PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 22, 2001

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[English]

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

Our order of the day, pursuant to Standing Order 108(3)(e), is to consider the annual performance report of the Office of the Auditor General of Canada for the period ending March 31, 2001.

Our witnesses today are Ms. Sheila Fraser, the Auditor General of Canada, and Mr. Michael McLaughlin, the Deputy Auditor General.

Before we get to the opening report, I would like to tell members that today we also have present some people from the Hungarian study tour. I would like to introduce: Dr. István Balázs, the chief government councillor of the Prime Minister's office in Hungary; Ms. Zsófia Czoma, head of the international affairs section and a law expert in the Prime Minister's office; Mr. Péter Janza, deputy president of the government control office; Mr. Mr. József Thuma, government commissioner in the Prime Minister's office; and Mr. Tamás Sepsey, president of the government control office. They are observing us today.

Again, before we start I would just like to mention to the Auditor General that I have just come from the House of Commons, where the Speaker tabled a ruling on a point of order I raised three weeks ago based on your comments in your audit of the Public Accounts of Canada. He upheld one of the points in the point of order, and basically instructed the government that they have to amend the supplementary estimate A to conform with the rules and procedures of the House in the business of supply.

Therefore, I would like to congratulate you for being a diligent officer of Parliament in bringing these things to our attention, which the Speaker considered to be a matter of serious concern.

On that note, we will now hear your opening statement.

Ms. Sheila Fraser (Auditor General of Canada): Thank you, Mr. Chair.

We are pleased to be here today to present our 2001 performance report. In this document we look at whether we have met the commitments made in our 2000-01 “Report on Plans and Priorities”. We achieved this performance under the leadership of Denis Desautels, and we are grateful for the outstanding contribution he has made to our office.

Our office experienced intense activity in 2000-01. We completed the audit plan presented in our 2000-01 “Report on Plans and Priorities”. We published 43 value-for-money chapters on such issues as the environment, health and safety, immigration, and the education of aboriginal children, and we identified opportunities for savings in government operations.

In addition, we delivered the final report of the former Auditor General, which assessed the government's progress over the last ten years with regard to certain of our priorities. We issued over 100 opinions on the financial statements of the Government of Canada, crown corporations, other entities, and territorial governments. We conducted five special examinations of crown corporations and assessed the sustainable development strategies of departments and agencies.

[Translation]

Achieving this high level of performance is the result of our staff's dedication and contribution. They are the strength of the Office and worked hard last year to complete our audit plan.

Office spending for 2000-01, in terms of parliamentary appropriations use, was $58.6 million or 97.5% of our total authorities. Our authorities increased from last year by $6.1 million to fund new audit work, the new FIS accounting system, and salary increases.

Our work improved a number of government operations. Exhibits 6 and 8 in our Performance Report illustrate our efforts in selected departments and by Office priority. The percentage of our recommendations that are being implemented by departments has increased from 60% to 65%. As we indicated to your committee last April, we are committed to improving our performance in this area. We are developing a new follow-up audit approach that will provide Parliament with better information on progress made by departments in resolving issues raised in our reports.

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We continue to improve our internal operations and have adopted an action plan that identifies seven areas for improvement. For example, we revamped our risk-assessment practices for the selection of audits and implemented a new financial system. One direct result is the publication of our first set of financial statements, prepared in accordance with generally accepted accounting principles, and the unqualified opinion of an independent auditor on these statements. Our financial statements will be an important tool in helping us to account for our performance.

We recognize that our performance is not perfect. Our 2001 Performance Report mentions areas that require improvements and challenges that face us. I would like to mention a few.

First, a few words about value-for-money practice. A practice review of four 1999 value-for-money audits identified opportunities for improvement in how we resource audits, how we conclude against objectives, and how we document audits. We attribute this in part to intense activity levels over recent years and under-investment in training, particularly in the audit methodology and technology areas.

The next topic is sustainable development performance. Our sustainable development performance is mixed. During the past year the percentage of references to our office, the environment, and sustainable development declined in the House of Commons and the Senate. We attribute this to a period where environmental issues were not as high as other issues on the minds of Canadians.

The third aspect concerns performance measurement. We made progress last year in measuring the impact of our audit work. We revised our performance measurement and reporting framework and developed a result chain that illustrates the outcomes we seek to achieve. We reviewed performance measurement practices used in other jurisdictions. Work in this area continues. We are working with the Canadian Council of Legislative Auditors to develop benchmark performance indicators. We are developing a survey strategy to obtain feedback from members of Parliament and from senior departmental management on the usefulness of information we provide.

The Eighth Report of the committee, tabled in the House of Commons on 6 June 2001, contained a number of recommendations to improve our annual Performance Report, and I fully agree with them. Your committee's recommendations have helped us prepare a better Performance Report and will continue to help us in the future.

You will note that our Performance Report has changed significantly. Where possible, we have addressed the committee's recommendations. Future changes to the report will be a result of our new performance measurement and reporting framework.

[English]

The fourth issue is an effective audit office. The next few years will be challenging for the government and for our office. Canadians want an effective public service, and we believe building an effective audit office can contribute. We face continuous change in professional practices, and a significant portion of our workforce is nearing retirement. Therefore, we must ensure continuity in our management and audit capacity.

We have taken several measures to respond to these challenges and to improve our performance. We are reviewing our audit practice and methodology and are pursuing several initiatives to strengthen our workforce. We have developed a succession plan that prepares our employees to take on greater responsibilities and fill critical positions as senior professionals and managers retire over the next two to seven years.

Aggressive recruitment efforts, supported by modern technology, are giving promising results. We are investing more in training employees to become proficient legislative auditors. In fact, we have almost doubled the size of our trainee program, recognizing that this is the best strategy to acquire and develop talent for the future.

Last April we indicated to your committee that we had requested from Treasury Board Secretariat a significant increase in our base budget for 2001-02 to modernize our audit methodology and tools and to maintain our audit capacity. The government has responded favourably to our request and has increased our base budget by about 15%. This funding is of course still subject to Parliament's approval. The additional resources would help us meet our challenges.

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Before concluding, I would like to take a moment to share with you some of my priorities as Auditor General. They are not final, but I intend to address them more thoroughly in the next report on plans and priorities.

I have identified five areas of focus for our audit work: accountability to Parliament; an effective public service; health, safety and security, or the well-being of Canadians; heritage and legacy; and aboriginal issues. Over the next few months I will define these priorities and the nature, and extent, of the work they entail. I would very much appreciate receiving your comments on these priorities or on any other issues of concern to you.

Our office enjoys a solid reputation in Canada and abroad. Our credibility and the trust the public puts in our work are the result of our sustained efforts to produce useful reports. I intend to preserve this track record. I will continue to maintain the office's credibility and tradition of excellence, and to provide Parliament and the public with the same quality of information they have come to expect from the office.

Mr. Chair, with your permission, I would like to ask Mr. McLaughlin to briefly take us through some of the sections of our performance report.

The Chair: Before we get to that, Ms. Fraser, we have guests here from the Prime Minister's office in Hungary, and perhaps you can take a couple of minutes to tell them, for their edification, about the Auditor General's office here in Canada as an office of Parliament. They could perhaps go back with some enlightenment on the role you play here in Canada.

Ms. Sheila Fraser: Actually, I think in many ways the role of the office in Canada is quite similar to the role the auditor general in Hungary plays. I actually had the occasion to meet Dr. Kovacs just recently at an international conference of auditors general.

The Office of the Auditor General of Canada reports directly to the federal Parliament. We are an office of about 500 people. We conduct, obviously, financial audits, but we also have a mandate to review the efficiency and effectiveness of programs in government.

We have no direct relationship as such with the provincial auditors, which is quite a different situation from that of many countries. Federal auditor institutions are actually called, in the international world, “supreme audit” institutions, which is an interesting connotation. All of our reports are tabled through Parliament, but we do have very good relationships, I would say, with most departments. We do try to work together to improve government operations.

The Chair: Thank you very much, Ms. Fraser. The more we share information on how we accomplish things here in Canada... We think we're doing reasonably well, but we always know that we have much to learn by observing what goes on in other countries, and how other institutions and so on have tackled problems that are the same as ours—accountability, honesty, integrity, value for money, return for the taxpayer's dollar, and so on.

How long a report are we looking at from you, Mr. McLaughlin?

Mr. Michael McLaughlin (Deputy Auditor General, Office of the Auditor General of Canada): I would hope less than five minutes, Mr. Chairman, thank you. I'll just quickly go through the important tables.

[Translation]

Our performance highlights can be found on page (ii), just before the message from the Auditor General. This is something new in this year's report. The context and background of our work is presented from pages 5 to page 9, in both official languages. Exhibit 2, on page 8, outlines the risks the Office must deal with and the strategies it has devised to deal with them. This section describes what could prevent us from reaching our performance objectives and sets out the strategies we have devised to lessen those risks. When we talk about risks, we don't necessarily mean that the Office has experienced those directly. We have perfected an operational system that allows us to manage the Office so as to attain our objectives in spite of existing risks.

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Page 10 provides information on the resources used during the year. This year, we present the costs of our activities in two ways: according to the parliamentary appropriations used, and according to the recognition of expenses in accordance with generally accepted accounting principles, that is the accrual basis of accounting. I will come back to this in a few moments, when I talk about our financial statements.

Exhibit 3, on page 11, presents the Office organization chart. It provides a snapshot of the organization of the Office as of March 31, 2001, when Denis Desautels was the Auditor General. You will find appended the revised organizational chart as of November 2001.

[English]

Exhibit 5 on page 13 is a summary of performance. The exhibit distinguishes between outcomes and management performance measures. It compares performance over a three-year period and compares actual performance with our targets for 2000-01.

Exhibit 6 on page 15 shows follow-up results. In here we are responding to a recommendation of this committee to present more information concerning our follow-up work. This table does provide an example of the impact of our work, by department. Later, on page 19, exhibit 8 will show selected achievements, by department, according to the priorities we had for that period. So we had five priorities and we give examples of how we have achieved those priorities, again using anecdotal examples.

Pages 22 to 28 present information on three management performance measures—degree of completion of our audit plan, extent of adherence to our professional practice standards, and our sustainable development process.

In exhibit 11 on page 28 we show the sustainable development performance. This updates the office sustainable development strategy, which was presented in 1997. Our primary focus is improvement in integrating environmental and sustainable development concerns into our audit work. So while we talk about our own use of products, it's the integration of environment and sustainable development concerns into the actual audit work.

On page 29 we present information on two important management initiatives, people and audit practices. Exhibits 12 and 13 provide information on the composition of our staff. Exhibit 12 in particular shows how the representation of designated groups in the office compares with the rest of the available workforce. Exhibit 13 is there to show the impact or the degree to which our management staff and senior professionals will be eligible to retire in the periods 2003 and 2008.

On pages 32 to 45 we present financial information. In particular, tables 2 and 3 on page 32 compare total planned spending with actual spending. Actual spending increased by $1.7 million from the 1999-2000 to 2000-01 period. This is due to the implementation of the financial information strategy and salary increases in the office.

Table 7 on page 34 presents information on the cost of our federal government audits. This is a particularly interesting table, Mr. Chairman, as it compares the budgeted cost of the audits with the actual cost of the audits completed in 2000 and 2001. So it is a product cost table, not a period cost table. Audit costs include overhead and other services provided without charge, so we call this the “fully loaded” cost.

Differences from the planned and actual are usually due to scope changes; findings being more complex than we had originally anticipated, thereby warranting additional testing; discussions with management on particularly controversial issues or areas of disagreement; and in some cases staff mix, where we've used more senior staff or more junior staff. Depending on what it was we were looking at, we would change the staff mix to match the needs.

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Table 8 on page 38 is much like information presented in prior years. It is the period costs associated with each entity. It shows the level of audit effort to each of the entities. We show the hours and dollars spent in the year 2000-01. The reason we show the hours is that this is the main management driver in our office. We budget by hours and then work out the cost based on the hours assigned to the audits. The variance reasons, in these tables, are similar to those for table 7, with the exception of timing differences. When we hit timing differences, the audits can in fact change.

In the future we would like to present many of these tables on the Internet and then bring the information to the committee, or send it to the committee in a paper format in advance, rather than continue to publish it in our DPR. We would have it available through the Internet.

The real innovation for this year, Mr. Chairman, is our section 3, which begins on page 46 and goes to 59. It presents our financial statements, and begins with the management statement of responsibility and the auditor's report. You can see from the auditor's report that we have a clean opinion.

On page 49 you can find the statement of operations, which presents expenses by product line and expenses for professional practices. We also present expenses by major classification of expense. This is presented in note 7 on page 57. The expenses presented have been determined in accordance with generally accepted accounting principles, and as such include services provided without charges and expenses that will be funded by Parliament's appropriations in future periods.

It's important, Mr. Chairman, as you look at these financial statements, that the notes are read, because without the notes it's very difficult to understand what's in the financial statements. The notes are an integral part of the financial statements.

That concludes my presentation and walk-through of the important tables in our departmental performance report.

The Chair: Thank you, Mr. McLaughlin. To that great and wonderful philosophical question of “Who audits the auditor?”, I'm glad to see we have the final answer—Welch and Company and Lévesque Marchand. So there you have it.

Mr. Shepherd, please.

Mr. Alex Shepherd (Durham, Lib.): Thank you very much.

Some of our people from Hungary will be interested to know that not one member of the opposition has shown up today. It just shows how attentive the government is.

The Chair: Mr. Shepherd, I have to disagree.

Mr. Alex Shepherd: The chair has to be here.

By the way, this is a great improvement over the previous, and you should be congratulated. I certainly like the idea of the budgeted figures and so forth.

Ms. Sheila Fraser: Thank you.

Mr. Chair, I remembered the comment Mr. Shepherd made to us this spring, and we did what he asked.

Mr. Alex Shepherd: That's good. Excellent.

On page 28 you say:

Federal organizations that comply with appropriate standards of practice for protecting the environment and promoting sustainable development

You've set some targets in there, I guess. I presume by this you're saying that in 1998-99 only 32% of the departments met certain appropriate standards, and in the year 1999-2000 it was 50%. You targeted 2000-01 as 75%, yet they still only met the range of 50%.

I'd be interested to know what standards you're using and how you arrived at that. Possibly you can discuss why you estimated they should have been 75% and still the government departments don't seem to have moved in any way.

Ms. Sheila Fraser: This is work that is done by the Commissioner of the Environment and Sustainable Development. The commissioner has the responsibility to audit the sustainable development strategies of departments. We use ISO standards, ISO 14000, which are environmental management standards, to analyse their practices.

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We select—and we don't have the exact number, but we could get it for you—a certain number of departments each year to assess how their management practices and strategies have been implemented. The strategies themselves are a fairly new tool. They've been around I think four or five years.

So the 32% is probably not surprising initially, because it was a fairly new issue. The targets were published by the commissioner very early on as being an expectation of performance. I think we can probably all admit today that this might have been optimistic, but not to have seen any improvement from one year to the next is disappointing, I think. I guess we would say we would have been very pleased... If it was 75%, it wouldn't have been unrealistic that it wouldn't have made that, but that it hasn't increased at all is disappointing.

If ever the committee would be interested to learn more about sustainable development strategies, I'm sure the commissioner would be most happy to meet with you and to go through her audit work and the types of reports she does.

The Chair: On that very point, Mr. Shepherd, I'll be bringing to the steering committee a letter from the environmental commissioner asking us to look at her report as well. So we'll be talking about that in a couple of weeks or so.

Mr. Alex Shepherd: On page 36—I can't resist this—it says “budgeted cost” and “actual cost”, and now that we have the figures we can look at them. This shows that the actual costs in fact were 10% higher than the budgeted. That's in the area of financial audits of crown corporations. They seem to have gone over budget, and I don't know exactly why.

Ms. Sheila Fraser: As Mr. McLaughlin mentioned, in many cases it is due to complex issues or difficulties that we encountered during the audit.

For instance, in certain of the financial institutions, we had quite lengthy discussions in the audit, including this year, on loan provisioning. Many of the institutions changed their method of calculating their loan provisions, and that involved a great deal of extra work on our part. There were other ones, too, where, for instance, there were changes in personnel or in staffing. At the mint, for instance, I think the team was practically completely new. As well, there was a new plant in Winnipeg, so there were some issues with learning curves.

I don't know if Mike wants to add more to that.

Mr. Michael McLaughlin: Yes, some had significant variances. At the National Capital Commission there were a few issues that were more complex than we had originally anticipated. Those were eventually reported through to the board. The Marine Atlantic was a restructuring of the Marine Atlantic corporation, so our audit procedures had to be reviewed.

When we were first budgeting the audit, we didn't know these things were happening, so once we got there we had to revise the budget to take account of that. Those I think capture the main ones that had a significant variance.

Most of our attest work with financial corporations comes in fairly close to budget. There's not that much of a variance, but when we do have it, usually the complexity has changed or there's been a particular issue we had quite a discussion on with the audit committee and with the board of directors.

Mr. Alex Shepherd: On page 49 you show your statement of operations. I note that they're not comparable. You also have a note to the financial statements saying that it's neither practical nor cost-effective for the office to show comparative amounts. In the private sector, I know, if we changed our accounting system, we'd be pretty much duty bound to go through the process to show comparative figures. What was so horrendously costly that you couldn't do that here?

Ms. Sheila Fraser: I agree that we would have preferred to give comparative figures, and we will be giving them next year, obviously. The issue was that the accounting system was just not designed to be able to produce this kind of information, and it was the new financial system that went in that was able... So we were basically on pretty much a transaction base, as the departments were, in producing what they call “plates” for the public accounts. There was no accrual information, and getting costs of services provided without charge and all that.

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So it just became too difficult to do it. We actually have to go back through our time records to be able to build up a lot of the information.

The Chair: But you'll have it for subsequent years?

Ms. Sheila Fraser: Yes.

Mr. Alex Shepherd: Finally, you talked about your priorities going out for the following year. Could you state those?

Ms. Sheila Fraser: I have five. One is accountability to Parliament, and the kinds of information given to Parliament. Obviously that is our major role.

The second one is an effective public service. So we're looking at such issues as financial management, human resource management, and information technology.

The third priority involves issues of health, safety, and security, issues that directly affect the Canadian citizen.

The fourth is legacy and heritage, which involves management of heritage assets, even our fiscal situation. For instance, what are we doing to preserve the assets we have, and what are we transferring onto our children?

The last priority, which I think will be significant over my term, involves aboriginal issues—financial, social, and governance issues.

The Chair: Thank you, Mr. Shepherd.

From the opposition benches we have Mr. Harb.

Voices: Oh, oh!

Mr. Mac Harb (Ottawa Centre, Lib.): Then I'll take the opposition's time as well as my four minutes.

On page 57, Mr. McLaughlin and Ms. Fraser, the total cost of operations is shown to be $63 million and change. How does that compare with the overall? What is your total annual budget? Is this your total annual budget? No.

Mr. Michael McLaughlin: Because this is prepared on an accrual basis, the appropriations from Parliament are in fact different. Those appropriations are shown in table 1 on page 32, which brings you to the voted appropriations.

Actually, as Ms. Fraser just pointed out, on page 55 we've done a reconciliation of the net cost of operations to parliamentary appropriations. That's under note 4.

Mr. Mac Harb: So $58 million, that's how much your annual budget from the Government of Canada—

Mr. Michael McLaughlin: That's what we used of our appropriation. We did not use the full appropriation.

Mr. Mac Harb: Which is?

Mr. Michael McLaughlin: Which is $60.1 million.

Mr. Mac Harb: So we give you $62,555,000 annually. And you spent $58 million of that.

Mr. Michael McLaughlin: The number was $60.1 million, and we spent $58.576 million.

Mr. Mac Harb: Okay.

With regard to the figures you have on pages 34 through 45, basically you look at the job and say this how much it's going to cost me to do this job. You estimate, for example, 200 hours to do finance. So for 200 hours, at whatever per hour the cost is, we estimate this is how much it's going to cost. The same goes for every other department. Then, at the end of the year, you look at the actual costs and how much time you have spent.

I think this is very good, but my question to you is, with FIS now being introduced, will that make life a lot easier for you? You will have a lot more information at your disposal that's a lot easier to read and so on. Is that a true statement or not?

Mr. Michael McLaughlin: From the point of view of presenting annual costs and product costs, we did have a management system that would do that for us, so we could have presented the same tables in prior years. We did not believe it was of interest to the committee, so didn't present it. What we could not have presented was accrual information, such as we presented in the financial statements, because we rely on Treasury Board, Public Works, and other organizations to provide that information. Under the FIS system they can now provide us that information for our financial statements.

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Mr. Mac Harb: The question is—and this is perhaps a little out of hand—do we have certain ways to actually bill the department for the auditing we are doing so they pay back part of that? I'm just floating this by you, for good reason.

Ms. Sheila Fraser: When departments eventually prepare their financial statements, I would expect that they would include the cost of the audit as service without charge. For instance, when we occupy space in a building, we don't actually pay rent. That's provided to us. But we account for that cost in our financial statements. I would expect departments as well to include a cost for audit, but we don't actually have billings back and forth.

Mr. Mac Harb: Why, then, would you ultimately have to write a check to the person who is doing the work? Why wouldn't they pay you for the actual work and then you take that money, put it in your actual bank account, and pay your employees? There might be some side benefit to that—for instance, to force them to be a lot more efficient so that you have to spend a lot less time doing some of the work you're doing with them.

I'm just floating this idea, because you seem to have been light-years ahead of everyone else.

Ms. Sheila Fraser: We take a very strong position on our independence from departments. We believe we work for Parliament, and believe our client is really Parliament, which gives us an appropriation to do certain statutory work and to do work that we feel is important to do on Parliament's behalf. If we have to start negotiating fees with departments, I'm not sure they would always be willing to have us do the extent of work that we might feel is necessary. And I question whether it would be appropriate.

We are looking now at new ways or new mechanisms, at how the office should be funded. Personally, I don't think we would ever recommend that we actually bill departments. As you may have noticed, we only actually charge fees for two audits, which we do outside government, to UN organizations.

Mr. Mac Harb: I notice you've audited Petro-Canada, and Petro-Canada is partially government, partially private sector. I wonder whether you have charged them for part of that audit or if that also was—

Ms. Sheila Fraser: If I'm correct, I think this Petro-Canada is just a very small holding company owned...a subsidiary government. It's not the oil company.

Mr. Mac Harb: I see.

Ms. Sheila Fraser: This is the old Petro-Canada.

Mr. Mac Harb: The final question is, how did that compare with other countries? The former Auditor General always brought up the examples of New Zealand and England as well as Australia. How do we compare in terms of our efficiencies per audit or per employee or per dollars we are spending? How do we compare with others? Are we in the middle, are we at the top, or are we at the bottom?

Ms. Sheila Fraser: To be quite frank, we have compared and obtained information on outcomes—more, for instance, on implementation of recommendations—but various audit offices are structured very differently, and have very different mandates from what we would have. So I don't have a comparison like that, and I question whether it would even be applicable. It would depend on how governments are structured, how audits are conducted. I believe in some jurisdictions, for instance, there are actually audited financial statements for each department. So it could influence quite greatly how the costs were shown.

Mr. Mac Harb: Do I have time for a 15-second one?

The Chair: Go right ahead.

Mr. Mac Harb: What you do is exceptionally good, and to a large extent that could be applicable to a lot of the government departments. Do they do those kinds of things—breakdown per project, breakdown per...

Ms. Sheila Fraser: Mr. Chair, one of the constant criticisms we have in our reports, almost consistently, is the lack of information departments have to manage, and in particular cost information. It is very difficult, the way the management systems are now, to get information on a project or a program basis. It tends to be more by classification of, say, salaries and other costs like that.

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So to slice the cost, if you will, in different ways is an extremely difficult challenge now. It almost has to be done manually. Hopefully, one of the accomplishments FIS will bring about is a change in systems in order to have better information.

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

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

Mr. Murphy, please.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman.

To the Auditor General, just from looking at your numbers with regard to this whole recruiting issue, you're going through the same challenges and pressures that other departments right across the civil service are experiencing. Do you have, and can you describe, a very comprehensive plan to deal with this issue?

As well, are you recruiting across Canada or are you restricting your activities to the Ottawa area, as we've seen in some of the other departments?

Ms. Sheila Fraser: As you may be aware, we do have offices across Canada. We have five offices outside of Ottawa. We do recruit across the country. Because we are a small organization, in our recruiting strategy we do try to target certain universities. It's very difficult for us to be at universities all across the country and to actively recruit, but we do recruit across the country. I guess in many cases we would have more challenges recruiting in Vancouver and Edmonton, for instance, than in Ottawa. But in fact a lot of our staff in Ottawa come from the Maritimes and other areas.

Mr. Michael McLaughlin: I might be able to add to that, Mr. Chairman.

We use an electronic recruiter at the moment. That has been quite innovative since we've run into this problem. It allows virtually anybody in Canada to apply. With any of the notable ads we've put out, where we've had to go beyond the “e-cruiter” to newspapers, we're going with national newspapers in order to do our advertising for recruitment. So we are always looking nationally. I cannot recall an ad we've put out that's been restricted in any fashion to the national capital region or any region of the country.

Mr. Shawn Murphy: I'm just curious about your representation, on page 29 of your report, of designated groups. And this is perhaps just for my own education. Take persons with disabilities; your goal, under workforce availability, is 3.4%. How is that determined? I notice that your goal for women is 46.4% under workforce availability.

I guess my supplementary question is on this workforce availability. Is that in the professional or quasi-professional criteria you people deal with—your high-level accountants, CMAs, CGAs, engineers—or is that just the general workforce in Canada? How do you determine that?

Mr. Michael McLaughlin: The way in which it's determined is that we use the Statistics Canada classification system. In that particular classification system they will have accountants and certain types of professionals, so we do our comparison against the availability in those groups. That becomes a wider workforce availability.

Now, when we set forth our own goals, we have to look more specifically at what opportunities we're going to have in the next year. We have people who are there, so we're not going to be telling people they have to leave because we have to hire somebody else to meet a particular goal. So we have to look at what the turnover is going to be and then what the availability would be to replace people and gradually bring ourselves up to a comparable number with the workforce availability.

It's particularly difficult, we find, in the aboriginal area. We do a lot of work in the north, but very few qualified accountants are designated aboriginal, so it becomes very difficult to recruit. But we keep looking. We're trying to promote easier access to our trainee programs so that we can in fact meet these particular targets. Where the people in these designated groups might find it more difficult to be able to get into the workforce, we're trying to make it easier for them through our training programs. But it's going to be a long story before we can actually get to what Statistics Canada has identified as the workforce availability.

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Mr. Shawn Murphy: What do you do when you go above your goal? When women are 52.1% and your goal is 46.4%, do you stop hiring women?

Ms. Sheila Fraser: Can I talk about that one?

The issue, of course, is that if you break down the representation of women throughout the office in the various groups, there tends to be overrepresentation, I would say, in the administrative supports...and probably even in some of our younger professionals, because a higher percentage of women than men are coming out of the universities in many faculties; it's as you get up into the senior management that there are less. So eventually, over time...

Mr. Shawn Murphy: One final question, Mr. Chairman, if I may.

I see by your statements that you've done some international auditing, at UNESCO, ICAW. Who makes the determination as to what international bodies you look at?

Ms. Sheila Fraser: The office has had for a very long time an involvement with UN agencies. Over time it has been felt that doing two audits is probably an appropriate level for us. The decision as to the auditors are made by the assemblies of these organizations. In fact, for UNESCO we had to go through a bidding process with other auditors general around the world. We were selected. For ICAO, in Montreal, I think we have been the auditor since its inception, for over 40 years. For UNESCO, this will be our second term of six years. It is very likely after that six-year term we would not bid again, and we would try to get another international organization.

Mr. Shawn Murphy: Are you paid for that?

Ms. Sheila Fraser: We are reimbursed for our costs in that, yes.

Mr. Michael McLaughlin: Perhaps I could add to that.

The Department of Foreign Affairs will ask us to present ourselves for certain of these audits, so we're tying in with the overall government policy of being active in these international organizations. If the government didn't support us, we wouldn't do it. We still need Governor in Council approval, under section 11 of our act, in order to proceed with accepting one of these nominations.

The Chair: Thank you, Mr. Murphy.

I have some questions. You made some reference to replacing those who are retiring. The demographic issue in the public service is a serious issue at this point in time. How well is it being managed in your office these days?

Ms. Sheila Fraser: Mr. Chair, we have many of the same challenges the government has, although I think we are at least aware of the issue. We have identified retirement dates for most of the people in the office who will be eligible to retire within the next, say, ten years, and we have been actively trying to recruit staff at lower levels and to develop them up to replace. So I think we do have a good program to deal with that, and we are identifying successors for for each one of the critical positions.

The Chair: You mentioned that you advertise nationally and so on. You are outside the scope of the Public Service Commission, and you hire your own staff?

Ms. Sheila Fraser: Correct; we hire our own staff.

The Chair: Okay.

You talked in previous times about the pay equity issue, where you have gotten dragged into that dispute. Where does that stand these days?

Mr. Michael McLaughlin: Mr. Chairman, PSAC had launched a complaint to the Federal Court and the government had in fact challenged that complaint. The trial judge had ruled that the complaint should proceed. The latest we have heard is that the government has now decided not to appeal the decision and to proceed with a statement of defence against that. That should proceed—to ruling and trial and all the things that go on—perhaps in February or March. I think they're trying to find a date at this point on when that can proceed.

The Chair: Can you give me a quick overview of the situation again? As I recall, you wanted to settle with your employees and pay the pay equity, but Treasury Board said, no, you can't, by virtue of this case that's going on. Give us a quick synopsis so we can understand.

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Ms. Sheila Fraser: The federal government was sued, as we all remember, and the pay equity was determined in favour of its employees. The Office of the Auditor General, being a separate employer, was not part of that suit, was not sued by employees. But our employees had always been paid on the same basis as the federal government employees, and we felt that in order to have that basis of comparability and fairness to our employees they should receive the same compensation.

Treasury Board did not agree with that. We have no authority to pay those moneys to them ourselves. There's a whole legal impediment to it because of the pay freeze during a certain period of time. We are not able to pay our employees, so in fact there is now a suit against the federal government and the separate employers, of which there are six or seven—

Mr. Michael McLaughlin: Seven.

Ms. Sheila Fraser: —yes, seven—including us. We are named as part of that suit.

The Chair: And Treasury Board has taken the lead in coordinating the defence.

Mr. Michael McLaughlin: I think we have to be more precise. While we are named as one of the separate employers, the suit is against the Treasury Board. The contention of the suit is that the Treasury Board is the de facto employer in the case, because they control the bargaining and the compensation given to the employees of the separate employers.

The Chair: You mention that your record of government acceptance of recommendations is now up to about 65%. Are you comfortable with that level? Can we see that going higher, or where do you think you're going to go?

Ms. Sheila Fraser: We are pleased that the rate has increased. We would probably like to see it a little higher than that, though, perhaps 70% or so. I don't think it is realistic or even advisable that we ever aim for 100%. I think there will always be times when the Auditor General and departments do not agree on recommendations.

There will be, over time, recommendations that because of changed circumstances are no longer relevant and won't be implemented. It could also be an indication that in fact we have become too easy, if you will, in our recommendations if they are all implemented. So I think 70% is probably a reasonable target.

Mr. Mac Harb: A mark of “B”.

Ms. Sheila Fraser: We can maybe hope for “B+”.

The Chair: On page 15, exhibit 6 deals with, as it says, “Follow-up results—Implementing our recommendations”. You list a few. The first one is Human Resources Development Canada with regard to the management of the social insurance number from your 1998 report, chapter 16. You say:

A more in-depth analysis is needed to help parliamentarians fully understand the practical, economic, and political implications of different options.

Are you suggesting here that another chapter is coming down on this issue? Or are you asking the parliamentarians of this committee to find some methodology to get HRDC before the committee to follow through on that? What are you saying there?

Ms. Sheila Fraser: Mr. Chair, this was the result of the follow-up we did. We felt that the department itself needed to do more analysis and needed to give more information to parliamentarians. This could be...as I mentioned, we would like to change our approach to follow-up and highlight and do a little more in-depth work on particular recommendations, or departments grouping series of recommendations. That could be one we would chose to follow up on, depending on circumstances, in two or three years from now.

The Chair: Again, under National Defence, “Improving the efficiency of support services”, you list a number of reports. You say:

In our December 2000 Report we looked at progress since 1996 and found few improvements.

How do we motivate DND to work at these improvements, and also, of course, Health Canada? We know the public accounts committee and yourselves have spent a fair amount of time with that department, and we're not very satisfied with their willingness to tackle the serious problems in that department. Any words of recommendation?

Ms. Sheila Fraser: Well, that's one of the things motivating us to review the way we do follow-ups now. At the present time we take our recommendations and follow them up on kind of an individual basis two to three years after the initial report, but the follow-up reports tend to be very succinct. A lot of reports tend to be in one chapter. To be quite honest, they tend to get a bit lost in the shuffle. That's why we are looking at ways to give more prominence to follow-ups; to do more work when we do follow-ups; to be perhaps a little more targeted in the ones we do; and to have a fuller discussion with this committee on the issues.

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In many ways I think that is where the true test is—not in the initial audit, when we make the recommendation, but whether anything actually happens with it, and what departments do to deal with it. So perhaps by giving more prominence to follow-up we can encourage departments to act on the recommendations.

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

In table 6 on page 33, “2000 Contracting activity for professional services”, I see you had five non-competitive contracts for $243,000, each of them being over $25,000. I think the guidelines say anything over $25,000 should go out for bid.

Any comment on this?

Mr. Michael McLaughlin: Mr. Chair, we have in fact reviewed all of the contracts. There are certain exemptions allowed under the contracting regulations. These cases, the larger ones in particular, dealt with the implementation of the financial information strategy systems within our office. But the type of equipment we had required that we go with one particular contractor, because that was the only contractor that could in fact serve that equipment. So that was for the larger ones.

There are smaller ones where, due to the nature of what it is we're looking at, we don't feel we can put out a call for bids to investigate. It would lead someone to believe we've drawn a conclusion, perhaps negative, on an individual situation.

So we would go more particularly to get an auditor that we knew had the expertise we required to conduct the audit. It's very rare that we have those, but if we put out a call for bids, then perhaps it would point directly at somebody in the private sector in a case where we were concerned about moneys they had received from government, and we needed somebody to do a more detailed review. It might lead to nothing, but on the other hand, we've got to follow the trail even if we don't have the expertise in-house to do it.

The Chair: There will always be the concern that we need openness and transparency, Mr. McLaughlin, so don't be totally consumed by the idea that we can't embarrass somebody just because perhaps somebody may draw some conclusions or inferences from public contracts and so on. I would say err on the side of openness and transparency rather than protection and lack of embarrassment. Perhaps you can take that under advisement, because we really want to ensure, in public procurement, openness and transparency.

Mr. Michael McLaughlin: I would absolutely agree with you, sir, and I believe we do that. There are issues covered by the Privacy Act that I must respect as well.

The Chair: I have one final comment. We don't have a quorum here, so I certainly can't make a motion, but I'll say this as chair of the public accounts committee. As you know, many of the reports we table in the House of Commons require departments to include in their annual performance reports—and we're dealing with your annual performance report—particular information that public accounts said should be included in their reports. We don't really have the resources or the time to go back and ask whether they have followed through and done that, and the information the public accounts committee called for would then become part of the public domain.

I would ask you to think about doing an audit of the reports of the public accounts committee where we have called for inclusion in the performance reports, by departments, of specific information to see that they've actually followed through and done that. Would that be appropriate?

Ms. Sheila Fraser: We will be looking at certain aspects of departmental performance reports and issuing an audit in the coming year on that. I would certainly be willing to at least consider your recommendation and to see how effectively we can do that, or how far back we have to go, too, for recommendations of the committee.

The Chair: Performance reports have only been around for about three years, so you don't have to go that far back. If departments knew that somebody was actually keeping an eye on them to ensure that they follow through and live up to the request of the public accounts committee, then I think...

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Ms. Sheila Fraser: I think in many cases we do that, and incorporate it into follow-ups, but perhaps we can try to do it in this specific audit on departmental performance reports. It might give it a little more prominence.

The Chair: Specificity. Thank you.

Mr. Harb, any more questions?

Mr. Mac Harb: No, I'm quite happy with the performance report. I think it's something we should all be very proud of.

The Chair: Yes, I think they've done a good job.

You have lots of information there about internal analyses you've laid forth for public consumption. I would hope that departments would look at your report as a guide to demonstrate how we can be open and transparent and get information on the table. That's what openness and democracy is all about.

On December 4 we're going to be hearing from you again. It's the next report of the Auditor General, your first. It's been a long time since we've had one, so we're looking forward to it. Then I presume you'll be here on December 6 to give us your priorities on that. Then there will be a steering committee, where we decide what we're going to do regarding that.

We look forward to all these things that are going to be happening in the near future. In the meantime, we are going to adjourn until Tuesday, November 27, when we will discuss draft reports.

The meeting is adjourned.