on that. It's an audit of the financial statement of the account.

Mr. Alex Shepherd: Okay, the opinion that most people are familiar with around here is that there is a big surplus, and is that...

• 1640

Ms. Sheila Fraser: That is part of our opinion. There's a fourth paragraph in our opinion that makes note of that surplus, but we do audit all the transactions that are in that account, so we ensure that any payments going out of the account conform to the authorities and legislation and that the moneys collected have all been transferred in there.

Mr. Alex Shepherd: So it takes... is that 3,300 person-hours to determine that?

Ms. Sheila Fraser: That's correct.

Mr. Alex Shepherd: That seems like a lot of time. I'm a layperson. Isn't that...

Ms. Sheila Fraser: I can't respond in any great detail, but I know that for instance we look at all the collection of employment insurance in CCRA. We have to ensure that all those moneys are properly recorded in the account, and then we have to ensure that all the employment insurance payments that go out are all accurate and in accordance with the regulations.

Mr. Alex Shepherd: Oh, so you audit the payment side as well?

Ms. Sheila Fraser: We look at all the payments that go out and determine whether they are in accordance...

Mr. Alex Shepherd: Okay. As for the Mint, the Mint gobbled up $844,000 with a $600,000 special audit.

The Chair: That was loose change, Mr. Shepherd.

Ms. Sheila Fraser: Mr. Chair, the $600,000 is a special examination that is conducted once every five years at the Mint.

Mr. Alex Shepherd: It's a statutory audit. Okay. The public accounts, which presumably partially include us... Is that a fair...

The Chair: We're the public accounts committee, Mr. Shepherd.

Mr. Alex Shepherd: I see $2,200,000. Is that the public accounts plus your appearances here?

Ms. Sheila Fraser: No, Mr. Chair, the whole audit of the Public Accounts of Canada costs—if you look on the next page—$5 million. The $2 million basically covers the central team, the planning, committee appearances, writing the observations, doing all the work, bringing all the results together...

Mr. Alex Shepherd: But reporting to Parliament...

Ms. Sheila Fraser: Reporting would be included in that $2 million, yes.

The Chair: Thank you very much, Mr. Shepherd. That was quite enlightening about the loose change at the Mint.

Mr. Mayfield, we'll come to you. Mr. Bryden isn't...

Mr. Philip Mayfield: The whole area of personnel and the tensions there are an issue I'd like to follow up on. I believe that in your report you mention renewal, and you've discussed that today. In responding to Mr. Murphy, you mentioned that you're bringing in people who don't perhaps have the same level of qualifications or training that you may have had in earlier times. Is that not correct?

Ms. Sheila Fraser: No, Mr. Chair, what I meant by my comments was that for several years the office had reduced the number of students and more recently of accredited accountants who it brought in, just because there was very little turnover in its staff. When we see the retirement bulge coming in the next few years, we realize that we have to bring in a significant number of students. We have in fact doubled our recruitment of students and recently of qualified accountants in order hopefully to meet the demands that are coming four or five years from now.

Mr. Philip Mayfield: This inevitably means that the task of training and qualifying them for your standards is in your hands. They don't necessarily come ready to sit down and start doing the job—if it's possible to come in off the street and start doing that job.

But anyway, I think in the report you mention that you're renewing human resources through training, implementing a succession plan, and updating methodology and knowledge management. Now, some questions come out of that. You've perhaps mentioned that there is some difficulty in recruiting. Can you perhaps describe how that is making it more difficult for you? How difficult is the recruiting task for you right now?

Ms. Sheila Fraser: Mr. Chair, for certain positions, I would say it is very difficult to get people with IT skills, especially in the Ottawa market. It's not easy, as well, for financial auditors. There is also a very high demand for those people.

• 1645

I would say we have been relatively successful so far in recruiting the people we've needed. Going forward I think we have to put a lot more focus and attention on that. We have recognized that's an area where we have to pay a lot of attention and we have to do more. The office, for instance, has to become better known on university campuses. We have to more actively recruit people into the office. We have to engage our personnel more in recruiting people they know.

Mr. Philip Mayfield: Is there a sense among people in your industry that the Auditor General's office is perhaps an employer of choice or something like that? Is there a special reputation, cachet, something like that?

Ms. Sheila Fraser: I would like to think we are. To be realistic, I don't think we are. I'm not sure that on the university campuses accounting students think of the Office of the Auditor General when they think of employers. They are thinking of the large accounting firms.

Mr. Philip Mayfield: I see.

Ms. Sheila Fraser: The accounting firms spend an inordinate amount of attention trying to recruit the best students. The numbers of students going into accounting programs has reduced significantly, so there's a seller's market. The students are in great demand out there and firms are giving signing bonuses.

Mr. Philip Mayfield: Before the chairman cuts me off at the time limit, I also wanted to ask what implementing a succession plan consists of. What is that?

Ms. Sheila Fraser: What we have done is look at the profile of retirements we are expecting within the next five to seven years and identify those positions we believe are critical, that have to be filled and require specialized skills. Then we look to see if there are people in sufficient quantity within the office to fill those positions, and if not, how we are going to fill them when that person retires. Are we accepting that we will go out and recruit from the outside, or do we want to bring in people now to develop them—

Mr. Philip Mayfield: Are there goals and benchmarks in that?

Ms. Sheila Fraser: Yes. We have our own development profiles.

Mr. Philip Mayfield: On the same subject, to conclude, could you describe briefly for the committee your human resources strategy? I presume you do have a strategy, but—

Ms. Sheila Fraser: Yes, we do, and I can perhaps ask Mr. McLaughlin to respond further.

Mr. Michael McLaughlin: Yes, we do have a human resources strategy, and it's based on the overall vision of the office, a vision of a caring employer, an employer who cares for the people.

In terms of the people we have inside the office, we want them to be trained, to be capable of doing the work, and to perform to the competency models we have developed for the different types of work at different levels. So we provide the training, we provide feedback, we provide evaluation to people so that they can in fact improve their performance and deliver according to the norms and standards of the office.

In bringing people into the office we recruit at all levels. We don't just recruit at the entry level; we recruit at all levels. We bring people in with a wide variety of backgrounds and expertise who can be readily placed in the jobs. But legislative auditing is different from any other type of auditing, so it's important that we have the training programs in place when people arrive to be able to educate them in what is really unique to the Office of the Auditor General and unique to the government as a whole.

One of the other things we celebrate, and it happens quite often in our office, is when somebody leaves the office to go and work for the government. We celebrate that because we think if we can get our message out further to the government through qualified, trained people from the Office of the Auditor General, the government will run a little bit better.

Those are the main elements of our—

Mr. Philip Mayfield: Thank you for your patience, Mr. Chairman, and thank you for your answers. My questions are concluded.

The Chair: I thought the general public, Mr. McLaughlin, thought you were the government.

Mr. Bryden.

Mr. John Bryden: The annual financial audits, you would agree, I would think, are a legitimate cost of doing business. It's a cost that should be there.

Mr. Michael McLaughlin: Yes.

• 1650

Mr. John Bryden: Tell me then, in looking at these audits you do for the various crown corporations, including crown corporations that are in businesses like Atomic Energy of Canada Ltd. and VIA Rail Canada, surely the charge of the financial audits should be taken by those corporations rather than by the Auditor General, but you're the ones who actually pay for those audits. Is that what I understand?

Ms. Sheila Fraser: Mr. Chairman, Parliament votes us a certain amount of funds to cover those audits. We believe it's important, as part of our independence, that we not be funded directly by the entities we audit.

Mr. John Bryden: Yes, but there's a difference between being funded by them and having a user-pay situation. It's really an accounting thing. I would have thought, as a way of giving you more money, that for these corporations, these entities, the crown corporations, part of their operating costs should include a payment to the Auditor General to do their books—or to some auditor.

Ms. Sheila Fraser: Mr. Chair, I came not too long ago from a world where I had to negotiate fees. I hope I don't have to go back to one.

I believe very firmly that it's important for the audit office to have full power to determine the scope of its audits, to be able to question, and not to have someone at the other end saying we can't do that because they won't pay it. I appreciate that there is some validity to user-pay. On the other hand, I think there are consequences that could affect the independence of the office.

Mr. John Bryden: I have another question, if I may. Can you tell me a little bit more about the ongoing study on grants and contributions? Can you give me any idea of what you're doing there and where you're going? That's an issue that greatly interests everyone.

Ms. Sheila Fraser: I can ask Mr. McLaughlin to elaborate. We have, in fact, four audits going on in grants and contributions. There is a government-wide audit of management, throughout the government, in which we're doing several departments—Mr. McLaughlin can give you the details—but we're also looking at economic development, the ACOA grants and contributions, we're looking at grants and contributions in Health Canada in the health promotion branch, and at settlement programs in Citizenship and Immigration.

So we have, in fact, four audits. The government-wide one is very extensive. We'll be looking at Treasury Board, too, but I'll ask Mr. McLaughlin to give more details on that.

Mr. Michael McLaughlin: Thank you, Mr. Chairman.

The objectives of our government-wide grants and contributions audit is to determine whether Treasury Board and the Treasury Board Secretariat have ensured effective government-wide control over the spending of public moneys through voted grants and contributions; and then to determine the causes of government-wide control problems, if any, and to assess the board and secretariat's progress in addressing them; and to determine whether ministers and their departments have effective control over selected grants and contributions programs.

The chapters will consist of three interrelated pieces, will roll up the audits we've done from 1998 to 2001, and will provide a summary of the results of audits reported during that timeframe. They'll audit the role of Treasury Board and the secretariat in carrying out their responsibilities in seven grants and contributions programs, so that we can make a summary of observations on quality.

The entities included are Agriculture Canada, Agri-Food Trade, Environment and Natural Resources, the Climate Change Action Fund, the Medical Research Council, and now the Canadian Institutes of Health Research operating grants in AIDS research, the Solicitor General, the first nations policing program, Heritage Canada, the official languages community program, the Canada Economic Development Agency for the Regions of Quebec, innovation development, entrepreneurship in access, and Western Economic Diversification, or the WED program. We're not quite finalized in what we're doing in Western Economic Diversification at this time, but we're looking at it carefully in order to include it.

That's the basic scope of the audit.

Mr. John Bryden: Mr. Chairman, these are results that we all eagerly await.

The Chair: With bated breath.

Mr. John Bryden: If I may just ask one other question, through you, Mr. Chairman, is there an opportunity for this committee to make suggestions on other areas that might be examined in this context, should the committee, in its wisdom, find other areas of interest?

Ms. Sheila Fraser: Yes, Mr. Chairman, we'd welcome your suggestions. I would just caution you, though, on the grants and contributions audit. It's already underway, and we're trying to report in December. So time is of the essence.

• 1655

The Chair: We'll try to get you a grant to pay for that.

Mr. John Bryden: Thank you, Mr. Chairman.

The Chair: Thank you very much, Mr. Bryden.

I note that about 60% of your recommendations get approved and accepted to your satisfaction. Do you consider that to be a satisfactory number, or should it be higher?

Ms. Sheila Fraser: Mr. Chairman, we would obviously like to see it higher than 60%. We have not established our own expectations as of yet. We have to go through and do a better analysis of the recommendations. As I mentioned, we put together a database of them and we have to go through them, but we would like to see that number closer to the 70% mark than it is to the 60% mark.

The Chair: The recommendations you make are honest assessments by independent auditors. If an intelligent recommendation by an independent auditor is not followed through, that's a fairly serious indictment of the credibility of your office in terms of telling management how they should be doing things. Don't you think you should be aiming higher than 70%?

Ms. Sheila Fraser: Perhaps, Mr. Chair. I would like to add, though, that in the coming years we would like to look to how we do our assessment of recommendations and the follow-up. Currently, we return two to three years afterwards for specific recommendations. We're starting to question if we shouldn't perhaps be doing it more on a departmental basis, in a way much like we did—I don't know if you're aware of it—with transition letters that we sent to the new Parliament and the various committees. We took a department and presented the audits we've done in the last four or five years, the major issues that we believe are still outstanding, and how a committee might want to look at these areas. So we might go more to a department- or a program-specific emphasis, rather than recommendation by recommendation, at a certain point in time.

The Chair: Now, on funding, you mentioned that you're hoping to get some more money out of Treasury Board. I ask the question every year: Do you feel you have enough funds to do the job adequately?

Ms. Sheila Fraser: At this point, Mr. Chair, quite honestly, if we do not get the extra money, no, I do not think we have enough money.

The Chair: When do you expect to get an answer from Treasury Board?

Ms. Sheila Fraser: I would hope we would have an answer within the next two months.

The Chair: Can we ask you to write to the public accounts committee if the answer from Treasury Board is not to your satisfaction?

Ms. Sheila Fraser: You can be assured we will write to the public accounts committee.

The Chair: Very good. Thank you.

Mr. Desautels, prior to his retirement, mentioned a review of the act. Do you want to comment on that, or do you want to leave it until the permanent Auditor General is appointed?

Ms. Sheila Fraser: I don't think it would be appropriate, as interim Auditor General, to comment on that. I think the new Auditor General should review that subject.

The Chair: Apart from the point that Mr. McLaughlin mentioned about the lack of perceived independence in the negotiation of salaries and wages with the employees, are there any other impediments to your independence that you wish to mention?

Ms. Sheila Fraser: Mr. Chairman, in Mr. Desautel's capstone, he did mention the funding arrangements. As we've mentioned, we have to negotiate with Treasury Board Secretariat. We would prefer that it go directly to a parliamentary committee. We think that would give more independence to the office.

The Chair: Okay.

Looking at value-for-money reporting, I guess it comes down to value for money of the Auditor General. You're asking about a $55-million... well, including your shadow costs, it's over $60 million. In your performance reports—and you do value-for-money auditing a lot of the time, with 40 chapters last year—is there any way you can include in your performance report, in essence, the value you have provided to the Government of Canada and to the people of Canada through, perhaps, savings achieved through improved efficiencies and the implementation of recommendations that can be costed? Do you have any comments on that point?

Ms. Sheila Fraser: Mr. Chair, we have indicated certain indicators, like the adoption of recommendations or the number of parliamentary hearings. We do give examples of cost savings. You may be aware that other legislative auditors in other countries use that as an indicator. We have been reluctant to use that as a specific indicator, because we think it could drive behaviour in our office and in government to only trying to find reductions in costs, and that may not be appropriate. We try to give examples of where we have found efficiency gains, but this is not a kind of indicator such as other audit institutions use, where people say for every dollar they've spent in their office, they have saved x number of dollars in government. Some do that. We are very reluctant to do that.

• 1700

The Chair: Okay.

The government has just completed a long-term strategy—the financial information strategy or FIS—which I understand has been implemented successfully as of April 1. I understand FIS has actually enhanced the efficiency of management of government information, government data, and government finances. It improved it by bringing in the accrual system and allowing for better management and better analysis of the financial information.

Are there any other long-term strategies of the government, or strategies you would be recommending to the government, to improve efficiencies within departments, rather than just relying on ad hoc, value-for-money, independent audits of specific issues?

Ms. Sheila Fraser: Mr. Chair, may I comment on FIS?

While I would not like to presume on the results of an audit we'll be carrying out this year, when we say FIS has been achieved, it has actually only been the hook-up of systems that has been accomplished.

The Chair: I'm quoting the government, by the way.

Ms. Sheila Fraser: It remains to be seen if introduction of management information resulting from accrual accounting... this has yet to occur. Even accrual accounting, as you are surely aware, will only be coming in in March of 2001 with the year-end numbers. So the current-year management, I presume, is much as it was before.

This will take a certain amount of time. The whole comptrollership initiative is going on. We would applaud the efforts that have been made in strengthening internal audit. Studies are going on as well on human resource issues.

The other main issue obviously facing the government is government on-line and how it is going to affect the management.

There are many challenges left for government in the area of management.

The Chair: The government recently introduced a bill—I can't remember the number, but it basically dealt with the Canada Pension Plan Investment Board—to reinstate a piece of legislation that had fallen by the wayside inadvertently. Part of this reinstatement includes exemption from certain sections of the Financial Administration Act, including audit by the Office of the Auditor General.

How do you feel about being excluded from major funds of the government, like the Canada Pension Plan Investment Board? You're also excluded from NAV CAN. It seems to be coming—

Mr. Alex Shepherd: I have a point of order.

The Chair: Yes.

Mr. Alex Shepherd: We're not talking about a fund of the Government of Canada when talking about the Canada Pension Plan Investment Board. We're talking about the funds of individuals who are investing in the Canada Pension Plan.

The Chair: But the same employment—

Mr. Alex Shepherd: They don't belong to the government.

The Chair: I know they're not, but—

Mr. Alex Shepherd: I just wanted to clarify.

The Chair: Yes. They're managed by the Government of Canada and invested by an independent board.

Now I understand that, through the exemption of the Financial Administration Act, they're subject to a financial audit by independent auditors appointed by the board. But they'll never be required to have, for example, a value-for-money audit or an in-depth analysis on return on investments.

Your comments on that.

Ms. Sheila Fraser: Mr. Chair, as you may recall in the capstone report and in an audit we did on new governance arrangements, questions of accountability to Parliament were raised. We believe the audit provisions are an important aspect of this.

We are concerned with the amount of government money being transferred outside the reporting entity we look at. This is a personal comment, but whether or not we are the auditor of record is an issue. But it's also an issue that we aren't able to what we call “follow the dollar”, to go into some of these organizations to see what is happening.

So there are two issues we will be looking at in the current year. We are auditing new governance arrangements and we'll be reporting on this in December, and we are developing an office position on the whole aspect of the accountability arrangement—in particular, the audit arrangements of these new entities.

Yes, we are concerned.

The Chair: You are concerned.

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Mr. Shepherd's point is also significant, about being able to take the information in the report on plans and priorities for one year, and to have the ability to analyse the same information in the annual performance report for the same year to see if this information dovetails. It should.

I've made this comment, not just to your department but to all departments, that for parliamentarians, if we are to be able to find a way through this mountain of information and mountain of figures for the estimates of all departments, there has to be some simplicity and continuity.

One of the issues I would like you to consider is auditing the performance reports of other departments to ensure they are fair and reasonable in their self-assessment. I think back to the time we dealt with HRDC and on the social insurance numbers. There was not the slightest mention of social insurance numbers in their performance report. You would never know that they were even responsible for social insurance numbers, and yet there was an extremely critical report on social insurance numbers, which were part of their responsibility.

Have you given any thought to auditing the performance reports to find out if they are valid documents, telling the whole story, or just smoothing things over and telling the good side?

Ms. Sheila Fraser: We have obviously not considered auditing performance reports—giving an opinion, if you will, on individual performance reports.

Last year we did a government-wide audit on performance reporting in general. We also do—as you're likely aware—three assessments of performance reports of three agencies. Auditing of individual departmental performance reports would have to be initiated by Parliament, and doing those audits would require significant resources as well.

The Chair: I'm not talking about a financial audit. I'm talking about an analysis of the information contained in the report to see if the information is an accurate reflection of what is actually taking place in the department, and that the report contains everything that would be appropriate.

For example, I mentioned social insurance numbers that were totally and completely ignored by a particular department. This was a major part of its responsibility, an area in which—according to your report and after analysis—the department recognized extreme weaknesses to the point that it was going to re-evaluate the entire process of the management of social insurance numbers, but there was no mention of them in the report.

I would like to see somebody go to the departments... It gets back to my concept of accountability: if you know somebody may come along one day and check to see your information is accurate, you are more motivated to ensure that the information in your report is accurate.

I'm not asking for a detailed analysis of each and every number in their report, but an assessment of their performance report to see that it does in some way reflect accurately the activities of the department.

Is this possible?

Ms. Sheila Fraser: Yes, of course, Mr. Chair, it's possible. We would obviously respond to any request coming from Parliament. It might actually be a logical progression, if departments are starting to do their financial statements, that at some point in time they present an integrated picture of their financial information and performance information as a whole, and then that there be either some assessment or review or audit done of this information.

The Chair: So it's possible?

Ms. Sheila Fraser: It is possible.

The Chair: In closing—

Mr. Philip Mayfield: I need clarification on your last question, Mr. Chairman.

The Chair: Yes, Mr. Mayfield.

Mr. Philip Mayfield: Are you thinking of the audit of the performance reports being linked perhaps to a comparison of those performance reports with a fairly recent audit by the department's auditor general? Was there some correlation you had in mind there?

The Chair: No.

I used the example of HRDC's performance report, where absolutely they didn't even have a mention of social insurance numbers—good, bad, indifferent. If you had read the report, you'd never have known that they had the responsibility for managing social insurance numbers. Here is a performance report that was missing specific information about their responsibility. They just didn't acknowledge that it was their responsibility. They didn't make any comment on it, whether good, bad, or indifferent.

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So I'm looking for an audit of performance reports to see that they are a valid, reasonably unbiased statement of activities of a department. I'm not asking for an audit of the internal numbers, but if they say... Using social insurance numbers as an example, you know yourself the amount of fraud that you've pointed out that was going on there. Some guy had 72 social insurance numbers and so on. They have privy to some of that information themselves. If they were privy to it and they didn't include it in the report, then I think we, as parliamentarians, would want to know why.

It's that kind of assessment of the report that I'm looking for. I tend to feel that these reports are quite fluffy and self-serving and therefore largely useless. I would like to see them more effective than they are.

Ms. Sheila Fraser: We agree fully with that. I think Mr. Desautels has mentioned on several occasions that the difficulty for these performance reports is that they never present anything but the good, and that there has to be more honest and more transparent reporting.

The Chair: Well, I'd like you to take that under advisement, so that you can see if there is a way, without going in and auditing every number at huge costs because you're auditing financial statements in total—

Ms. Sheila Fraser: But you do appreciate, Mr. Chair, that this would require significant effort on the part of an audit office to obtain the knowledge of business required to give that kind of assessment.

The Chair: Well, I'd think that you don't have to do them all in one year. You can take one, go into the department, say here's your report. You say X, Y, and Z. Show us the data that prove that X, Y, and Z are appropriate.

Ms. Sheila Fraser: Well, if I might suggest, Mr. Chair, I don't know if this committee has ever looked at the performance reports of the agencies on which we do give assessments, but that might be an interesting place for this committee to...

The Chair: Okay, we may want to start there.

Mr. Bryden.

Mr. John Bryden: Just a suggestion. Maybe what really ought to happen here is this committee should be writing to every department and asking how they would resolve this problem of performance reports that are not candid. It seems to me that it's an administration problem rather than an auditor general's problem.

The Chair: I agree that it's an administrative problem. I was just thinking that one of the ways to resolve it is if you know that an inspector or an auditor will come along and ask you to justify your work, you tend to be a little bit more focused on doing the right thing.

Anyway, I think we'll bring this meeting to a close if nobody has any more questions.

One point before we do that. Again, on behalf of the public accounts committee and all parliamentarians, I would like to thank you and the staff in your office for the diligence and hard work that has been put in to ensuring that departments are held to account. We appreciate very much what you do on behalf of us and all Canadians. Thank you so much.

Ms. Sheila Fraser: Thank you, Mr. Chair.

The Chair: Do you have some closing comments?

Ms. Sheila Fraser: I would just like to thank the committee for the interest you show in the work of our office. We look forward to working with you in the coming years.

The Chair: Thank you so much.

The committee is adjourned. There will be a meeting of the subcommittee on agenda and procedure on Thursday, April 26, 2001, at 3:30 p.m. to plan future business of the committee in Room 208, West Block. That's right here. Regarding the issue Mr. Bryden raised, if anybody has any input for the subcommittee, please get it to us before that time.

Mr. Shepherd.

Mr. Alex Shepherd: There is some business on the vote on appropriations.

The Chair: We don't have a quorum at this time, so when we have a quorum, we'll bring that point forward.

The meeting is adjourned.