The committee met at 7:03 p.m.

[M. Starchuk in the chair.]

Deliberations

M. Starchuk (Chair): Good evening, everyone. My name is Mike Starchuk. I’m the MLA for Surrey-Cloverdale and the Chair of the Select Standing Committee on Finance and Government Services, a committee of the Legislative Assembly that includes MLAs from the government and opposition parties.

I’d like to acknowledge that we’re meeting today on the legislative precinct here in Victoria, which is located on the territory of the lək̓ʷəŋən-speaking peoples, now known as the Songhees and Esquimalt Nations.

As part of our committee’s oversight on statutory offi­cers, we’re reviewing the budget requests, service plans and annual reports of these offices. We’re going to begin this meeting today with a preliminary discussion about the budget requests.

I’ll seek a motion to go in camera.

Moved and seconded.

Motion approved.

The committee continued in camera from 7:04 p.m. to 7:22 p.m.

[M. Starchuk in the chair.]

M. Starchuk (Chair): Now that we’re back, we’ll take a two-minute recess.

The committee recessed from 7:22 p.m. to 7:25 p.m.

[M. Starchuk in the chair.]

M. Starchuk (Chair): All right, we will call the meeting back to order.

Before we get started with the Office of the Auditor General, we’re going to do a round of introductions. We will start with the Deputy Chair.

T. Shypitka (Deputy Chair): Thank you, Chair.

My name is Tom Shypitka. I’m the MLA for Kootenay East and the Deputy Chair.

C. Oakes: Hi. Good evening. I’m MLA Coralee Oakes, and I represent Cariboo North.

B. Stewart: Hi. I’m Ben Stewart. I represent Kelowna West.

H. Yao: Henry Yao, MLA for Richmond South Centre.

N. Simons: Nicholas Simons, MLA for Powell River–​Sunshine Coast.

R. Leonard: Ronna-Rae Leonard, MLA for Courtenay-Comox.

G. Chow: George Chow, Vancouver-Fraserview.

S. Chant: Susie Chant, North Vancouver–Seymour.

M. Starchuk (Chair): And Mike Starchuk, Surrey-Cloverdale.

I’d like to welcome the staff of the Office of the Auditor General to the meeting and turn it over to the Auditor General, Michael Pickup for your presentation.

Michael, just a reminder that there’s 25 minutes on the board.

It’s all yours.

Review of Statutory Officers

OFFICE OF THE AUDITOR GENERAL

M. Pickup: Thank you so much, and nice to see you all again.

I will begin by acknowledging with respect that we at the Office of the Auditor General of British Columbia conduct our work on Coast Salish territories. I would like to take a moment to say thank you to other Indigenous people, both past and present, for allowing me to work and play on these traditional Coast Salish territories of the lək̓ʷəŋən-speaking people, now known as Victoria.

As a status Indian member myself of the Miawpukek First Nation way out on the Atlantic coast on the other side of the country, I say thank you to Indigenous people here for all that you are sharing with me while I live on the Pacific coast.

I will leave introductions of our team until I turn it over to Marie. Today we will be providing an overview of the updates since the spring meeting with the committee, including highlights for the upcoming year. This will include highlights from our annual report and service plan. As well, I’ll walk you through the budget proposal and provide details on any business cases.

You’ve been provided our annual report, and I’ll note a few key items in there, but encourage you, of course, to take a closer look at ’22-23, which was a busy and, I might say, productive year. We did 32 reports. That’s how many reports we have published since I first stepped into the office at the end of July 2020 — something that I’m extremely proud of, as this is a testament to all our teams, not just the folks who are with me here tonight.

We also have a great overall staffing summary on page 15 of the document. If you just want a high-level look at numbers with our people, that’s a great spot to go to.

Digging in a little deeper on page 18, we saw some great improvements in our workplace environment survey scores, particularly in our overall engagement score. It went up to 72 percent from 66 percent 3 years ago. That’s an increase of 20 percent. Does that make me smile? Absolutely. Our overall satisfaction is up, close to 30 percent over the past three years. Again, that makes me happy, and all of us here tonight are grateful for that. This reflects the efforts we have focused on with all of our team members.

One other thing I’d like to flag in this report is highlighted on page 19. We saw our staff turnover rate fall in ’22-23 and ended the year with fewer vacancies and fewer temporary positions than a year ago, going down from 21 percent to about 17 percent, and that rate includes things like retirements. As a result, our workforce numbers are more stable than the previous year, and that’s a good thing as well. This shows me that we’re doing a lot of things right, and that we are on the right track.

For the service plan, let’s turn our attention to the ’24-25 service plan. I’ll go through in more detail with our budget request later, as these all tie together. Remembering our four strategies for ’24-25 are to continue to improve our audits, create a comprehensive training strategy, implement a compensation framework and modernize our IT infrastructure.

[7:30 p.m.]

If you look through the overview of our objectives on pages 8 through 13, you’ll get a good idea of some of the work that has been done and a breadcrumb or two that pushes to our strategies for the year that are listed later in the document.

I would like to highlight two things, as noted in our objectives. On page 8, we iterated that in our ’23-24 service plan, we committed to a corporate policy refresh. That is well underway, with some delays, of course, with competing pressures.

Maybe one last thing to highlight is on page 18, our new audit follow-up process, something I’m particularly proud of. We took careful consideration after very direct feedback from the Select Standing Committee on Public Accounts. It really did inform us and helped us create this new process that we now have in place.

Every year we will now produce a public report that is tabled in the B.C. Legislature that follows up on recommendations we’ve made in the past to governments. I think that is just great. We released our first annual follow-up report this July, and we will look to release the next one even earlier, possibly as early as May 2024. That’s an advancement of over two months from this year.

For our budget submission, let’s turn our attention to the estimate of resources for ’24-25. We have three key requests, as well as a request regarding current operations. Those requests are related to a compensation framework, IT modernization and a supplemental ask regarding our leading workplace strategy project, or what we call LWS.

I’ll give a brief summary of our key requests, and then I’ll focus on the analysis of our budget proposal, found on page 5, where vacancies in our request are significant.

Let me first start with our compensation framework. When we came to this committee in October 2022, we noted that we would do a review of positions under government’s MCCF, or management classification compensation framework, as well as a review of market competition regarding compensation for these roles. We have completed that, as promised. We’ve now developed a structured approach to ensure fair and competitive salaries for our staff that fall within the MCCF.

For a bit of background, our office is mostly made up of staff in this MCCF band, and 81 percent, in fact, of our people are in this MCCF. The remaining 19 percent of people are what we call schedule A positions.

These positions already have a compensation plan, with steps for salary progression within each of the classifications. Compensation for those schedule A positions follows the B.C. General Employees Union classification and compensation framework. They are referred to as schedule A because they are not in the union, but these roles are in alignment with the union classification and compensation plan.

As we know, we are a unique office that clearly competes directly with private sector industry for MCCF staff. Of that, there is no doubt. We compete with major audit firms, and the labour market is tight. Therefore, starting salaries for new employees can, in some cases, be almost as much as for our experienced staff. That’s the world and market that we live in. Why? It’s because our experienced staff aren’t getting raises based on their knowledge and experience.

Our mandate creates the need for a highly qualified and experienced workforce. In addition to being competitive when recruiting staff, of course, we want to invest in and retain people. We like to recruit the people we already have by keeping them. It takes time for staff to learn our audit methodology and our systems. This learning doesn’t take months; that takes years. We need to have an approach that rewards knowledge and experience in order to retain our strong, skilled workforce.

Our new compensation framework approach retains government’s MCCF pay bands and classifications, while giving a way for staff to progress based on experience and their performance. With our research, we’ve benchmarked our positions to comparable positions in both the public and private sectors as well. This will enable us to determine where to best start new employees in their pay band. It also helps us to recognize when positions might require a reclassification review.

[7:35 p.m.]

It all really comes down to this. We are grateful for the support we’ve received from the B.C. Legislature, through this committee, regarding the previous budget lifts for staff salaries, as it has definitely been one of the reasons our staffing contingent is stabilizing and has stabilized over the last year. Again, I know I said it earlier, but this is what we want to see happen.

Moving forward, we’ve analyzed the impact of the compensation framework implementation, and we estimate the cost to be $1.1 million to implement. This would be followed by ongoing salary costs of 2.4 percent per year, an estimated $410,000 for ’25-26 and $420,000 for ’26-27.

So what happens if the request is not approved? I think that question came up in the pre-guidance for us to answer. What happens if this request is not approved?

Realistically, it’s a simple story, I think. We’ll be challenged to fairly compensate staff, and we’ll likely face staff leaving our office for more competitive salaries. That’s a very logical approach.

The team that remains would also likely be pressured, and they would probably experience lower morale and productivity. We also don’t want to risk staff burnout. Those, of course, are not good things and not what we’re aiming for.

Now I want to turn our attention to our second key re­quest. I am keeping an eye to the clock, and we’re right on time. I want to turn now to IT modernization. Small organizations like our office are becoming higher risks to be likely targets for sophisticated and frequent cyberattacks.

Now, you might be wondering why. It is because often, frankly, we don’t have the same resources that larger organizations can put to data security. We don’t have the resources like the broader B.C. government does, but we can partner with them to support our data security.

All B.C. government ministries moved their infrastructure data and applications to the Kamloops data centre in the early 2010s. This data centre offers us access to over 200 IT support staff, with 24-7 support and state-of-the-art technologies that are safe from the earthquake zone. Our office can take advantage of this support. To me, this seems like a very commonsense, logical approach to what is a big issue.

In fact, we’ve also found out that some of the other independent offices of the Legislative Assembly have already had their infrastructure moved and data kept at the Kamloops data centre. We want to follow government’s ap­proach on securing data — and remember, our data is often government data — by moving our critical infrastructure and data to the Kamloops data centre. It all comes down, of course, to the money that it will cost to do this.

We estimate IT modernization costs to be the following. A $2.25 million ask for our operating budget in ’24-25, consisting of a $1.25 million one-time cost to migrate the IT infrastructure and data to the Kamloops data centre; $750,000, representing a half-year of the annual maintenance costs, which are currently calculated at $1.5 million a year; and $250,000 in accounting amortization costs related to the capital spending on new hardware and servers planned for the current year, subject to approval of the supplementary budget request for ’23-24. As well, there is a supplemental need of $1.2 million in ’23-24 to get this started.

So again, as I head out of this section, I go back to some of the words you left us with. What happens if this request is not approved? I do want to answer that question to say that it will be a struggle for us to protect ourselves in the best possible way against the increasing and ever-changing cybersecurity risks in the world that we live in now. We would never want to face a data breach that could limit our ability to fulfil the mandate that we have.

If the supplementary request for capital funding is not approved, we will have to return, at some point in the future, with another request, and the migration project will, of course, have to be delayed.

This is a big ask. I know that. We all recognize that. However, it’s not rare. Organizations all over are dealing with similar transitions and responses to this ever-changing and happening concern in cybersecurity. This is a dynamic situation.

[7:40 p.m.]

To some extent, it’s a bit of a pay now or pay later approach. If there’s a data breach, there’s nothing more expensive than a data breach. So what do we do to look into this?

We explored several options for satisfying our cybersecurity and location risks and found the B.C. government’s Kamloops data centre to be the most efficient and effective option for protecting our critical infrastructure.

Now, I’ll move on to the last area: the supplemental ask regarding our LWS project, the leading workplace strategy. As you may recall, this project is essentially about modernizing our workplace and reducing our office footprint from, in simplest terms, three floors to two floors. This is in response to and in alignment with our hybrid work setup. With not having as many staff in the office at any one time, we no longer have the need for space that we currently occupy.

We are updating the current space to make it more conducive to a hybrid and mobile workforce while also saving money by right-sizing and leasing out one of the floors. We look to complete this project in ’23-24, and we’ll be able to start subleasing that floor in ’24-25.

I should note that that money from the sublease will be paid directly to the Ministry of Finance, and it’s not something that we can reflect as a reduction in our budget as it can’t be used to offset the cost of lease. That’s just how the government accounting works, and we have to follow how the accounting works. So to be clear, our budget proposal reflects the full cost of our lease, not the reduction for the leased-out space, because that all returns to government and is not a reduction for us.

Our supplementary ask entails a capital budget request of $100,000 for ’23-24. That’s this fiscal year, and that’s to fund the replacement of our fluorescent tube lighting. I don’t know why I’m looking up at the lighting in here, but it’s to replace our fluorescent tube lighting with environmentally compliant LED lighting.

This is not something we came up with. This is a new federal government regulation that bans the manufacture and sale of fluorescent tube lighting by 2026. This is a new must-do with not much choice for us. They tell us the cost of this must-do is $100,000 — to have lighting in the building that is LED and environmentally compliant. The most cost-effective and least disruptive time to address this federal regulation is now. There are savings by making the change during the current renovations, rather than replacing the lighting later when the regulation is fully in effect.

Finally, a high-level analysis of our budget proposal, found on page 5. I’ll speak to the line items where variances in our request are significant. I am getting near the end.

As you’ll see, as noted, our requested operating budget for ’24-25 is 13 percent greater than our approved budget for ’23-24. This amounts to $2.958 million. The details of that breakdown are as follows.

An increase of 10 percent for total salaries and benefits, which is $1.6 million. That is what I just went through — mostly the costs of implementing the new compensation framework that I spoke about. It also includes a 1 percent inflationary increase.

Secondly, under operating costs on line 60, we have an increase of professional fees of $595,000. That is related to that IT modernization that I just talked about. Outside of that, we have reduced our professional service budget, but there is $1.25 million related to that IT modernization project. On line 63, we are requesting an increase of 75 percent for information systems costs. That, again, is related to the maintenance costs of that IT modernization that I just talked about.

Finally, I’ll draw your attention to line 65, where we have a decrease of 44 percent for office and business expenses, of $399,000. That just simply reflects the fact that the LWS project will be coming to an end, so we’ll no longer need money for that. Then, a 40 percent increase for amortiza­tion on line 73. That just reflects accounting concepts related to…. If you increase capital, you have more amortization.

In conclusion, we are on the right track. I believe you trusted us in the last three years that I’ve been here, and I believe we have delivered. We are proud of the progress we have made towards our strategic objectives and goals.

[7:45 p.m.]

Our focus, as always since I started this job, has been on people and product, first and forward. I think we are very proud of what we have done. Our output of audit and information reports has been relevant. It has been robust. It has been timely, and it has been delivered in high levels of output. Remembering that we’ve gone through…. For three of those last three years, two of them were in a period of COVID as well.

In ’23-24, of course, we will continue to face similar challenges that many professional services organizations face. The recruitment and retaining of staff is not going away, right? The demand for skilled staff, for people who know what they’re doing, is not going anywhere. That will continue to be an issue for us.

Happily, though, staff retention has been improving. Our workplace environment surveys, that I talked about earlier, have been showing improved engagement. Again, these are tangible signs to me that we’re on the right track. We have the right strategic plan. We have the people. We have the plan, and we’re doing, I believe, the right thing.

Maintaining a skilled and experienced workforce stands as our biggest risk of fulfilling the mandate. At the end of the day, we can buy new computers, we can outsource and do our IT stuff, but it’s still people doing this job, and that remains our biggest risk. Then, of course, the modern IT infrastructure in an ever-increasing world of cybersecurity risk…. It is critical that we get that up and running.

We’re not afraid to use the word “grateful”. We are grateful for the resources that have been entrusted to us over the last number of years. We take it seriously. I believe we are fulfilling our mandate. I believe you have helped us to do this, and I want to thank you all for coming on the journey with us.

I’ll turn it over to Marie.

Marie, you have four minutes and 30 seconds left.

M. Thelisma: Excellent. I’ll try and stay within the time for sure. Thank you very much, Michael.

Today I’m just going to introduce our team that is here to help answer the questions, of course. I have at my right Sonya Kofler. She is our executive director of strategic HR, so she’ll be able to answer some of the questions with reference to the compensation. You’re going to have some questions on that, I’m sure.

We have John McNeill here, our chief financial officer, our CFO, on the financial side to help with any budget questions that you may have.

We have Carlos Caraveo, our chief information officer, on the IT front. Carlos is new to our office and has joined us. Welcome Carlos. He’ll help us answer some of the questions.

Of course, myself, I am the assistant auditor general for the critical audit support team, and all these lovely people work in my team.

M. Pickup: We’ll conclude on that. I’m happy to take questions/comments.

M. Starchuk (Chair): Thank you, Michael. Thank you for your presentation.

You’ve set the gold standard for being three and a half minutes early. No pressure to the other officers that are going to come and visit us. Duly noted at the beginning, when you talked about having a big smile on your face, and lastly for fitting the format into your presentation this evening. It’s greatly appreciated.

I didn’t know whether you want to take the time to introduce the folks that are behind as well.

M. Pickup: Behind me, we have Sheila Dodds. Sheila is our Deputy Auditor General now, for the last two years, and our lead for equity, diversity and inclusion — the only Deputy Auditor General in Canada with equity, diversity and inclusion in her job title, which I did when I appointed her. Without embarrassing Sheila, I like to say one of the smartest decisions I have made as Auditor General is making her deputy. I don’t mean to embarrass her.

Next to her is Jenna-Rae. Jenna-Rae is on our team and supporting us and helps us get things like these binders together. Every weekend, for those who don’t know, Michael gets a weekend of reading binders and materials, and people like Jenna-Rae prepare the binders of weekend reading material for Michael to read on the weekend.

Next to her is Nick Johnson. Nick is our head of communications and looks after all the wonderful things we’re doing in the world of the socials. See that? I’ve learned “the socials” — not social media. He looks after all of that stuff.

Thank you, all.

Behind them, not here, are lots of people that support these folks as well. Thank you for that opportunity to introduce them.

[7:50 p.m.]

M. Starchuk (Chair): That leads us to questions of the committee. We are going to the OAG whisperer, Ronna-Rae.

You look like you wanted to whisper something.

R. Leonard: I’m not sure.

N. Simons: Whisper into the mic.

R. Leonard: Yeah. I don’t know if that helps, actually.

M. Pickup: Do you want me to come over there?

N. Simons: Why don’t you write down your question? I can speak it out loud.

R. Leonard: Yes.

M. Starchuk (Chair): Tom, did you have a…?

T. Shypitka (Deputy Chair): Thanks, Michael and team, for all you do. It’s a tall order to keep all the other statutory offices accountable financially, and thank you for all the service you do.

I wanted to bring it back to the supplemental request that was made last year, on the $1.5 million capital and $410,000 in operational funding. That wasn’t to be spent that year. I think it was to be deferred to the 2023-2024 year. Are we on line with that $1.5 million capital spend, and — what is it? — $410,000 for operational funding?

M. Thelisma: That’s excellent.

Do you want to take that?

J. McNeill: Great question.

We just finalized our bid with our general contractor. We were actually very worried we would come in way over budget, based on inflation, but we’ve come in on budget — well, a little bit over budget but enough that we can absorb it, given our overall capital budget. That’s why the only amount we’re asking for is that $100,000, which is a slight increase in scope, for the LED lighting.

We’re on track, based on the schedule, to finish by the end of the fiscal year, so the project should be wrapped up.

M. Pickup: If you were to come to the office, you would see me working in a broom closet on the second floor now.

T. Shypitka (Deputy Chair): I’ll check that out.

It’s good to know that inflation doesn’t hit everywhere sometimes. That’s awesome.

Also, some explanations. On the $399,000 increase in occupancy costs — that, I assume, is just leases that have gone up in the next fiscal, I guess?

J. McNeill: It’s a combination. One is…. When I was developing the business case, I netted the savings against the annual lease. Then, when I realized that it’s likely we’re going to be doing a sublet, I couldn’t net that, so we’d be showing the gross amount and remitting whatever we get for the sublease directly to the Minister of Finance.

Then, also built into our lease, every five years, there’s a five-year step increase to our lease based on CPI. That five-year step increase is happening November 24, so part of the year will see us at a higher rate. Our lease goes up every five years, and then every year there’s usually an operational increase for the operating costs related to our building that’s charged to us by our property management company.

So yeah, there’s a mix of the gross amount of the lease being shown, as well as just rent increases, based on our lease agreement, built into that.

T. Shypitka (Deputy Chair): Okay. Thank you.

Am I to believe, then, the $399,000 increase in occupancy costs is net after subleasing?

J. McNeill: No, that’s the gross amount, so the total amount that our lease is going to cost.

T. Shypitka (Deputy Chair): Okay. So that’s the gross.

Now, on sublease, then, that doesn’t factor in at all.

J. McNeill: No. Where the sublease will come in is…. Say we collect, for example, $325,000 for a sublease. That $325,000 would come in through our other revenue in our organization and directly to the Minister of Finance, so into the coffers of government that way.

T. Shypitka (Deputy Chair): Right. So those subleases are never applied to operational costs or never get brought in to reduce…?

J. McNeill: They won’t get net against our expense, so we’re not going to see it directly in a cost savings on our financial statement of operations, but probably we’ll be disclosing the amount in our notes to our financial statements, depending on whether who we lease to is a related party or not.

We’ll also be able to provide the committee with an update when we’ve found a tenant as to how much they’re paying. So it’s not going to be reflected directly, but there is going to be a savings over time, just related to more revenue coming in.

[7:55 p.m.]

M. Pickup: It’s not free extra money, if that’s what you’re looking for.

It’s not like: “Oh, they’ve got this pool of money that’s coming in from this, and they’ll just spend that as well.”

T. Shypitka (Deputy Chair): Right, but I believe it was budgeted that it would reduce overall operations — the sublease, I mean. It must somewhere, right?

M. Pickup: Well, to government as a whole, at the end of the day, right?

J. McNeill: On consolidation.

M. Pickup: On consolidation, right. Government has got to be better by that amount of that lease, yes.

T. Shypitka (Deputy Chair): So I guess my follow-up to that is: is that a traditional, standard accounting practice that’s always been done that way, back to general revenue and not to the operational costs?

J. McNeill: Well, it depends on…. Really, if we want to get technical, it depends on the form that the lease takes.

Legally, there could be a way where, say, the landlord charges us our portion and then they have a contract directly with our tenant where they could release or could charge that person directly, and it could result in a reduction. But we are requesting for the most conservative approach, which will not put us in a bind if the second party doesn’t negotiate directly with our landlord. So there potentially is an option, but this all comes down to….

This is where we get detailed and technical, and forgive me if we’re getting to this. But in terms of revenue recognition, accounting principles…. If revenue is coming in, you can’t net it against an expense. You have to report it directly as revenue.

M. Pickup: So if it’s helpful, that’s not uncommon or unusual. It was the same thing in Nova Scotia when I was AG there.

J. McNeill: Yeah, thanks, Michael.

M. Pickup: We had that kind of revenue come in. We didn’t get to re-spend it. It just flowed through us back into government.

T. Shypitka (Deputy Chair): So not necessarily going back to the office itself but to the general good of government.

J. McNeill: Yeah, net benefit on consolidation.

T. Shypitka (Deputy Chair): I’ll let some others….

M. Starchuk (Chair): Thank you, Tom.

To Tom’s note, I just…. What my memory gives me is that this was…. The overall savings of it is based on a longer lease term. I assume that has been granted or got….

Then the other question I have is regarding the time frames that are there and the possibility of what the tenant improvement process would be to get the permits to start doing the work.

J. McNeill: Do you mind if I answer that one?

We already have the permits in place, already approved by the city. The contractor is literally coming next week with a sledgehammer to start demolition. So we were really aggressive in making sure we were ready to have this done at the end of the fiscal year, because we didn’t want to come back with another supplemental request. So that answers the second question.

What was the first question, again? Sorry, Chair.

M. Starchuk (Chair): About the time of the lease.

J. McNeill: Oh, right. So our lease expires in 2034. We’ll have about ten years of that, let’s say, $325,000 of money going to government and on consolidation creating a net savings. We also have opportunity to renew our lease at the end of the lease. So every five years that we renew our lease, it creates greater and greater savings. So it’s really recurring savings that we have, and this is even savings net of what we’re spending.

Initially, this LWS…. While it works great for the en­gagement of our staff and how we work, it was initially created as a cost-savings measure. Yeah, the savings…. The business case is very strong in terms of savings, even with the minor delays we’ve had. We’re going to develop savings over time and then, potentially, even more, depending on how long our lease is.

M. Starchuk (Chair): Your numbers show that, in your surveys, your satisfaction levels were coming up. Do you know why?

M. Thelisma: Oh, that’s a good question. Do you want to start?

M. Pickup: Sure. Is that okay? Only because this excites me. It excites me, honestly.

Thank you for the question. I think…. It’s not one thing. It’s not two things. It’s 101 things that we’re doing, and it’s what we do every day, I think. I was going to say Monday to Friday, but in some cases, Saturday and Sunday as well. But it’s what we’re doing every day of the week in terms of how we’re trying to lead.

[8:00 p.m.]

So I think it’s reflective of the belief in the executive and leadership team that has gone up, as well, when we start looking at some of the underlying figures. It’s the belief in the strategic plan and the mandate of what we’re doing.

I talk to my colleagues about this, and few of us have seen the type of increase in the belief in the strategic plan and what we’re doing, by over 30 percent, in how the staff view what we’re doing. Those are tremendous increases.

I think doing these things is what you do. Yes, it is the building. Yes, it’s the hybrid work approach. Yes, it is all those things. Yes, it is paying people more fairly. Yes, it is fixing these compensation things, but it’s a lot more than that, right? It’s how people like the folks behind me and with me here are leading. The diversity we have and the inclusiveness we have, I think, are wonderful.

If you look at what we call the leadership group, sort of at one level, including some of us here but even one level down — that top 15 percent of leadership, we got pretty much everybody certified with a certificate in diversity and inclusion, with a four-course program, so that we’re all talking the same language.

We all went off-site and did two days together and got certified by the Canadian Mental Health Commission in mental health first aid — all of us. A cheap endeavour — it’s $150 a person. I’m not trying to push the Canadian Mental Health Commission, but what I’m saying is it’s all of those things. I could give you another 85 things. It’s not one. It’s not what you stick on the wall. It’s how you show up and how you do all these things.

At the end of the day, all of this has to result in output in the business we’re in. We’re in the business of producing audits. At the end of the day, we’ve produced 32 reports in the last three years. If I look at the year before I came — I’m not being critical — there were two reports. We’re averaging about 11.

I think success builds success. I don’t think people would be as interested in working here if we didn’t have the success we’re having in the output — when we see the committees taking up our reports, when we see the interest in our work, when we see the value, and when we see 99.9 percent of our recommendations accepted by government. This is why, I think, we are seeing these increases.

I probably used way too much time, but I think it really is worth highlighting that it’s a lot of hard work by a lot of people.

J. McNeill: To add to that, we also appreciate the support that the committee has given us, say, for LWS around the compensation stuff. Those are things that, without your help, are out of our control to change, because there’s a cost associated.

While we’ve done all those things, it has also been very helpful to have the committee behind us, enabling us to implement some of these strategic plans.

M. Starchuk (Chair): Good. I think it’s important to also notice that there’s a group of head nods right behind you, agreeing with what’s there. Thanks for squeezing in 101 things in about three minutes.

C. Oakes: First, to Michael and the team, I’m a new member on this committee, but I would like to take this opportunity to thank you for the work you have been doing.

I want to especially acknowledge the work your team has done around rural roads and connectivity. I think it’s incredibly important for rural communities to have the ability to have that extra look where we do not have capacity in some of our communities. I wanted to highlight that.

I think there’s also a huge opportunity to look at Lytton. I know that was brought up at public accounts. I think there’s a really good opportunity for us to continue the great work that you’re doing on providing that output for people in community.

Nick, I want to congratulate you on your social media, because I think it’s a good opportunity to communicate out to people. Anytime we’re utilizing taxpayers’ funds, it’s important we demonstrate that value. Thank you for that work.

My question is for Carlos, around the IT modernization project. Reviewing some of the numbers, I’m just wondering: looking at the statutory office budget submission for the last five years, would it be fair to say that the existing budget amount is under the line item of information systems, operating?

I’m trying to find out how much we’re paying now, because I think we’re going to carry forward $1.5 million, annual maintenance, after the implementation. I’m trying to get what we’re paying now, versus what this IT modernization will create in annual cost to the taxpayer.

[8:05 p.m.]

C. Caraveo: Thank you for the question. The money we have right now for the IT budget — the money that we spend today — really covers a lot of the things that will be taken care of by us moving to Kamloops. A lot of the money is going to just maintaining the lights, keeping our system secure and even our staff dedicated to providing that work.

The $1.5 million in addition to the money we’re paying today is just to transfer all those services to the vendors: taking care of our network, our servers and the security around that. There will be some cost savings by doing so, because we won’t be needing to spend money today that we’re spending on our own contracts to the support teams that we have. We will be transitioning some of those services over, but at the same time there will be a reduction in the overall cost on what IT has been as we move forward.

We don’t really know exactly how much money we’ll be saving until we migrate and complete our rationalization project. This means we’re looking at all the systems that we have, all the information that we have, and we’re really trying to reduce as much as we can, because that will reduce the cost of additional storage that we’d need to acquire in the new environment.

Basically, if you think about it, it’s like we’re moving to a new house, and we’re cleaning up the garage right now. We’re doing a lot of that heavy work with removing the things that we don’t need to move over. That will create additional savings once we are in the new environment.

C. Oakes: Help me understand. I’m looking at a budget for 2018-2019 under the line item of “Information systems and operating.” We’re at $517,000. We move forward to, say, 2022-23, and we’re at $866,000. Now we’re proposing to go to $1.5 million annually, plus we have the $1.2 million in the modernization.

That seems quite significant. It doesn’t sound like a money savings. It sounds like quite an expense.

C. Caraveo: I’ll let John answer on the historical matter of the IT budget of a few years ago. I joined the office very recently. I’m looking, honestly, forward into the future, but I’ll let John answer.

J. McNeill: To provide a little bit of clarification, you’re right; the cost of IT is increasing or has increased at a rapid rate. When Carlos talks about savings, he’s not talking about savings overall, but savings as part of that $1.5 million. That’s an estimate. That’s the outer edge of what we think it would cost.

It is getting more expensive, or we are planning or hoping to spend more money on it, and it’s more — I don’t know how much to say here — “you get what you pay for” in your risk tolerance. As to what we may have been spending in the past, what we’re saying now by asking for more is that we’re not comfortable with the level of risk.

We want less risk, so we’re asking for more money. When Carlos is mentioning cost savings, that’s potential savings in that $1.5 million. Maybe it will be $1 million or $1.3 million. We won’t know, until we start what we’re calling the rationalization and migration project, to see what can stay and what can go.

We are going to be spending more money on IT, but when we do our budget request, we need to ask for the outside limit because we need to balance our budget. Often, we’ve asked for more, and then we underspend because we need to come back — it’s a lot of work for you guys and for us — for every thing. So we’re asking for the outer limit, and then we can report back on what it actually cost, returning anything that we didn’t spend.

M. Pickup: I don’t know, Member, if this is adding anything, but it’s not a situation we want to be in. This is a little uncomfortable, but we’ve got to push through this and deal with this. We’re not beating each other up here on the team, but it’s not a situation we want to be in. I mean, this stuff is expensive.

[8:10 p.m.]

You know, I’ve been working 30-some years now. This IT stuff is not getting easier, and it’s not getting cheaper. I will tell you, and I think some of the members here will certainly appreciate this, one of the things that I did was bring in an outside firm to say: “Test us a bit here.”

There are options here. There are things here. Here’s the situation, without going into too much detail on it. Are we doing the right thing here? Is this the way to go? That’s something I learned, I think, in years of auditing when people didn’t do that and didn’t necessarily make the decisions without enough of a due process, so we did do that.

That external review and help we got helped assure me at nighttime that the folks here, who I trust, obviously — that we were heading in the right direction. I’m being a little bit purposely vague, I think, just because of the nature of this topic, and wanting to say how important it is that we move forward without giving away the store, if you will.

C. Oakes: I understand.

M. Pickup: Yes, thank you.

S. Chant: As always, thank you very much for the presentation and for the work that you do.

I was looking at the sort of stats around turnover and number of staff and that kind of thing. Now, I think one of the asks that you had before was for some additional FTEs. I’m not sure when I look at the math that there are additional FTEs there or if you got your additional FTEs but lost something else. Could you talk to me a little bit about that, please?

J. McNeill: When you say additional FTEs, can you be a little bit more specific? Was that for FTEs related to IT in a previous ask?

S. Chant: This was last spring. I believe you were asking for some funds for some additional full-time people. I don’t know whether you got them or not, because when I look at the turnover, it doesn’t look like there’s a lot of difference in the numbers of people.

S. Kofler: Yes. Actually, some of the competitions are underway right now. We did request to add some additional positions — for example, particularly in our professional practices area. Yes, and we are working on doing that staffing now.

S. Chant: So we’re still working on it.

S. Kofler: Yes.

M. Pickup: Can I add something quickly? Two quick points.

One is that, and this sounds like an anecdote, three years ago, when I came here and we would have had performance audit positions available, we might run an ad where we had ten people apply. Now, we’re getting 150, and good applicants in a tough market. That’s a tremendous change. I think it’s the people here, but it’s also the people back doing the audits. At the end of the day, we’ve got to be doing work that’s valuable or we’re not going to be able to attract people, so I think that’s important.

To the comment about the importance of regional audits, I particularly agree with that. I think I always view diversity and inclusion as…. Regionalism is a big part of that as well. Having grown up in a region of the country and in a small region in a fairly rural area, I know well what it’s like to be away from the big city, so for me, it’s important that we’re doing work, as well, that reflects cities but also has regional aspects to the audits.

I was going to add that as well, something that’s been important to me is external engagement — getting out to see the province and getting out to meet people. This summer I got to go up to Prince George. I spent time in Prince George meeting with the universities, meeting with the health care folks, meeting with the mayor, meeting with people around town and saying: “What is it like to live in Prince George?”

I got to be — I’m going to say “unfortunately” in the right context — in Kelowna before the fires started and to be there when the fires were happening and working to get out safely while the fires were going on as well.

It’s been very important to me to get out and see as much of the province as I can and to meet with people. I usually go alone, which always kind of freaks people out — that I show up for meetings alone. Then I just go and listen to people, and they’ll tell me about the experiences and what are some things we should potentially audit.

Some of these other choices that we make, frankly, I think reflect me being out across the province and listening to people.

[8:15 p.m.]

N. Simons: I was just going to add…. First of all, thank you all very much for the work you’ve done. You are seen by the public as a trusted institution and an important one for our democracy.

I’m just going to echo what Coralee was saying about the importance of representing not just rural voices, but voices that are not heard much. The way you ask: what would you want to see looked at? I know you’ve done that before, in your report on Indigenous services in prison, for people with mental health and addiction services. I think that’s just so valuable.

That’s not necessarily a big news item or anything, but it’s so essential to so many communities in so many parts of our province. So thank you for that work and for the presentation that you’ve given us today.

M. Starchuk (Chair): Now, there’s a timer that’s in front of you that we’re going to disregard. The committee is set to be here till 8:30, so if it’s okay with you and your staff, we’ll go till 8:40. No, I’m just kidding.

G. Chow: Yes. Thank you for all the work that you do.

You mentioned that you published 32 reports. That’s great. I like that, versus two before, so you’re in tune with the Legislature. What determines your priority and your workload, to publish these reports?

M. Pickup: Sure. That’s the number one question I get asked as Auditor General: how do you pick the audits that you do? Really, it is looking at dollars, right? Where are big dollars? It is looking at new programs, things that happened perhaps quickly. I think of some of the audits we did, like purchasing the hotels. If I think of the safe spaces for women and children leaving bad situations, it’s those types of things.

It is things that are of interest to people in the Legisla­ture. If there are things that are of keen interest that maybe aren’t the same dollar level but that are important, if they are new or unusual areas that government may be getting into, a little more complex, that may be something to look at.

Frankly, as Auditor General, I get to pick some things that are of interest. Diversity and inclusion will always be of interest to me, so we will pick audits that touch vulnerable people. We will pick audits that touch people who are different, because I think that is important as well.

As we saw on that audit on mental health and substance use for Indigenous offenders, that benefits everybody. Yes, it was targeted at Indigenous offenders, but all those same questions and all those same findings could go for everybody else as well.

It really is looking at all those things, I’d say, on purpose. As an Auditor General, if we are all over the place, mission accomplished. That’s what I think we have been — all over the place. We’re doing the grants and contributions and the basics, but we’re also doing all of these different other things.

We’ve done five reports on fraud. There’s nothing more important to me, probably, other than diversity and inclusion, than fraud risk management. Those five pieces of work, I think, have made a huge difference.

I don’t think anybody is going to call you up as MLA or call me up as Auditor General to say, “I didn’t commit fraud because I knew I was going to get caught, because government is managing this better,” but that’s the story. Government is managing fraud better because of those five pieces of work, and fraud has to be going down. The science will show that.

Long answer to a short question, but I think it’s really looking at all of those things.

T. Shypitka (Deputy Chair): Maybe if you could ex­plain the migration costs in 2024-25. It’s $1.5 million. I’m assuming that is to migrate data from the old to the new. Is that what that’s all about? Is that contracted? Is that through a procurement or bidding process? Maybe explain how that process worked?

C. Caraveo: Thank you for the question.

I think, just to summarize, without getting into a lot of details on our current infrastructure, what I can say is that, yes, we are trying to join the rest of government, as they have invested and dedicated a lot of time and effort to building this data centre that meets all the secure requirements. They keep their information there. We would like to continue doing that same approach, by not retrieving information from that data centre and putting it anywhere else.

That was the best choice that was actually selected by not only ourselves but the firm that Michael was mentioning. Just to confirm, that was the right approach.

[8:20 p.m.]

We’ll not be using the contract that the government has with the vendor. We will have a separate contract just to maintain our independence and to make sure that there are no conflicts when we’re doing so. Yes, it will be a different contract that we will have, but we will be using the same resources. They are maintaining core government infrastructure, as well, to protect our data and our environment there.

In the long run, it really is a cost-saving measure. We don’t have to recreate or create our own big data centre and have the people to maintain it in the same way the government is doing right now.

T. Shypitka (Deputy Chair): I might have missed that, then.

The resources used to migrate the data are in-house contractors, so to speak. You do that yourselves? You don’t bid that out?

C. Caraveo: It will be a combination. It will be a combination of people that know our current environment and our team. We will rely on the expertise of the company that provides these services for the whole of government.

They have done these migrations from on-premises to this private cloud, which they offer to all government. They’ve been doing that for the last 15 years. It’s our turn to get there and to take advantage of all the additional benefits that come with that — the 200 employees dedicated to protecting the information and the cost savings measured by us getting this large pool of benefits by going there.

T. Shypitka (Deputy Chair): Right. Given that it is a combination of sorts for that kind of work…. How confident are you that the budget will remain intact for the $1.5 million and that contracting costs won’t increase between now and then?

C. Caraveo: We have done a significant amount of discovery and investigation of the cost, working with this company that provides these services. We have to go and just really go into the details. How many applications are we running? How much storage are we using?

They have, basically, given us an estimate of how much it will cost to replicate the current environment that we have, but we know that it is going to be significantly cheaper if we do a lot of these rationalizations, as I mentioned before, and reduce the amount of service that we need and the number of applications we’re running. All of that, in the end, will bring additional savings to this exercise as we move forward.

J. McNeill: Do you mind if I jump in on that?

The $1.25 million is related to professional services contracts from the vendor to support our staff to do the transition. The staff salary time, like Carlos’s time on the project, isn’t included in that. And $250,000, so to make it to $1.5 million, is from the amortization of the capital assets, the physical servers that we’ll be purchasing.

In terms of our confidence with the budget, like Carlos said, we’re fairly confident that that’s what it’s going to be. But because professional services are part of operating expenses, if there are minor overruns, we’ll work to absorb them within the overall breadth of our budget.

We really try our best to avoid coming back with supplemental requests, if we can avoid it. If we come in under the $1.25 million for professional services or under on amortization, for example, that money will contribute to our overall surplus, and that money will be returned to government.

T. Shypitka (Deputy Chair): Right. So in the 2024-25 budget, you have noticed…. Speaking of professional services, you have a $625,000 decrease. How do you explain that, then?

J. McNeill: There is a decrease in our professional services. We’ve let go of some complex audits, like B.C. Hydro, for example. They were large, complex, quarterly reporting. Also, with a more stable workforce, we’re able to have our staff take on more work.

I know this is a big ask. We are working very hard, in the background, to use our resources as efficiently as possible, and that reduction is kind of a manifestation of that.

You probably also noticed, I believe, a minor reduction in our travel expenses. The need to travel is less with a hybrid workforce, not just us but, also, the people who we audit.

[8:25 p.m.]

While we have these big projects that are coming up, we are still working hard in our basic operations to manage costs and increase our value for the dollars that we receive.

T. Shypitka (Deputy Chair): Thank you.

M. Starchuk (Chair): Nick.

N. Simons: Thanks. I’m actually Ronna-Rae right now.

M. Starchuk (Chair): No, you’re not.

N. Simons: I know. I’ll speak out loud.

Ronna-Rae had a question about the compensation framework. She’ll correct me if I’m not asking this correctly.

She’s wondering about the difference between public sector wages and private sector wages and, perhaps, how wages that are being offered by the Auditor General fit into that frame. Will the new compensation framework bring wages into line with other public sector wages? Maybe just talk about that whole….

M. Thelisma: Excellent. Yeah. That’s a good question. We have done a lot of work. Sonya will be able to provide a bit more detail.

We’ve definitely looked at all the benchmarks that are out there. We’ve compared ourselves to other offices, other Auditor General offices, to see how things are looking there for their compensation. We’ve also looked internally, here in B.C., at some of the IOLAs and what is happening with some of their compensation.

Our staff in our office are unique in what we offer. As you know, most of us are accountants or in that line of work. So our compensation is a little unique than some of the other IOLA offices. We’ve compared to government also to see…. What is the competition? What is out there?

That’s how we started, with the benchmarking, to kind of decide how we were going to compensate people.

Sonya, do you want to add anything more to that?

S. Kofler: Yes.

We did investigate the market through a licence with Salary.com. Salary.com is an organization that specializes in doing salary surveys. It is providing HR-reported data. We know that we can count on that data as being accurate.

We were able to do searches on organizations of a similar size and look at the various different kinds of jobs we have in the organization and pull up comparisons that are regional within Victoria and Vancouver. We weren’t just getting across Canada averages but averages for organizations of a similar size based in Victoria and Vancouver to really help us get a handle.

In answer to your question in terms of how salaries compare, it depends on which positions you’re looking at. In some cases, we’re close. In other cases, we’re not going to even be able to compete, but we can get better, right? We can focus on the total compensation that we offer, which includes the benefits package and more competitive starting salaries.

It really depends on the actual role. We did benchmark all of them. We benchmarked through Salary.com as well as, as Marie said, with other OAG offices across Canada and with government positions here where there are similar government positions or where we’re drawing people sometimes or where we’re noticing that we’re recruiting from core government into positions.

We did the full comparison on all of those bases.

N. Simons: On behalf of Ronna-Rae, that was a very fulsome answer. Thank you.

S. Kofler: Thank you.

N. Simons: I think she is agreeing with me.

The second question Ronna-Rae had, I think, might require us to just do off the record or meet in camera as it relates to the other issue about IT.

M. Starchuk (Chair): Tom, do you have a question before we…?

T. Shypitka (Deputy Chair): No.

M. Starchuk (Chair): Okay. All right.

In light of the issue around the sensitive nature about the security of IT, we will motion to….

N. Simons: I move to go in camera.

Motion approved.

The committee continued in camera from 8:29 p.m. to 8:41 p.m.

[M. Starchuk in the chair.]

M. Starchuk (Chair): All right, we are back.

Michael, you and your team, thank you very much for your presentation this evening. It was very insightful. I look forward to the deliberations that follow.

If there’s no other business, a motion to adjourn.

Motion approved.

The committee adjourned at 8:42 p.m.