2011 Legislative Session: Fourth Session, 39th Parliament

SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

MINUTES AND HANSARD

MINUTES SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

Tuesday, November 15, 2011

8:00 a.m.

Douglas Fir Committee Room

Parliament Buildings, Victoria, B.C.

Present: Rob Howard, MLA (Chair); Doug Donaldson, MLA (Deputy Chair); Mable Elmore, MLA; Dave S. Hayer, MLA; Pat Pimm, MLA; Bruce Ralston, MLA; Bill Routley, MLA; Dr. Moira Stilwell, MLA; Jane Thornthwaite, MLA

Unavoidably Absent: Bill Bennett, MLA

Others Present: Josie Schofield, Manager, Committee Research Services

1. The Chair called the Committee to order at 8:02 a.m.

2. Pursuant to its terms of reference, the Committee began its review of the three-year rolling service plans, annual reports and budget estimates of the statutory officers.

The following witnesses appeared before the Committee and answered questions:

3. The Committee recessed from 8:41 a.m. to 9:00 a.m.

4. The Committee adjourned to the call of the Chair at 9:56 a.m.

The following electronic version is for informational purposes only.

The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

select standing committee on
Finance and Government Services

Tuesday, November 15, 2011

Issue No. 63

ISSN 1499-4178

[ Page 1759 ]

TUESDAY, NOVEMBER 15, 2011

The committee met at 8:02 a.m.

[R. Howard in the chair.]

R. Howard (Chair): Good morning, Members. Members will know that we're now on part 2 of our terms of reference, "to consider and make recommendations on the annual reports, rolling three-year service plans and budgets" of the statutory officers.

Our schedule, as exists currently, is this morning, Tuesday, November 15, we will hear from the Merit Commissioner and the Auditor General. Thursday, November 17, again meeting from eight to ten, we have Elections B.C. and the Information and Privacy Commissioner. Monday, November 21, meeting from four to six, we have the Ombudsperson and the Police Complaint Commissioner. Then Wednesday, November 23, meeting from eight to noon, we have the Representative for Children and Youth and the Conflict-of-Interest Commissioner as well as some time set aside for deliberations of all eight reports.

With that, I will welcome, at this very spry hour of eight o'clock on a Tuesday morning, the Merit Commissioner, Ms. Fiona Spencer.

Welcome. I'll just pass the microphone over to you, and you can make a presentation.

For the members' knowledge, I'll keep a speakers list, and we can get into questions after the presentation.

Office of the Merit Commissioner

F. Spencer: Okay. Thank you, Mr. Chair.

Good morning. I'm pleased to be here today to present to you the service plan and budget submission for the Office of the Merit Commissioner. I'm accompanied today by Shelley Forrester, who is the executive director of corporate services, who is responsible for providing administrative services to our office and the offices of three other independent officers, so you're going to see her three more times during your deliberations. Among other things, Shelley provides support for our financial responsibilities and acts as our chief financial officer.

As you know, my mandate is to uphold fair hiring in the B.C. public service by overseeing appointments to and within the public service to ensure that they are merit-based. The Public Service Act outlines my three major responsibilities: to monitor the application of merit by conducting random audits of appointments, to provide a review of the application of merit as the final step in a staffing review process and to report annually to the Legislative Assembly on the application of merit.

To fulfil these responsibilities, I engage a small staff of three professionals and one support staff. I supplement this workforce by contracting with five auditors on an as- and when-required basis to assist with our annual audit activity. You may recall that I am a part-time appointee.

[0805]

What I'd like to do this morning is review briefly the results of our work since reporting to you at this time last year, go over our service plan and priorities for the years ahead and review what we consider to be our budget requirements to address these priorities and to continue to have a positive impact on merit-based hiring in the public service.

It has been a very busy year for our small office. While we were able to recruit an additional professional last year, our capacity was once again reduced when the office's longtime manager and a key resource retired in the early summer. We're back up to full strength now, but our workload challenges are expected to continue.

First, with respect to progress since last reporting to the committee, I'd like to report briefly on the 2010 merit performance audit, special studies that we conducted of auxiliary appointments and lateral transfers, and completed staffing reviews. Of course, full information is contained in my annual report, and I'd be happy to elaborate on any of that or to answer any questions at the end of the presentation.

Our 2010 merit performance audit was not a full-year audit but an audit of appointments only made during the last four months of the year. This partial-year audit was conducted to allow the public service staffing system time to adjust to the changes to hiring practices put in place by the B.C. Public Service Agency. A total of 183 appointments were audited.

B.C. Stats ensured that our overall sample size was sufficiently large to enable us to generalize the results of our audit to the larger population of appointments made during this time frame, with a confidence interval of 95 percent — that is, that we can expect results to deviate from our findings in only 5 percent of the cases.

We modified our audit sampling somewhat by oversampling administrative support appointments. We did this as the administrative support category is one of the largest groups of employees in the public service, basically working in every ministry. They are a group where responses to the public service work environment survey have indicated a continuing level of dissatisfaction with the fair and merit-based hiring within their organizations.

They are one of the first groups that are subject to what are called pool-hiring practices. The pool-hiring processes were also of particular interest to us, as the use of this staffing method is still relatively new and is being used predominantly for groups such as the administrative support group, where perceptions of fairness are already an issue.

Just to clarify what pool hiring is, it's a process by which interested employees are prequalified for consideration for certain positions, are then placed in a prequali-
[ Page 1760 ]
fied pool of candidates and then referred to managers for final assessment as positions become available. Pool hiring is generally used for less specialized positions, such as administrative support positions where large numbers of appointments are made in any given time period, and is intended to increase the efficiency of the staffing process.

My annual report for 2010-11 includes the results of the 2010 merit performance audit, which demonstrated that changes to hiring introduced by the BCPSA have yet to address the deficiencies identified in previous merit performance audits.

It was disappointing to observe poor performance in areas where it was expected that recent changes would result in improvements. For example, we found increased occurrences of issues related to the appointment process, documentation and calculation of years of service. The BCPSA has acknowledged these issues and continues to work towards process improvement. Nevertheless, the trend is of concern.

Results of our oversampling of administrative support appointments showed no significant difference between that category and the general population with respect to merit-based hiring in 2010. We're continuing to oversample this group in our 2011 audit, however, given the continuing and increased use of pools and the perceived risk to merit-based hiring this represents.

Also included in my annual report are the results of a special audit of auxiliary appointments that was conducted. Generally, auxiliary appointments are intended for work that is not of a continuous nature. This audit was conducted to determine if this appointment type was being used for its intended purpose and to determine the level of risk it might present to merit-based hiring.

We examined all appointments coded as active auxiliary appointments in the corporate human resource information and payroll system, also known as CHIPS, as of September 2010. Many appointments were clearly legitimate short-term appointments, so we were able to filter the over 3,000 active appointments down to a population of interest of about 200.

[0810]

Through examination of these 200 appointments, we made several observations, including that half did not have an end date identified, that over 40 percent have been extended more than once, some up to 16 times, and all reflected an employee who worked in one specific position and continued to do so without layoff for periods ranging from more than one year to more than 25 years.

These findings would indicate a potential misuse of this appointment type and therefore a risk to merit-based hiring in the use of auxiliary employees to perform longer-term work. The risk arises because auxiliary appointments do not require a merit-based process under the act and, therefore, using this appointment type inappropriately would seem to be a way of circumventing the act.

These findings and observations were also provided to the BCPSA, who have recently indicated that they also see this as an issue. They are monitoring usage and will bring the matter forward for discussion with deputies.

We are keeping auxiliary hiring on our longer-term agenda and will re-examine it after next fiscal year.

Last year we also carried out a study of lateral transfers. Lateral transfers are exempt from the requirement of a merit-based appointment process. However, we decided to examine data related to lateral transfers, as our experience to date has been that many appointments coded in the information system as promotion are, in fact, lateral transfers. We wanted to assure ourselves that the obverse wasn't true — that is, that appointments coded as lateral transfers were, in fact, promotions, and therefore should have resulted from a merit-based process.

Our study determined that less than 1 percent of lateral transfers may have been improperly identified. Therefore, there was limited, if any, risk to hiring practice. We consider that no further action is required on this matter at this time.

In addition to conducting random audits and studies related to merit-based hiring, my mandate is to provide a level of review of appointment decisions as the final step in the staffing review process. In fiscal 2009-10 such requests for review from employees were down over previous years. However, in 2010-11 we saw a return to a more typical state.

Eleven requests for review were received based on a variety of grounds, four of which were outside my jurisdiction. In one case I found in favour of the employee due to an inconsistency in the short-listing process and directed the deputy minister to reconsider the appointment. In the remaining six cases the original appointment decision was upheld.

Now I'd just like to move to our service plan and priorities for the next fiscal year, 2012-13, and beyond. First, it's important that we continue our merit performance audits to fulfil my obligations and mandate under the act, but as important, to monitor the impact the changing hiring practices are having on merit-based hiring.

A full audit was considered necessary for 2011 appointments to establish the new baseline for merit-based hiring under the new system. We've already started this audit and have completed review of approximately 100 appointments, with another 75 in process, encompassing appointments made up to and including the end of August. Our audit sample is 5.4 percent overall, balancing between maintaining our high confidence level and keeping workload at a reasonable level to allow staff time to address other issues and the increasing number of complex requests for staffing reviews.
[ Page 1761 ]

Alternate approaches to a full audit for 2012 appointments are being considered, such as randomly selecting appointments from specific appointment types or organizations or, rather than auditing the entire appointment process, auditing just specific aspects which may have been problematic in the past — for example, just a notification process or just looking at the process for calculating years of continuous service.

In the coming fiscal year we will also conduct another study of temporary appointments originally intended to be less than seven months in duration but which have continued beyond that time frame. This will be a follow-on to a similar study which we undertook in 2009, in which we found that there were potentially large numbers of employees who had been temporarily promoted without the benefit of a merit-based process, whose appointments had become long-term. It was shown that these employees were significantly advantaged with respect to permanent appointments.

We also plan a special audit of the pool appointment process, which will include auditing the front end of this process. In 2010 we were only able to examine that part of the appointment process from the point of referral of candidates to managers for consideration. The other elements of the process, including short-listing, testing and selection for referral, were not examined and so will be a part of our special audit in this coming fiscal year.

[0815]

The audit is considered important not only due to the planned increased use of this method of staffing, but because of the risk it is considered to pose to merit-based hiring. Concerns expressed in my annual report relate to the practice of referring candidates based on factors other than merit, including candidates in competitive processes from outside the pool, thus enabling possible favouritism and bias, and offering extremely limited access to recourse with respect to appointments made through these processes.

In general, I have a concern about fair hiring taking a back seat to efficiency in the hiring process. I believe that vigilance is necessary if we are to ensure merit is not compromised in the interest of such efficiency or simplicity.

There are also two special studies that we have put on our longer-term workplan. We've noted a trend toward appointments being made as a result of competitions that are very narrowly restricted to a ministry or, at times, to a particular branch or division within a ministry. We'd like to study the impact of this trend and how it relates to the requirement for open and fair competitions.

The other special study we have on our workplan relates to the recourse and redress provisions currently in place and whether they provide employees with easy access to timely and accurate information about their performance in competitive processes. Rules related to recourse are currently quite restrictive, and with such restrictions, the openness and transparency of the hiring activity can be called into question.

Input from employees and their representatives indicate that this particular aspect of hiring significantly influences perceptions of the fairness of the process. Again, we consider this as an aspect of hiring in the B.C. public service, which could benefit from further study and consideration.

Finally, to date, this fiscal year we have already received ten requests for staffing review, some of which are quite complex and require significant staff involvement. According to my legislative mandate and our own internal performance standards, we'll continue to investigate requests for review thoroughly and in a timely manner.

In establishing our workplan and these priorities, we've consulted our audit advisory committee members, who have provided us with valuable input and advice in this regard.

Now my budget requirements. You'll note from my budget submission in 2010-11 that the Office of the Merit Commissioner managed within 8 percent of our budget allocation. Underspending in salaries resulted from a lag in hiring and an underconsumption of our budgeted leave liability. Also, amortization costs were less than had been anticipated. The subletting of previous office space as well as some proposed reduction in professional service costs enables me to propose to you an operating budget for the Office of the Merit Commissioner for fiscal 2012-13 which is approximately 4 percent less than the current budget allocation.

With the expiry of the lease at our former location, building occupancy costs will once again be reduced in fiscal 2013-14, enabling me to propose a further slight reduction in operating funds to $1.018 million. I've put forward this budget proposal being mindful of the need to manage prudently and responsibly from a limited public purse. I consider this allocation will enable my office to fulfil my mandate and carry out our service plan in the coming years.

Thank you, and I'd be happy to respond to any questions you might have.

R. Howard (Chair): Thank you very much for that. We do have a few questions.

D. Hayer: Thank you very much for your presentation and information. I have, actually, a couple of questions. My constituents and people who work here often ask me some questions, so you are the right person to find out these answers from.

What does "merit-based" really mean? When people tell me who are working here…. They said that in British Columbia, basically, governments just show…. One in four British Columbians are from an ethnic and multicultural background. They say that when you take a look at this Legislative Assembly and you look at the staff, it
[ Page 1762 ]
doesn't really reflect that. I said, "But we have merit-based hiring," and they said: "Dave, are you telling me your government or the province thinks that there are not qualified people, on a merit basis, of those one in 25, to reflect at least maybe 10 or 12 percent — maybe 15 percent — of the population from that background?"

I said I didn't know. Maybe you are the right person to ask the questions of so that maybe I can answer appropriately. Or is it that we have no way of looking at the people from visible minorities who are, from a merit point of view, qualified and not getting jobs? Is there some other reason? That's the question I've been asked many times, over the last ten years.

[0820]

Hopefully, maybe you can help me. Or do we need to make some changes somewhere to make it more merit-based so it takes the merit of everybody, regardless of looking at the colour or background or ancestry?

F. Spencer: Right. I think there are probably two elements to your question, and I can certainly talk to the one that addresses merit. I think your bigger issue or concern may relate to diversity and representativeness in the public service, and that's not really a question that I could speak to.

D. Hayer: They're looking at it from the merit point of view. They say if they're equally qualified, five people, then having that reflected in there…. You would think they would be based on merit.

F. Spencer: Right. Well, merit is commonly accepted to mean that appointments are made on the basis of an assessment of competency and ability to do the job and are non-partisan. In the act there are a number of factors that are set out that we must consider when we're trying to determine merit. They include things like education, skills, knowledge, experience, past work performance and years of continuous service.

When I'm looking at a merit-based process, what I do, of course, is audit. I do random audits of appointments. We select appointments that are made during any particular period and look through those files to make sure that, first of all, those are the factors that have been considered in the selection process; that the process is, in fact, transparent and fair — and it relates to the job, that the requirements that are specified in any competitive process are reasonable; and that the decisions that are made around the selection process are reasonable.

I'm looking to see whether or not there's fairness in the process and, obviously, looking for any kind of indication of bias or prejudice. If we were to find any of that, we would determine that that particular appointment was made without merit, so merit had not been applied in that appointment process.

I'm just trying to think, but I could say with confidence that we have not found any evidence of that in any of the appointments that we've audited in at least the last two or three years. I can't speak of prior to that because I wouldn't have examined the details, but it's not an issue that comes up in our audit process.

D. Hayer: What I'll do is…. For some of the people who have provided me information, actually, it looked like fairly serious allegations. I'll ask them to send it to you, because maybe you can take a look at it to see. But they thought they were qualified with their experience, and they said merit wasn't followed. Maybe you can take a look at it.

F. Spencer: Are they employees of the B.C. public service?

D. Hayer: Yes, they are.

F. Spencer: If I can't address it, I'll certainly make sure it goes to someone who can.

D. Donaldson (Deputy Chair): Thanks very much for your budget presentation. Congratulations on it — it's very clear — and for coming in at 4 percent less than last year — it's something to be strived for — and for getting the work done at the same time, which is a concern of mine.

My question is about upcoming reviews. Something that has come up in the Legislature this session was a bill to create a new position — natural resource officer — that covers four or five different acts. My question to you: is it something that you've seen before that you would have concerns about — amalgamating a number of positions under one heading, and problems that that might create with using a merit-based system when so many different job classifications end up under one heading? Have you seen that before? Would you be monitoring that, be interested in doing a review on how that impacts merit-based hiring guidelines?

F. Spencer: Thank you for the question. I haven't seen that before in the B.C. public service. I think you're talking about taking employees who are in certain classifications now and them all becoming one occupational group. Is that what it is?

D. Donaldson (Deputy Chair): Yes, in one title.

F. Spencer: I see, okay. Well, my past experience would say that when that sort of policy is put in place, at the same time there's usually a policy put down as to how that's going to happen and what the impact is going to be on the employees. It's not normally through a competitive process that that reclassification or trans-
[ Page 1763 ]
formation occurs. If it's not a competitive process and there aren't appointments being made to those specific positions, then it's not something that would fall within my mandate.

I can only look at appointments that are made in the B.C. public service. As I say, generally, there's some kind of special provision that's made for a transition for employees from current occupational groups into those other occupational groups.

[0825]

Now, if they're dissatisfied with what's proposed, there are redress and recourse provisions in place in the public service that they have available to them, and there may be special ones that are put in place for this instance. Generally, there's a grievance process that's available where they can question the determination of their new classification and their positioning in any sort of salary range. But I wouldn't expect it would be something that in the transition phase would come within my mandate.

B. Routley: You raised the issue of auxiliary appointments and people holding those positions for 25 years or even more than one year. I'm assuming that auxiliary has been used to circumvent the act — the very fact that you came and raised that issue. What recourse is available to you to stop that kind of abuse? Is there any, or do you simply have to raise it as a public issue?

F. Spencer: My powers of recourse are extremely limited. All I can do in terms of something like this where we have concerns around auxiliary appointments is raise it with the B.C. Public Service Agency, bring to their attention where we are finding possible abuse.

One of the problems we have is that in this particular study, for instance, we found there were a certain number that would seem to be problematic. But without going back and looking at all the files on those appointments, we don't know whether or not the initial appointment of the auxiliary employee was as a result of a merit-based process.

So the numbers could be lower than what we've identified through this particular audit, and it's up to the B.C. Public Service Agency to do some investigation into those and get a better handle on the extent of the issue or the problem.

As I mentioned, I spoke to the head of the B.C. Public Service Agency recently about this. She's also concerned, especially since we're seeing in 2011 a significant increase in the number of auxiliary employees being hired into the B.C. public service.

She would like to not only take a look at what we've uncovered in terms of potential problems but make sure that the policies in place with respect to new hires of auxiliary employees are such that the act is not circumvented, and she's going to be raising this with deputy ministers at an upcoming meeting.

B. Routley: You also talked about ten requests for review. Do those come from applicants that are concerned about the fairness of the appointment, or is there some other process in place that I'm not aware of? If there are ten, that's really quite startling to me. That's a large number of complaints, regardless. Obviously, there's perception that there's some kind of favouritism or potential discrimination or other kind of act.

I might add to my friend's point about discrimination. I went through an interesting case where we discovered that 12 well-meaning people who were part of a hiring team all came from a certain ethnic origin, and that seemed to have led inadvertently to hiring only people of a certain ethnic origin.

F. Spencer: Of the same.

B. Routley: So I think there has to be caution in that. I, too, am concerned with what I heard about not the proper percentage of the population being represented in the public service. That's also a troubling feature that I think should be looked at.

F. Spencer: With respect to your question about staffing reviews, there is a three-step process that employees can access with respect to a staffing review. The first is just to request feedback from the panel members with respect to their performance. It's only unsuccessful employee applicants who have access to this particular process. If they're dissatisfied with what they hear at that level, they can go to their deputy minister for what's called an internal inquiry. The deputy minister conducts that inquiry and provides a decision. If the employee is still dissatisfied with the results of that, they can come to me.

[0830]

So yes, I think it was last year we had ten of those. A number were outside my jurisdiction. That is that three of them were outside the time frame, and the time frame is one of the concerns I have about employees' access to recourse. The time frame is extremely short. Employees have five calendar days from the day that they're advised of the deputy minister's decision to be able to come to me and ask for a review at my level.

It's calendar days including weekends and holidays. I have a concern that that doesn't give employees sufficient time to take in the information and decide what they're going to do about it, because it's a significant step to come to the Merit Commissioner to ask for a review of an appointment decision. But that is the time frame that's in place.

Three of those employees were out of time, basically, when they came to me. For another there was no appointment made, so it wasn't something with which they could request my review. The others were ones that we did have to do a detailed investigation on.
[ Page 1764 ]

It's difficult to say if the number is high. There's no gauge. All I can use to gauge is previous occurrences, and as I said, we were a little bit concerned and wondering why people weren't coming forward with their concerns about the staffing process in previous years, because the number was quite low. But it's gone back to a more typical level of ten or 11.

When you consider the number of appointments that are made in the B.C. public service every year, I'm not sure if that is a high number or it's a low number. I'm never quite sure whether or not high numbers are indicative of a healthy organization where people feel free to come and bring their concerns forward or if it's indicative of a level of discontent. All we can do is look at those requests as closely as we can and make a good decision.

P. Pimm: I just wanted to follow up on that a little bit. I missed how many appointments you're actually talking about in the course of a year and how this ten would translate into that percentage somehow.

F. Spencer: Well, let me just see if I can give you the number. We audit a certain number of appointments. We do a random sampling of appointments, and so when we're looking at audits, we're looking at a percentage of the total appointments that are made in any year. I can just tell you that — I don't have the exact number for you — in 2010 in our audit sample we looked at 180 appointments, which was about 10 percent. So we're probably looking at about 1,000 appointments in a year within the B.C. public service that are within my mandate.

Of course, you know, there are appointments like lateral transfers that occur, which are not ones that I can take a look at because they don't require any kind of a merit-based process. So the number vis-à-vis total appointments made within any particular year, ten appointments, is — what would that be? — less than….

P. Pimm: You said 180 samples. That was about 10 percent. So you're saying 1,800 total appointments — something like that? And ten that have surfaced. Okay.

F. Spencer: Yes.

B. Ralston: Some years ago there was a process of what was called conversion of auxiliary employees. After you attained 1,827 hours, then I think there was an arbitration decision by Vince Ready that you were then "converted" into a full-time employee. Is that process still in place, and how does it match with a merit-based hiring process?

F. Spencer: That's very good that you remember that exact number, because that's exactly it. Yes, the process is still in place. After an auxiliary works 1,827 hours in approximately a 15-month period, they can be converted to a full-time employee. They have to be employed in work that's of a continuous nature, so either full-time or part-time work. They are converted, and there are a certain number of conversions that occur every year. In fact, when we were looking in our study, of the 200 that we identified in the population of interest, by the time we got to be looking at that group, 16 had already been converted to full-time employment.

[0835]

Because there's no competitive process, those conversions are not part of my jurisdiction, so they don't come into my audit sample. That's why I'm concerned and interested in looking at auxiliary appointments, because these appointments more often than not initially occur without the benefit of a merit-based process. So if people are basically remaining as auxiliary employees but doing the work of a permanent full-time employee, that's a concern because there seems to be a circumvention of the act. Or if they're being converted in large numbers to permanent employees, again, it's almost a back door into permanent employment.

I can only look at that front-end part to make sure that auxiliary employees are being used appropriately. The conversion process is not one that I'm engaged with or have the ability to look at.

Sorry. I just found that number. There were 1,048 permanent appointments and temporary appointments exceeding seven months last year, so around a thousand is what I'm saying.

D. Hayer: My question is a little more clarification. You said it is five or seven days to put a complaint in after they are not happy with this, and it was a merit-based….

F. Spencer: Yeah. They have a five-day window after they receive the results of the deputy minister's inquiry. I'm not sure what the time frame is — I'm sorry — between when they're provided with results of the appointment, to go to the deputy. But once they've gone to the deputy minster, he or she conducts an internal inquiry and provides them with the results of that. If they're still not satisfied, when they receive…. There's usually some sort of way of indicating when they've actually received that information. There are five days from that point in time when they can then come to me and ask for my review of the appointment decision.

D. Hayer: So that includes Saturdays and Sundays or holidays?

F. Spencer: It's calendar days. It includes Saturdays, Sundays and holidays, yes.

D. Hayer: Okay. What would you say would be a reasonable amount of time notice required, generally? Is there some other time period in other provinces or other busi-
[ Page 1765 ]
nesses or organizations? Or are they usually with a similar time before they can have a final appeal, or not?

F. Spencer: There are different time frames. Looking at other jurisdictions would certainly be part of the study that I would be proposing for us to undertake with respect to recourse and redress and to see what might be reasonable and what we think would be fairer to employees. I know that in the federal jurisdiction it's 14 days. Yeah, it's 14 calendar days.

M. Elmore: Thank you for the presentation. You mentioned the study that you're proposing to undertake on recourse and redress. When is that planned to initiate, and are there other areas that you would consider taking a look at?

F. Spencer: Well, we're hoping to scope that out — what that study is going to be. We're hoping to scope that out this fiscal year. We may not be able to undertake that until the next fiscal year. As I say, we have a small staff, and the increasing number of staffing reviews we're receiving is taking away our time to be able to engage in some of these other studies. So we're hoping to do that in the coming fiscal year.

The only other study that we have on our longer-term agenda relates to what we're looking at and seeing as a trend toward restrictive areas of competition. Whereas you might expect opportunities for employees to be open across the B.C. public service, ministries are sometimes restricting their competitive processes to their ministry and sometimes to a branch or a division. You'll appreciate that what that results in is a very limited number of candidates who can compete and, in some cases, not an unexpected result in terms of who the successful candidate is. So that's the other study we're looking at.

M. Elmore: In terms of the comments raised with regards to representation of visible minorities in the public service…. Certainly, it's not directly under your purview. But do you have thoughts in terms of the issue of diversity and representation in the public service, in terms of the avenues to pursue those issues?

[0840]

F. Spencer: I'm sorry. I'm not sure I'm in a position to make a comment on that. I really haven't looked at representation in the public service. I know it's something that the B.C. Public Service Agency is looking at now. In fact, I did have a general conversation about it with the head of the B.C. Public Service just to see what they were looking at in terms of representation. I'm sorry, but it would be unfair for me to comment on that.

M. Elmore: Fair enough. Thank you.

R. Howard (Chair): Excellent. I think we're out of questions, Fiona, I will thank you and Shelley very much for coming forward. I think I speak for the whole committee when we say that we appreciate your prudent and responsible approach to this process as well as to the good work you do. So thank you.

F. Spencer: Thank you for your time.

R. Howard (Chair): Committee members, we'll have a brief recess until the Auditor General arrives.

The committee recessed from 8:41 a.m. to 9 a.m.

[R. Howard in the chair.]

R. Howard (Chair): We're joined now by the Auditor General, John Doyle. John has with him Katrina Hall, manager of finance and administration; Malcolm Gaston, the assistant Auditor General; and Marc Lefebvre, executive director, standards and quality assurance.

Welcome, Mr. Doyle.

Office of the Auditor General

J. Doyle: Good morning, everyone. I'll probably take about ten to 15 minutes to make a brief presentation and then open up the rest of the time to any questions that you may have regarding the budget for the office.

My office is pursuing a long-term strategy. The strategy was first outlined to this committee I think about four years ago, where I explained that when I'd arrived in British Columbia and taken over the role of Auditor General, I was faced with a workforce that was due to retire within five years.

I think I had about 60 or 70 percent of the workforce that was due to retire within about five years, including all of the senior staff. And whilst that was not an unusual occurrence for the public sector, it created a number of serious problems for me as I went forward — mainly about maintaining the capacity of the office to actually deliver on the mandate that it's been afforded by the Auditor General Act.

What I did in regard to that was that I outlined my approach to moving forward, and the approach was simply one where I would be recruiting youngsters, recent graduates from university, and training them and developing them in the way that the office had done in the past to become chartered accountants and, thus, auditors.

I'm pleased to say that that process now, four years later, has resulted in over 30 percent of the staff under the age of 30. We have had the expected number of retirements. In fact, most, if not all, of the senior people who are eligible have retired. We do have a few left but relatively few in comparison.
[ Page 1766 ]

We have this rather large cohort. It's described in one of the graphics in the annual report — just how it's changed since 2008. As I say, that was a deliberate process that I explained and that was sanctioned by this committee some years ago.

An unfortunate by-product of that has been that we now have…. Our long-term succession planning has developed, and we now have 15 youngsters who have been born to our staff, which was not an outcome that I expected, although maybe I should have. It's not something I've faced for a long time. We've had nearly 9 or 10 percent of our staff on maternity or paternity leave over the past period of time, which has caused its own little problems, including the entire decimation, for a temporary period, of one whole team in our performance audit area.

Good news, but a few difficulties for me. I know you're not sympathetic. However, we do have some very nice collages now about the number of youngsters. Our long-term succession planning is well in hand, and there's more to come as we go forward.

I'm sure you're aware of the work of the office. Perhaps what you're not aware of are some of the big challenges that we face as we go forward. One of the biggest is a temporary challenge that's going to be in place — but it could have long-term repercussions — and that is the new accounting and auditing standards.

[0905]

The auditing standards have changed. They're now in place. We have prepared the office well to comply with all of the international auditing standards. The impact of that is to shift and change the way that we conduct our financial and performance audit work. The entire profession is doing this. As I'm sure you'll note in my act, I am required to follow the auditing standards in all the audit work that I do. So I must also comply.

The actual work of the office in regard to financial audit is also impacted by the change in the accounting standards, which is also then being accelerated by decisions — appropriate decisions, I might add — that have been made by government in regard to the adoption of PSAB, the public sector accounting standards, and the discontinuance of the use of certain parts of those standards, which are called not-for-profit accounting areas.

That's all in play at the moment. Over the next two years almost every entity in the government reporting entity will actually change its basis of accounting, except the ministries themselves. The other great area, the Crowns, will be adopting IFRS, which is international financial reporting standards, which are a fundamental change to the way that they report — a huge effort on their part. That will also be occurring within the next two years.

My staff need to get on top of all this technical change and also need to be prepared to conduct the audits that they're required to conduct. The audits that we actually conduct are detailed in our financial statement audit coverage plan. Those are our financial audits. As you can see, it's somewhat similar to previous years, although the way that we actually conduct the audits is continuing to evolve and change as we go forward. The reason for that, as I mentioned before, is the statutory requirement to comply with auditing standards.

I've mentioned before, and I'll mention again, that I am a frugal manager. If I don't need to spend anything, then I hand it back. The track record to date has been that on occasions I have been handed a budget and I don't just go and spend it. If I can't spend it, or if I can't spend it in a way that would make sense and add value to the services that we're providing, then that money is not consumed. It stays within the…. It gets handed back, basically, to treasury.

I still adhere to that policy and approach, but I am now moving towards the stage where I think that my budget out-turn, the actual spend that it's going to incur…. Like for this particular financial year, it's going to be very close to the budget. So the years where I'm handing back fairly large sums of money I think may well have passed.

I've now reached, over a period of four years, the stage where the funds that I am allocated I'm actually consuming, and I need to consume them. The result of that is that I need very tight controls within the office — hence, Katrina, who's our finance manager, who apparently doesn't have a sense of humour when it comes to budget overspends or anything else like that.

We do have a couple of other pressures, beside the maternity leaves that have taken place. I'm due to get some staff back next year, but my understanding is that it's a few more that are likely to go and have leave in the near future. For those of you that don't know, that's usually about a year away from the office. It's not a free year. We still have to pay some aspect of their salary to top them up to the moneys that they would earn if they were actually working.

We have some increased costs in respect to legal work. Also, because of the performance audit work that we're doing, we are bringing in more subject-matter experts to come in and provide us with precise information in regard to some of our topics. That's been one of the questions that I'm frequently asked at the Public Accounts Committee. "How do you know anything about this? Aren't you an accountant?"

[0910]

After I've confessed that I am, I then explain that we actually do bring people in that could look at these particular matters and give us expert advice. We do that on a frequent basis, and we're doing it more often as we go forward.

Currently we occupy space in Bastion Square, and we have been there for 30 years. It's an interesting building. It has its challenges, and I'd like to explain a couple
[ Page 1767 ]
of them to you. It backs onto an alleyway which is quite dangerous for a number of reasons. The first is that people keep falling over because of the surface in the alleyway. Very recently we've had at least two people that have actually fallen. There's no ice on the ground. This is just…. It's dangerous. We've written to the city council to get them to do some work in the back alley to try and improve it.

Secondly, we have some unsavoury characters that I'm almost on speaking terms with as I go in and out — well, usually, it's when I go out in the evening — who are hovering in the area. But it means that many members of staff feel it's a very unsecure route to go home and have difficulties, particularly as the nights get darker, to go out that particular route.

It is not seismically safe. We had a review done some years ago about that. It was determined that in fact it needed a major upgrade, which has not taken place at this time.

We have little friends in the office. We're running out of names for them. They're about this big. There's lots of them. We just can't get rid of them.

During the summer we had one situation where we had to evacuate the office because of the seagulls and what was coming in through the air vents, and so on. I could go on for half an hour.

This is a building that's served us well, but it's reached its use-by day in regard to the infrastructure that's in the building, and it needs a major upgrade for it to remain suitable for occupation as an office.

We have a long-term lease, though. And, if you like, the location was very, very good for us, and we were quite confident that we could work our way through these kinds of issues, although we did predict that there would be a significant increase in cost in the near future as the rental escalates and some of the investment we have to do in regard to infrastructure took place.

We're actually in two offices. We have another office on Pandora Street, which is not signed, where we have some overflow from the main office.

We were approached by the managers of a building just down the road from us, within two minutes walking distance. The suggestion was that, in fact, if we would consider moving there, which is the same class of building as we've got at the moment, the landlord would be prepared to take our current lease at no cost to us. Therefore, we would save money in regard to changing of lease and moving out and ending a lease commitment — no cost to us — and they would actually have a tenant for the new building, which, as I say, is literally a stone's throw away from where we're currently based.

The actual space that's available is slightly more than we have at the moment, which would mean we'd be less squeezy than we currently are. If any members of the committee want to come and have a look at the current space, you're most welcome to do so, and we can show you exactly what it looks like at the current time.

The cost differential per square foot is quite modest and probably less than we would be charged anyway, with the upgrades in rent that are going to occur in the next 18 months or so.

[0915]

The actual space that we use at the moment, or we can use, for offices is in the order of 23,000 square feet, and this building — and it's in floors that we could occupy the space — is around 25,000. So we're talking about a modest shift and change in occupation.

We would avoid the renovations in our current building, and we would avoid any major costs in changing buildings, which was something we did consider a few years ago. But the prices that we were being offered at that stage — and I think this committee had some experience with those prices — as other officers moved to different accommodation were, quite frankly, just outrageous as far as we were concerned, whereas these are quite modest in comparison to those figures, and in fact, well below. I think we're about 60 percent of the cost of some space that's available on the market at the moment within Victoria.

If we do move out, then the current building could be upgraded and be made available to somebody else, but basically, at the moment, it can't be upgraded, and we're basically causing huge disturbance when we do the work that we do just to make it suitable for purpose. I'm happy to answer any questions on that later on.

Other challenges that we've got are that our IT infrastructure needs to shift and change as we go forward, and the requirement for us to maintain appropriate and confidential records continues as we continue with our audits. We found that we can keep pace with this kind of change. It just takes an investment up front to be able to do that, and we've managed to do that within our existing envelope of funds, in the main. I see no reason to change but just to demonstrate that we are always seeking mechanisms by which we can reduce the total amount that we actually pay out for our work.

Our training, however, is not negotiable. There's no point in sending an auditor out to conduct an audit if they're not competent. The only way you can make competent an auditor in this world, with the standards changing as they are at the moment, is to offer the kind of in-house training that we currently do.

There are two forms of training that are currently in place. One is the training for new staff that come in who are training to be chartered accountants, which is that young cohort — which is the mechanism by which we recruit most of our new staff. What happens to them is that they used to get to qualification and then leave the organization, and we might not see them again for some extended period. These days they are staying, or a good proportion of them are staying, and we're able to use
[ Page 1768 ]
them and their experience in the conduct of our financial audits.

The other group of training we do is training for all our staff, which is on the standards which are ever-growing and changing as we speak.

We're also looking at the mechanisms by which we do that training. Just standing in front of someone talking is not necessarily a great training mechanism. You need a combination of different ways of actually making sure that you can apply the knowledge that you have just picked up. As an ex-professor — oh, I suppose I still am a professor — it was quite clear to me that just standing there is only part of the story. You've actually got to make sure that people have grasped and understand what is happening.

I'm pleased to say that we are leaders in making sure that this adult learning model actually operates and works well, and we're able to leverage off the Institute of Chartered Accountants and also leverage off other training suppliers to make sure that we actually lift the competency and the capability of our schools.

We still do have a number of staff who are eligible for retirement. For example, in my senior executive there are at least two that have indicated they are eligible for retirement. So I'm still expecting some turnover to occur as I go forward.

[0920]

What happens when one of these staff leaves is that a massive chunk of corporate knowledge walks out the door with them. One of the strategies that we have deployed is: how do we get that corporate knowledge spread to more junior members of staff so that it's not such a tearing of a hole when we go forward?

The value-for-money component within the presentation that we've given you, the estimate of resources, talks about something that I've raised each and every year for the last four years, and that is that we're very efficient in comparison to Canadian Auditors General right across the country. If you use their mechanisms — and these aren't projections for what they should have; these are actually what they have got — you will find that there is a gap between the services that we provide and the work that we do and the quantum and the quality of what we do.

There is a gap between how much we are funded and how much we would be funded if we were somewhere else in Canada. That gap is anywhere between $4 million and $6 million — not my figures. These are figures that are actually produced centrally and made available, and I am not asking for equality with those other jurisdictions. I'm quite satisfied that I can still deliver a range of services that are good and appropriate with the resources that I have. If, however, you force upon me a huge sum of money, then I'm sure I could use it wisely. But I don't believe that it's ever going to occur.

So I do believe that even though my audit is one of the largest, in expanse and the way we work, across Canada — some others are quite restrictive in the work that they actually do — by all the measures that we've got, we demonstrate good value. The estimate that I've put forward is what I think we need for next year and the two years afterwards, and it's explained in the document.

I'm looking for something in the order of $16.58 million. Last year I only asked for, as a flow-on, $15.9 million. The reason for the difference is the one-time funding to move to the new building; basically, a rent increase that was going to occur anyway — it's just occurring a few months sooner; and to do some work on our performance audit methodologies.

Just so that you know, this province leads the country in its performance audit methodologies. We are rolling out a program at the moment which is entrenched in the way that we manage staff and we develop competencies and criteria for performance methodology. We're going to be making a presentation in February next year, and it is my expectation that the presentation will go well and that we're going to get some extra support and resources from across Canada, although how big or small that will be I'm not sure yet.

Hence, at the moment it's pitched at what it's reasonable that we could do for a B.C.-based methodology. But I do expect to get some additional resources, whether they be in-kind or in another form. Also, we're looking at upgrading some of our computer systems as we go forward.

I think I'll stop there, Chair. I'm happy to field any questions. I just wanted to mention one thing. I've reached a stage in life where I actually can't see any of you with my glasses off and can't read my notes with my glasses on. So if I'm continually doing this, it's because I'm trying to switch between the two.

R. Howard (Chair): Okay. Thank you, John.

D. Donaldson (Deputy Chair): Thanks very much for the presentation. I appreciate the cost breakdowns at the end of the document around value for money and compared to other jurisdictions. Congratulations on that, and please pass that on to the staff.

[0925]

I have a couple of budget-related questions and a work-related question. I'll save the work-related question to the end, after other people have a chance, just to make sure we have enough time.

On the budget-related questions and the costs associated with the move. Can you just fill me in a bit more on: would you anticipate, with the proposed rent increase at your current location and the tenant upgrades, that would be the equivalent of what you are going to be paying in the new location? I think you alluded to that. I just want to make sure that was the case and give you a chance to elaborate on that.
[ Page 1769 ]

Does the 2012-13 line item budget under occupancy cost include the cost of the move? I anticipate it'll be costing some money to move if this proposal is approved.

Finally, on the capital spending and the three-year computer replacement strategy. Is this the final year of that strategy?

J. Doyle: If you go to page 7 of the estimates, the cost of the new building plays out in two places on the forecast.

The occupancy costs do reflect the increase in rates. The cost of the move is shown down in office expenses and amortization, so you see it coming in and then disappearing. That's the answer to that particular question.

The IT, the capital item — it's a rolling process. We're a mobile workforce. We actually don't pick up a desktop and take it with us. We don't have computers in place. We use laptops and technology for all our working papers and the collection of information. We're visiting to conduct audits, which again is non-negotiable, and on that there are usually questions about travel. We have to travel.

What it is, is part of that technology upgrade is the replacement process for those laptops. They usually last about three years. Then we clean them off and get the next laptop.

Some servers and IT infrastructure need to be upgraded on a regular basis, particularly the security networks that we need to put into place and to make sure operate well and the backup of our current system. So it's all around that kind of shift and change.

Also, the acquisition of software that we may need as we go forward. At the moment we're having some difficulties with some of our records management software as it currently sits. We're looking at actually buying that software.

The other question was the shift. We didn't do a direct comparison between the two, but if I could just explain. The rate from where we are at the moment — the rental — is going to go up. It's not going to go up today; it's going to go up in about 18 months or so. When it goes up, it's going to go up…. We're going to have to pay for that somehow, even if we don't move.

We are going to have to do work on our building to maintain the deterioration of the infrastructure. And no, the landlord doesn't do it all for us. We have to do it ourselves. It's that kind of lease: lower rent, more responsibility on the tenant to do work.

By moving over to the new building, we attempt to squeeze out of our existing budgets what we’re avoiding and what we will need to ask for in the future in the way of a budget. We're actually bringing it forward a little bit earlier and, if you like, creating a stable accommodation going out for ten years.

[0930]

We've been offered, on quite advantageous terms, leased accommodation there. The cost of the move obviously wouldn't be incurred if we weren't moving. That's a fairly large cost — to actually pick everything up, go over and move, even though it's a short distance. That cost is a one-off which won't be repeated.

My suspicion would be that if we did not move now, we'd have to move at sometime in the future and find space, and we may not have such an advantageous offer made to us in a similar locality with grade B accommodation, which is not great, but it's okay, and certainly a lot less than I've seen around some areas in Victoria. The rates are still quite low because we're a good tenant.

So my guess is that I could probably conjure up the numbers to make it look like it was the same. But the reality is that I'm not quite sure exactly how it all plays out, other than it's probably a good deal. If we have to pass it up, then we would have to move anyway at sometime in the future, and we'll have this conversation again in a couple of years' time or a year's time.

R. Howard (Chair): Thanks for that, John. Just before I move on to some other questioners, for context, if I could, on page 7 you're talking about an appropriation of $15.7 million and $15.9 million. I'm just trying to understand what the actual…. On the table below you have a budget of $15.7 million for 2011-12.

J. Doyle: Yes, that's the current year.

R. Howard (Chair): The actual increase you're looking for, you've described as, I think, just over $600,000. When I compare the $16.58 million to your budget, I get a little over $800,000.

J. Doyle: Yes, thank you, Chair. I can clarify that. When we submitted our budget last year, we actually showed that there was a flow-through effect of some of our expenses last year, which would say that if nothing changed at all, the budget would be in the order of $15.958 million — something like that. So that's the difference that I'm referring to when I say it's going from one figure to another.

The $15.752 million is the current year's budget that we're working to at the moment. What we have is some current-year effects and some full-year effects. Some expenses that we have incurred, we incurred partway through the year, but they will continue going into the future. So it's cheaper this year, but it won't be cheaper next year. That's the reason why we built the budget in that particular way.

R. Howard (Chair): Gotcha. Thanks for that.

J. Thornthwaite: Thanks for your presentation. Just a quick question. What determines which school boards
[ Page 1770 ]
you go for, either a direct or oversight category, and what would that be — the criteria?

My other question is about Community Living — the same type of question. You said that it was planned for a low involvement, but you bumped it up to one other category above that, and you've given a rationale. I'm just wondering why that is and if there are other things going on, obviously, with organizations — if that would increase your rationale for bumping up the involvement.

J. Doyle: Okay. Thank you for the question.

School districts. There are sixty-odd, and my original thought was that they were a fairly homogenous group, but I don't think they are. I think every one is different. As a consequence, we've been reviewing and revising just how many school districts we conduct audits in over the last four years or so.

[0935]

The plan that you've got in front of you, which is called the financial statement audit coverage plan, goes for three years. But we actually have plans that go out for a good deal further than that. We have a number of school districts that are going to cycle off from the current plan, and new districts are going to come on board.

What we typically do is we do a risk assessment of the school districts and determine how many we need to do in order to ensure that there is no material error in the government reporting entity. So what does material error mean? It means that there are no big mistakes above, in this particular case, $300 million or so, $400 million. It's very rare for a school district to get it that wrong. In fact, it's not very rare; I've never seen a school district get it that wrong.

So we've got to put school districts into the perspective of the $55 billion operation, which is the government reporting entity, and say: "What is it that we should be looking at?" Quite frankly, school districts, which are predominantly salaries with an element of pay in regard to financial auditing, don't rank very high in the way of risk, as opposed to maybe some other entities where there could be some quite significant cash flows where the risk could be higher.

At the moment we've got the biggest number ever of school districts that we're reviewing. We're conducting some direct audits. We're conducting some overview audits. And what's not mentioned in the plan is that we also look in very great detail at something called school district 99, which is the amalgamation of all the school districts right across the system.

We look at it from that perspective, and then we also go down and do random standard reviews. Now, this is purely for financial audit purposes. This is to say whether or not the financial statements give a true and fair view according to the standards.

We also conduct other work in school districts, which is not mentioned in the coverage plan specifically, although it is referred to, and that is governance work and other work that we may undertake. For example, we've done work in Langley and New Westminster. We've done work in regard to special education, which we'll be reporting out in December in three districts, and so on.

So just to look at the coverage plan doesn't really give you the whole picture of the school district work that we're undertaking in any particular given year. We have ongoing discussions with the ministry in regard to their risk factors to determine what would be a good place to go and do work in.

Financial audit. I think we've probably got the balance about right. I don't think there's a great deal of merit in going in, although we are finding some consistent problems, particularly to do with IT systems within school districts, which I think we're going to deal with as a separate audit topic.

Governance seems to be quite good. We did some work on governance a little while back, and I think most boards are actually responding to that governance work. Performance audit work will be expanding as we go forward. We're looking at different aspects of the financials in order to conduct that work.

The question asked of me at the Public Accounts Committee was when I am going to look at Delta, for example. I don't know if that was the question. The answer is: the year after this plan. It's the next one along — that we were going to do an overview of Delta and, possibly, some other school districts in different parts of the province. Eventually we'll go through many of them, but not all of them, over time.

When it comes to Community Living, we're only looking at the financial audit here, which is: "Do the financials show a true and fair view?" One of the risk factors we have is that if an organization has difficulties or pressures when it comes to budget, then audit risks may be elevated, and therefore, we tend to want to make sure that the audit risks are actually properly managed so that the financial reporting is appropriate.

[0940]

That's one of the reasons why we decided to continue with our involvement in that particular area.

R. Howard (Chair): Mindful of time, I'll just ask us to be as brief as we can with questions and answers so we can get through it. Thank you.

B. Ralston: Thanks for the presentation. I also note in your report the program for accelerated leadership and the co-op students that you've had at your office. I think those are both very positive developments in terms of building morale and creating a long-term succession plan.

My question is just about the lease. I think you've set out the proposed move fairly clearly. Have you done
[ Page 1771 ]
any comparison just to give some benchmarks with…? I know the Chief Electoral Officer has recently moved to the old B.C. Ferries building up on 1100 Fort, and there are four independent officers who moved into new premises at 947 Fort about a year and a half ago.

Have you done any comparison of the rates? I suspect that the proposed rate that you're entertaining would be lower than both of those, but that probably is something that might be of interest to the committee.

J. Doyle: Thank you. A very brief answer. Those buildings — I think the rate is about $56 per square foot, whereas we're talking about $31. So we're about 60 percent of those costs. That is in no way an observation or a criticism on my part. It just happens that we have got a very advantageous offer that has been placed before us. Otherwise, I wouldn't have raised it in the way that I have.

D. Hayer: I've got a couple of questions. One is: when your staff is changing and some of the senior staff is retiring…? Normally in an organization, senior staff who work a long time, over time the salaries go to probably the highest grid. When you are sometimes hiring younger staff, do they start at a lower grid, or are they almost at the same level as the ones who are retiring?

J. Doyle: No. What we've been doing is…. Senior staff have been retiring. A director would be retiring, and we won't have anyone to promote to that position yet because we have to grow them. So what we've got is a different makeup. I think it's in the annual report. On one of the pages there, there is a diagram which shows the remarkable shift that we've had.

You've got to be careful, though, about costs. To train a chartered accountant actually costs a bit of money, and at that level we pay the same as any other chartered firms in regard to their remuneration and the support that we provide. As we go further up, the comparison with industry is such that we're actually paying our staff probably anywhere between 60 and 70 percent — this is more senior people — of what they could get elsewhere. So they've actually got to want to be with us as we go forward.

What we've got to do is make sure that the work that they do…. And we do have people that are committed to the office because they want to make a difference in the public service. They're not joining just for a career, but they actually want to make a difference. As we go forward, we're hoping to hold on to more and more of those staff because of the quality of the experience within the office and the level of training and development and the expanse of work that needs to be done.

What we've got is a similar number of people, but what we don't do anymore, which may go to your question, is we don't recruit people to bring in, to fill in the gaps, during our busy times anymore. We've actually got enough junior staff to be able to do the work that we have to do.

The people that we used to bring in used to be paid on an hourly rate. I think we've got one that we use for a particular area, but all the others are no longer recruited by us. At one stage it used to be 20 or more people that we would bring in.

We're seeing a shift away from the contractors into salaried staff, and those salaried staff invariably, if they do not stay within the office, from recollection, move to somewhere else within the public service. So we are actually a net exporter of chartered accountants to the rest of the public service, and if you go round the public service, you'll find that there are lot of alumni from the office that are actually in senior positions.

[0945]

D. Hayer: Thank you. Just one more question. I think you have explained it to a certain extent. If an ordinary person was to look at your budget 2010-2011, the occupancy cost is $686,000 on page 7. If we would look at 2014-2015, it is $1.31 million. If you take a look, that's about a 50 percent increase. The year 2011-12 is $736,000. So if you compare 2011-12 to 2014-15, that's about a 40 percent increase.

Is that because of the quality of the building and the size of the building you're going to, because an ordinary person will say: "When governments are going through these difficult times, how can you be having some costs going up by 40 or 50 percent in a short period of time, when there's a recession around?" It's probably better to put it on the record so that if someone reads it, they can see exactly why it is going up — I know you started talking about it in the beginning — in a very short time period — if you can say it, then.

J. Doyle: The current cost is a great deal. I don't mean it's big; I mean it's a good deal. It's been remarkable, over years, that we've been able to keep the rate down as low as it is. Our actual cost per square foot is at the low end at the moment. Even if we shifted to this new building, it's still at the low end of costs for office space in this city.

I've just explained to another member that the rate that could have been is up in the above $50 — $56 — and we're talking about $31. That didn't come out…. The idea came to us, and then we negotiated and pushed it down even further.

I think one of the — and this is an accountant talking — problems with accounting is that it shows the actual figure. These figures are correct, but what it doesn't show is the opportunity cost or the cost benefit built into them. In fact, that figure of $736,000 is probably lower than it could be if we hadn't been able to keep the pressure on to actually keep the rates down as low as we have in the past.
[ Page 1772 ]

There is going to be a correction, and that correction is going to occur whether we move or not. It's going to go up, and it's still a good deal.

D. Hayer: I appreciate that. My background was as an accountant. I was starting to be a CA. So I understand. But it's just that the ordinary person, when they look at it…. The whole economy is going sideways. Somebody will ask the question, so I appreciate you explained it. I believe they can understand how the Auditor General…. When his costs go up 40 to 50 percent in a short period of time, it is because before it was a really good deal, which was probably not realistic. It will go up over the long period of time.

R. Howard (Chair): In the interest of time, I know that I've got four or five questions that I'd like to read on the record. I know there are other members on the list that will probably also have a few questions. We'll see if we can get those read onto the record as well. Then I will ask Mr. Doyle if he could respond, I guess, to the Clerk with that information, and we'll move forward from there.

If anybody has any additional questions, they can forward them to the Clerk as well, and she will endeavour to get some answers for us.

Again, I'm just mindful of the time. We're going to have to be out of here in four or five minutes.

I just had a question, John, on the business model. When you talk about contracting out resources — and I know you've had to use some of that approach because of your challenging staff levels — I just wonder if you've looked at a model that starts to move that way, where you have senior staff members that would oversee contracted-out services, and wonder if that model would offer any efficiencies.

The second question would just be on how you're utilizing and accounting for gap funds. By "gap funds," I mean budgeted positions as reduced on an actual cull from that position by either maternity leaves or promotions or other leaves.

[0950]

My third, I think, was partly answered by your response to MLA Hayer. The lift that you're seeking here has been characterized in the report as due largely to one-time costs. But then I observed in the out-years of '13-14 and '14-15 it doesn't drop off, your total request.

There was a fourth question I was wondering about. You've acknowledged on page 5, in the middle, that the office is undertaking significant project review to enhance performance and audit guidance and you're looking at exploring options to share the cost with other legislative offices. I'm quite interested in that. I know that you've indicated that we're leading the charge here and we're on the leading edge. I just want to reflect on the question that in these really challenging budgetary times, is there any win for us in sliding back off the leading edge into the middle of the pack — either that or pull up the rest of the pack to us by some cost share?

I guess my fifth question is just in terms of the transition training and the extra work that you're having to undertake as a result of all the different rules that are coming in. Once we get through that kind of a rat in the python, if that's the correct kind of description of what's happening, will there be some efficiencies in the out-years as a result of having at some point landed in the new era, landed on the new accounting rules, so we no longer have to deal with one foot kind of in each world?

I'll leave you with those questions, if I could, because I know that MLA Donaldson and MLA Pimm also have some questions.

Gentlemen, I'll ask if you could read them onto the record, and if we have another minute or two left, we'll get John to start his response. If not, we'll do it in writing.

D. Donaldson (Deputy Chair): My question has to do to with funding pressures. On page 8 you write "Public-private partnerships and alternative service delivery initiatives increase the complexity of government's management of capital investment and overall operations." My question would be: are these topics — public-private partnerships and alternative service delivery models that the government has initiated…? Do you anticipate that increasing the cost of your audits in the future?

P. Pimm: I just wanted to follow up on the building questions, more so the differential between the amount of square footage in the new building compared to the old building. I think we talked about seismic upgrades. Is the new building complete with seismic upgrades? The old building was not. That was my understanding. I just want that clarified and the differential in actual cost per square footage from the old building lease to the new building lease.

J. Doyle: I can deal with that one very quickly. Yes, it's seismically upgraded, and it's under $3.

P3s and ASDs. No, it won't increase the cost of our audits. What it will mean, though, is that we would have to turn attention to those areas. I'm currently looking at ways that we can utilize our financial audit teams to actually conduct performance audit work. What I'm finding is squeezing efficiencies from within the office to reallocate the talent that we currently have, and their flexibility, to make sure that we can conduct work with lots of numbers in it, which is what P3s and ASDs actually are.

R. Howard (Chair): Excellent. Thanks, John. I'll have to stop you there.

I saw another hand go up. We'll take one last question for the record. Then, I think, so that we can wind down in an orderly fashion before the bells ring, we'll call an end to it.
[ Page 1773 ]

B. Routley: Thank you for the work that you do. The concern about governments, because they're elected in four-year blocks of time, adding costs to future governments….

[0955]

Has the Auditor General had any look at the piling on of all this additional contractual obligation that we now see heading towards $80 billion? I'm concerned about the long-term cost to future governments and that we may be….

If the work was actually done by government as part of a debt — they actually borrowed the money and did the work themselves — there would be long-term benefits to the province of British Columbia by doing it ourselves versus paying huge sums of money for people who are really profiting at the expense of the province.

I don't know if that's a political issue or an auditing issue, but I am extremely concerned as an individual about passing on to future generations — not only of politicians but certainly our children and grandchildren — debt obligations where current governments are running around cutting ribbons but those contractual commitments are out there 35 or 40 years. I don't know if you're studying that.

R. Howard (Chair): Thank you, MLA. I think we've got the question.

And thank you very much to John and all your staff for being with us this morning. We look forward to the responses of the questions we've laid out for you.

J. Doyle: Thank you, Chair.

R. Howard (Chair): Thank you, Members. We'll now adjourn.

The committee adjourned at 9:56 a.m.

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