Public Accounts — Issue No. 16 — Monday, December 3, 2007 (HTML)

2007 Legislative Session: Third Session, 38th Parliament
SELECT STANDING COMMITTEE ON PUBLIC ACCOUNTS
MINUTES AND HANSARD

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON
PUBLIC ACCOUNTS



CONTENTS

		Page

Presentation by G. Dubrow, CCAF-FCVI: Effective Public Accounts Committees		335
	G. Dubrow

Emerging Issues in Accounting		346
	C. Wenezenki-Yolland
	J. Doyle

Chair:	* Rob Fleming (Victoria-Hillside NDP)
Deputy Chair:	* Joan McIntyre (West Vancouver–Garibaldi L)
Members:	* Iain Black (Port Moody–Westwood L) * Randy Hawes (Maple Ridge–Mission L) * Mary Polak (Langley L) * John Rustad (Prince George–Omineca L) * Ralph Sultan (West Vancouver–Capilano L) John Yap (Richmond-Steveston L) * Harry Bains (Surrey-Newton NDP) Guy Gentner (Delta North NDP) * Bruce Ralston (Surrey-Whalley NDP) * Diane Thorne (Coquitlam-Maillardville NDP) * denotes member present


Witnesses:	John Doyle (Auditor General) Geoff Dubrow (Canadian Comprehensive Auditing Foundation) Michael Macdonell (Office of the Auditor General) Cheryl Wenezenki-Yolland (Comptroller General)

R. Fleming (Chair): It's wonderful to see everyone here this morning, fighting through various weather fronts to get here, particularly Geoff Dubrow, who's come from Ottawa this morning and is going to begin our committee meeting this morning with his presentation from the Canadian Comprehensive Auditing Foundation on effective public accounts committees.

You'll notice the changes to the agenda, Members, that was sent to you last week. The infection control report will now be dealt with by our committee in the new year. It was mainly a problem due to availability of witnesses.

What we do have today is an agenda on some emerging issues, as well as some impressions and thoughts and direction from our new Auditor General, Mr. Doyle. For that section, we'll be in camera.

Then we're going to revisit, finally, an item that was first discussed…. A hearing was held in April of this year, so six months later we're going to revisit the business of adopting recommendations or wading through the recommendations. For that, members would have been sent a summary of the hearing and committee discussions to assist them. Hopefully, you've had a chance to look through that four- or five-page document for that section of the agenda.

R. Fleming (Chair): Mr. Dubrow, it's wonderful to have you here again in front of our committee. Some of us worked with you at the conference we hosted in August. You're back here. I know you've visited, I think, five legislatures in the past year and public accounts committees and have been working on a national project in that regard.

Welcome here this morning to the Wosk Centre. I'll just turn the floor over to you for your presentation.

After Geoff has gone through his presentation, committee, we'll open the floor for questions, if you would prefer it that way. Or would the committee prefer to ask questions during the presentation?

I think maybe, because we do have an hour for this item, members can actually ask questions as they wish during the presentation.

G. Dubrow: Thank you very much, Mr. Chairman. I appreciate very much the invitation. I'd like to extend my thanks to you, the vice-Chair and the Clerk of the committee for having facilitated this visit. I'm very happy to be here on behalf of the CCAF. Before I begin, I just wanted to acknowledge the presence of your new Auditor General, John Doyle.

The CCAF works very closely with the legislative audit community. A great deal of our funding support comes from the legislative audit community. We're delighted to have a newly installed Auditor General in B.C. We're particularly interested, obviously, in his experience from Western Australia, and we're really looking forward to his rich learning base and to learning more from him about his experience.

And also Cheryl Wenezenki-Yolland, the comptroller general. The CCAF…. About 10 percent of our support, in terms of the foundation, comes from the comptroller community. We've worked closely with Cheryl on a particular project, and I'm always delighted to see her.

As you said, Mr. Chairman, the CCAF has been very active in the area of strengthening public accounts committees and strengthening parliamentary oversight. Partly because we are serving the legislative audit community — that is, the 11 legislative auditors or Auditors General of Canada — we're often trying to work to strengthen linkages between Auditors General and public accounts committees, which of course are the main oversight body of legislatures.

I do want to mention sort of a note of caution, which is that we're very, very conscious about not casting judgment on any particular PAC or any other body that we visit, nor are we interested in ranking. We won't say: "Well, B.C. ranks here in terms of public accounts committees." We do try to be fairly frank and provide perspective, but we're not here to sort of cast judgment. We recognize that every jurisdiction in Canada is unique in its way and has its own experience.

A couple of other words before I launch right in. I've been asked to keep my remarks brief — maybe ten, 15 minutes — but feel free to jump in at any time with questions.

I mentioned that we've been actively working on public accounts committee–strengthening. In 2006 we published A Guide to Strengthening Public Accounts Committees, and I'll refer to that frequently. We can have additional copies sent via the Clerk, if you you're interested, Mr. Chairman.

Then, of course, as you mentioned as well, at the conference which was hosted by British Columbia — the annual conference of legislative auditors and public accounts committees — we presented a CCAF vision for the PAC of the future, to which the Chairman and the Clerk of the committee contributed as part of our Public Accounts Committee advisory group.

I say all this just by way of introduction. I wanted to talk to you a little bit about it. I should also mention that I've got sort of a mixture of presentations, because

I'll start by talking about what CCAF uses: an effective public accounts committee within the Westminster system. This takes into account not only CCAF's experience but also the Commonwealth Parliamentary Association's experience in effective public accounts committees, and I think it's very consistent with the Canadian Council of Public Accounts Committees.

If you take a look at the overhead, generally we find that most of the work that public accounts committees do tends to be based on the legislative auditors' reports, the Auditors General's reports. For public accounts committees to convene hearings on chapters of the Auditor General's report is sort of a typical activity of a public accounts committee. We say that an effective public accounts committee tends to go further in its ability to make recommendations to the government on how to take corrective action, if you like.

You see arrow 2 there. The public accounts committee in some jurisdictions will make recommendations to government to say: "Based on the report of the Auditor General, we recommend the following be done." The idea, again, is to bring around corrective action. The government will generally issue a response to the public accounts committee report.

Some public accounts committees in Canada are now working on follow-up, particularly the House of Commons Public Accounts Committee in Ontario, which is working on strengthening their follow-up mechanisms so that they're going back and actually looking to see whether the government did implement the recommendations of the Public Accounts Committee.

So that ability to take corrective action is, I would say, one of the three main tenets of the public accounts committee of the future presentation that we made in Victoria in August of this year. If you could just sort of take three key features of a public accounts committee of the future, one of them, again, was accountability or performance-driven — a public accounts committee that is able to bring about corrective action, that tends to be more constructive and less partisan than other committees.

I'm going to welcome a discussion on that, because I know that often when I raise the issue of constructive partisanship, members — not necessarily here but in any jurisdiction — will smile and look over at me as the naive boy from Ottawa coming here and talking about constructive partisanship. I'd like to engage you in a discussion about that.

That's the first area — a public accounts committee that issues recommendations, follows up, plans a set of long-term objectives and is more constructive and less partisan than other legislative committees, which tend to look more at policy matters.

A second area — and my understanding is that this is an area B.C. is fairly strong in — is institutional capacity. About half of the PACs in the country don't have a researcher. The absence of a researcher makes it very difficult for a public accounts committee to write reports, brief members and liaise with government departments in terms of asking for status reports on follow-up. Again, this is an area where, when we talk about what the public accounts committee of the future should look like, we talk about the importance of having adequate institutional capacity.

The third area is related to an experienced public accounts committee. One of the areas that we talk about in particular is consistency of membership — that is, that the Chair, the vice-Chair and preferably the members of the committee be appointed for the life of the Legislature. You don't need me to tell you that a public accounts committee is a unique creature with a unique role. We found that frequent turnover undermines the ability of the committee to function effectively. It takes time for a group dynamic to emerge among the members, and it takes time for a constructive partisanship to emerge. So it's very important to have that consistency and to limit substitutions.

We found, in talking to other public accounts committee members, that if you have a member who comes in at the last minute, hasn't been properly briefed, doesn't understand the role of a public accounts committee and hasn't read the report, that can often undermine the effectiveness of a public accounts committee.

The other issue related to experience is the importance of PAC members having an in-depth knowledge of their oversight responsibilities and being well briefed on public accounts committee reports.

In terms of our PAC of the future, I decided last night that I would add this in just to give you a sense of what a forward-looking public accounts committee in planning its future might do. I'm not going to go through all of this — not to scare anybody. This is sort of the standard…. You see some of the areas that have been highlighted here; I want to talk just about a few of them today. It's not my intention to go through all of them.

If you look at the four columns, this is our presentation on an effective public accounts committee. This is our standard presentation on what an effective public accounts committee would look like. There are four columns. One is that there are certain prerequisites for an effective committee. There, again, is that constructive non-partisanship element. There is certainly the importance of planning, as part of the second column. The effectiveness of a hearing is part of the third.

I think where I want to focus, particularly with this committee today, is on the value-added results of a public accounts committee. The Auditor General is already issuing a report, complete with recommendations. One of the questions PAC members often ask themselves is what their value-added is and how they can communicate that value-added to their constituents. I think that's an area that was discussed — one of the members of the B.C. PAC mentioned that particular issue — at the CCPAC conference. Again, I won't drag you through this whole thing, but I did want to focus on a couple of areas in terms of the prerequisites for an effective committee.

I think the one that I'd like to focus on in terms of the B.C. experience is the issue of setting meetings and meeting agendas. In particular, you'll find in Canada

that most public accounts committees do have the ability to call their own meetings. I just came out from Manitoba — I was there last week — and that's a jurisdiction where it's up to the House Leaders to decide when meetings should be held. This is not reflective of Manitoba, in particular, but when any House Leader is involved in an issue such as setting meetings, it's very hard to perhaps depoliticize the public accounts committee process. Obviously, most public accounts committees in Canada have the ability to set their own meetings.

One of the prerequisites for an effective committee is the ability to meet regularly and frequently. I'll give you some background on that. I'd be interested in hearing of the B.C. experience in this regard. Generally, the larger jurisdictions in Canada do tend to have regular public accounts committee meetings.

Alberta will meet every Wednesday morning and occasionally out of session. Saskatchewan has weekly meetings, and they also meet out of session two days in January and June, and then September, October.

Ontario meets every Thursday morning. Quebec meets once or twice weekly, and the House of Commons meets twice weekly while in session.

I've got some numbers in terms of the number of meetings that took place. Just to perhaps give you some perspective, Ontario had 21 meetings in 2006. Saskatchewan had 15 meetings in 2006. Alberta, in 2007, will have had 24 meetings, including out-of-session meetings. That ability to set a regular schedule and keep to that schedule is, I think, an integral part of an effective public accounts committee.

I should mention, by the way, that one of the things we've been very lucky…. The Chairman mentioned that we've been out to about five public accounts committees. I think the number has increased since the last time I spoke to the Chairman.

We've managed to meet with all the western provinces in particular, in addition to Ontario and the federal House of Commons. So I'll be very happy, when we get into our dialogue, to talk about the Alberta experience, the Manitoba experience and the Saskatchewan experience. They're all very different. I just wanted to mention that I'd be very happy to get into that with you.

The issue of whether a public accounts committee can meet outside session. You'll see a bar chart, which is probably too small for the naked eye. This is from our 2006 public accounts committee survey. As you see, most public accounts committees can meet when the Legislature is recessed. Of the 14 in Canada, 12 are able to meet when the House is recessed, and about eight of them can meet when the House is prorogued.

I'm going to skip over a lot of stuff here. I don't want to drag you through too much. I think I'm just going to skip to the end, about the issue of recommendations and follow-up. Then I'm sure your questions will take us back to some of the other things.

I'll just take you back to the first chart here. If you look at the value-added results column at the end, I'd like to talk to you a little bit about this.

This is an area where, in terms of the public accounts committee of the future, we've been doing a lot of work. I'd start again with whether the PAC has the power to issue recommendations. As you see, about 12 of the 14 public accounts committees do have the power to issue recommendations, but not all do.

There are about four or five jurisdictions which actively — four that I can think of — and consistently issue recommendations. Those tend to be the larger legislatures that have more institutionalized public accounts committees. They're issuing recommendations to the government, and it's a way for the public accounts committee to dialogue with the government and to make concrete suggestions for improvements that they want to see made to the administration of government.

Similarly, about half the public accounts committees have a formal follow-up in place. This means that when the public accounts committee issues recommendations to the government, there is a process in place where the public accounts committee can go back and look at whether the government has actually followed up on those recommendations. Has it actually kept its promise to do so?

I'd be very interested in the B.C. experience. Generally, there's a particular amount of time the government has — up to 150 days, depending on the jurisdiction — to respond and say: "Yes, we have implemented the recommendations," or "Here's what we're going to do to the recommendations."

Finally, the ability of the public accounts committee to initiate inquiries outside of business referred to it by the Legislature. This is an area that's very interesting in terms of the public accounts committee's ability to study larger governance issues.

CCAF does a lot of work on performance reporting, for example. We've had jurisdictions express interest in examining a larger governance area. What is the state of performance reporting in the province? That would be an example of a governance-type issue that the public accounts committee could look at, without necessarily a reference from the Legislature and without necessarily having anything contained in the Auditor General's report.

I think I'll just make a few more comments. My intention here is really to stimulate conversation. I did want to get back to the issue of constructive non-partisanship and talk a bit about why, so you don't have the idea that I'm somebody very naive from Ottawa who's come here to tell a bunch of politicians that they should be less partisan.

Generally, the view is that a public accounts committee's role is fairly unique from other committees in the Legislature. I'm sure all of you know this already, but just to reiterate. Generally, public accounts committees are not looking at policy issues. Not all legislatures have active legislative committees, but where there are legislative committees, those committees can engage the government, particularly the elected government — so the minister — in a discussion about the success or failure, or the perceived success or failure, of policy.

That's often a forum where departmental performance reports or annual service plans will be used as an input into that discussion.

Public accounts committees tend to focus more on the administration of government, the implementation of policy. They tend to question…. At least, the effective ones tend not to have ministers appearing before the committee as witnesses on a regular basis. They tend to have the deputy heads or other senior bureaucrats appearing because, again, the question is on the administration of a particular policy, not on the policy itself. So that's the differentiation.

In terms of an effective hearing, one of the roles, obviously, that we talk about a lot is the role of the Chair and the vice-Chair to be able to steer questioning and a discussion away from policy and to keep it in the area of administration. Those committees that are the most non-partisan…. I'll raise one as an example: the National Public Administration Committee in Quebec, which is the equivalent of the public accounts committee in other jurisdictions. In the last Legislature it was virulently non-partisan. At least, they prided themselves in being virulently non-partisan.

So it is possible, and there are examples in Canada of jurisdictions. Another example that's interesting is Ontario. Ontario has an Estimates Committee which is known for being very partisan, not surprisingly. They are looking at the estimates. When they're looking at the estimates, what will happen is that Treasury Board will spend countless hours preparing briefing books for members of the committee, but most of the questions will be to the minister on issues that will get them ready for question period, particularly for the opposition.

On the other hand, the public accounts committee tends to be less partisan. They're calling deputy heads. They're not necessarily interested in what went wrong and who screwed up but in what's being done to redress a particular situation, so that takes a lot of the politics out of it. It's not necessarily about shame and blame in every jurisdiction and in every public accounts committee. Sometimes it's more about: "We know. We've read the Auditor General's report. We understand what went wrong. Now, please tell us what you're doing to fix it and to address it."

One of the things that the Public Accounts Committee in Ontario will do at the beginning, when the Auditor General's report is released, is divvy up the chapters. There are three parties in the Ontario Legislature, and they'll divvy up the chapters based on the preferences of the three caucuses. The Clerk of the Public Accounts Committee will then send out a request to each and every department saying that that's been included in the report and saying: "Could you please inform us, including those who have not been selected to appear before the committee, about what you've done to redress the situation."

Again, often, it's not a matter of shame and blame but rather a matter of what's being done to improve public administration. That's the main focus of the committee.

I hope that's given you some background. At this point I'd really like to stop talking and start listening and perhaps answer some questions.

R. Fleming (Chair): Thanks very much, Geoff. A lot of interesting aspects you bring up there. I will ask committee members if they want to pick up on any particular slide or comment that you made.

I thought maybe I could just ask first about this idea, since you come from Ottawa where it's much more mature and where partisanship is much lower. I'm kidding. I have a serious question.

My serious question is about the House of Commons. It's often commented on that it has a strong committee system. I know there's a lot of discussion about how much power is concentrated in the Prime Minister's Office and what ideas there are to maybe distribute that and how that would improve government. That notwithstanding, it's often commented that the House of Commons does have a strong committee system and that a lot of provincial legislatures have a weak committee system.

What does that mean? Well, you have suggested that a weak committee system is probably one that doesn't meet frequently and is also likely not to have its own independent resources. I notice from the Territories — not to single anyone out — that they're almost completely dependent upon the Auditor General, which is actually the federal Auditor General…

R. Fleming (Chair):…to set their agenda, to provide them with the issues of which they talk about. It's a very passive relationship. At the House of Commons, the Public Accounts Committee has its own research secretariat. I think the library at the House of Commons is also at the disposal of the committee.

Each member of the Public Accounts Committee there seems to be able to get any attention and any answer to any question they might possibly have, in or out of a committee meeting, to pursue…. I mean, that's almost an avenue of follow-up beyond the report itself — an area of interest that a member might have. It's interesting how both formal and informal accountability has emerged, with a stronger committee system.

I also think a weak committee system is reflected in legislation, and I'll criticize ours a little bit. The Public Accounts Committee and most of the standing committees of the B.C. Legislative Assembly have very little control of the assembly's agenda so that even when they submit a report, typically the Chair and the Deputy Chair will make very brief comments, and that is about it, even though there may be a summary of eight or ten audits of varying degrees of controversy and interesting findings. And so it goes for most of the other standing committees.

I wonder if you could maybe comment on that first. How do stronger committees actually have more say in the agenda of the assembly itself? It seems to me that there's a high degree of disconnect between standing committees and how they actually report back and participate in the main debate of an assembly.

I do believe that there is a strong correlation between a strong committee system and a strong public accounts committee, partly for the reason that in most legislatures, public accounts committees aren't given very many privileges above and beyond what other committees have. So if you have strong, active committees and you have institutionalized committees, you tend to have a stronger public accounts committee.

You mentioned the issue of committees having very little control over their own agenda. I was just reading yesterday that in the U.K., the Committee of Public Accounts Chair actually begins proceedings by, I believe, either 15 or 30 minutes of his own questions — just sort of a very interesting twist.

Let me talk a bit about the research, and I'll come back to the issue of committee control. You are right that in some of the legislatures with a larger number of seats, particularly the House of Commons, Quebec and Ontario, they use a Library of Parliament model whereby each committee is assigned two researchers. So there is sort of a permanent…. Now, you look at the congressional system in the States, and that's very, very paltry and very weak compared to what other committees have. But nonetheless, in terms of the Canadian context, those particular committees do have researchers who are able to brief the committee, who are able to write reports for the committee, etc.

In terms of committees having little control over their own agenda, I'm just trying to get a better sense of what you had in mind. My understanding is that the B.C. PAC does have the ability to set its own agenda, but I think one of the differences is that some committees have the ability…. They don't need to have a reference from the Legislature.

I think one of the things that's been happening is that there's been a gradual evolution of independence of public accounts committees in Canada. Being able to meet outside session, being able to call their own meetings — those are all factors that allow them to sort of continue their work independently of the government of the day, independently of the House Leader. I think that's a particular feature — and the ability of committees to be able to look at their own issues, study their own issues.

The House of Commons would be another example, particularly with regard to conducting studies. They will look at studies. They'll look at the role, for example, of Treasury Board in the larger governance issue. They'll look at other exciting issues such as accrual accounting. And I mean that, of course, with the comptroller general and Auditor General sitting to my left, with all….

This is something that public accounts committees can do. I think there is a feeling that that gives them a bit more control over their own destiny. I don't know if that answered your question on the issue of committee control.

R. Fleming (Chair): Yeah, I think it does, and there are a number of other questions that other members would like to ask.

J. McIntyre (Deputy Chair): I just have a very simple question, actually. I was just curious about the structure of the public accounts committees. You alluded to things across the country. Are they structured similarly to us? Actually, from the conference I realize that opposition is the Chair and that government is the Deputy Chair. Is that always the case? Most of all, is it structured the same, where the deputy then has the majority — the way ours is structured?

G. Dubrow: In terms of the Chair being an opposition member, that is sort of the Commonwealth standard. When I was in Tanzania and Ghana doing training for public accounts committees, the same thing applied there. The exceptions in Canada are the two territories that have consensual government, Nunavut and the Northwest Territories, where there of course is no opposition and Chair.

In terms of the size of the government and the distribution of the seats, it really depends. Right now there are several jurisdictions where there are minority governments, and the government does not have a majority in the committee. In the House of Commons the government does not have a majority. In Nova Scotia the government does not have a majority, and I don't believe they have one in Quebec either. So it really depends on the number of seats that each party has in the Legislature.

M. Polak: First of all, I want to acknowledge that I really appreciate the term "constructive partisanship." When we discuss the idea of being non-partisan when we're all people who are elected to support the views of a given party, it to me just seems disingenuous. I actually think there's a purpose to our Westminster system, designed around partisan debate such that you hopefully come out at the end with something that is a bit more clear and has perhaps been sharpened due to that kind of testing. I actually quite appreciate that term.

I'm interested in your description of the public accounts committee's report mechanism. You describe a scenario whereby a report would come to a public accounts committee, the public accounts committee would make recommendations, and government would come back and respond with respect to their view of the recommendations — how they felt they might implement them, or perhaps had been, etc.

I am asking myself, then, how that fits with our traditional structure, which is typically — I guess not in all cases but in most — that the report that is received by the Public Accounts Committee includes the response of the government ministry already. Not only is it a response — in some cases refuting some comments, in other cases supporting them — it will also typically reflect the work that they have already engaged in.

Many times we have reports coming to us where the response from government is, "Gee, thanks for those," and by the time we get the report here, they've actually already completed response to those recommendations.

In that environment what could be our appropriate role, given that if they've already responded and said,

"We've done X, X and X." It really doesn't make much sense for us to then come out and say, "Well, you should do X," because they've already done it.

G. Dubrow: I think that's not only an excellent question but an integral question.

I want to go back to the CCPAC conference — which, of course, I recall that you attended — and the comments of the Chairman from the Alberta Legislative Assembly, who talked about this issue. The reason I raise that is just to say that this is something that's on the record, so I'm not revealing any secrets about Alberta.

One of the concerns that comes up when the government's response is…. Now, it's different for the Auditor General to say: "We've talked to the audited entity, and their comments were X, Y and Z. We've discussed our audit findings with them, and they acknowledged them." That's a little bit different.

What happens in Alberta is that, as soon as the Auditor General issues his report, the government issues its response straight away. The concern that the Chair of the Alberta Public Accounts Committee had was that this really cuts the Public Accounts Committee off at the knees. It doesn't give the elected officials the chance to have a more robust conversation.

If the Auditor General is issuing a report and the government says, "We agree with everything. Thank you very much. We'll take care of this. The Public Accounts Committee needn't interfere or needn't busy itself with this. The big people will take care of this," then what's left, really, for the Public Accounts Committee is a more nominal role.

Auditors and public accounts committees and politicians in the Canadian system of oversight in the Westminster system work very closely together, but the politicians, obviously, have a unique view. What we'll often talk about is the role of the Public Accounts Committee in adding to the recommendations of the Auditor General.

M. Polak: So would that be in terms of…? I'm trying to picture in this particular scenario…. Generally speaking, you have something a little further than that. It'll actually lay out: "Here's the way in which we've responded." Often we even have the Auditor General and the ministry officials saying that they've actually worked together on the solution. So you're sort of further down the road.

I guess I'm exploring in my mind if the appropriate spot, then, for the Public Accounts Committee is to in fact test what has been stated. As you're saying, it's not good enough for….

"Yeah, we like the recommendations. Thanks very much." Pat, pat, pat. "Away you go." Public Accounts could be a rather effective tool to say: "Well, you've said that you've done this and this. Can you describe for us how this has gone?" Or you can ask the Auditor General, "Are you satisfied with that?" etc. That tends to be where our discussion goes. The question, then, comes in terms of, I guess, follow-up or recommendations.

R. Fleming (Chair): Geoff, If there's anything that you're unfamiliar with from the B.C. jurisdiction, the comptroller general and the Auditor General, feel free to join the discussion. Just so you…. I'll let you respond.

No, I think those are precisely the kinds of questions a public accounts committee could ask, in terms of digging a little further, finding out if the government really is following up. When we say the government here, we're not talking about the elected government. This is not a frontal attack on the government. This is a dialogue between the legislative branch and the administrative arm of the executive branch about the implementation of recommendations to improve public administration.

M. Polak: That sort of leads into my next question. You also talked about the difference between legislative committees. One of the ways in which the Public Accounts Committee differs from other select standing committees is that the focus is less policy-oriented, and it has an administrative orientation. That brings me to an area of discussion that is also ongoing in our jurisdiction, and that is the emerging role of performance reporting and, I guess, the defining of performance reporting.

It was interesting. We have a report on the end of our agenda today — recommendations to deal with — that actually came to mind when you mentioned this. There was a part of it in which there's clearly a divergence between the Auditor General's office and the ministry office with respect to a policy question. Not to give you the whole report, but it's on treaties. The Auditor General, in his report, said: "I think doing it this way is not going to get you very many treaties." The ministry came back and said: "Well, we actually think it will." That's a policy divergence as opposed to an administrative one.

Does the role of Public Accounts tend to expand and contract with respect to recommendations as the scope of a performance-reporting model expands?

G. Dubrow: Again, an excellent question. Let's separate out the two for the purpose of this discussion. Let's separate out performance reporting at this point and talk about how discussions tend to incur into the area of policy.

Generally, the reason they tend to do that is because of an Auditor General's value-for-money audit mandate, looking at economy, efficiency — whether the government has delivered services with due regard

to economy, efficiency. Those two areas tend not to be as much of an issue in terms of the incursion into policy.

The other "e" is effectiveness. In some jurisdictions the Auditor General is able to actually look at effectiveness. In other jurisdictions — the federal Auditor General, case in point — they can only look at whether the government has the methods in place to measure their own effectiveness. But once you start getting into that discussion of effectiveness, you start getting very close to policy. So it's like the rocket ship always getting a little too close to the sun.

There's rarely or not very often a discussion that just talks about administration. It's often necessary for the Chair and vice-Chair to work together to make sure that the discussion tends to steer clear of an incursion into the area of policy.

M. Polak: Do the differences between provinces with respect to how they handle performance reporting vis-à-vis effectiveness, etc., tend to shape the way in which they conduct their formal follow-up?

I wouldn't be able to go that far. I mean, I think very few public accounts committees use performance reports — that is, the department's performance reports — in their discussion. The central focus tends to be the Auditor General's report. The two exceptions would be Alberta and Quebec, where performance reports will be discussed on a more regular basis.

M. Polak: Yeah, because I think when you get to where the — I hate to use the word "effectiveness," but for lack of a better one…. When you get to the question of effectiveness around public accounts committees, around the debate that ensues around the decisions made, I think it would be fair to observe that for most, there isn't great difficulty in confronting basic administrative issues and ensuring that ministries follow up on those and, in fact, respond to the recommendations.

Where the, I guess, robust debate tends to take place is when the discussion veers off into the opinions of members with respect to whether or not the policy initiative or direction fits appropriately or not. I think that for most members, the issue of whether financial questions are taken up or not is not as problematic as the idea that we would make recommendations around things affecting policy. That's an interesting juggling.

B. Ralston: My question is about the effectiveness or usefulness of committee proceedings. I did read a transcript of one of the British public accounts committees, and the questions there were fairly wide-ranging and quite lengthy. Our proceedings here generally tend to confine participants to a single question or perhaps two questions. If one tries to proceed further, then members opposite….

B. Ralston: That's very unusual in this setting, frankly. Members opposite tend to chafe at that point. One really wonders: is a more robust form of questioning in the hearings useful, or is that the practice, or is it simply satisfactory to confine members of the committee to a single or two perfunctory questions?

G. Dubrow: Another absolutely integral question is the ability of parliamentary committees, legislative committees, to get to the bottom of matters. There was an article in the Globe and Mail — I believe it was a couple of days ago, last week — talking about the challenges that a committee like the ethics committee of the House of Commons will face in the questioning of Karlheinz Schreiber.

This is an issue that goes above and beyond the work of public accounts committees, but it's a very serious matter. Let's take it from the civil servants' side for a minute. Civil servants often feel, when they're appearing before public accounts committees, that they sort of get blindsided. They'll prepare very thoroughly, and then they'll find that the questions — as you've put it, Mr. Ralston — will be all over the place.

One member will ask about X, another member will ask about Y, and another member of the same caucus will ask about Z. It tends to be frustrating for the witnesses and also for the members of the public accounts committee because there's not much time to get to the bottom of any particular issue. Just as you start your line of questioning….

The House of Commons Public Accounts Committee has…. I thought it was eight, but I heard seven recently. As they rotate party by party around the table, each member will have seven or eight minutes to ask their questions. That's not very much time. What tends to happen is that the witnesses don't get….

Especially if you look at the RCMP hearings on the RCMP pension issue that took place recently…. There were some really important issues that needed to be discussed, and the reputations and lives of some of the witnesses lay in the balance. Many of them felt…. Again, if you look at the transcripts, they felt very rushed. So: "Hurry up. Let's get to the answer here. Did you, or didn't you? Let's move on." They don't have the time to get to the bottom of things.

Similarly, if the Public Accounts Committee is looking at a particular issue — perhaps the department of education is not doing a good job with respect to area X — if the members could band together and ask a series of questions on a particular issue, it might make the hearing a lot more effective. But if, as you put it, one member is interested in such a perspective and the other member is interested in such a perspective, then it really limits the effectiveness of the committee to get to the bottom of anything.

My answers tend to be very lengthy, and I apologize for that. I haven't perfected the art of short answers.

I think the questioning issue is…. I don't know of any public accounts committee in the country, including the federal, that's happy with the way in which the questioning is distributed. It doesn't allow the committee to get too deep into any one matter.

H. Bains: My question is along the line that I think Mary started. It's about being constructive and having a non-partisan way of conducting our business. We're on the administrative side of the public accounts. But in reality, I'd like to hear how others actually have overcome that issue, because with every report that comes before us, my impression is that it becomes political.

There are recommendations, for example, by the Auditor General, and there's a response by the government. I've seen, to a point where recommendations could be embarrassing to the government…. When we are adopting that report, my colleagues on the government side would want to make sure that the recommendations of the government are also adopted, which is part of that report now. I don’t know what their reasoning is, but my impression is that it is because they're trying to minimize the damage or the embarrassment to the government — why we have some of the recommendations that exist in the Auditor General….

How do the other jurisdictions deal with these issues in a non-partisan way, if you suggest that there are some ways to do that?

H. Bains: Well, how this committee can be non-partisan. For example, there's a report on the convention centre by the Auditor General. There are some very serious issues in there that are damaging, embarrassing to the government. The report could come to us, and there will be a response by the government in that report. The government part of the members will insist that those government responses must be included and accepted, as well, whether it makes sense to us or not or whether they actually administratively are the right things to do or whether they have dealt with the recommendations adequately that came from the Auditor General. But it's kind of that political lines are drawn.

Obviously, it's my intention to steer clear of any homegrown or homemade issues or B.C. political issues or Auditor General reports and to talk on a more general basis about this particular issue. But I think a couple of things.

I think that the culture…. A couple of observations. First of all, I think that generally one can say that the more political the nature of an issue being discussed in Public Accounts, the more that the government feels that its reputation or its re-election can be threatened and the more the opposition smells blood and sees a chance to make political points. There's a direct correlation between that and an ineffective public accounts committee.

So if there's a particular issue that's highly political and that the government feels threatened by and the opposition sees as an opportunity, this will usually make it almost impossible for the public accounts committee to function in any kind of non-partisan or constructively partisan way. I think that's something to be aware of.

What I've seen in other jurisdictions or what I'd at least suggest in some other jurisdictions is that sometimes committees, if they're trying to develop a culture of constructive partisanship and trying to work together more effectively…. Often the selection of the reports is very important.

Again, I'm not making reference to anything that happens in this particular committee.

Sometimes committees will start…. I'll give you an example. I was in Alberta a couple of weeks ago, and they were calling community colleges from the SUCH sector — so schools, universities, communities and health care organizations. The Alberta Public Accounts Committee didn't really function until about a year ago. What I found particularly healthy about that was that if you're calling the SUCH sector, if you're calling community colleges….

Whatever happened at Grant MacEwan College in Edmonton really is probably not going to be something that is going to bring down the government or affect the government's reputation. Sometimes calling reports and witnesses that are a bit more removed from the day-to-day hustle and bustle of government allows the committee to get its feet wet and talk about an issue which the government doesn't feel threatened about.

That, again, is not to say that the committee should shirk looking at more serious issues, but if a committee were at a stage where they're saying, "Look, we're still trying to work together and get this constructive, non-partisan thing going," one of the suggestions I would probably make is to try to pick chapters of reports that are maybe a little bit less controversial. I think that helps to create a culture of the committee working together.

The other example, of course — to go back to Mary Polak's question on the performance reporting — is taking a governance issue, like performance reporting or another issue, and looking at something like that.

Again, that's an area that…. I can pretty much guarantee that no discussion about performance reporting is ever going to affect probably one vote in terms of any citizens. That, again, would be the kind of issue — and it doesn't have to be that one — that a committee could get together, work on and start to build a culture of cooperation, collaboration and constructive non-partisanship, without feeling like there is sort of a dagger hanging over their heads.

D. Thorne: You're talking about practising the whole partisanship thing — right?

D. Thorne: I don't think I'm giving any secrets out to say that I think we're a fairly partisan committee. I just can't imagine how a committee like this could function any other way, really. I just can't imagine it. Maybe it's because I'm new at the job and this is my only experience, but it seems to me that just the nature of the job makes that happen.

I did have a couple of other questions. You mentioned something about ministers sitting on the Public Accounts Committee. I'm just wondering if anybody here knows: has that ever happened in British Columbia — that we've had ministers sitting on Public Accounts Committee?

C. James (Clerk Assistant and Clerk of Committees): It wasn't until about 1990 that ministers were not allowed on parliamentary committees.

D. Thorne: Okay, so we don't have them on at all now. So that's not the norm across Canada? There's a mix of both, then — ministers sitting on committees and not — in different provinces.

G. Dubrow: There's a gradual devolution. In 1976 the Chair of the Nova Scotia Public Accounts Committee was the Minister of Finance. There's a gradual devolution away from ministers sitting on committees.

G. Dubrow: No, but we strongly recommend — and so does the Commonwealth Parliamentary Association and, if I'm not mistaken, CCPAC — against…. Well, let's drop the "strongly." We recommend against ministers sitting on committees.

G. Dubrow: I'd go one step further. I think what we're finding is that anybody on a committee who is political, be it a House Leader, a Leader of the Opposition — there are PACs that are so small that they need to have the opposition leader — a Whip, a parliamentary secretary…. What we're finding is that, again, the presence of those people tends to politicize.

D. Thorne: Okay. I mean, I wondered about that. I just can't imagine what would happen if you had a minister sitting on this committee the way we operate now. It would be an amazing addition.

G. Dubrow: Well, it would be like dividing the Red Sea. The two parties just split according to party lines. The opposition will say….

D. Thorne: Well, it would be way more than that, but I'm not going down there.

The thing that really interested me — one of the things — in your presentation was how many people have regularly scheduled weekly meetings, and sometimes more than that. I'm just wondering. We certainly operate in a totally opposite way. Our meetings are haphazard and rare. We're always rushing through reports that we don't get time to look at.

One of the problems is scheduling. We have a heck of a time fitting meetings in, apparently. Certainly, a regularly scheduled meeting would take care of all of those problems — the lack of time and the scheduling of meetings.

I'm just wondering. Do you feel that that's a really important thing, or is it just something that you mention in your presentation, and we can go on the way we are and still function reasonably well?

G. Dubrow: Well, without commenting on the circumstances here, I think the ability of the committee to set a regular meeting schedule is integral to the effective functioning of the committee. There is no question about it.

Again, I'd go back to the Manitoba experience. There is a bit of a difference because the House Leaders still have to agree on the meetings taking place. The first step there should be a devolution of that responsibility to the PAC itself, but then the PAC will need to be able to set its own meetings and keep a regular meeting schedule. As I mentioned, most of the larger jurisdictions in Canada, right up to federal House of Commons and down to, I guess, Saskatchewan in terms of seat size, set regular meetings.

D. Thorne: As far as I know, we can set our meetings whenever we want. But we just don't have enough meetings. And we don't have enough time to really…. I can't imagine us ever being in a position that we could actually initiate, on our own, separate inquiries on any topic, because we just don't have enough time, that I can see, to adequately even do the reports that we're given by the Auditor General.

Certainly, for us, maybe that is something we want to look at. It's great to have continuous members and to have that continuity, because that is important, but all of it pales in comparison to the fact that we so rarely get together.

G. Dubrow: Yes. I definitely understand where you're coming from. In terms of the west, two western provinces, Alberta and Saskatchewan, have regular meetings. Both Ontario and Quebec have regularly scheduled meetings, and so does the federal House of Commons.

D. Thorne: Then you truly do have continuity and time to actually do the job properly and not feel that it's quite so haphazard — as I often get the feel.

G. Dubrow: Yeah. Commenting on another jurisdiction where I see the Chair and the vice-Chair spending a lot of time trying to set meetings. Most of the effort is spent on the setting of the meetings.

R. Fleming (Chair): Geoff, some of those jurisdictions have regular meetings when the House is sitting. Are they shorter meetings? Are they an hour or an hour and a half in duration, or are they…?

R. Fleming (Chair): So they probably just have one item of business on them. I mean, one hearing if it's going to be a hearing, or….

G. Dubrow: Yeah, sometimes. In the House of Commons, for example, they'll take a chapter of…. The Auditor General, when she publishes her report…. There are four reports a year. Each report will contain about eight chapters. They'll take a chapter, and they'll look at it over the course of two hours perhaps.

R. Fleming (Chair): Oh, I see. So they will have several hearings on the one report.

G. Dubrow: Or not necessarily, but they don't usually look at more than one report in the course of two hours. But then again, they'll look at one chapter in that two-hour session.

In Saskatchewan, for example, as I was mentioning earlier, when the House is out of session, they will put whole days aside to look at….

R. Fleming (Chair): So some of these jurisdictions actually have meetings Monday, Tuesday, Wednesday — continuous. Is that your experience?

G. Dubrow: No, it tends to be once to twice a week. In Alberta, every Wednesday morning. Saskatchewan, weekly meetings and two whole-day meetings out of session for at least three months of the year. Ontario, every Thursday morning — I think they have three hours, nine to noon, if I'm not mistaken. Quebec, on average one and a half days a week, because; sometimes they meet once, sometimes they meet twice. The House of Commons tends to meet twice weekly.

R. Fleming (Chair): Yes, there's one more question that a member has for you.

G. Dubrow: Okay. I just want to take a couple of minutes to cover another angle that Diane Thorne had asked, but I can wait until the end.

R. Fleming (Chair): Do you want to just wrap up on all the points that have been raised at the end?

R. Sultan: Listening to Diane Thorne, I'm tempted to quote that police inspector in Casablanca, who said he was "shocked, shocked" to think there'd be partisanship on this committee.

I'm intrigued by Geoff's point that the more policy-oriented the discussions, the less partisan discussions become. I thought that was kind of strange, because….

R. Sultan: Let me get this straight. If we'd spent less time on dissecting implementation of policy and more time arguing about the policy itself, we'd be less partisan. Was that your point? That's what I thought. I'm sorry. I didn't explain that very well.

My initial reaction was: well, that's kind of a strange thing to come from an expert from Ottawa, because that is not really consistent with, it seems to me, the gist of most of our reports, which are concerned with dissecting, you might say, or appraising or assessing the effectiveness of the implementation of policies, the execution of policies.

Then listening to the conversation this morning led me to think: maybe Geoff is on to something here, because I think our Auditor General really picks the subjects that his office is going to investigate. We sit here and receive the news — good, bad or indifferent. Then we skirmish a little bit and move on.

Maybe, compared to the norm across Canada — or at least the norm that you're advocating, Geoff — we're sort of on the wrong track here. We should be getting off this critical examination of performance and execution and be debating policy. If so, we would move to a higher plane and a more thoughtful, less partisan plane.

Is that your advice? And if so, I'd be very interested in whether John Doyle, our new Auditor General, plans to change his spots.

G. Dubrow: I think one of the reasons why I tend to get along quite well with elected officials is that I have the instinct to be able to sidestep controversial questions at the right moment. It wouldn't be my role to give any advice to the current legislative Auditor or to the committee.

I would just go back to the comment that generally the role and function of a public accounts committee is not to look at policy. That role falls to other legislative committees that are talking about the success or failure of government policy.

The minister will be called, and the opposition will say: "Minister, you're doing the worst job possible. You should resign." And the government members will say: "Minister, you are doing a fantastic job. You are the greatest thing since sliced bread."

The reason ministers are not on Public Accounts or are recommended not to be on Public Accounts is to avoid such discussions and to have the committee work together — not to talk about the success or failure of government policy but to look at the administration of policy. It's part of a feedback mechanism and part of a feedback loop. Generally, I think public accounts committees tend to steer clear of the policy area.

R. Fleming (Chair): I wonder if you could maybe just relate it to Quebec, though, where the Committee on Public Administration, which is the equivalent of us…. How do they stay true to what you've just said around avoiding policy issues but giving rigorous oversight to the public administration interests of the committee?

G. Dubrow: I think that each province has a culture, and once the culture is set, it's hard to overcome or hard to change. I think the culture there has been a traditional reliance on committee members' ability — despite, obviously, substantial differences on a range of issues — to work together.

One of the things CCAF wants to do is start looking at some of the practices around the country and publishing studies on those very types of issues, in terms of the discussion and how committees tend to function in that way. But generally, I think the culture of the committee tends to be inclined towards not letting things get off track and focusing more on the administration side and less on the policy side.

I'm sorry that I can't give you a more detailed answer. I haven't, unfortunately, had a chance lately to observe the Quebec Public Administration Committee in action, so it would be hard for me to comment. But I'll certainly look into that and let you know.

R. Fleming (Chair): Now would be a good time, if you have any closing comments, Geoff. You did come here and spark some very good discussion for members to think about and for us to consider in the new year, when we come back as a committee.

G. Dubrow: Thank you, Mr. Chairman. I think I would close with…. Perhaps I regret already that I didn't spend more time or introduce this issue earlier. One of the suggestions that I make to public accounts committees when asked is: think about what you want to accomplish. I think that's an issue that is often best tied to the fact that public accounts committee members are elected officials.

Think about what you want to accomplish. Then how are you going to communicate that to your constituents? I believe that it is possible to communicate, and that goes, of course, to the incentives. What does a public accounts committee want to accomplish?

We're always happy to facilitate such discussions, or you have within B.C. such talented people as Craig James, who has been an experienced chair. I guess you've got the Auditor General and the comptroller general on your public accounts steering committee. So you've got some really great people who could participate in such a dialogue, if so desired.

Again, the question of how the Public Accounts Committee…. What does the Public Accounts Committee actually want to do? What does it want to accomplish? Thinking about that and actually, then, tying it to the issue of how you go back to your constituents and talk about that….

The issue of communicating with the public. Mary Polak, I think I remember a comment that you made on this issue in Victoria, a very good comment — the ability of the Public Accounts Committee to explain their accomplishments to constituents. What did you want to accomplish? Is there a strategic statement that the committee has made in terms of saying: "Our job is to ensure that we are looking at the administration of government programs and making recommendations for their improvement"?

When constituents ask, "What do you actually do as a Public Accounts Committee member?" you can explain: "Well, this is our objective, this is what we're doing, and this is how we're trying to fulfil it."

One of the suggestions that we made in other public accounts committees is that there be a non-partisan communications person working on behalf of the entire committee to help take the technical issues that are being discussed in a PAC and then explain them and break them down to more of a simple level — because, obviously, some of these issues are complex and technical — and be able to explain them to constituents. "We work on a particular issue." "We work to improve the way a particular transportation service is run so that it could work more effectively through you in the future," etc.

I think that issue of incentives and that issue of planning and really thinking about what a committee wants to accomplish is integral to its success.

R. Fleming (Chair): Thanks very much, Geoff. We really appreciate you being here this morning. I think we'll have you back at the committee on a different topic at a different time. We really appreciate your interest in how we do our business here and some of the things that you brought to the table this morning.

In closing, I should just clarify that I really do find accrual accounting to be an extremely exciting topic, in case there was any misunderstanding on that issue.

R. Fleming (Chair): Please stick around, on that note, because that's next on our agenda.

J. McIntyre (Deputy Chair): Yeah, I would like to thank you, Geoff. We've met several times, and I've been interested in having you come and talk to the whole committee, at large and together, because I think you're obviously experienced and have some interesting observations.

I want to add just one little note to the discussion, if I may, with the Chair's indulgence. I think it didn't come up. I was listening with intent to the back-and-forth. The Auditor General may or may not want to respond to this.

I think one of the issues in British Columbia, to be honest, is that some of the Auditor General reports we've received over the years — certainly, most of us are all new since the 2005 term — have been fairly prescriptive. I think that leads to some of the partisanship, and I think it undermines some of the constructive partisanship that you may talk about.

They may point out an issue and say: "Yes, it needs to be improved," or "You could pursue this course in the public interest." But by prescribing — by being too definitive and too prescriptive about how it should be — then the ministry response ends up being fairly, I guess, defensive, for lack of another word, or partisan. Then, I think, the committee takes its cues from that.

Perhaps, going forward, if Auditor General recommendations were sometimes, in a way, less able to make it really partisan…. I know I'm not saying this very well, but I think that does make a difference, to be honest.

I think we've gone through a number of years where some of these recommendations did verge into policy and did verge into areas that perhaps may be overly prescriptive. Given that, I think we might have a different tenor and an ability to be a little more constructive. That's my last two cents.

The next issue on the committee agenda this morning we've just tentatively titled "Emerging Issues in Public Sector Accounting Practices." Of course, many of the committee members know that change is the only constant in public sector accounting and in the profession today.

We've asked Cheryl Wenezenki-Yolland to speak a little bit this morning. I think John Doyle will add to it as well.

Before I turn the floor over to our comptroller general and our Auditor General to speak to this issue, I also wanted to introduce Mike Macdonell, who is here this morning and is now the director of communications for the Office of the Auditor General.

It's great to have you here this morning, Michael. I don't know if you wanted to talk about how your office is moving forward in the new era and that you're now the communications director. We welcome you here to the committee this morning. Feel free to participate at any point in the meeting this morning.

C. Wenezenki-Yolland: First off, thank you very much for having me come and speak to you on the topic of emerging accounting issues. I am quite thankful, after the last presentation, to be speaking on this very non-partisan topic, although I can tell you that in our profession it feels very partisan sometimes.

As the comptroller general, obviously I have a great interest in what's happening with accounting issues, not only within our jurisdiction but across Canada and also on an international basis.

My favourite document of all the accountability documents of government, of course, is the Public Accounts. It's this lovely document. I'm sure you've all read it and know all of the lovely notes and the great effort that we put into this document. It does have a significant purpose, though. It is one of our primary accountability documents. It does present the government's fiscal plan, and it does present the results against that fiscal plan.

It also provides you with the current standing of the government's financial position at that date, in the context of both the balance sheet and the income statement. If you are a real reader of the notes, it even outlines for you some of the areas that we see as potential risks to that financial position.

In the context of our public accounts — not that I want to brag — B.C. really does have a very strong set of public accounts. Other jurisdictions do look to some of the reporting that we do and mimic us. If mimicking is the highest form of flattery, we definitely do see that happening.

The accounting standards that we follow in British Columbia are actually prescribed within the Budget Transparency and Accountability Act. You'll recall that back in 2001 there was legislation passed, and we did say that B.C. would follow generally accepted accounting principles.

We absolutely do, do that. We follow, in our context, the Canadian accounting standards that are prescribed by the Canadian Institute of Chartered Accountants. Those are the standards we follow.

Within the context of the Canadian Institute of Chartered Accountants and the GAAP, which is defined, they have an interesting governance structure. I think some of that is important for you to understand.

The accounting standards that are followed in Canada…. There is an oversight body, which is the accounting standards oversight board. They oversee all accounting standards within Canada.

Under that umbrella there are public sector standards. There are also private sector standards, and the private sector standards will also do some prescription for not-for-profit. They do have subsets under the oversight board that are responsible for due process in relation to setting the standards. So they do have their own governance structure, and the Institute of Chartered Accountants is very clear in demonstrating that that governance is independent of the institute itself.

They do have quite an extensive process that they go through when setting standards. I think one of the things you mentioned, Rob, is that it's forever changing. It's been a really interesting challenge with some of the ever-changing accounting standards, because we have had three years of following and being fully compliant with these standards. I think people might have had in their minds that we'd get to this goal. That would be great. We would be there.

The one thing we know is that it's been anything but "being there." Every year there are new standards emerging. There are changes that come in what's required for how you record and recognize the economic substance of the transactions. I think some of those changes were changes not anticipated by the people who originally thought that was a good place to go.

It does have implications for information that we report to the public, how we explain what we're reporting. Sometimes it can actually be quite confusing, even though it is consistent with the standards.

B.C. itself was the first and is still the only jurisdiction to actually enshrine within legislation that we will follow generally accepted accounting principles. A number of other provincial jurisdictions do follow them, but they haven't gone as far as to actually encode it in legislation, which is interesting.

They all are moving along, but there are some differences when you look across the different jurisdictions in Canada. For example, in B.C., because we fully comply with generally accepted accounting principles, we fully consolidate the SUCH sector — which is schools, universities, colleges and hospitals.

Other jurisdictions have taken various different positions in relation to that. I think Ontario has actually excluded universities in their context. While they are following GAAP, I believe that we're following it on a fuller basis, if you can account for that. That has other challenges.

Our adoption certainly does continue to be the most comprehensive. We are certainly very much involved with the standards-setters. Because of the implications, we very much take a leadership role within the community. We meet regularly with other comptrollers from across the country, and we do share what we are learning from our adoption of the standards — some of the challenges that we've had and some of the benefits that we've had.

Certainly, in the case of the credit rating agencies, because we have fully adopted the professional standards…. There is a credibility that comes with our financial statements and our financial information as a result of doing that.

In the context of credit rating agencies, they have gone as far as to actually state that that is one of the strengths when they are considering the information and assigning the rating to B.C. As far as an accountant can go, that's a very significant compliment to the work that we have done.

Also, in the context of the standards-setters and the approach that they take, they do engage the broad community. The community is not just the comptroller community. They involve the auditor community. They try to engage users of reports. So the credit rating agencies…. They would look to politicians and people who would be using the information when they are setting the standards.

They do invite people to put forward names to participate on the boards that they have when setting the standards. Also, they have task forces that they structure when they're looking at new and emerging standards. They try to get a broad perspective of individuals to participate in those processes so that they understand the context in which they are setting the standards.

We've definitely been very active. We've participated in a number of the task forces on various issues as the opportunity has arisen. We have done presentations to a number of different organizations, and we will continue to do that so that the standards will continue to evolve and be healthy.

The context of our entity. It is quite a complicated entity when it comes to reporting. I mentioned all of these different standards that they have under this umbrella of generally accepted accounting principles. In our context, we actually have organizations that follow all three of them.

When we're looking at accounting standards, we can't just be looking at public sector accounting standards. We also have to be looking to private sector and not-for-profit and keeping our eye on what's happening there and what changes we have to make to adapt.

In our entity all of our commercial Crowns — ones you'd be familiar with would be B.C. Hydro, ICBC — follow private sector generally accepted standards. A number of the other government organizations, such as universities, will follow some variation of not-for-profit. Then we have the core of government, which is the ministries and some of the Crowns, which may follow PSAB.

The interesting challenge for that, given you have all of those entities following different variations of accounting standards, is that when we do the consolidation to produce the public accounts we actually have to make adjustments to take all of those different

standards and put them all on the same basis so that we can produce a collective set of financial results that are on a common standard. It is an extensive amount of work. We do have over 200 various organizations that are consolidated within the public accounts.

It is not only a great deal of work for my office, but as you would know from the reports you receive from the Auditor General's office, it is a great deal of work for his office, which has an oversight in providing an opinion as to the quality of what has been reported. It is no small task, and there are ongoing issues that emerge from each of those.

There have been some interesting changes recently in relation to standards. In particular, in the public sector standards there have been quite a few recent changes. I'm not so sure that it was recent; it was actually a couple of years ago. But we've had a few standards recently that have really highlighted some of the challenges.

In particular, the conceptual framework for public sector accounting was exposed. When I say exposed…. Once these task forces meet, they come up with a proposed standard. Then they send it out as broadly as possible for public consultation, and they receive feedback. They will incorporate some of the feedback before they finalize the standard, and then it goes to the board for approval.

Most recently there have been a couple of items brought forward that have highlighted some challenges. In particular, there was an exposure draft on non-exchange transactions related to transfers — transfers from one level of government to another. There was another exposure draft in relation to financial instruments, which would see quite a different valuation of financial instruments within the government context than we have seen in the past.

When you look at some of the responses that have come from the broad community — and it is all levels of government that have responded — what became apparent within those two exposure drafts was really that what would have been a core principle previously in accounting seemed to have disappeared, and people were not aware it had disappeared — which is one of matching.

The focus within the conceptual framework, which is consistent with what we've seen in some of the private sector, is really moving away from some of the more traditional and is focusing on representation of current assets and liabilities and increases and decreases in those assets to get a net overall financial position.

What has happened there is that with the apparent removal…. It was removed at the time they approved the conceptual framework, but it didn't become apparent to the community. What happened is that there would be significant swings within revenue streams, potentially. I think that because we are in a time of significant surpluses in various levels of government, it becomes very apparent and very concerning.

What would happen is that where the federal government, for example, gives a transfer payment to a province — it may come at the end of a fiscal year, or it may be for a significant amount of revenues — the province would have to recognize those revenues immediately on receipt unless there were very significant conditions tied to some future obligation back to the federal government.

Previously those types of non-exchange transactions may have been deferred based on a future period of service delivery, so you would have a matching of the revenue in the same time that you would expense the program and have a smoothing effect within your income statement. What this would do is see significant times of surpluses followed by, potentially, significant times of deficits when you actually deliver the programs.

That is an exposure draft that's currently being exposed. There has been a lot of feedback from the community about whether the context of public sector is understood or not. While you said it's maybe non-partisan here, I think, it's not so non-partisan in the community. There are very strong viewpoints on some of these issues, and there are very interesting discussions that take place. It's a similar situation with financial instruments.

That tells you a little bit about the standard-setting process and some of the challenges. One of the other evolving issues that is certainly coming and will have significant implications initially for our Crown corporations is the convergence with international standards.

As I've said, right now we currently follow Canadian standards for generally accepted accounting principles. The CICA has announced that there will be convergence with international standards — at this point, on the private side. That obviously has implications for our commercial entities that follow that standard, and it has implications for us, because we consolidate those entities within the reporting entity.

At this point they have not said…. That convergence is to happen by 2011. That is a significant amount of work for those commercial Crowns. If our experience with adopting generally accepted accounting principles, in the first place, is any example, it is a lot of work. There will be a lot of challenges.

The initial perspective is that it will introduce swings in the numbers that people are used to seeing. I think that one of the hardest challenges when you are changing your accounting standards is that the numbers swing. You have to be able to explain how they're different and why they're different. These are very technical issues, and they are often very hard to put into terms that are easy for people to understand.

Sometimes, even when you do that, they may still not believe you because seeing these large swings in surpluses and deficits can…. I mean, your immediate response may be, "Well, you're not doing a good job of your fiscal management," when, in reality, all you are doing is adopting…. Nothing in substance has changed. The economic substance hasn't changed. Nothing has changed. You've just adopted a new accounting standard.

Our job is to anticipate those changes. I do have an individual in my shop who I've hired. He has experience with the international accounting standards. He

has been a member of their task force previously. He has worked with the World Bank.

He has come in, and his job is solely to look at — as the accounting standards are evolving and we're moving to international standards — what we see as the gaps and what we need to anticipate in the implementation of those standards so that we can be anticipating what type of communication and information to be giving to people.

At this point that has only been announced on the private sector side. It has implications for our organizations that follow not-for-profit because currently the not-for-profit is defined within the private sector side of the accounting standards in Canada.

There is some work being done right now, in the context of public sector, around where we will direct those organizations to look. Will they be directed to follow the private sector standard as well, or will they be redirected to follow the public sector standard? So there are some implications for those organizations as well.

Within the Canadian context, we also have accounting that is allowed for rate-regulated organizations. It is a very technical issue but one that you would be familiar with, as B.C. Hydro follows rate-regulated accounting.

Of critical importance there, I think, is that under rate-regulated accounting, that organization is able to, for example, go to the rate regulator and identify that they need to expend money for, let's say, a new plant. Then they are able to defer that expense over a period of time over which the rates would be increased and come in from the consumer. International standards do not provide for this type of accounting at all, so what would happen is that you would see significant swings up and down. If you went that directly to rates, you would see significant swings in your hydro rates from time to time.

There are some challenges that we need to work through before we just go wholeheartedly out and adopt all of this. That is why there is such a long time frame — 2011 for the private sector — but it really does have significant implications. We want to make sure that we really understand what those are and that we do it in a slow, incremental way that can be communicated.

In the context of public sector, while the public sector side of the accounting standards has not said that they would converge with international standards…. I wouldn't say it's inevitable, but by my observation it certainly is something we're expecting will happen. When we look at the international standards, they do not currently have a….

It is not as well defined. Under the international standards, the public sector standards are not as well defined as they currently are in Canada. The international standards-setters have only just now started to look at a project around a conceptual framework for public sector.

Good news, though. They recently located their research office for that in Toronto, and some of the individuals that are staffed in that function have come from the Canadian standards-setting organization. I do believe that there will be some greater convergence or some variation of the Canadian standards and the international standards.

We are very much aware of all that is going on in this community and are trying to make sure that we are very much at the forefront in participating so that we can anticipate what the impact will be for us but then, also, share what we have learned and what we see. But it is significant. It is not a small undertaking at all.

One of the interesting things when you're looking longer term down the road, even within the Canadian context, is we have different people that participate in the discussions around the standards. You have different provinces that have different perspectives, the local government may have a different perspective than the federal government, and you have all of these different interests that come to bear.

The generally accepted standard is based on trying to understand all of those multiple contexts and issues and the standard that would best represent the economic information to the users. Canada has been able to develop standards that fit within its context, and you can imagine that as you move to international standards, you're now trying to fit a standard that fits a much broader context. It's a world context.

That means some different things. You may not have the best standards; you may not have the same information. I think it just re-emphasizes our need to be very cautious as we move or adopt that and how we adopt those standards and what works and what doesn't work.

The United States is becoming very active with the international standards-setting community at this time. If we contrast the Canadian standard approach to the U.S., the U.S. is very much a rules-based approach and very prescriptive and would see significant changes if a lot of that was adopted into the international standards. I think one of the key parts there is that as you move out to that standard, your ability to influence and shape, in the context, is quite different.

I think those are certainly some of the accounting changes that we're seeing. We are certainly also seeing requests in regards to incorporating more performance-type information into our reporting.

We have seen the accounting standards group issue. It is not a standard but a recommended practice in relation to performance reporting. There is always more information, more disclosure that they would like to see.

I think the one caution, in addition to taking slow, incremental changes, is just really understanding what the implications are of all the additional reporting. What incremental value is additional reporting or information really going to provide users such as yourselves? Is it really going to be useful information, and how are you going to use it? Does it really provide value versus the cost?

Some of the things that we're seeing in relation to reporting could have significant cost implications. You

have to look at how many — the human resources and the capacity — you need to deliver on that. You also have to look at whether you have the systems and the infrastructure in place to provide that type of information and that it is going to be very valuable, meaningful and accurate — and all of that weighed in the context of the real incremental value that you get.

Sometimes it can become a very theoretical exercise. Being an accountant, I am partial to theory. But it also needs to be a little bit more pragmatic. Really contemplate: is it useful information? Are we going to get a cost benefit out of the additional information? We really do have to look at it that way.

Not to worry, though, because you have very excellent staff, very professional staff — both in my office, of course, and the Auditor General's office — who are all very aware of these issues and more than happy to bring them to your attention anytime.

R. Fleming (Chair): Thank you very much, Cheryl. Bruce Ralston wanted to ask you a question, and then Mary Polak.

I'll just remind members of our agenda time. I'll have to move onto the next item soon, so brief questions are welcome.

B. Ralston: Just in the context of evolving reporting on accounting standards, in January 2007 the Auditor General issued a report and spoke about, among other things, their accounting for P3s. One of the things that was suggested was that the contracts be divided into the construction cost and then the cost of the ongoing maintenance. As you're aware, those contracts stretch out sometimes as long as 35 years.

So far, I don't think we've discussed that report at this committee. I'm wondering where that fits in with contemporary standards and what advice you are incorporating into the public accounts as we go along.

C. Wenezenki-Yolland: On the P3s, if you actually read my public accounts and the letter that I write, you would see that we have actually taken a very strong position in relation to P3s. Because of the volume of public-private partnerships that we have done and the obvious intention that there will be more, we decided that we wanted clearer principles in relation to P3 accounting.

The accounting standards community was not providing those, so we have very much taken a leadership role on this particular issue. We have drafted a full paper on a proposed methodology. We have tested it against our existing P3s. We have shared that methodology with the Auditor General's office, and to date, they have been quite supportive. I'm sure they would be happy to provide you with their own opinion of the approach taken.

We have also done presentations with the Canadian Institute of Chartered Accountants on our methodology and shared it with that community. We have been invited to Ontario, who also has a great number of P3s and who is very interested in the principles and approach that we have taken because it provides for a very consistent principle approach to how you record, recognize and report on P3s, which would always provide transparent information and also support decision-making. It has been very well received.

The international accounting setting body is also interested in P3s. We'd actually been to a forum that had the U.K., Scotland, Australia and New Zealand in attendance. Sometimes we go to the international community because we find that for some of the issues that we're running into, there is greater experience there than there is here in Canada.

Based on that, they didn't necessarily have any better approaches to the recording in those countries. So we have shared the paper that we have prepared with the international accounting-setting community, which is actually in the process of doing a project on the issue. To date it has been very well received.

That proposed methodology will be taken forward shortly to basically formulate into key principles that ministries would apply all of the time. I mean, that's what we're doing. We're just actively dealing with the issue and not waiting for somebody to tell us to do something about it.

Our objective is to provide good information to people in government who are making decisions and to people who are using our financial information outside of government.

R. Fleming (Chair): Thank you. That might be an interesting paper to circulate to committee members who might be interested in it.

B. Ralston: Just to give a more practical example. I think I've been in correspondence with your office and as of yet have received no response.

The Fraser Health Authority said that they were referring to you the issue of how the costing of the maintenance contract for non-clinical services at Abbotsford hospital would be dealt with in the public accounts. By what method, or how, do you propose that it will be accounted for in the public accounts? Is there a response? Have you reached a decision at this point?

C. Wenezenki-Yolland: What we were doing in that particular issue is testing this methodology that we had been developing. It will be applied in the case of that particular contract. They were waiting for confirmation on that methodology. We have now shared that with the Ministry of Health, which has run their projects through the approach. They will have that shortly. It certainly was a principle that was under development.

B. Ralston: Is that then available to myself as a member of the Legislature? I mean, I appreciate that it's

being shared with various ministries internally. But do you intend to release that to members of the Legislature?

C. Wenezenki-Yolland: We will be releasing it as soon as we have concluded the exercise and have the final reporting information.

C. Wenezenki-Yolland: It will definitely be this year. It will be included in the public accounts.

C. Wenezenki-Yolland: Yes, this fiscal year. It'll be included in the public accounts as of March 31.

M. Polak: A quick one with respect to your comments related to the work you have to do when you're consolidating all the information that's coming in from the different organizations which have to report through us or are reflected in our reports. I thought we at one point made it a requirement that they report in a GAAP-compliant manner. Am I mistaken in that, or is there still other work that has to be done, even if they do report in that way?

C. Wenezenki-Yolland: They are reporting in a GAAP-compliant manner. I think the key there is that GAAP has three different methods or approaches under which they can report. We had not prescribed to them what method they would use. The choice of method had been left to their various boards.

M. Polak: Yeah, that does seem to jump out as something that…. The first natural question is: gosh, should we not all get on the same path?

C. Wenezenki-Yolland: The handbook does provide them…. GAAP provides guidance as to selecting the accounting approach that your organization would follow, depending on the characteristics. They have looked to that in determining which method they would follow.

J. McIntyre (Deputy Chair): I just had a quick question. I understood when you were describing the movement to dealing with federal transfers. Then you also explained that the same thing, these swings, might occur when we move to some of the international standards. I can see the immediate downside, to be honest, of all that, because the swings are hard to explain and hard to deal with.

Not being an accountant, what is the rationale for accounting for those moneys — for instance, in the federal transfers — at the point of receipt rather than when you know something is going to roll out over a three-year program and not match them to expenses?

C. Wenezenki-Yolland: The rationale being that they reflect these, and they believe that these are non-exchange transactions. So there is an exchange between one level of government — and it could be an outside entity, too — and the other.

In doing that, the criterion they have defined within the existing standard that has been exposed basically says that if you don't have a repayment obligation to the other level of government, you have no basis from which to recognize an ongoing obligation or liability. That is an interesting criterion.

J. McIntyre (Deputy Chair): You mean we could take the money and not spend it the way we're asked?

C. Wenezenki-Yolland: Well, it's a very specific criterion to try to identify when you have an ongoing obligation or you don't. One of the things it doesn't acknowledge is that there may be an obligation to a third party who is expecting to have the service delivered at a future date.

This is part of the ongoing contextual discussions that we're having with the standards-setting community about what is at the core of public service that is different than the private sector. There are some fundamental differences, but that is at the core of why you would see some of these swings.

In the discussions they believed that it is true to the conceptual framework that was developed for public sector accounting. However, my observation — and there is lots of tension in the community about this — is that it's an extreme interpretation of the conceptual framework. They've actually had to go to the point of redefining what a liability is within the standard in order to do that.

That feedback is being provided. They haven't yet said that will be the standard, because there is a lot of controversy and a lot of different feedback that they're considering in what direction they're going to go with that. But it is significant.

R. Fleming (Chair): I want to thank the comptroller general for presenting the topics this morning. Obviously, there are some areas that we're going to revisit repeatedly in the area of transfers and changing international standards and compliance within the service plans and the reports that we discuss at this committee.

Auditor General, you indicated that you wish to speak, and I'll let you in a second. For committee members, for our next item we're going to entertain a motion to move in camera for the remainder of our agenda. If the Auditor General is brief, we'll almost be on schedule. With that, I'll ask Mr. Doyle to comment.

J. Doyle: I just wanted to observe that this is a little bit like déjà vu to me. Australia has already been through the adoption of the international financial reporting standards. Naturally, everything that happened in Australia is not transferable to Canada, nor should it be.

Canada has got a reputation of having moved ahead of the international community and in some respects is in a place which is quite different from where the international financial reporting standards are. It has to make a decision on whether it transfers over or whether it stays in that place and continues to operate where it wants to.

The approach that was adopted in most of the states and territories in Australia — and there isn't a strong public sector standards board in the same way there is in Canada — was that harmonization existed, which means that all financial reporting is similar. Government tended to narrow the range of policies that was available to government entities — the policy decisions — so that they were in compliance with the international financial reporting standards, but they were limited in how they applied them.

Then within each jurisdiction, there was also the issue of what is called Treasurer's Instructions, which further narrowed down and filled the gaps that were identified that could exist. For example, transfers between government entities within the province were dealt with by something called a Treasurer's Instruction, and they didn't necessarily deal with it the same way that the international financial reporting standards dealt with it.

Now, the issue around government grants and what have you is a hot topic at the moment in the universities in Western Australia, where all four are insisting that they're not part of the government entity, and they're not consolidated in Western Australia. They all want to defer receipt of this income to match it against the actual expenditure. The rest of the country, with the exception of Melbourne University and one other whose name I can't remember, have the alternative view, which is, in fact, mainly brought about by Auditors General insisting that it is a non-reciprocal transfer.

These kinds of issues will exist and will continue to exist for quite some time. It is not about accounting. This is about trying to stabilize the framework of reporting and then users, if you like, learning or retraining themselves to actually read these reports correctly.

When I read the financial reports that are currently available, I do a translation back into the international financial reporting standards. That's what I did, when I first arrived, with that book that Cheryl was waving — this one that I read. I just want to say that there are two of us on the planet that actually read this, and we're both here.

When I read through that, I converted it back into my way of reading reports and following things, and I understood what was being done. But I don't want you to go away with the thought that this is an easy or a simple process. This is a painful exercise for preparers, for users and for auditors, and the longer it takes, the more debilitating it will be.

I'm not sure how quick is quick enough. I do know that it felt like the retreat from Moscow when I was doing it in Western Australia. That was where we did the big bang approach, and we brought them all in at the same time.

I suppose the issue that I would have would be: we need to narrow down the time frames for implementation, but we also need to go through some very, very major re-education or re-understanding types of processes to make sure that the preparers prepare correctly, the users can interpret correctly and the auditors actually can audit correctly, because there are significant shifts and changes.

This is not a technical change. It's a fundamental change in the way that reporting takes place. As a consequence, this book will probably be about three times as thick, with all the notes associated with financial reporting.

Other than that, I just want to complain that Cheryl took all my notes and presented them.

I want to thank the Auditor General for that presentation and the members who have participated in the meeting today.

I know that we're now a little over time, so I would ask for a motion to adjourn. It's moved by Mr. Rustad.

Before we vote on that, I will just reiterate that the item on the audit of treaty negotiations in B.C. and the consideration of recommendations will be put to our next meeting of the committee. I have had a suggestion today from the Deputy Chair — which members will hear about in the near future, and this is subject to scheduling — that January 29 is likely to be the next date of this committee.

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REPORT OF PROCEEDINGS (Hansard)

SELECT STANDING COMMITTEE ON PUBLIC ACCOUNTS

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON
PUBLIC ACCOUNTS