The committee met at 7:01 p.m.

[P. Milobar in the chair.]

P. Milobar (Chair): Good evening, everyone. I’ll call to order the Select Standing Committee on Public Accounts.

Just a couple of housekeeping…. MLA Routley emailed he’s unable to attend tonight. We have MLA Rice on Zoom, and welcome to our newest member. MLA Merrifield has joined us as well on the committee. So there we go.

Yes, it’s been a long day already, and we’ve got a couple more hours to go. We’ll get started. We’ll jump straight right in.

First up we have consideration of the Office of the Auditor General report, Fraud Risk and Financial Statements: B.C. Public Sector, Part 2, from May 2023.

With that, I’ll turn it over to the Auditor General office.

Consideration of
Auditor General Reports

Fraud Risk and Financial Statements:
B.C. Public Sector, Part 2

S. Dodds: I’m Sheila Dodds, the Deputy Auditor General. I’m here for Michael today. Unfortunately, he was unable to attend. He had a previous commitment where he is part of presenting at the CPA Canada public sector conference in Ottawa this week, but he will be here with the next Public Accounts Committee meeting.

I will begin by acknowledging with respect that the Office of the Auditor General conducts its work on Coast Salish territories. Primarily, this is on lək̓ʷəŋən-speaking people’s traditional lands, now known as Victoria, and the W̱SÁNEĆ people’s traditional lands, known as Saanich.

I’m a visitor on these lands, and I strive to be mindful of the connection the land holds to the Indigenous peoples of these territories.

The first report that we are discussing this evening is Fraud Risk and Financial Statements: B.C. Public Sector, Part 2, the second half of our two-part series of reports on fraud risk and financial statements.

Our first report, which was tabled in March, discusses fraud risk management practices at Crown organizations, health authorities, post-secondary institutions and other public sector entities.

This second report that we’re discussing tonight is looking at fraud risk management practices at 22 ministries. This is an information report. It’s not an audit report. It summarizes ministry responses to our fraud risk management questionnaire. It represents ministry views and their understanding of fraud risk and fraud risk management in their organizations.

We did not audit their responses, and we provided no conclusions on the information in the report. But these survey results were considered as part of our assessment of the risk of material misstatement due to fraud in government’s summary financial statements, which we do as part of our annual audit of the summary financial statements to inform how we plan our audit strategy, which we’ve assessed as low.

We summarize the self-reported information to provide legislators in the office of the Comptroller General with insight into ministry practices and perceptions. Although the information has not been audited or reviewed, it provides insight into practices. Increasing awareness about fraud and fraud risk management is a good thing, and it contributes to reducing fraud risk.

Since Michael Pickup was appointed Auditor General, our office has issued five reports related to fraud risk management. Our team has provided constructive insights on this topic in this report, and they’ll be sharing those with you tonight.

The team members who we have here tonight are Stuart Newton to my right, now the assistant Auditor General for the financial audit and related services, and Mark Castator, the director in that team.

Just before the team starts their presentation, I’d just like to take a quick moment to also acknowledge that October is Women’s History Month, a time to celebrate the women and girls who have and do contribute to a better and more inclusive Canada.

On a personal note, I pause to reflect on women who have inspired me and mentored me, and the first place I land is my mother, my grandmothers and my amazing daughter. But I also reflect back to starting in my career to Mrs. Erma Morrison, B.C.’s first Auditor General, who led this office when I started as an articling student in 1985.

[7:05 p.m.]

Thank you for that, and I’m going to turn it over to Mark to walk you through the report.

M. Castator: Thank you, Sheila.

Good evening, Chair, Vice-Chair and members of the committee.

This information report was tabled earlier this year in May. I’ll be walking you through the information in our Report at a Glance, which is found on page 4 of the report.

We conducted a survey of 22 ministries to help us plan the audit of the province’s 2022-23 summary financial statements. This report includes the highlights of that survey.

As Auditor of the province of B.C.’s summary financial statements, we must assess the risk of material misstatements, whether due to fraud or error. This is a requirement for any financial statement audit.

The Association of Certified Fraud Examiners defines fraud as “any activity that relies on deception in order to achieve a gain.” In other words, if you lie to deprive a person or organization of their money or property, you’re committing fraud. Fraud can also include the intentional misstatement of financial or nonfinancial information, misappropriation of assets or other illegal acts or corruption.

While the comptroller general has responsibility for the overall quality and integrity of the financial management and control systems for government, including controls to mitigate the risk of fraud, Treasury Board policy identifies that ministries are responsible for the design, implementation and operation of internal controls to ensure the accuracy and completeness of financial statement information and to prevent and detect fraud and error.

We sent a questionnaire to all ministries in September 2022 to gain insight into ministry perceptions and practices that would help us assess the risk of errors in the financial statements. The questionnaire was designed to gain an understanding of ministry practices in five aspects of fraud risk management.

We asked about their understanding of fraud risk; fraud risk governance at the ministry; ministry processes for assessing fraud risk; ministry controls and processes to support fraud prevention, detection and investigation; and ministry practices for monitoring and evaluating their fraud risk management program.

We have provided summary-level responses in this report to give MLAs insight on fraud risk management practices in core government. The responses to the questionnaire presented here were not audited. This is a compilation of the responses we received from the ministries.

I will now walk you through the fraud questionnaire highlights from the second page of the Report at a Glance.

We first asked the ministries questions to understand their perceptions of the risk of fraud. We asked the ministries whether they had experienced fraud in the last year, and 45 percent of ministries, or ten, reported that they had experienced fraud, with the most common types being theft of physical assets and vendor, supplier or procurement fraud.

We then asked about the perceived vulnerability to fraud. So 27 percent, or six ministries, reported feeling highly vulnerable to at least one type of fraud, and 95 percent of ministries reported their vulnerability to theft of physical assets was low, despite eight ministries having experienced this type of fraud in the past year.

We next asked about fraud risk governance. All ministries said that they had assigned responsibility for fraud risk management to a member of senior management, and 50 percent, or 11 of the 22 ministries, reported that they had not established a policy devoted to fraud risk management but did have other policies that referred to fraud risk management.

There may have been some misunderstanding with this question, as all ministries are covered by the fraud policy in Treasury Board policy but did not establish this policy, while other ministries have established additional fraud policies for their specific fraud risks. We would expect these differences, as each ministry will have unique fraud risks as well as fraud risks common to all ministries. We will make sure to clarify this in future questionnaires.

Next, we asked about fraud risk assessment. Again, 50 percent, or 11 of the 22 ministries, reported having no ongoing process to identify and document ongoing fraud risks, even though we were informed that ministries had participated in a fraud risk assessment process established by OCG.

We then asked about fraud prevention, detection and investigation at these ministries. So 21 of the 22 ministries reported that they had established a compliance monitoring and reporting function. And 23 percent, or five ministries, said they had not assessed the need for a fraud hotline to report incidents of noncompliance or fraud, and 18 percent, or four ministries, said they had not established policies and procedures to follow when potential incidents of fraud were identified.

Finally, we asked about the monitoring and evaluation of fraud risk management in these ministries. One ministry said they did not have all incidents of fraud and corrective actions reviewed by senior management, and 23 percent of ministries said that they had not established a schedule to perform fraud risk management evaluations.

[7:10 p.m.]

In preparing for this meeting, we reviewed the presentation prepared by the office of the comptroller general and noted they had followed up with ministries to validate the responses provided to us. We were pleased to see our information report resulted in discussions on fraud risk management practices between the office of the comptroller general and ministries. Conversations on fraud risk management will increase the awareness of fraud risks.

To conclude, I would like to express our appreciation for the ministry staff who completed this questionnaire and to the office of the comptroller general for their contributions.

Thank you. I will now turn back to Sheila for her concluding remarks.

S. Dodds: Thank you, Mark.

Work like this, I believe, assists in keeping losses due to fraud at lower levels and contributes to better fraud risk management in the province. As we increasingly discuss this topic of fraud and take it seriously, the less likely it is that people are going to take part in it. I believe, as do many others who focus on fraud prevention for a living, that these discussions alone are helping to reduce risk.

Right now I’ll draw your attention to the bottom of the Report at a Glance, where we’ve provided three questions that you may wish to consider asking of government. “How will government ensure that all ministries have the elements of fraud risk management in place to reduce the risk of fraud to an acceptable level? What do inconsistent responses between ministries mean for government’s overall level of fraud risk? Why do only half of ministries say they need to be highly vigilant regarding fraud?”

We hope that gives members a good overview of our report, Fraud Risk and Financial Statements, Part 2. We’ll be happy to answer any questions or offer clarification after the comptroller general’s presentation. Thank you.

P. Milobar (Chair): Thank you so much for that.

Over to the OCG, I guess.

C. Fischer: I thank you very much, Chair.

I’m Carl Fischer. I’m the comptroller general. I have Charles Mutanda here with me today. Charles is the executive director of our compliance function and deals with all of those bits and pieces that make sure that we are free from error, abuse, misuse or fraud, including forensic accounting.

We’ve been here to discuss fraud risk management about four times in the past. It is a function that we’ve focused on for the past five years, and we have a pretty comprehensive program that Charles will reiterate.

I’m concerned with this report that the conclusions or the enumerations that are included in the report might lead someone to believe that what we’ve presented in the past on behalf of government has been misleading, right? The reports that we’ve made seem very different than what’s reported in the Auditor General’s report. We wouldn’t want the committee to think that government’s been here to mislead them.

We did do a follow up, because we were a little concerned about the inconsistencies in the responses and the responses framed in a way that was very different from what we knew to be the case. Charles will provide a brief presentation of the review of this report.

The report itself does not include a response by government. So we’re here to answer any questions or provide any follow-up that you might need.

As part of our submission, we did include our last year’s annual compliance report, which includes our fraud review and monitoring report. That report is publicly available on our website, and it’s shared with the deputy minister’s audit committee, the Chair of Treasury Board, ministry executive and deputy ministers across government as a way of testing and ensuring that we are monitoring and evaluating the effectiveness of government control.

With that, over to you, Charles.

C. Mutanda: Thank you, Carl, and good evening, Chair and Members.

I’ll be referring to the slide deck provided and noting when I’m transitioning through as I go through them. I’ll jump right in.

As Carl had mentioned and as you can see on the timeline there, OCG has been before the committee several times to discuss government’s approach to fraud risk management. Back in May 2022, there was a comprehensive discussion, an overall positive audit report, on the state of government’s fraud risk management program.

Fraud risk management is an emerging area of practice driven by the evolving nature of fraud risk in an increasingly digital and inter-connected world. There are no established standards to follow. However, government has developed a comprehensive program as part of the broader control environment.

[7:15 p.m.]

As we have reported in the past, government’s fraud risk management program is comprehensive and mature. The key elements of the program are a robust corporate fraud policy, annual fraud risk assessments by all ministries, a fraud management toolkit to support management and staff in their responsibilities, mandatory fraud awareness training, a compliance monitoring program to assess and respond to risk and maintain internal controls and a corporate reporting process to keep everyone informed and responsive. This is a comprehensive fraud risk management program.

When government received the fraud risk survey report from OAG, we were immediately concerned. It conveyed government’s understanding of fraud risk management as inconsistent and incomplete, an outcome that is materially different from what we have reported to the committee in the past.

OCG initiated validation work on the survey responses as they did not reflect what we know to be true. We worked with ministry CFOs to understand their responses and how the survey questions were framed.

The results of our validation work identified shortcomings in the approach taken by this report. Surveys have inherent limitations. They are only as strong as their design, the quality of the questions, the understanding of their recipients and the interpretation of the analysis of results.

This survey was targeted to ministry-level practices, and government’s fraud risk management program has key corporate elements that were not surveyed. Finally, no audit work was done to verify or explain the inconsistent survey results when compared to previous audit outcomes. Government provided progressive feedback identifying these factors, but no changes to the report were made.

The resulting impact of a survey approach that was not comprehensive and did not have any validation process is that the report does not represent the true state of government’s fraud risk management program. I have given some examples of the disparity.

Contrary to what is in the report, every single ministry is subject to corporate fraud policy, every single ministry completes an annual fraud risk assessment and every single ministry is subject to mandatory fraud training.

On the training front, completion across government by public service employees is at approximately 90 percent, which is an exceptional adoption rate. All these are known to OAG.

On page 9 of their March 2022 audit report on government’s fraud risk management, they concluded the key components of an effective fraud risk framework were in place, including fraud policy that establishes clear direction on employee and ministry responsibilities, staff training on fraud awareness, fraud prevention and detection activities and regular reporting on losses due to fraud.

As I mentioned before, ministries also complete a cross-government fraud risk assessment that is done annually, the first of which was provided to OAG for review.

Another discrepancy is a misunderstanding of what was reported as loss of assets fraud. On validation, we found the vast majority of what was reported is not generally understood to be fraud. For example, in fiscal 2023 just over 1,000 incidents of asset loss were reported across all ministries. These range from loss due to theft from break and enters at government premises or government vehicles to damage or lost items due to normal operations, such as lost cell phones or damaged or destroyed firefighting equipment. This is not fraud.

Moving to the next slide. The fraud risk landscape government faces is varied, from financial risks to the inherent risks in providing social services, in managing natural resources and managing cybersecurity, to name a few. Government has dedicated compliance and enforcement programs and central agencies that, as part of their broader mandate and accountabilities for sound financial management and internal controls, assess and manage the risk of loss and fraud.

This means there is a multilayered approach. It is not just the ministries, and we are all working together to manage fraud risk. These programs and central agencies that are key functions in the fraud risk landscape are not represented in the report.

Moving to the final slide. In summary, this report does not give readers an accurate or proper understanding of government’s fraud risk management program.

[7:20 p.m.]

We are concerned that readers will draw incorrect conclusions from it. They may think that fraud risk is not appropriately managed in government. Bad actors might interpret this as an opportunity to exploit, and this potentially increases fraud risk for government. It is unfortunate that additional validation or audit steps were not taken to uncover the inconsistencies between this report and previous audit reports.

This is an important topic, and government takes fraud risk management seriously. We have confirmed through additional validation work that the fraud risk management program is working as intended.

Thank you.

P. Milobar (Chair): Okay, thank you.

Any questions from anyone?

J. Tegart: Could I ask how there could be such a difference?

I feel like there are some questions that need to be answered to the committee in regards to: is a survey a good instrument for the subject matter that we’re talking about? Is a survey without validation a good tool to use and to report out on?

I’m not an accountant. I’m simply a layperson. But I’m quite concerned about where we’re at this evening with these two reports.

C. Fischer: I can provide some insight into what we heard back from the ministries that participated in the survey, and Charles can add additional detail. He went through an exhaustive process of interviewing the chief financial officers.

The survey itself was very narrowly focused. It was specifically focused on ministries and asked questions about ministry experience, ministry policy and ministry results.

We didn’t see a copy of the survey. It wasn’t shared with OCG, it wasn’t shared with the chief information officer, it wasn’t shared with the Public Service Agency — all those corporate entities that have contextual responsibility for fraud and fraud-related items in government.

Ministries were in a little bit of a bind. The questions were very specific. “Does your ministry have a policy?” In some cases, they did, as well as the corporate policy that’s in the core policy manual available on the website.

We’ve brought to the committee, in the past, ministries that have exposure to specific types of potential fraud. For example, social benefits fraud or, in the natural resource sector, the Forests people have a risk of fraud from scaling deficiencies or, you know, people using the wrong timber marks. In the justice sector, of course, we have liquor and cannabis distribution, which has its own unique fraud situation.

Those ministries have program areas, compliance and enforcement programs, that have policies or practices specific to fraud in addition to corporate policy. But some ministries don’t, because they don’t have public-facing programs that expose them to that same type of potential for fraud. So, you know, ministries responded quite correctly.

But OAG did not think back to the audit they did just a year before and think, “Well, why is this different than those results?” and “How can we improve the survey process?” — so completeness. When you do a survey, like when you do polling or statistics of any kind, you have to think about making sure that you have a complete sample, right? You’re examining all parts of the puzzle.

You also have to test those questions. There is good practice for ensuring that the way that you frame questions — “Does your ministry have a policy?” — are not so specific that they conflict with what the answer would be.

Finally, the survey process that they went through only provided a yes-no answer through a drop-down menu. No opportunity to provide additional context or explain what CFOs thought was relevant information.

[7:25 p.m.]

So surveys — very useful for gathering information, but in this case, we have a survey that’s the sole basis for a public report and report to the Legislature.

P. Milobar (Chair): Shockingly, the AG would like to, maybe, have a different perspective.

S. Dodds: Thank you, Chair.

I can understand the confusion. When we do a survey to gather audit evidence, to be able to conclude on it in a report, to support an audit objective…. What the comptroller general is referring to in terms of the validation process would be something that would be part of an audit. We did not audit government’s fraud risk management program for a year. We did not audit the ministry practices.

What we did is we surveyed ministries to get their perceptions. We were wanting to understand how they think of fraud risk management, to elevate that discussion but really to help inform our assessment of the risk of fraud as part of our financial statement audit.

So this was not an audit. This was a piece of work that we did related to our financial statement audit.

To the other point from Carl, we did do an audit of fraud risk management at the office of the comptroller general that we tabled, I think, about a year and a half ago. We did an audit of the design of the elements of the framework that the office of the comptroller had in place. We did look at the fraud training. We were familiar with the fraud policy. We had concluded that the design of it was effective, but we did not audit whether it’s implemented effectively. We go through layers as we’re learning this.

So they were two different things. The audit of the fraud risk management program at the office of the comptroller general was an audit of the design of the elements of the framework, which was positive. The report that Charles has provided here is one of the tools that the comptroller general’s office does to monitor fraud risk. But we did not look at the implementation of that framework and if it is effectively managing fraud risk. That wasn’t what that audit was about.

I think this one was to be able to gather information. Our previous report was looking at the broader public sector. We were wanting to have that conversation about: how do you perceive fraud? How do you consider it in the terms of your operations? Do you have policies in place? Do you have somebody responsible for managing fraud risk? Have you considered a hotline? It’s those questions to elevate that conversation.

Frauds are constantly evolving. I think ten years ago we wouldn’t have been talking about cybersecurity and cybersecurity risk to the extent we are now. It is something to stay on top of, to monitor on a regular basis and to always think about if there’s….

You know, you find fraud. Finding fraud is a good thing. You understand what you need to be responding to. It’s being able to be on top of it, have those conversations, increase our awareness of what the risks are and how we manage them and how we evolve as the challenges to our operations and our organizations evolve.

I’m just going to see if Stuart or Mark would like to add anything.

S. Newton: Yes, sorry. Just one other thing.

The important thing to remember about any time we do audit work is they are point-in-time events. We do a piece of work in 2022, and we do a piece of work in 2023. We’re only opining on the information at that point in time. It’s not that we do a piece of work and then forever or for the next 20 years that is the defining sort of piece of work that is operationally…. Like, it’s actually operating as intended for an extended period of time.

They’re all point-in-time pieces of work. So there is the possibility for point-in-time pieces of work, over a couple of years, to be different. That would be the only thing that I would add to what Sheila had to say.

R. Merrifield: Just a couple of clarifying questions. The first one is: who took the survey? When you say it’s the ministries, who within the ministries actually took the survey?

S. Dodds: We sent the survey to the 22 deputy ministers at that point in time, at September 2022.

Mark, can you speak to…? Do you know who responded?

M. Castator: It was generally the CFOs that responded.

S. Dodds: The chief financial officers.

R. Merrifield: So it was the same people that responded within the survey that then were validated?

M. Castator: Yes.

S. Dodds: I can’t speak to the process that Carl and his team went through to validate those surveys, but it was….

[7:30 p.m.]

We were not looking to conclude on their responses being: “That’s exactly what’s in place.” We were not auditing their responses. We were gathering their responses to understand how they see the practices and how they perceive risk in their organizations, to help us understand the potential impact of fraud on financial reporting.

R. Merrifield: Would it be safe to conclude…?

Sorry. With your permission, Chair, one last clarifying question.

On the reports, were the surveys anonymized, or could you tell who was responding?

Interjection.

R. Merrifield: Okay, so they were not known. Would the conclusion then be that while there are strong policies that are in place, they are not necessarily implemented to the same level that they are present?

S. Dodds: We did not reach any conclusions because the survey was just to gather information. But as part of our audit, when we were out meeting with the CFOs and ministry staff, going through our planning for the audit of the financial results of each ministry, we were able to follow up on some of those questions. So it was really informing us to inform our audit planning.

I just want to make a note that Carl referred to conclusions in the report, but there are no conclusions. It is just sharing with you information that we gathered through the survey, as part of our broader audit of government’s summary financial statements. But it’s information for the office of the comptroller general as well.

Your response was perfect. It was: “Here are some different perceptions. Are ministry CFOs understanding fraud risk management? Are they understanding the central policies that the comptroller general has established? Are they understanding the importance of the training?”

The fact that there was the work to work through with ministries around corporate responsibilities and ministry responsibilities is what helps reduce the risk of fraud, because you’re talking about it. You’re more aware of it. If something comes up, you know where to report it.

C. Fischer: Well, just to your question, I can confirm that in each and every ministry, the government’s fraud risk management policy is fully in place and fully effective. We know that not just because of the engagement with those chief financial officers and the representation they make annually to us, but we do an annual fraud risk assessment that includes Charles going out and meeting with the financial leadership teams in each ministry to talk about their experience and keep advancing that program.

So we do take the monitoring and validation process annually very seriously, and that’s included or outlined in the compliance report that we included with our submission. I think it’s Appendix C or D.

P. Milobar (Chair): I guess from my perspective…. I recognize this isn’t an audit per se, but every other audit report we have has a series of recommendations for ministry-specific or program-specific audits that are done as to things that could be done better.

We have, obviously, conflicting survey results and impressions. OCG is saying: “No, no, it’s 100 percent implementation of fraud risk policies and programs in place.” You have CFOs that weren’t acknowledging that for one reason or another, even on a yes or no. One would hope that a CFO would answer, would check the box, “Yes, we have,” even if it’s the most rudimentary question around fraud risk — that they would know that there’s some sort of fraud risk, even if there’s not a chance to put any qualifier in there.

I guess my bigger concern or question is: what’s the point of all this if there’s not going to be any next step or potential changes or things that need to be improved upon? You read these, and it’s almost like we’re hearing that government has zero exposure, and they’re magically the only organizations out there that have tackled fraud risk, and they have no more steps to take.

I can tell you, as someone with a background in bars and liquor stores and things, just as cannabis and the liquor board would be, there’s massive potential in there, in just this one area.

[7:35 p.m.]

So what’s the point of all of this if there’s not even a next step of any type of follow-up whatsoever that is very clearly spelled out of anything out of this, other than that we have duelling offices debating the validity of a survey?

S. Dodds: Thank you for the question. Infrequently, we do issue an information report. It’s not part of an audit, we’re not reaching conclusions, and we don’t provide recommendations.

Part 1 of this work, which was when we were surveying the broader public sector entities, a similar report…. We did that, surveyed them, to gather information to inform the planning of our audit.

We ask questions about fraud of CFOs every year. We expanded what we were asking to get that sort of broader sense of information. We shared that in the first report. There were no conclusions, because it wasn’t an audit. We were not looking to audit it, but we have been focusing on it. We did do an audit of the fraud risk management framework on Site C. We did do an audit on the fraud risk management framework that was established centrally through OCG.

They’re all contributing to a better awareness of fraud, an awareness of what the office of the comptroller general has in place, which, in itself, is going to be a deterrent, as people understand that there are eyes on it and there are processes in place. We’re not telling organizations or the fraudsters what’s in place and how to navigate it. We’re saying that the opportunity might be less and the likelihood of getting caught is likely to be going up as the controls increase.

The purpose is for our summary financial audit work, for that financial statement audit work. But the real purpose in bringing it forward is to have that dialogue around fraud risk and how significant it is. There are practices that can be established, and we should always be paying attention to it.

S. Newton: Just one other thing to add. The original point was to gain impressions on fraud risk management. It helps us do our work.

Also, in providing those in a more public forum, we do know, talking to some of the people that we audit and engage with, that that type of information has sparked debate across a number of organizations around: “Okay. Well, you know, they are talking about fraud. We never really considered fraud was important.”

Now that we see that organizations are talking about it, that they have a risk, they are expressing opinions on the likelihood and importance. That’s entering into the dialogue that occurs in some of those entities themselves at the board level, to then be able to discuss fraud and fraud risk management. Had we not done these reports, I don’t know if we would be being told that that level of dialogue is actually occurring. So that is one of the drives for our office in bringing fraud risk management to the forefront, is to continue the conversation.

Everything we’re learning about fraud is the more you’re talking about it, the more you’re open about it, the more you’re being quite candid about what is occurring but also how you’re dealing with it, the less likely you are to be subject to it and the more likely you are to put things in place.

Increasingly, as fraud schemes change, you have to actually change what you do in order to be able to prevent and detect them. So by having that level of discussion and dialogue and a sense of an increasing perception that there may be a fraud risk, people tend to do more work in the fraud area, versus what we used to do in relation to fraud, which is that nobody wants to talk about it. “It never happened to me, so we’ll just assume people are taking care of things.”

I think that’s part of what’s evolving in relation to fraud. It’s really, to Sheila’s point, the dialogue, but also to get the perceptions out there.

S. Chandra Herbert: I think maybe it’s possible to hold what seem to be two conflicting views in your head at once, and I’m going to try to do that.

I think what I’m hearing is that the fraud risk was low in terms of the assumptions for the summary statements. That’s my understanding. But in doing that work, people may have answered questions very literally. Like: “Do we have a fraud risk policy? Well, my ministry doesn’t have a specific ‘my ministry’ fraud risk policy. There is, of course, an all-of-government fraud risk policy. But you’re asking: does my ministry? If that’s yes or no, well, no. Mine doesn’t.”

You hear that it doesn’t specifically have a my-ministry fraud risk policy, so that sounds concerning. I guess that’s where I read this, and I go: “Oh, no, 50 percent don’t have a fraud risk policy.” Well, actually, they all do, because all of government has a fraud risk policy.

[7:40 p.m.]

I do thank you for digging into it, trying to get that dialogue going. I do understand the comptroller’s point that that could lead people to conclude erroneously that there is nothing being done.

An interesting report. It’s very specific, so it’s not quite the fraud that some of us might be thinking about.

Thank you for that.

R. Merrifield: As Stuart was speaking, my next question was on what the comptroller general had put in the summary, as described by Charles on slide 8 — basically, that having this survey out there implies that fraud risk is not appropriately managed, and therefore it’s going to increase fraud risk. What Stuart was saying was that no, by talking about it we decrease the amount of risk because we’re having the dialogue about it.

I’d be curious…. My question was for Charles.

How do you understand it to increase fraud risk by showing that there are potential issues? I won’t give it more validity than you have, but how would that increase the fraud risk? Wouldn’t it signal that no, diligence needs to be had, and that this does need to be throughout the organization? I guess that would signal to me a lack of confidence in the actual fraud risk policy that everyone has 100 percent of.

C. Mutanda: My take on that would be that because of whatever coverage was received, based on the release of the report, what we saw was that it was a relatively negative take on government’s fraud risk management program and understanding of it.

That would mean, by interpretation or extrapolation, for people who may be paying attention: “Well, there may be areas within government where their internal controls are not as strong as they could be, or they’re not necessarily paying attention to all these fraud vectors.” Hence, they may be emboldened to try different fraud schemes to test the process and the system. Whenever you have that increased focus of attention by bad actors, the chances of something slipping through definitely go up because of the broad nature of government, the diversity of entities, programs and so forth.

Again, with the interconnected digital environment, it is easy to take a multi-vector approach and, essentially, do a lot of coverage or attempts, with very little capital or set-up. That is that magnitude-expanding component that’s the concern.

To give you an example, more recently we’ve noticed increases in email phishing attempts. Just due to the volume of what was going on across ministries, some people did get caught in it, not very many. However, whenever there’s that magnitude, you are risking those incidents going up.

C. Fischer: If I can add one additional piece of context, I’ve been doing this for 36 years now, and always my biggest concern with regard to fraud is low-level employees who have responsibility for managing cash or financial assets and who don’t really have the training, background or support, in some small regional office, to really do a good job of it.

Our biggest risk is employees that feel inclined to take that chance to stretch out their paycheque over the weekend till payday — because in a lot of cases, they don’t get paid very much — and then realize: “Well, no one’s really watching. No one’s really looking or reconciling or checking that the bank deposits get made every weekend.” That’s kind of a cascading event.

What we’ve experienced over the past years: our exposure to fraud in those circumstances is really an exposure of our own making. We’re not doing enough to help people understand or train people about the risks of fraud — the fact that they’re going to get caught — and to develop a better understanding of the more comprehensive nature of the checks and balances that government has in place.

[7:45 p.m.]

That’s kind of the basis of our training program and why we rolled it out to all public servants, rather than just a select few who had vulnerabilities or a type of financial responsibility. To my mind, that’s one of our most serious responsibilities: to help ensure that we protect people from making bad choices, by helping them understand.

We don’t have a lot of fraud in the province. When I talk about fraud, I talk about internal fraud. We have every instance reported to our office. Last year, there were nine reports. On two of those that we followed up, we found that there was inappropriate behaviour. It’s not a heavy impact. Certainly, I’ve never seen — nor has anyone ever seen — fraud become material enough to impact financial statements.

We do need to continue being vigilant about it, because we never know when we’re going to have another material fraud situation. They happen every few years. Our audit results, and all the evidence that we have collected over my time as comptroller general, indicates that we are doing a good job and successfully managing the risk of fraud.

S. Dodds: I’ll just follow up on the comptroller general’s point. Fraud, by its very nature, is deceptive. You often don’t know that it is happening. You’re more likely to find out about a fraud because of a whistleblower than by stumbling across it. This is the importance of being alert to it, being aware of it and understanding what processes you have in place.

From the fact that the comptroller general’s office followed up with ministries, I would suspect they have a better understanding of their responsibilities, a better understanding of corporate policy, because of that follow-up work. You increase the governance around that organization, being more aware of those fraud risks. It’s really, I guess, supporting the culture piece.

R. Merrifield: Thank you for that and for the explanation. Having come out of the private sector, I would say that I would be more concerned about the 100 percents across the board that I see than about the 50-50, 14-36.

I’ll echo what my colleague had mentioned: we can hold both of these and not see them as completely nullifying, but with an ethical slide — as you described, Carl, or the culture of vigilance that Sheila described — I think it’s important on both to really make sure that culture is present so an ethical slide doesn’t happen.

It’s easier to do when those conversations are taking place. Even if all the survey did was to provoke those conversations again and to reiterate that vigilance, I think it was a worthwhile exercise.

P. Milobar (Chair): Okay, it looks like we’re all good with this report.

We will move on, then, to the consideration of the Auditor General’s report on B.C.’s COVID-19 Response: Destination Development Grants, for May of ’23 as well.

I believe we have a couple of staff joining us online as well. We’ll take a quick recess to switch out the staff.

The committee recessed from 7:48 p.m. to 7:50 p.m.

[P. Milobar in the chair.]

P. Milobar (Chair): Okay. We will call the meeting back to order. As I mentioned, we will be looking at B.C.’s COVID-19 Response: Destination Development Grants, May 2023 audit.

We do have a couple of staff from the Ministry of Tourism, Arts and Culture that are joining us by Zoom as well. If the members in the room are wondering who else is on the screen, that would be who.

I’ll turn it back over to the Auditor General.

B.C.’s COVID-19 Response:
Destination Development Grants

S. Dodds: Thank you very much, Chair.

Now we’re onto the second report of the evening, our audit of B.C.’s COVID-19 response, specifically the destination development grants. The COVID-19 pandemic devastated B.C. tourism, with nearly two-thirds of people in the industry losing their jobs in 2020.

As part of its broader strategy for development, the B.C. government included tourism-related destination development grants, administered by the Ministry of Tourism, Arts, Culture and Sport. The program was launched under a compressed timeline, raising the risk of grant applications being inconsistently assessed.

Our audit team has provided insight on this important topic, and I’d like to recognize the team members who contributed to this audit. On my right is Laura Hatt, the assistant Auditor General, and to her right, Maxwell Edwards, the manager on the audit. The other team members were Daria Babaie, a director in our performance audit group; Alexander Gunn, a manager; Ruwa Mgodi, a manager in our group; and Julianne King, a performance auditor.

Now I will turn it over to Max to share more about what we found with this audit.

M. Edwards: Good evening, Chair and committee members. Thank you for your interest in our report on the community economic recovery infrastructure program, destination development funding stream, which was tabled on May 30, 2023. I will be walking you through the information in the Audit at a Glance, which provides a summary of the report, including the key findings, and is found on page 4 of the report.

In September 2020, the provincial government introduced its COVID-19 economic recovery plan, with an initial $100 million for the community economic recovery infrastructure program. This funding included the destination development grant stream, administered by the Ministry of Tourism, Arts, Culture and Sport. The ministry administered $41.4 million in grant funding that went to 106 community-led, small-scale infrastructure projects throughout B.C. to support the province’s economic recovery. Grants went to local governments, not-for-profit groups and Indigenous organizations.

During our audit, we had the opportunity to speak with some of the organizations that had received funding. Recipients that we spoke to all gave positive feedback about the grants and the opportunities they had enabled in their communities. We examined the ministry’s development and administration of the grant stream between September 2020 and November 2022. We concluded that the ministry administered the destination development grant stream according to most government transfer payment policies and program guidelines. However, there were some minor gaps and inconsistencies in the evaluation process and the monitoring strategy.

I will now provide a summary of the three main findings from our audit. First, we started off our audit by looking at whether the ministry had established the destination development funding stream according to government policy and program guidelines. We found the ministry had followed the appropriate guidelines, including receiving necessary approvals to establish the program, setting appropriate eligibility criteria and funding requirements, and developing written funding agreements with all of the successful grant recipients.

Second, we looked at the evaluation process that the ministry established, to see if it aligned with government guidelines for selecting funding recipients. We found that the ministry used a systematic process to evaluate applicants, using eligibility criteria including multiple rounds of review. We did note some minor gaps and inconsistencies in the evaluation process, including instances where some evaluation documentation was missing.

[7:55 p.m.]

We also noted that the ministry had conducted a due diligence process, though that process was not clearly defined in the evaluation guidance.

Third, we looked at whether the ministry established a strategy to monitor grant recipients. We found the ministry had established a monitoring strategy that tracked recipient compliance, and the ministry addressed instances of non-compliance by grant recipients. However, we found minor issues in the monitoring process that included delays by recipients in submitting expenditure information as well as some instances of recipients sending in reports late and gaps in the ministry’s documentation of compliance tracking.

We made four recommendations that focused on the evaluations, funding decisions and monitoring processes so that lessons learned from this program can be carried forward to the ongoing destination development fund and future tourism grant programs.

We are pleased to note that the ministry has accepted these recommendations.

To conclude, I would like to extend our appreciation to the team at the Ministry of Tourism, Arts, Culture and Sport for their support and cooperation throughout this audit.

Thank you, and I will now turn it back over to the Deputy Auditor General.

S. Dodds: Thank you, Max.

Lastly, I’d like to draw your attention to the bottom of the Audit at a Glance, with the three questions that we’ve posed that you may consider asking of government. How will this program evolve to support tourism development? How will the program monitor the economic impact of grants? And what is being done to help ensure all of the projects are completed?

I hope that provides a good overview of the report. And again, we’d be happy to answer any questions after the ministry’s presentation.

P. Milobar (Chair): Just before we get to the ministry presentation, Carl, anything to add from the OCG?

C. Fischer: I have no further comments, Chair.

P. Milobar (Chair): Okay. So we’ll turn it over to the ministry, and then we’ll open it up for questions after your presentation.

N. Mayhew: Good evening, everyone. My name is Neilane Mayhew, and I’m the deputy minister for the Ministry of Tourism, Arts, Culture and Sport.

I want to, first, thank you for creating the opportunity for us to participate virtually. I had intended to be there in person, but I came back from overseas recently and, unfortunately, got COVID. So you’re glad I’m not in the room.

I want to begin by acknowledging the territory. I am coming to you from the territory of the lək̓ʷəŋən-speaking people, presently known as the Songhees and Esquimalt First Nations.

I’d also like to introduce Amber Mattock, who is joining us. She is the acting executive director of the tourism branch and will be providing me support in answering any questions that the committee may have.

I thank the Auditor General for the presentation.

I will just provide a bit of an overview with respect to the ministry’s response. I understand you have the presentation that we provided in front of you. So I’m just moving now to slide 2, which is the overview.

As was noted, the Ministry of Tourism, Arts, Culture and Sport did accept all four recommendations of the Office of the Auditor General related to the community economic recovery infrastructure program, specifically the destination development stream.

Before I go on to speak about how we incorporated some of the recommendations into further work or further streams of funding, I just want to give a little bit of context around the conditions that the province was in when we launched the CERIP program, specifically the destination development grants.

As was noted, we were in the middle of the pandemic. Tourism was one of the hardest-hit sectors. Certainly, as a partial response to the COVID-19 pandemic, the province immediately began to design and implement several programs to help offset the impacts of COVID-19 by providing financial support to businesses, communities and vulnerable populations.

As was noted, as part of these supports, the province developed the CERIP program in early fall of 2020, and the destination development grant was one of four streams of funding that was actually administered under this program. Our ministry — the Ministry of Tourism, Arts, Culture and Sport — was responsible for designing the destination development stream.

The primary purpose of CERIP was to provide much-needed infusion of funding to support jobs and projects that could get underway quickly and to help respond to the unprecedented financial challenges the tourism sector was facing. For ease, I’ll probably just refer to it as the CERIP program because it is a fairly long name.

As was noted, the program had to be developed and delivered very quickly — it was over a span of just a couple of months — with limited resources and while the ministry was certainly helping to support the sector in other ways during COVID.

The application intake window opened on October 1 of 2020. Successful applicants were announced in February of 2021. There was a second round of successful applicants, and those were announced in September of 2021.

[8:00 p.m.]

The grants were intended to provide funding for shovel-ready tourism infrastructure and amenities to support the communities to build and grow tourism products and serve as a boost for job creation.

Despite the challenging circumstances and compressed timelines, the ministry met most of government grant policies and program guidelines while administering the program. The CERIP program concluded in the fall of 2021. However, as the pandemic continued and recovery needs were acute, a further $30 million was approved to support destination development projects. In the fall of 2022, the ministry launched a redesigned destination development fund.

Actually, the timing of the audit was particularly helpful for us, because the audit had been started and we were able to get some feedback from the Auditor General as we were working to develop that redesigned program, so we implemented a number of improvements that respond to the recommendations that were in the finalized report of the Auditor General.

Turning to slide 3, I’ll just respond quickly to some of the key findings.

As was noted, the Auditor General did find that the ministry administered the program according to most government transfer payment policies and program guidelines. We followed appropriate approval processes, established appropriate eligibility criteria and implemented a systematic applicant evaluation process. We did accept all of the recommendations, and there are no outstanding recommendations.

Turning to the specific recommendations — I’m now on slide 4 — this was the recommendation specifically related to evaluation guidelines. In response to recommendation 1, in the redesigned program that was launched in the fall of 2022, we did ensure that the evaluation guidelines were clearly defined in all aspects of the evaluation process. We developed a more detailed evaluation guidebook to ensure that the process was clearly outlined at each step of the review, evaluation scoring and decision-making phases.

The program team also developed robust risk assessment instructions and criteria and scoring guidelines for staff and associated training for the program staff as well as the adjudicators. In addition, the adjudication team was provided with an evaluation scoring matrix to guide each phase of evaluation. This was implemented in the redesigned destination development fund.

Turning to the next slide — slide five — which relates to recommendations around documentation, in the newly designed destination development fund, we were able to purchase and implement Salesforce program management software. That software actually enabled us to improve the documentation, so the software provided ample space for us to record rationale for evaluation, both by adjudicators and program leads, as well as for clearly documenting decisions by the program director.

The roles and responsibilities for all program staff were clearly delineated, and the clear progression in the evaluation from the adjudicator to the program lead to the director is able to be documented in that system, and therefore ensure that the rationale was recorded and documented at each step in the process.

Turning to the next slide, which relates to recommendation 3 and formally defining a due diligence process and evaluations guidelines…. Specifically there in the redesigned program, we do, as I noted, have a detailed evaluation guidebook that’s there to ensure the evaluation process, roles and responsibilities were clearly outlined at each phase of the review, evaluation and decision-making process.

We also implemented in the newly designed program a two-stage intake process, whereby we first had a stage 1 of invited expressions of interest to determine eligibility of the project and its strategic alignment with the program objectives, and then, after evaluation of those expressions of interest, we invited proponents to submit a full application that we were able to then assess against the program objectives, risks and the ability to deliver the project within the program timelines.

[8:05 p.m.]

This system provided efficiencies for both the applicants and program staff and helped to ensure clear alignment with the program objectives at the early stages of the evaluation.

Turning last to recommendation 4, which is on slide 7, we did improve the design of the monitoring strategy to ensure we were provided with timely expenditure reports to be able to monitor compliance. We did implement more simplified and clear instructions with respect to reporting progress.

We actually aligned periodic progress reports to a specific date, being January 31 of each calendar year until project completion. This meant that applicants didn’t have to determine how far along they were in the project, where we had before said: “Upon a certain percentage of completion.” We asked for a report this way, there was a clear deadline attached, and each year they have to provide a progress report until conclusion. That just eliminated the uncertainty of when to submit reports by attaching a specific date.

Last slide, slide 8. Just in summary, I want to express my appreciation to the Auditor General team. As I said, we were in the midst of developing our redesigned destination development fund at the time the audit was going on. The work that the Auditor General did certainly allowed us to take learnings from that and make sure that we improved the administration of the redesigned destination development fund, which was launched in the fall of 2022 and has been fully implemented.

With that, I’m happy to turn it back.

P. Milobar (Chair): Okay. Thanks for that. Questions?

S. Chandra Herbert: If I might ask…. I appreciate…. I worked in grants, I worked in reporting, so I understand how sometimes reporting can be very onerous. Sometimes reports can be late. Sometimes they can ask silly questions. Sometimes they can be really, really useful and really get you to think about your work and what you need to do, and help governments understand where governments need to change.

I guess the question I have is — and the Auditor suggested it, but it’s a good one — is really looking at the future of these projects and how we assess the success of the project so that we can modify any regulations, any rules, because one community may think this is the best project ever to help them achieve economic success, and then in two years, nobody’s using it again.

I don’t know. Just curious. Five years, ten years down the road, do we look at — was this just a flash in the pan, or was this good long-term use of money? Whoever wants to answer that one.

S. Dodds: I think that’s a better question for the minister to answer.

N. Mayhew: Yes, certainly. We do…. As I said, in the redesigned program, we’ve asked for more detailed reporting than we did at the first outset, I think, certainly took some learnings and made sure that in our required progress report that we asked for them to report back on.

There are a number of things that we asked them to report on, including things like increased visitation. Have we seen increased tourism expenditure or attraction into the area? Then certainly looking at community benefits as well in terms of improving visitor experience or access­ibility.

Those are some of the things that we do ask for under the destination development fund that was redesigned and launched. We asked for that information to be provided through the periodic reporting.

I’d have to turn to Amber to know when the last reporting cycle is. You mentioned, you know, two years, five years, ten years. I’m not sure when the last date is that we would be asking for a report back on the projects.

S. Chandra Herbert: Just to jump back in, thank you. I’m not trying to suggest that these poor small communities should keep reporting into forever. I just think it might be useful for the Tourism Ministry to consider looking at what are those projects that help the community really grow, because I think we sometimes look at these things and go, oh well, they’re the reason why visitation increased, but there can be so many reasons why visitation increases.

It would be interesting to see just what were those destination developments that really did develop a destination as opposed to other good things, which maybe the locals really liked and tourists like too but weren’t maybe the things that actually did develop that destination.

Anyway, I’ll just leave that there.

[8:10 p.m.]

P. Milobar (Chair): Any other questions?

Renee.

R. Merrifield: Sorry, I feel like I’m monopolizing.

I’m going to piggyback on a little bit of my colleague’s questions, and that is: on these recommendations and on all of the different things that were implemented, how does it all come together?

We’ve got Salesforce project management software, but then one of the other recommendations is looking at the due diligence process. How is that then used for that due diligence process? Does everyone have access to all of those comments and all of that reporting? Then how does that actually go into the matrix in which those projects are evaluated?

I’m looking for things that would reduce the amount of subjectivity for each of these different projects. Then I have a follow-up question on the data aspect, but I’ll leave it there for right now.

N. Mayhew: Yeah, for a detailed answer in terms…. Salesforce is accessible by anybody that’s engaged in the program in terms of doing the evaluation, so the adjudicators as well as the program leads. The documentation happens at each step of the process in terms of the evaluation.

As to the matrix and how that’s incorporated specifically into the software itself, I’d have to ask Amber to respond to that.

A. Mattock: Thanks, Neilane. I can speak to that.

The Salesforce software is much more detailed in terms of…. The matrix is actually built into the software. Staff are reviewing applications and commenting on each of the different criteria and objectives of the program as they’re evaluating, so that matrix ties back to the program objectives.

Each of those evaluation steps is considered by, first, the adjudicators, and then it goes through a multiple three-phase process as it moves up the line to final approvals. There is that tie-back in terms of the ability to actually review what’s been documented in Salesforce from this first level of adjudication through to the program director and making recommendations for final approval.

R. Merrifield: Okay, awesome. I can hold my next question for when….

S. Chant: Really quickly, 106 were approved. How many came in?

N. Mayhew: The number of applications we received?

S. Chant: Yup.

N. Mayhew: I don’t have that at my fingertips.

Amber, do you know how many we received?

A. Mattock: Not off the top of my head, Neilane, but I can find out.

N. Mayhew: We were well oversubscribed, I would say.

S. Chant: That’s, I guess, the answer I was wondering about. Thank you.

N. Mayhew: Actually, we initially had only $20 million, and we were very oversubscribed so then did get further funding approvals to allow us to disperse another just over $21 million on top of the original $20 million. We actually didn’t need to go in and ask for more applications. We had sufficient projects in that very first intake because we were so oversubscribed.

A. Mattock: If I may add to that, Neilane.

We did have, I believe it was, over $100 million in requested funding supports through that first intake. We don’t have the specific number of applications, but the financial ask was well over $100 million.

P. Milobar (Chair): I’m assuming that this hasn’t happened, but I just thought what the heck, the timeline seemed to match up.

The report was done or the recommendations, changes have been made or adopted, but we’ve also had a change in minister. Has there been a further change to the absolute most current way of people applying and seeking these types of funds, or is it still all status quo based on the recommendations from the Auditor General report?

N. Mayhew: We don’t have an open intake currently. When we launched the destination development, the redesigned fund, in the fall of 2022…. We launched that, and we have actually used that single intake for the funding that we have to date.

We don’t actually have an open intake anymore because we don’t have any more funding to provide. That intake in the fall of 2022 is what is being used to disperse the $60 million, I think it is, that we had funding approval for.

P. Milobar (Chair): Okay. I was more wondering about any future program.

N. Mayhew: We don’t have an open intake.

[8:15 p.m.]

R. Merrifield: Going back to what Spencer was asking in terms of the economic impact…. If I step back even one step further, I just want to say thank you. Thank you for this initiative. Remembering where we were in 2020-2021 and just how the tourism industry was decimated, I know that this was a lifeline for many. So thank you for doing the work, doing this on the fly and, to our Chair’s comment, making sure that this is ready for how we move forward.

This is an awesome opportunity to look at some of the economic impact of the grants and to see exactly how that went, but also just really data collection. I would encourage — if that’s not already embedded into even the Salesforce aspect of what was done — data collection for building the business cases forward.

Yes, we want to know if it did actually have an impact but also for how we move forward in the future and how we create that stimuli for communities around B.C. and for the tourism sector. I just would encourage you to take a look at that and to make sure that we’re monitoring that and collecting as much data as possible to spur it on forward.

N. Mayhew: Yeah. Thank you for that comment. I absolutely agree. We are collecting as much data as we can and looking at where it has been dispersed throughout the province, where those investments were made, on what types of things those investments were made, where it was spread out regionally. We’ll be using the report facts to also look at the economic impact.

We also work very closely with the regional destination management offices that are set up in each of the tourism regions and will certainly be looking to partner with them as well.

I think there was an earlier comment about how it’s sometimes hard to tell what specific tourism infrastructure amenity was the draw into that community, because there are many factors that determine where a visitor goes and why they go to a place. We’re certainly always working with our tourism sector partners to try and make sure we’re getting as much data as we can and a handle on what it is that’s drawing people to various parts of the province.

R. Merrifield: Absolutely. Thanks.

S. Chandra Herbert: I noticed it has been answered by government, but one thing that did surprise me a little bit was the question that these are supposed to be shovel-ready projects ready to go, but there wasn’t a requirement that they have approvals or permits in order to actually go. They’re shovel-ready, but maybe not with local government approvals or something. It seems like a small oversight, but it could be a major oversight depending on what happened.

N. Mayhew: Yeah, that was a learning.

S. Chandra Herbert: Yeah, for sure.

N. Mayhew: That was a learning from the first one, for sure. We did actually have, of the 106 projects we had, four that did not proceed.

Certainly, in the redesigned destination development fund, we do ask them to actually tell us that they’ve received the appropriate permits to be able to proceed with the project.

S. Chandra Herbert: Thank you for mentioning…. I also read about Salesforce. I think it was Salesforce. Funny equipment to use. But hey, you use what you can use to try and track the data because applicants always want to know why they didn’t get it or if they did get it.

I guess the auditor has to be sure that there’s no-one playing favourites, so that information is really important — if it’s ever actually looked at. I guess it’s a good thing we have our trusty team of auditors here who are able to dig through that and make sure that the i’s are dotted, t’s crossed and so on. This is good work, but you want to make sure that people feel their money is spent well. I know there was only so much money out there to support the tourism industry in a time that really, really needed that help.

I’m surprised that there weren’t more mess-ups, so to speak — just the amount of money, the amount of need out there at the time. I know the desire to get it out the door as fast as possible. It’s not happening fast enough. But it was able to, with clear guidelines and a clear idea from the community of what they needed.

Government was able to respond in a good way, and certainly, the community, I’ve heard, all over the province has noticed that. Nimbleness — we don’t hear about it a lot, but government can be nimble and, in this case, I think was, in a really good way.

P. Milobar (Chair): Any other questions? No.

Okay. We will take a very short recess so staff, if they want to, can head out.

We do have one piece of other business. Jackie’s got a motion she’d like the committee to consider, so we’ll get that distributed either during the break or, hopefully, here. Then people can take a quick look as well.

The committee recessed from 8:20 p.m. to 8:22 p.m.

[P. Milobar in the chair.]

Referral of Matter to
Public Accounts Committee

GOVERNMENT RESPONSE AND
RECOVERY EFFORTS FOR
2021 LYTTON WILDFIRE

P. Milobar (Chair): Okay. We will call the committee back to order.

Jackie Tegart had a motion that she would like to discuss with the committee. So maybe I’ll just turn it over to you, Jackie, right away, and you can move it and speak to it, if you like, and then we can have some conversation.

J. Tegart: I move that pursuant to section 13, sub (2) of the Auditor General Act, the Select Standing Committee on Public Accounts request the Auditor General undertake an examination of the government of British Columbia’s response and subsequent recovery efforts related to the June 30, 2021 wildfire that devastated the community of Lytton and the immediate surrounding area, with a view to supporting the return to homes and communities, and that the examination include a review of processes, timelines and results as they relate to initial response, ongoing recovery efforts, procurement and public expenditures of funds.

P. Milobar (Chair): Is there a seconder? MLA Merrifield.

Jackie, did you want to speak to it?

J. Tegart: Thank you very much, and thank you to the committee. As you’re aware, on June 30, approximately 90 percent of the community of Lytton burned to the ground. Lytton had been the hot spot for a number of days in the country, and June 30 was one of those days. Wind blowing briskly, the temperature was in the low 40s. People were indoors with their curtains closed to keep the sun at bay.

It’s a miracle that more people did not perish in this fire, considering the conditions, although we sadly lost two residents that day. The fire moved so quickly. People literally ran for their lives. The stories told of that day are harrowing. It’s a day etched in the memories of so many.

[8:25 p.m.]

In the aftermath of the fire, government and the Premier of the day assured the people of Lytton they would be there for them. They would rebuild the community of Lytton. They would have their backs.

Well, 838 days later, an estimated $30 million later, not a house or business has been rebuilt, and my constituents are looking for answers. We have written letters to multiple ministries, to ministers of the Crown, to the Premier. We have tried to get clarity around who’s in charge of the recovery that was promised and who signs off when the dollars are spent — to no avail.

Two years and four months later, my displaced residents are absolutely disillusioned, disappointed, distrustful and, quite honestly, angry at the lack of progress in getting them home. In fact, they are planning a public rally this week to bring attention to their plight — two years later.

I put this motion forward to provide answers for the people of Lytton and for the people of British Columbia. If this is the process of recovery that all communities in B.C. will be expected to follow when disaster hits, then we must learn from this.

I respectfully put this motion forward and ask for your support, for the people of Lytton and for the people of British Columbia.

Lytton was seen as the poster community of climate disasters. We have an obligation to learn from what’s happened in Lytton. Quite honestly, this motion is after looking at every other avenue available. I hope you’ll support it.

P. Milobar (Chair): Any discussion or comments?

S. Chandra Herbert: Is it appropriate to ask the mover questions?

P. Milobar (Chair): Yeah, I think we can kind of go with it. Sure.

S. Chandra Herbert: Okay. I guess my question is…. I never would have thought an army of auditors would speed it up. Do you know what I mean? I guess my question is how the member believes that having auditors would help make it faster in this circumstance.

J. Tegart: I would respectfully suggest it can’t go any slower.

What my people are asking for are answers, and we can’t seem to get the answers anywhere else.

P. Milobar (Chair): Both Jackie and myself, actually, had met with the Auditor General and the assistant Auditor General in the summer with a similar request and a pretty long, long meeting and discussion even then. So this has been another four or five months later.

Even then it was made very clear that — and in speaking, myself, even with the mayor of Lytton — it’s really around just a lack of transparency on timelines and funds and who really was responsible for decisions. And just trying to get an impartial set of eyes — that this is what they do, they dig into these types of things.

I mean, realistically, it’s going to take probably a year, a year and a half to see even that audit come forward. So it isn’t 100 percent, in my mind, even about necessarily speeding up anything from today over the next year and a half. It’s about being able to provide clarity and answers to people that they may have a little more faith in. Because, frankly, right now their faith in the institution of government in general, regardless of any political stripes, has been shaken to its core because of the 838 days.

That is kind of how I’m viewing this. This is more about how we can try to get some clarity and transparency and answers to the residents versus strictly a timeline piece. It’s really around that side of it as well.

S. Chant: You say you met with the Auditor General in the summer to discuss this. What was his feedback at that point?

J. Tegart: The letter was sent on July 5, and no response.

S. Chant: But you met with him before that?

P. Milobar (Chair): We met with and then sent a…. So we met on July 5 as well.

S. Chant: And they did they recommend you send a letter? Or you presented a letter at that time?

P. Milobar (Chair): No.

[8:30 p.m.]

We met with the Auditor General, followed up with a letter summarizing the meeting and the request on the same day, after the meeting was over. So that’s how it was all done on the same day. We came to Victoria and met face to face. To this point, unless Jackie has had a response…

J. Tegart: None.

P. Milobar (Chair): …we’ve had no response to that letter. That’s why Jackie was…. With the provisions….

The Legislature can direct the Auditor General. We can, too, as a committee. We have that authority. That’s how this motion came to be. We actually have that authority to help direct their work throughout a year.

S. Chant: I wonder if we are within our realm to request a response from the Auditor General to the letter.

I’m not trying to delay or anything. I just feel like I’m missing a piece of the equation about that, just in terms of what their response would have and should have been. I would be interested in that.

J. Tegart: I’ll just respond. I mean, a letter from July 5 on an urgent matter and no response. We have sent letter after letter.

P. Milobar (Chair): Jennifer, did you want to add something?

J. Rice (Deputy Chair): I have a few comments. Before I get there, I’ll let other people speak.

I just have a technical question that maybe the Clerk could help us with. I understand that if this committee requests an investigation by the Auditor General, they have to carry it forward. It’s not often. I don’t think it happens very often, but as the Chair mentioned, it’s completely and entirely in our realm.

I’m just curious. I know the Auditor General can investigate Crown corporations and health authorities and public institutions like universities. Does the Auditor General have the authority to include local governments in their audit reports?

P. Milobar (Chair): When we met with the Auditor General, we were wondering the same. We kind of looked at it. It goes back and forth. It’s how you want to interpret, I guess, the flow of the money, in terms of it being handed off to municipalities or not.

That was one thing we were expecting an answer back on and haven’t received any follow-up or answer to. Again, not to put words in Jackie’s mouth, but I think that’s why this was seen as an opportunity to try to get some semblance of whatever depth of power they have to look into what they can look into within that situation, to try to provide….

Whether or not they’d be able to encompass every single thing, perhaps not, but there were certainly multiple ministries involved over the last 838 days. Surely, the Auditor General has some legislative ability and oversight to dig into and look into it, not just financially but even performance-wise.

R. Merrifield: Two things.

One, even if the Auditor General couldn’t go into, let’s say, the books of the local municipality to say: “This is where the money went, and then we can’t see it anymore….” It is as indicative of what’s happening as being able to trace it all the way through or being able to understand the entirety of the process and where things are breaking down.

I also want to just echo…. Looking at the 2003 Okanagan Mountain Park fire, where we lost over 200 homes, versus Lytton, where we lost over 200 homes, and the speed at which one was rebuilt and the speed at which this is not being rebuilt….

We have a huge issue. Something is going on. I think that the fear is…. Now we have two more Lyttons. We’ve got the Shuswap and West Kelowna, where we’re going to have to literally rebuild 200 homes each on those two sites.

I think there’s a huge amount of urgency in understanding what is happening that’s breaking down and how we can move forward in a different way, in perpetuity, regardless of whether it’s these two communities or whether it’s the Sumas Prairie flooding.

[8:35 p.m.]

S. Chandra Herbert: I guess in terms of where Renee is coming from….

I don’t know. I don’t want to put words in your mouth.

It makes me consider. We do have a number of other areas that have been impacted, not in the same way as Lytton, obviously, but with similar questions around reconstruction and rebuilding. You look at the Sumas Prairie. I think that’s a good example. I think we look at different communities across B.C., with flooding and so on.

I guess that’s my question. This is very specific to Lytton. I understand why the member would bring it out of her own community. Is there not something also valuable in asking us to look at that question of disaster response in general for the reconstruction phase? I wonder. Obviously, the Auditor General, I think, would look to the biggest areas where reconstruction is necessary. I’m just curious if that’s useful.

Also, with the Auditor General not here, I’m not able to ask them. What is in their upcoming workplan for the year ahead? If they’re already looking into wildfire response, which I would imagine they probably are…. Is it in the workplan? I don’t know. I wasn’t at the meeting. I know we had the meeting a little while ago about what our upcoming year’s request is for the Auditor to work on. It would have been awesome to have this here then so that we could talk to them at that point about it.

Is anyone aware? It’s hard for me to make a decision around something if I don’t know what is actually in the workplan. I don’t actually have the benefit of the Auditor here.

I’ve had this motion dropped on me at the last minute, literally the last minute. Not really a respectful way to treat a committee, I don’t think, given that we’re all working here together. A motion like this normally considers more consideration than, “Here it is; now is your time to debate it,” in the practices of how we’ve worked in the House.

I guess that’s where I would say my concern is. It’s last minute. I don’t have the benefit of the Auditor General here to actually go: “Are you doing this work today anyways? How do we structure it in a way that’s going to be useful to you as the recovery is ongoing?”

J. Tegart: I’d just like to suggest…. Lytton, as a community, has been devastated.

It is very specific. It is looking for very specific answers. It has been a focal point for government. I do apologize that it came late. My understanding is that as a committee, we have a right to give direction. I would suggest…. In my experience, if Lytton becomes part of a much bigger investigation, once again it will be forgotten.

P. Milobar (Chair): Yeah. I guess the only thing I would say is…. Frankly, I don’t care what the Auditor General’s workplan is for the next year and a bit.

The process is set up. We do have that ability to direct. We’re not directing on the grand scheme of audits. This is an incredibly important one to Lytton specifically, but it’s a very small overall scope compared to what they would deal with, with other ministries and dollar values and things of that nature. It’s around $30 million or so that has been moved over to Lytton, through various ministries, to the municipality or to contractors.

Trying to even get a straight answer over who paid for and did the fencing contract to fence off the highway…. You can’t get an answer to that. It’s those types of things…. You need the power of an Auditor General’s office, in my opinion, to go out and seek those answers for the people of Lytton.

We have other legislation right now about wildfire and recovery. This is not about that. This is about, specifically, what has transpired over the last 838 days. Where did the money go? Who was actually coordinating? What lessons can be learned from that for Lytton specifically?

[8:40 p.m.]

The scope and scale…. If this was about overall recovery, then I would totally agree. What’s their workplan? But I have to have faith that the Auditor General’s office could prioritize or figure out a way to make this happen. If not, they’ll….

For any of us that have been on the Finance Committee before…. The first thing the Auditor General will do is go to the Finance Committee and say they need more money to hire a couple of part-time auditors to get this done or on a contract basis.

I don’t want that side of it to necessarily impact a decision. I can respect that is, ultimately, where other people’s headspace is at, but my headspace isn’t worrying about how they find the staff to do this, because there are other avenues. They can then go to other places within this building to seek those funds out, and this building tends to move fairly quickly when things adapt, as we just saw recently with the fourth official party and the reworking of a new independent member and everything else.

There’s always an evolving piece to some of these agencies and statutory offices and the operation of this place, so I’m less concerned about that and more about trying to send a signal to the residents of Lytton, again, on an audit that will probably take a year, a year and a half to get fully completed and out.

This really isn’t about anything other than trying to let them know that there’s an official process underway or that will be started in the near future and done by an independent statutory office of this Legislature.

J. Rice (Deputy Chair): My hesitation is around not interfering. I completely understand MLA Tegart’s frustration but also her sadness for her constituents. I have the same kind of quivering voice right now. I’m not their MLA, but I have attachment to Lytton as well, so I completely empathize with that.

I guess one of the concerns I have is to seek the answers to all the questions that she specified…. I think it’s just really labour-intensive, so if it holds back the recovery, then that’s kind of worrisome for me. I don’t disagree that we need to examine what happened with Lytton, including how recovery has been carried out.

I’m curious if it would be better to do the audit once the recovery is completed. Or if I understand correctly…. Well, maybe I should just pose the question, since we’re allowed to pose the question. I want to say, intuitively, that MLA Tegart’s goals are to just get her people home and get them home as quickly as possible. I just want to know: does she believe that will happen from the Auditor General looking at it, or does she think that possibly it could hinder it? What is the exact answer that she wants?

I know I’m just putting words and saying she wants to get her people home, but is that the primary goal, or is there another goal to look at other areas of challenge? I’m sorry if that was unclear.

J. Tegart: Well, we can’t find out where the barriers are. That’s the problem. We don’t know where the problem is. I believe if the Auditor General is given this mandate, the barriers will go down.

R. Leonard: How can you not but appreciate the frustration and angst that this community is undergoing. I think that’s obvious. I’m concerned about why there’s been no response from the Auditor General.

I’m looking at what it is that they would be looking at. This is just my lack of appreciation and understanding of how the Office of the Auditor General might work.

[8:45 p.m.]

But in this case, it’s not a specific ministry. My sense is that we are dealing with multiple ministries, and it’s not a project, like Site C. I’m doing the thing you’re never supposed to do, which is try to speculate about what’s causing those barriers. It just seems to me that if…. The process is ongoing, I assume. I don’t know. I’m at a loss about it.

I’m just not certain, at this point, that the Auditor General is going to be able to corral it into their mandate in a way that works. I just don’t know, because it’s not like a project that has parameters around it. Yeah. It’s a struggle for me to know that this is the way to get action, to get answers that then can be responded to or raised. We keep seeing questions that the Auditor General comes up with.

I don’t know if it moves us forward. If it does, that would be one thing. But I guess I would really like to know: if it even fits within the purview, why has the Auditor General not responded at this point?

R. Merrifield: I am more afraid as a legislator of not doing this than I am of doing this. Doing this — what, it might disrupt the Auditor General’s work plan? It might be cumbersome, but it might be the only lifeline right now that Lytton receives, in terms of moving things forward.

In terms of it being our role and…. You know, I had the privilege of briefing myself today. I would say it’s absolutely the role — to figure out and to disrupt the work flow when necessary and when emergencies happen.

Just in terms of an Auditor General, you want a very specific search — i.e., on the destination, COVID funding. That’s a very specific $40 million audit program. This is the same. Like, you wouldn’t audit all of the emergency responses of all of the different…. That would be massive. This is a very specific case that can provide a lot of insight for a very broad number of emergencies that are happening around B.C.

I think as a committee, we’re really…. Yeah, I guess we have to ask our conscience: what’s worse?

S. Chant: Is there any federal involvement in Lytton?

J. Tegart: There is federal involvement on reserve. They have moved ahead. They are ready to go.

We’re talking about in the village. I could just say….

S. Chant: So there’s no federal involvement in the village.

J. Tegart: Not as far as I know.

And could I just say that I can name names of people who have died waiting to go home.

S. Chandra Herbert: This may not be the way the Public Accounts works anymore, but when I started, we used to talk about how Public Accounts has the ability to get right down to request a cheque requisition. We can really dig into a lot of different aspects.

So I guess the question is, specifically…. From what I understand, the questions are relating to the $30 million. Is that correct? Is it just the $30 million? I’ve heard from other members that that’s what we’re looking at, just like we were looking at the $40 million of destination development. Then I’ve also heard that maybe it’s the whole thing and beyond $30 million.

P. Milobar (Chair): Maybe the $30 million, I think, was really more a context piece. That’s the understanding of what has been spent to this point. It may be a little higher. It may be a little bit lower. But that’s part of the thing.

[8:50 p.m.]

It’s meant to be Lytton-specific, a from-fire-till-now type of thing, and what the dollars are is going to be in that magnitude. But we couldn’t tell you. Which, again, leads to part of the problem here — it’s that.

S. Chandra Herbert: Just to ask the Clerk, maybe: is it the kind of thing that a Public Accounts Committee could request — a meeting with such-and-such ministry to look at a certain set of questions that the Public Accounts Committee had — or is it only through the Auditor General does avenue exists?

J. Arril (Clerk of Committees): It exists through the Auditor General.

S. Chandra Herbert: Through the Auditor General. Okay. So not separately, not through the committee. Okay. Just looking for a shortcut.

P. Milobar (Chair): Garry, and then we’ll probably call the question one way or the other.

G. Begg: So just separate and apart from the ability of the Auditor General, under the act, to authorize an independent audit, is this the only thing that prevents the Auditor General from doing that? In other words, is the absence of this likely to prevent the continuation of the investigation?

J. Tegart: I don’t understand the question.

P. Milobar (Chair): There is no investigation.

J. Tegart: There isn’t an investigation.

G. Begg: But what you want as a result of what you’re wishing is that the Auditor General authorize, under the select standing committee, the public accounts act, undertake an examination of the procedure…? That’s what you want, right?

J. Tegart: Yes. I’m not wishing. I’m requesting that the committee support a request under the Auditor General’s Act, which we have the mandate to do, to have an investigation done in regards to what’s in the motion.

G. Begg: So I guess my question is: independent of that, or because of that, can the Auditor General authorize an investigation under the act?

P. Milobar (Chair): When we went to meet — and forgive me, I’m running off the top of my head here — there were two sections that we felt were relevant and that we highlighted to the Auditor General. They didn’t flat out reject it. For the one, they said probably not. For the other section, they did feel there was some merit. They wanted to go away and look at it and investigate. Again, it’s been silence.

I think it’s partly how you want to interpret an act versus…. That’s why this was thought to be the next step to try to get some action taken.

Okay. Well, we’ve probably all weighed in as much as we need to. I will call the question.

Motion negatived.

P. Milobar (Chair): We have no other business that I’m aware of, so a motion to adjourn.

Motion approved.

The committee adjourned at 8:53 p.m.