Finance and Government Services — Issue No. 18 — Friday, December 16, 2005 (HTML)

2005 Legislative Session: First Session, 38th Parliament
SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES
MINUTES AND HANSARD

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON
FINANCE AND GOVERNMENT SERVICES



CONTENTS

		Page

Office of the Auditor General		427
	E. Price (Deputy Auditor General)
	W. Strelioff (Auditor General)

Chair:	* Blair Lekstrom (Peace River South L)
Deputy Chair:	* Maurine Karagianis (Esquimalt-Metchosin NDP)
Members:	* Harry Bloy (Burquitlam L) * Dave S. Hayer (Surrey-Tynehead L) * Gordon Hogg (Surrey–White Rock L) * Richard T. Lee (Burnaby North L) * John Yap (Richmond-Steveston L) * Leonard Krog (Nanaimo NDP) * Jenny Wai Ching Kwan (Vancouver–Mount Pleasant NDP) Nicholas Simons (Powell River–Sunshine Coast NDP) * denotes member present


Witnesses:	Errol Price (Deputy Auditor General) Su-Lin Shum (Office of the Auditor General) Wayne Strelioff (Auditor General)

B. Lekstrom (Chair): Good morning, members. At this time I would like to call the Select Standing Committee on Finance and Government Services to order. I would like to welcome everybody here at this late date in December. I appreciate your commitment. We have had a full agenda as a committee over the last number of months, and we're going to move forward today.

Joining us today is our Auditor General, Wayne Strelioff, along with Errol Price, who is the Deputy Auditor General. As well, we have Su-Lin Shum, who is our director.

Welcome, and thank you for taking the time to come back. We're going to begin the meeting…. There were a number of questions that members had regarding the presentation you brought before us, and unfortunately, our time schedule at the previous meeting was so tight that we couldn't get through them all.

Again, I want to thank you and your staff, Wayne, for coming back to address the committee. With that, I will move on and look to committee members if they have any questions regarding the presentation. I'll begin with Maurine.

M. Karagianis (Deputy Chair): Wayne, I know that we discussed extensively at our last meeting some of the aspects of your request for funding and some of the additional tasks that you anticipate the Auditor General's responsibilities being extended to, such as examination of contractual work with government and some of the extended programs that government's involved in. I think, specifically, you talked about things like the Maximus contract, the Olympics and, obviously, some of the larger and more complex projects we're involved in.

I'd also like to ask you a little bit about oversight to B.C. Ferry Services and perhaps talk about what services you're currently providing to B.C. Ferries and what comments you may have on my public request now for a full oversight by your office for the services. Could you comment on those things for me?

W. Strelioff: Good morning, members and Chair and colleagues. It's a good time of the year. It's actually cold out there. By the way, as you know, this is likely to be my last meeting with you as the Auditor General, so this is an opportunity for you to ask me any questions you want and for me to give you as much advice about the future as I can offer.

Now, a member has asked me about B.C. Ferries. As you know, there was a change in the governance relationship at B.C. Ferries. We are examining that relationship right now. We're planning to finish our report by the end of March, and what we're dealing with is: what were the objectives when the transition happened, and to what extent are those objectives actually playing out in a sound way? What information is coming from the government to legislators on that transition and the success of the transition, or what issues need to be managed well? — as well as a particular focus on the role of the commissioner. The commissioner has a very important task in this transition, and as you probably know, the legislation that created the new B.C. services enterprise has a significant timetable going on. I think it's two years from now that the commissioner is faced with some very significant decisions related to rates and services, and so we'll be providing some advice to you on that.

So we are carrying out an examination right now. It's referred to in our funding proposal. We're hoping to complete that by the end of March. That's the Ferry Corporation.

Wayne, if I may ask, then, for the Auditor General to provide further and more in-depth analysis of the B.C. Ferry Services' model, what kind of additional resources do you think your office would require, above and beyond what you're currently asking for in this presentation?

W. Strelioff: We haven't got another examination of the ferry system model contemplated in our plan. Usually, when we carry out an examination of that complexity, it involves about 2,000 hours of work. Our average cost is about $110 an hour, so it ranges from…. That would be about $200,000 to $250,000 of costs if we were going to carry out an examination of whether the actual model is effectively delivering better services at a reasonable price.

M. Karagianis (Deputy Chair): Now, in your normal body of work, then, you would not provide any kind of oversight to B.C. Ferries on an ongoing basis. I understand you're currently doing a sort of specialized analysis — the report that's coming in March. Then if you were to embark on a specific review of the management model, that is about a $250,000 exercise. But what are the Auditor General's long-term oversight plans for B.C. Ferry Services, if any? In fact, I'd like that maybe to be extended, as well, to some of the other private, quasi-private or contracted enterprises that government is currently involved in.

You had mentioned, in your presentation, oversight of things like the Maximus contract. How does your office in fact look at the long-term future plan for ongoing review and oversight of all those?

W. Strelioff: All of those…. There is a lot going on in the B.C. provincial public sector, so our funding proposal doesn't contemplate a significant examination

In terms of B.C. Ferries, the government does have a service contract with B.C. Ferries that's pretty important in terms of the public policy issues. The service contract with B.C. Ferries is where the government contracts with B.C. Ferries for delivery of services that, in general, are not self-sufficient. So in terms of our role, a starting point is to make sure that those costs are reflected in the government's financial statements. To look at how that service delivery contract is being managed…. We haven't got that in our workplan at present.

I'll just step back again to bring you back to the role of the office, just to put our three lines of business in context to help you get back to where we were at our last meeting. Remember that we have three lines of business, and 50 percent of our resources are devoted to financial statement work. Right away, that's a pretty significant part of what we do. For that, you get an opinion on the summary financial statements and all the 200 components, and a whole series of individual financial statement audits. Some of those are carried out on a fee-for-service basis.

Part of the increased funding we're proposing is to make sure that we are able to continue doing that work in a robust manner. The reason I say "able to continue" is that because of a lot of the international events related to auditors and management groups, the work standards for auditors have increased quite dramatically and so have the costs. Those costs are increasing right across the system. So we're asking for an increase in our funding so that we can maintain the capacity to deliver that line of business in a robust way.

We are going to be extending our deadline in terms of the summary financial statements. We usually try to get it done, sign it off, on June 15. We're planning to extend that signing-off to about June 29 to make sure that we're able to actually get the work done.

With the new funding that we proposed on the financial statement line of business, what we would proceed with is beginning to explore how to carry out examinations of the reliability of quarterly reports by government and the forecasts that are in there. If you look at the quarterly reports over the years and compare them to what the actual results are, there is quite a significant difference. I guess the new Auditor General needs to provide you with some assurance on those quarterlies. That is becoming regular fare in the private sector with major organizations.

On the financial statement side, we're also going to work proactively at the ministry world, trying to encourage them to actually prepare financial statements — for example, the health system. The Ministry of Health, in my view, should be able to prepare a financial statement consolidating all the health operations of health authorities and what they deliver through the ministry. That would help integrate their financial planning, management and reporting. Right now it's just not there. I think that's an important step that the office can contribute to. That's the first line of business, 50 percent of our resources.

The second line of business relates to the performance reports of government. This is the Budget Transparency and Accountability Act, which…. As legislators have said: "We want results-focused performance information. We want service plans and service plan reports done in a timely way." We spend about 10 percent of our resources devoted to this kind of work. Our funding would allow us to continue to do that work, but it's done at a general level. We look at the general quality of performance reports across the system.

Increased funding. What we're going to do with that funding is begin to address whether the information of performance reports is accurate. So if the Ministry of Health says that waiting times are a key performance indicator, that it has some targets and that it reports as to the results, I think you need from your Auditor some explanation or assurance that those results are actually accurate. All the ministries and agencies had those issues. We're beginning to look at the credibility, the accuracy of that information. We're not there yet, but the increased funding would allow us to move into that area of work.

We also, in the performance reports…. We do fee-for-service work in this, so this is where management approaches us. For example, today, I think, Partnerships B.C. is going to publish what they call their value-for-money disclosure report on the Sea to Sky Highway. Partnerships B.C. approached us on whether we would attest to that performance report, and for about the last six months we've been working on that assignment. I think the performance report is supposed to come out today. There are a lot of interesting analytical facts in that, and because we came to the table, I think they're clearer. Read it. It will come out either later today or Monday.

That's part of making sure that the performance information you receive is credible. That's our second line of business, where we devote 10 percent of resources. If you provide us additional resources, we're going to go towards the accuracy of information in the Ministry of Health or Transportation or Education. We haven't touched that. So far we've just been trying to encourage ministries, Crown agencies and corporations to report in a robust way, to get all the elements on the table. Embrace reporting and a results focus. Embrace telling your performance story in a planning and a results setting. Move along.

But now — okay, is the information reliable? That's the next step. The proposal contemplates us touching on it. The future — and I think this will come to your committee as well as to the Public Accounts Committee — is: to what extent do you want your Auditor to provide regular assurance on the performance reports of provincial public sector organizations?

We're doing that for three organizations now. The public guardian and trustee was our first one; the Workers Compensation Board, the second. We're doing that now — leading-edge work, very valuable to the

board of the Workers Compensation Board and their external and internal stakeholders. The third one is a new one that just approached us. We're working with the B.C. Assessment Authority to attest to their performance report for the first time. These were largely driven by these organizations rather than by legislators. And of course, we have also been working with the P3 world in terms of the Sea to Sky, the Abbotsford health care performance report last year, and right now we're also working with the RAV line — I guess it's the Canada line — doing similar work.

But the issue for the future for you — and I'm not putting this on the table now — is: to what extent do you want assurance on the performance reports of government? That'll drive it through; that'll drive the integrity and discipline through the system. We can get there, but we're not there yet in terms of our practices, and certainly, the government's not there in terms of their capability of providing strong, credible performance reports. So the increase in funding for this next year or so is to begin to address some of the accuracy issues. That's 10 percent.

The last line of business is one that you usually focus on, and that relates to what we call risk audits or performance audits like how well government is managing its responsibilities, whether they relate to B.C. Ferries or the Olympics — last week in the Public Accounts Committee we had a very interesting discussion about the quality of the work environment — or chronic disease management or interface fires or the stronger IT systems. In that we devote about 40 percent of our resources. We have to make a lot of choices on this because with the breadth of the businesses government is in, we just don't have the capacity to do much coverage.

As I said last meeting, we organized ourselves in terms of four sectors so that in each of those sectors we have a focus — as a minimum each year, education, health, finance, transportation, natural resources. Then within those areas we look at some of the key issues that are facing government, that sometimes cut across, making sure that we're carrying out examinations on those areas.

In the funding proposal, we refer to them — aboriginal focus, for example. Right now we are carrying out an examination of the treaty negotiations process, how it's being managed by the province and the federal government. We're doing that jointly with the Auditor General of Canada. I think I mentioned last week that I was able to meet with the First Nations Summit because you scheduled me at an earlier time. Interesting meetings. It was my first-time meeting with the First Nations Summit. The purpose of the meeting — at least, our agenda point — was that representatives of the Auditor General of Canada came in to explain what we were going to do in the examination. We also met with the treaty commissioners.

The second thrust is to make sure the office covers alternative service delivery arrangements. That gets us into the B.C. Ferries examination. Right now we're looking at B.C. Rail and to what extent the B.C. Rail organization is monitoring the commitments made in the agreement. In the past it moved us to looking at the performance agreements in the health system. We're always trying to make sure, where there's restructuring, that part of our work program is devoted to that restructuring.

We also want to make sure that our risk audits are focused on economic cost drivers. I think Mr. Hogg asked me why we looked at diabetes. Well, it's an economic cost driver. It's a chronic disease in the health system. When we looked at what was facing the health system, we said, "That issue needs to be examined," so we looked at it. Right now we're finalizing an examination of Pharmacare. It's a cost driver. The report should come out in January — it's pretty well nailed down — to give you some advice on how we're managing the drug costs. In our plan we contemplate looking at access to health services, particularly related to bed management, as well as long-term care homes.

We also wanted to make sure we looked at electronic information systems as part of what we do. Let's make sure we have a presence when government is re-engineering their electronic information systems. You'll probably get a report next month on how they're doing on the centralized accounting system. We've been looking at that. In the future — I think this relates to future additional funding — we're going to look at the harvest billing electronic information system. As you know, there's a constant increase in complexity in what the electronic information systems are doing across the province.

We also want to make sure that we have a presence on federal-provincial agreements and negotiations. That moves us into the treaty negotiations. Last year it was wild salmon management. There are a lot of federal-provincial programs, particularly in health, and I guess the future will be in the child care system as well. We're trying to leverage off the Auditor General of Canada as well as other auditors, trying to get people to the table. Let's look at issues at the same time. For example, the Pharmacare one was done under the auspices of the Canadian Council of Legislative Auditors, the Auditors General. Seven Auditors General are carrying out the same examination, and we're kind of sharing information, sharing notes and making sure that what we do is more robust.

There are a lot of HR issues facing the provincial public sector. You've heard about them. Last week we talked about them at the Public Accounts Committee in terms of the work environment. We've got an examination on the planning horizon looking at HR in the health system — tough issue for HR. If you remember our examination of the health system's workplace a year ago…. It was called Healthy Workplaces. The health system isn't very healthy to work in. Absenteeism costs are about a billion a year out of an $11 billion system. A billion dollars a year? So we're planning to continue down that road to try to make sure that it improves.

By the way, good things happen when we come to the table on these issues. I mean, we cause problems and headaches for ministers and officials, but at the end of the day good things happen when you look back a year or two — whether it's interface fires, earthquake preparedness, chronic disease management, Olympics.

When you step back, one of the dilemmas for me as an Auditor General over 15 years now and two different jurisdictions, through all sorts of different ministers and deputy ministers and Public Accounts Committees, is that you see so many opportunities to step in and say: "Auditor General, the issue is exploding. Step in." You can't do that. "Well, gee, sure you can step in." You know you could. I mean, if you stepped in, you know you'd make a difference.

The last area that we focus on in the risk audits is sustainability. Right now we're trying to…. We've deferred an examination on drinking water. We're trying to lock it in. The Sea to Sky Highway examination took so long that we had to cannibalize our work on drinking water. We're hoping that we'll finish that by the end of the fiscal year.

We're beginning to look at agriculture and the sustainability of agriculture as well as, on the horizon, climate change and pine beetles. I think that on that one the Auditor General of Canada has approached us to work in concert on climate change with the commissioner for the sustainability and…. I can't remember the titles. So it's a lot.

B. Lekstrom (Chair): Wayne, sorry to interrupt you. I just want to make sure we have enough time, because we do have other members wanting to ask questions. We don't want to, I think, end up in a situation where we're actually coming back yet one more time — if it's okay with you.

W. Strelioff: The three lines of business — financial statements, performance reporting, risk audits and what you get, what you might get and what you don't get.

The only other thing which I think Wayne was getting into was what recommendations he would make to us on the future mandate of the Auditor General. I think you were exploring that, which would have been my next question. I'm satisfied at this point. That is, there is obviously a lot more that could be explored there on the recommendations of the Auditor General's office. Thank you.

W. Strelioff: Sure. Obviously, I welcome the opportunity to answer your questions as well…

W. Strelioff: …particularly in light of providing advice on the future. It's a very interesting role and perspective that I've seen, particularly watching members of standing committees coming to the table and making sure that they carry out their role of overseeing the performance of government — a very important role.

R. Lee: I have one specific question, actually, on the report. It's about British Columbia Investment Management Corp. They used to be under your department. How many resources do you see in the office for that activity?

W. Strelioff: Members, B.C. Investment Management Corp. When we presented our financial statement audit coverage plan to the Public Accounts Committee, which they approved, we said to them that we were no longer going to be their financial statement auditor, so we're no longer going to be examining directly their operations. We're not going to be devoting any resources to what they do for the time being.

W. Strelioff: In general, our fee-for-service work at the B.C. Investment Management Corp. was close to $500,000 a year. We did two types of examinations: attesting to their financial statements — I think they have about 30 different sets of financial statements, portfolio funds — and, at their request, their internal control systems. All the pension trustees wanted reliance that the B.C. Investment Management Corp. control systems were working, so we have been doing that work as well. That now has gone out to tender, and they're now working with one of the major firms.

R. Lee: So the half a million dollars was in this year's budget, this year's expense account.

W. Strelioff: In the fee-for-service element of this year there were recoveries of…. I don't know. It would be about a half a year of work, so probably about $250,000 to $300,000 was in our fee-for-service recover-

ies portion. There wasn't any money in the appropriation. It was in the fee-for-service for '05-06.

That's why, in the recoveries, you can see that our projection of recoveries is going down. The main reason is that we're stepping away from B.C. Investment Management Corp.

W. Strelioff: Well, yes, it is. If you look at the schedule on page 20, you'll see that in the recoveries for '05-06, we have it at $2.3 million, and in '06-07 it's down to $1.94 million. Well, the primary reduction there relates to no longer being the auditor at BCIMC.

Then there are some increases related to the cost of individual financial statement audits that we do on a fee-for-service basis that are increasing.

R. Lee: But the staff time saved in your office…. Which item is reflected in that column?

W. Strelioff: Well, if it's a $500,000 audit, we have $300,000 or $400,000 less resources. So it would be about 5,000 hours of work, which translates into six or seven people. To the extent that we have funding to keep those people, we will keep them. To the extent that you decide not to provide us funding, we won't replace, and they will leave.

R. Lee: I mean the six staff there…. You said additional funding you are requesting or…. I don't see the saving, actually, for that audit reflected in….

W. Strelioff: If you look at the '06-07, what we're proposing is an increase in our funding.

W. Strelioff: And an increase in our funding would allow us to increase our staff. So if you don't support an increase in our funding, we will have less staff.

R. Lee: Yes. I think the something that is missing is that you request $600,000 and $500,000 respectively, for this year's lift, for the upcoming year.

W. Strelioff: For '06-07 we're requesting $8.97 million for an appropriation.

E. Price: The staff that were deployed previously under the BCIMC audit would be redeployed to help us carry out the work that is contemplated in the uplift in funding, so that the net increase in expenditure in the office would be about $1 million. But the staff that had previously been used on BCIMC, which you correctly say represents a saving, will now be available to be used to carry out other work in the office.

B. Lekstrom (Chair): Just so I'm clear, Wayne and Errol, I think, really, Richard — and correct me if I'm wrong — that if there were six FTEs, for instance, that job will not be done…. I think the way I would understand it is that those six, if it was 5,000 hours, will be redeployed to take on different operations within the system, so the savings…. Because we're out on one side, we have the ability to reutilize those six FTEs into other capacities. Would that be a fair statement?

W. Strelioff: That's correct — if we have sufficient funding. If you don't provide us the funding, well, we reduce our staff.

J. Kwan: I just want to follow up on some questions around your overall plan in terms of the funding request that's before us today. I read in the document — and in your presentation, as well, you provided information to the committee members here…. The funding that we're talking about, while it is an increase…. All the increase does, it seems to me, is bring us back to 1996 in terms of funding levels. Am I correct in understanding that?

W. Strelioff: In general, yes, the main increase in our funding is designed to rebuild our capacity so that we get to a place where we were in the past. Yes.

J. Kwan: I see on page 18 of the document that you've presented to us, in the chart, over the years there was a significant dip, I guess, from the 2003 year to 2006 — at $7.670 million in 2006. Then looking back at the chart, in 1996 we were at $7.7 million. Essentially, it kind of brings us back to 1996. Yet we know that the office had faced increased work from the point of view that the government had also assumed many other organizations through the SUCH sector since that time. We also know that with inflation and so on, those dollars…. The cost of things has also increased. I believe you said last time that the cost to just do a general audit is something like 20 percent. Am I remembering this correctly?

W. Strelioff: At the last meeting I mentioned that in the private sector, for large organizations the cost of financial statement audits — the first line of business — in general has increased about 10 percent to 20 percent, mainly due to the increased expectations of auditors from the profession related to examining for fraud and internal control and quality control within organizations that they expect to be documented.

J. Kwan: In the work within your office, about 50 percent of that work is consumed with that kind of auditing. Is that correct?

W. Strelioff: That's correct. That's why we've said in the past, or at the last meeting, that a significant portion of the increase is really just to make sure that we carry out our existing financial statement work in the robust manner contemplated by the profession of auditing.

J. Kwan: I note on page 21 of your report that it reads: "Without this additional funding, we have no choice but to reduce the work in other areas of my office to support at least the first three of these activities. The impacts will be felt hardest in our risk audit work area — an area, as I previously stated, that already lacks adequate coverage."

J. Kwan: So those would be the consequences if the Auditor General's office does not receive funding.

I'm interested. At the last meeting, towards the end of the meeting, I received — and I think all members received — a piece of paper. The paper actually is a chart that says: "Cross-Canada expenditure and population figures." I wonder…. I guess I should have done it. I haven't yet. My apologies. Perhaps you have that figure for us.

On a per-capita basis, for the Office of the Auditor General's expenditures as a percentage of the consolidated rank expenditures, how do we rank with the other jurisdictions?

W. Strelioff: In general, about second- or third-last in terms of providing financial support to an auditor general compared to other jurisdictions. By the way, there was a question about Ontario as the least supported…. I think it was a question about Ontario. We were looking at Ontario just in between, and they did receive a $3 million increase in 2005-2006. So they do have a new mandate, and my understanding is that the Legislature will be supporting them more strongly. But they did add $3 million to their funding for '05-06.

In general — you asked where we stand — about second- or third-last in terms of financial support.

J. Kwan: In your opinion, what is a good size, in terms of number of staff, for the Auditor General's office relative to the size of government in British Columbia?

W. Strelioff: That's a tough question. A couple of answers to that. In the past my predecessors have said that an office of about 120 or 125 is a good capacity for the office. We now have 90 or something, so that's a significant…. I support that, but the variable that I'm not sure about is what I referred to earlier. That is the extent to which you, as legislators, want assurance on the performance reports of government — whether you want to know that the information in them is credible. That would be a different issue in terms of the size or capacity of the office.

In general, I think the wisdom of the past seems to hold. An office of about 120 or 125 would be a good place to get to in about…. It would take about five years to get there, because it just doesn't happen. There's a lot of capacity-building to grow people into experienced examiners. You just can't turn it on. About 120 or 125.

J. Kwan: That brings me to this question, because last time we did talk about capital projects somewhat, and I did ask the question on whether or not the government is in fact managing the capital projects in the province in a robust way. The response to that, and I actually have Hansard in front of me…. Basically, your response was that you could not say that you think government is managing its capital projects well. Part of the problem, I think, is that the office is only looking at a very small number of capital projects. Is there an overview of how, generally, the government is managing capital projects in British Columbia?

W. Strelioff: We haven't done an examination like that. We've now done — or we will have done by the end of March — three examinations related to public-private partnerships: Abbotsford, Sea to Sky, and the Canada line or RAV line. We're also carrying out an examination right now of the Olympics, and a lot of that relates to the venues. What this plan contemplates is that once those examinations are finished, let's step back and assess to what extent there are some lessons

learned and what that informs our office in terms of what we should focus on in the future.

I have to acknowledge, though, that we haven't contemplated an examination of the extent to which the government is managing the overall framework of capital asset planning. There are a lot of capital projects contemplated in the next five to ten years, and I guess everyone knows that's having a significant impact on labour, labour shortages and also material costs. This plan does not contemplate an examination like that. Perhaps stepping back from our work on P3s and what we find on the Olympic side would help us just…. Okay, what's needed. But I don't know right now.

J. Kwan: Just a final question to get a general sense of the scope of cost if such a review were to be done. Is it safe to assume — I think the figure you cited for other projects — that it's around $200,000 to $250,000 per examination?

W. Strelioff: In general, the cost of these examinations…. How we manage is by hours. We manage our time and cost it out, and away we go. In general, the risk audits take about 2,000 hours, depending on complexity. If it ends up being a fairly straightforward exam, it can go down to 1,500 hours. If it ends up being more complex or more sensitive or involving more players, it moves up to 2,500 to 3,000. Then you multiply that by about $110 an hour, which gets to be about $250,000 an exam.

J. Kwan: No, just a general comment. It would seem to me, in any event, that it would be worthwhile for the Auditor General's office to undertake such an examination on all capital projects because there are a significant number of capital projects being planned, and because of the risk factors that are out there related to a skilled labour shortage and to increased costs.

I certainly wouldn't want to see that, though, be done by the Auditor General's office at the expense of other projects that are equally important. Anyway, I'll save further discussion on this matter for the end of the meeting.

G. Hogg: Under the act, you're required to review the financial statements of the province, and then it's permissive in terms of looking at how economically, efficiently and effectively issues are going with respect to the province. There's a compulsive and a permissive part to the legislation.

Under the permissive part, I'm interested in what kind of values or principles might be applied in making determinations with respect to the areas you would look at, given that you must be given flexibility and a free hand under the model that we've employed.

That would be my first question. Shall I ask three questions at once, and then let you come back? That would be my first question.

My second question. You started out by talking about the uniqueness of your position here today in perhaps your last appearance before us — your experience with 15 years, two jurisdictions. I'm interested in what experience or what insights you might be able to provide to us with respect to, perhaps, the legislative framework within which you function, whether or not there is a need to look at, deal with or change the legislative framework that might provide — again, based on the values of independence and your ability to look at and comment on issues.

Finally, my third question would be around the three lines of evaluation that you've talked about. If you were to do an audit of the Auditor General's office, what might those three lines say in sort of an encapsulated form?

As my editorial note around those three questions, we've had some questions that have come to you, which have talked about such issues as per-capita comparisons in terms of the finance. I think I appreciate that — using your word — a robust review of any type of evaluation would naturally look at economies of scale. Therefore, I think a per-capita evaluation may be an indice, but it certainly wouldn't be persuasive in terms of looking at things or the numbers of staff. It would have to be a much more holistic review of that to be able to look at that.

Those would be three questions and then an editorial comment with respect to that last one.

W. Strelioff: The first question had to deal with how to frame the Auditor General's role in terms of yes, there needs to be a sign-off on the financial statements of the province and all the component units. Then, to what extent should the Auditor General be involved in the quality of performance reports and attesting to the overall performance reports as well as examining how well government manages its programs?

G. Hogg: At the risk of interfering, I wonder if we could make this a little bit more conversational than just having you go into it.

I was interested, in your experience with the Auditors General, in whether there were some values reflected in terms of how you make decisions as to where to go. Is there a set of principles applied that say: "Here's what I must do, and that's a given. Here are the things that we can look at in terms of ensuring the objective review of government operations"? Is there a set of criteria, values, principles that may be applied, as you've benefited from your experience in looking at that? What might those principles be?

W. Strelioff: The experience that I have is embedded in how we're making those decisions now. The idea of three lines of business is a choice — financial statements, the quality of performance reports and

how well government is managing its programs. Really, an auditor general is pretty well the only one positioned to do that.

There's a quantum of work that's required on financial statements. I see the quality of performance reports as a future issue. Do you as legislators want assurance that the performance information and service plans in the service plan report are credible? We haven't done that. We're going to develop a proposal for you. I think it'll be for the Public Accounts Committee, but that'll be on the table soon.

The third line of business. What we've done is organize our office. There's a choice in terms of the sectors that we have. If we had more resources, we'd have five or six sectors. It's a strategy choice. It's a priority choice, listening to legislators, watching what's going on, where the money goes, what are the issues of the day — health, education, finance, natural resources.

G. Hogg: So your office is pretty consistent, in terms of the operation of that, with the other provinces, then?

W. Strelioff: Other provinces…. Some of them are organized that way; some of them organize by line of business. So they'll have a financial statement group, an investigative group and performance audit or risk audit groups. The trend line is to organize by what the programs are, what the business is. I think you need to develop the expertise in the business to examine, and that facilitates that.

G. Hogg: So those are judgments that you've made in terms of being able to provide that service within the legislative framework for this particular province.

W. Strelioff: That's right. And we're looking at what B.C. is doing, looking at what the office looks like and looking at what the outside world looks like.

The other screen is listed on one of the pages, where I say: "What are the key issues that at any point we'd better be looking at — first nations–aboriginal, information systems, alternative service delivery arrangements, economic cost drivers like diabetes or Pharmacare?"

G. Hogg: So you've kept us pretty much on the cutting edge of that type of thought process? The data is right there?

W. Strelioff: Yeah. That's saying: "There's the thinking." I mean, it's a judgment. I could focus on social services, say, but when you're making choices and you're listening, you say: "As an auditor, you have to make choices. You have limited resources. Make sure you're at the table on those kinds of issues — and sustainability."

G. Hogg: The legislative framework that you have to work with now — is it comfortable? Are there changes that need to be made legislatively? Are we within what you would see as the cutting edge, legislatively, for the position?

W. Strelioff: There's a review being done by the central agencies of government, called the central financial legislation review. We're going to provide a public report on our thinking on that. That'll inform you in terms of possibilities on the extent to which service plans for health authorities or universities should be tabled.

Should you receive assurance on performance reports or quarterly reports? We're going to take positions on that and say: "Here's something that you should consider as you're considering the review of the central financial legislation of the government, which really happens only once every ten or 15 years."

In terms of the Auditor General Act, the other area that I think should be considered, and I'm not sure…. Well, I'll say it right now. Right now the Auditor General can be reappointed for a second term. I think that's awkward. I think the Auditor General should just have one fixed term. I think eight years is a good term — non-renewable — and let's go. When you put people into renewable situations, the dynamics aren't healthy. There's just….

W. Strelioff: Eight years is an interesting time frame for a lot of different things. I've held that eight-year view — non-renewable — for over a decade now, just in terms of my thinking and watching.

G. Hogg: Your thinking should change after eight years, rather than a decade — shouldn't it?

W. Strelioff: Let's see. There is an audit of our office going on. You're tendering it out.

W. Strelioff: There are two components to it. There are the financial statements, but we've also asked you to ask the auditor to examine our own performance report, because I think that's important. I advocate that for others. Well, what about us? That's a pretty important part of the terms of looking at the who-audits-the-auditor scenario.

G. Hogg: I was just interested in the audit process that we tendered. It wasn't broken out into the three lines that you're talking about here. I was just wondering if you were to obliquely apply that, or conceptually, if there was anything that immediately came to mind with respect to…

One of the key frameworks that we use in terms of risk management is four key risks that the office has to manage to be successful, and that's the independence…. How do we make sure we're independent? How do we make sure what we do is relevant? That's kind of what you're getting at today. Credibility means: when we actually do carry out an examination, have we done our due diligence? I know that last week it was challenged a little bit at the Public Accounts Committee in terms of our methodology related to the work environment. I mean, we do pretty credible work, but it's important. The fourth one is our capacity to actually carry out the work, which has a lot to do with today's meeting as well.

Those four areas are really important for the office to manage well in the future, and in terms of examining how well the office manages, those are important. That's covered in our annual performance report, so the auditor who's going to be auditing us will be getting into those areas, which is good.

The last comment I wanted to make was when you do these…. We often, as politicians, do comparators with other provinces, and we started to do that in some of our questioning over the last little while and our last few meetings. Have you, in your meetings with other Auditors General, looked at whether or not there is a holistic way of doing that? It becomes problematic, I know, when you start looking at just per capita. It becomes problematic when you start just looking at the number of staff. You have to have a much more holistic way of reviewing that, and I don't know how you tie it….

That is why I was talking originally about the legislative framework, wanting to tie it specifically to what you are required to do, and then there are the permissive parts within the act. I don't know whether…. Maybe it's not even possible to do, given the permissive part of what is contained within the act. Hopefully, you could tie specifically to the mandatory portions of that and then look at whether there are some comparators with other provinces, but I'm not sure. I guess I'm not even asking a question about this topic.

W. Strelioff: As a community we have discussed this, but we haven't got a…. It should be 3 percent of expenditures or something.

G. Hogg: How is that done in the private sector? How do they make a judgment with respect to private sector auditing?

W. Strelioff: Complexity. Risk. Most of the private sector auditing that exists in the world relates to financial statements — that first line of business — and that's it. There's not much outside the auditor general community related to examining how well programs are managed. On the financial statement side, it's complexity, risk. The costs have gone up a lot.

It's competitive, so you go out and tender. I guess it's mainly on complexity of the business — where is it in its…? In the private sector, it's staffing availability; it's deadlines; it's what the business is getting into. Is it in an expansion mode? Is it in a restructuring mode? Is it a going-concern issue, and the costs change? Is it in a very straightforward business, or is it in a…? It varies.

G. Hogg: I guess you're just reinforcing for me that we can't take those snapshots.

G. Hogg: There has to be a holistic look at all the variables that are contained.

W. Strelioff: Just think. In the Auditor General Act, you've said that we should follow the dollar.

W. Strelioff: Well, there aren't that many acts across Canada that give the Auditor General that authority and responsibility.

W. Strelioff: I think Ontario just got that, and I'm not sure who else. Ontario also is, extraordinarily, supposed to provide reviews of the communications. Before the government issues media, the Auditor General there is supposed to make some sort of determination of whether it's partisan or not. I'm not recommending that for here, but what I'm pointing out is that there are different nuances around. The Auditor General of Canada is supposed to do five-year reviews of the operations of Crown corporations in a very intensive way, so every five years they'll go to an organization like Canada Post or Atomic Energy of Canada and do a very intensive examination of whether the organization is managing itself with due regard to economy, efficiency and effectiveness. It's different.

G. Hogg: Well, I know that time doesn't permit us to go a lot further, but I find it very interesting that you highlight that there are only two provinces that give authority to the Auditor General to follow the dollar, which brings to mind: what the heck are the other provinces doing — just saying to go out there, maybe dictating what they want them to look at?

W. Strelioff: Well, follow the dollar means that if you gave money to Bombardier….

W. Strelioff: I can go in there and say: "Bombardier, tell me how you know you're using the money for the purposes intended." The standard kind of way would be to examine the ministry giving the money and say: "Ministry, how do you know whether Bombardier is doing…?" You as legislators have said: "When it's needed, Auditor General, you've got the authority to go right to the place." We haven't done that.

G. Hogg: A very powerful way of looking at and holding accountable the operations of government.

W. Strelioff: The Auditor General Act in general is a very strong framework for an Auditor General — very strong. Other offices across Canada and elsewhere look at it as kind of: "Okay, there's leading-edge thinking."

G. Hogg: Well, thank you very much for responding to that, and thank you for appearing before us. We wish you all the best in your future endeavours.

W. Strelioff: Thank you very much. I've still got a few more months. I've got quite a few interesting reports that are coming out.

G. Hogg: I remember you just waving your finger at us and saying: "Read that one."

W. Strelioff: Read that Sea to Sky one that's coming out either today or Monday. It's just a robust explanation of the transaction. There are a lot of good explanations in there, I think.

B. Lekstrom (Chair): Wayne, prior to wrapping up…. I know there are more questions that members want, but we are going to have to move on. We have quite an agenda.

Just going back to one of the questions that one of the members had asked. My understanding is, if I look at the appropriations, '96 was $7.7 million within the office. We then went down to $7.3 million, $6.8 million, $6.9 million, $6.923 million in 2000 and $6.743 million in '01. Today we're actually at $7.67 million, I believe, which is certainly an increase from the 2000-2001 budget.

B. Lekstrom (Chair): In looking at the work you've done…. Certainly, there is no doubt there were some changes made over the years, when government tightened its belt and asked the ministries, the statutory officers to come on board. The work you've managed to do, I think, has been tremendous. The reports you've put forward — we've had the opportunity over the last number of years to sit down and talk about those — have been very well put together.

What I didn't want, and I wanted to make sure I got on the public record…. It almost sounded like the budget today was less than it was in '97, which it isn't. It's actually more. It's substantially more than it was in 2001, although there was a point when there was a percentage decrease. If you look at the numbers reflected across the board over the last ten years, roughly, it has fluctuated from a high of, I think, $8.364 million in 2003 to a low of about $6.743 million in the 2000-2001 budget. Trying to keep up is a challenge for all facets, but I wanted to make sure that people were aware of that.

I do have one quick question regarding the Olympic Games. I know that's of interest to all British Columbians. My understanding…. Maybe if you could guide me through this quickly. We have three of 20 seats on the board of directors of VANOC, I believe. They've actually appointed their own external auditor, being Ernst and Young. When they do their audit, is that a document you would look at as the Auditor General of British Columbia? I guess I'm kind of curious. I know that you've done some work on the Olympics, yet they have their own external audit group, as well, to make sure that they can follow the dollars through. Just maybe a comment on that.

W. Strelioff: You're right. There is a major public accounting firm that does the financial statement audit of the Vancouver organizing committee. They issue a set of financial statements, and those financial statements, I assume — I'm pretty sure — are public, so we would have access to them. Certainly, that work would inform us in carrying out our own work.

We wouldn't be duplicating their financial statement audit, by the way. What we'd be looking at, and we're looking at it right now is…. When we reported on the bid back about two years ago or something, we said: "Here's our understanding of the financial undertaking in terms of revenues and expenses and capital projects." Okay. Two years later, or whatever it is, where are we in terms of financing, project timetables, venues and scope? So that's what we're doing right now and working with the people at the organizing committee and also at an organization within one of the ministries called the Olympic secretariat or something like that.

B. Lekstrom (Chair): We're going to try to move on, Jenny. A question? I've got a list, then, that I would have to go back to that would have Richard, Dave and

If it's acceptable to the members, Wayne, I want to thank you for the work you've done over the years. I've enjoyed our discussions, certainly, at this committee and talking about the reports. The work that you have put together in those reports is certainly a very in-depth accounting of the work you've done. Certainly, the population of British Columbia…. These are public documents that you put forward. I know it may not be intriguing reading to many, but it certainly has showed the accountability of governments and your involvement over the years. I want to thank you on behalf of our committee and the members of the Legislative Assembly that we are here representing.

Thank you for your time this morning. Again, thank you for the work you've done on behalf of British Columbians.

W. Strelioff: Thank you very much. I've certainly enjoyed the job. Just remember, again: when we're at the table, good things happen. I mean, we're in people's faces. That's the job, but if you look back — a year later, two years later, five years later — it's good. So I just recommend to you as elected officials of the people of B.C. to support a strong audit office. I think that by doing so, public confidence in our institutions of government will increase, and that's important to all of us. So thank you very much, and good luck.

B. Lekstrom (Chair): At this time we will reconvene the Select Standing Committee on Finance and Government Services. We are going to move to item two on our agenda, which is the review and discussion of the draft report to the House, which will include recommendations. I would look at this time for a motion to go in camera.

J. Kwan: I'm just curious as to why there is the necessity for us to go in camera. I've never been on the Finance Committee before, so I'll state that first. Certainly, having sat on the Public Accounts Committee as Chair — as a legacy of Fred Gingell, actually — we've had our discussions, even in the drafting of reports and in the discussion of recommendations…. All of those deliberations are dealt with in public sessions, including the discussion of workplans for the Auditor General's office. From that point of view, it seems to me that it would be appropriate to follow that kind of practice that's been established through the Public Accounts Committee approach.

M. Karagianis (Deputy Chair): My view on this is that we've had all of these presentations in open and public meeting. All of the requests from all our statutory officers have been open, in open meeting, and have been fully open to the public and are public knowledge at this point. Our deliberations are really on saying yes or no to the recommendations or the requests that have come before us.

I note from the practice within municipal government that you only go in camera on discussions where the entire discussion would take place in camera on personnel requests…. Certainly, we can see that there may be a tie for some of the funding requests from all the statutory officers to be linked to personnel.

It would be my belief at this time that unless all of the discussions were held in camera, in fact, there's really no rationale for holding the decision-making in camera. All of the requests are public at this point and have been made public. Some of them have actually been reported in the public. Therefore, our deliberations on saying yes or no would seem to me to be a responsibility to be also held in open meeting. That is my position on this.

G. Hogg: I certainly share the sentiments with respect to the principles being outlined. My experience in local government was that personnel matters, legal matters and matters that affected the economy or property matters were the only matters which were dealt with in an in-camera setting.

I recognize, however, that we probably don't apply the same principles in terms of British parliamentary practice. I would be interested in knowing what the British parliamentary practice is and what it's based on in terms of how these committees make determinations with respect to in-camera items.

B. Lekstrom (Chair): Certainly, as the Chair, I can possibly make a statement regarding this issue and then look for questions regarding that generally, the practice in British Columbia has been for parliamentary committees to consider the preparation of their draft reports in camera. This practice reflects the essential origin of committees as subordinate advisory bodies to the House. Committees are established by and primarily responsible to the House. It has been the view by committee members that reports should be first presented to the chamber so that all members are on equal footing before they are made public.

In British Columbia in-camera meetings are held sparingly, and their use is generally restricted to situations where there are reasonable and legitimate needs, such as the processes to interview and recommend the appointment of statutory officers or the preparation of reports. Although members of committees are best able to determine whether or when they should go in camera, they must be aware of the potential risks and complications of undertaking this decision, including the potential for premature disclosure of committee reports.

The pre-eminent parliamentary text in British Columbia, Parliamentary Practice in British Columbia, third edition, clearly states: "The publication or disclosure of

draft reports of committees before they have been reported to the House will constitute a breach of privilege or a contempt and may lead to reprimand and sometimes a refusal to nominate the offender to further select committees."

The premature release of parliamentary committee recommendations and reports before they are presented to the Legislative Assembly has the potential to infringe upon the privileges of all members and may constitute a contempt of the House. The Legislative Assembly has the power to impose sanctions, both on members and other persons, for such leaks.

That's the practice that we've worked under in British Columbia. To me, it seems quite clear that….

G. Hogg: One would be: are we then saying that it has always been the practice with respect to this committee and other committees of the House to go in camera and submit those to the Legislature? Has that been the practice of this Legislature ad infinitum?

C. James (Clerk Assistant and Clerk of Committees): With all committees, with the exception of the Select Standing Committee on Public Accounts, which had decided some years ago to consider its reports to the House in a public session…. The committee did ask my advice on the matter, and I did advise the committee in the same manner that the Chair is now making his statement to this committee. The Select Standing Committee on Public Accounts had decided to take a different course of action.

G. Hogg: I guess my position on the principle that's being put forward — that this should not be dealt with in camera — would be that I think I support that principle. However, given the history and the practice, I think the process of doing it as one committee might be problematic with respect to British parliamentary practice and the way we could be held accountable for bringing that forward.

It seems to me that it's something that should be reviewed, perhaps by the House Leaders, to give some direction to committees so that we wouldn't be putting ourselves in conflict with the House when they're giving us a direct mandate and a responsibility to report back to them. If that has been the practice, I think we should probably abide by that practice, but it's something that should probably be looked at, because I'm not sure I support the principles that seem to be driving that practice.

J. Kwan: To my recollection in terms of historical context, when the Public Accounts Committee, formerly chaired by the late Fred Gingell…. The decision was actually made by the Public Accounts Committee to not have their recommendations, when they deal with recommendations, be in-camera sessions. Ultimately, the committee went that way, and that practice has now been established for a number of years and continues to be so.

It would seem to me that, as my colleague Maurine had identified, the items and the recommendations that have been put before the committee for consideration are already on the public record. Therefore, there is nothing which this committee could breach in terms of exposing information. All the committee will do is decide, I assume, to accept the recommendations or not — or to amend the recommendations. That, too, is the purview of the committee. The Public Accounts Committee also has that ability to determine what sort of recommendations they'll make.

Given that all recommendations have been presented to us publicly, it seems to me that there really is no reason why we should have in-camera sessions in our deliberations at this time. Albeit, it's general practice, but we also have precedents set in select standing committees where a different course has been chosen by committee members.

M. Karagianis (Deputy Chair): I would suggest that at this point the Select Standing Committee on Finance is not a historic committee. This committee's existence doesn't go back a decade or two decades or have sort of longstanding practices. In fact, we have the authority to make a determination here on when we go in camera and for what purposes.

I mean, I believe all standing committees have that capacity under parliamentary procedure, so I would argue that we do not necessarily have to follow the normal practice of this committee in the past few years of its existence. We can actually establish today that given the fact that none of these presentations have been done in camera, we have the authority and we have the responsibility to actually deliberate, on approval of this, in an open meeting.

I just go back to the fact that if we had intended to make the consideration of these recommendations in camera, the entire presentation should have been done in that manner. I think this actually puts us into a little bit of conflict here in appearing to be secret about a determination of a lot of public information that we've been reviewing over the last number of weeks. Why would we be secretive now about determining whether or not we're going to approve, amend or turn down the requests that have been put before us? I think the taxpayers expect us to actually deliberate that openly.

B. Lekstrom (Chair): All right. I guess just a couple of quick comments, and then I do have one more speaker.

The Finance Committee is a historical committee within the Legislature. Although it may not have sat for many years, it does have some history. My involvement since the 2001 time frame is that I've had the opportunity to chair the committee twice before. This is my third time.

It has always been the practice to go in camera to discuss the recommendations and the draft report. Certainly, as per my statement, I think it reflects that. I do think it's important that there's nothing secretive about this, but there is, I believe, some protocol and some proper procedure that would allow the Members of the Legislative Assembly to make sure they have a report that we have been asked, under our terms of reference, to report to the House as soon as possible, which then becomes immediately public.

All of our debates have been in public. I will note that we just concluded a report that we, this very committee, presented to the House with recommendations on the budgets for which we had a number of in-camera meetings, and this issue was never raised. I think that's a valuable point.

Going in camera is by no means to try to hide something from the public. I think there is certainly protocol that would show us that there are some issues that should be discussed there. There are procedures we follow. As Gordon Hogg has said, if there is a wish by the House Leaders to speak about that, I think they could.

As the Chair of this committee, though, at this time, following the procedure that I have been involved with,

what I would think would be proper protocol is that the Members of the Legislative Assembly are the first to receive this report, once it's deposited with the Clerk's office, in conjunction with the statutory officers and the public. That would be the appropriate way to do this.

We do have a motion on the floor, which is to go in camera. With that, I'm going to call the question.

B. Lekstrom (Chair): We're now back in public session. A motion to adopt the draft report as amended, through the Chair, would be in order.

B. Lekstrom (Chair): Motion to adjourn? Prior to that, Merry Christmas, everyone. Have a great holiday. Thanks for your time.

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	Yeas	Nays
	Bloy Hayer Lee Yap Hogg	Kwan Krog Karagianis

Committee Staff:	Josie Schofield (Committee Research Analyst) Mary Storzer (Committee Researcher)

REPORT OF PROCEEDINGS (Hansard)

SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

REPORT OF PROCEEDINGS
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SELECT STANDING COMMITTEE ON
FINANCE AND GOVERNMENT SERVICES