The committee met at 9:03 a.m.

[Peter Milobar in the chair.]

Peter Milobar (Chair): Good morning, everyone. We will get started. My name is Peter Milobar. I’m the MLA for Kamloops Centre and the Chair of the Select Standing Committee on Public Accounts.

I’d like to acknowledge that we are meeting today on the traditional territories of the lək̓ʷəŋən-speaking people and the Songhees and SXIMEȽEȽ Nations.

This morning we’ll be considering the Office of the Auditor General’s financial audit coverage plan for fiscal years ending ‘26, ‘27 and ‘28. I would like to welcome the Acting Auditor General, Sheila Dodds, to the meeting. I’ll turn it over to her.

Just before we start, though, we do have a bit of a hard stop to wrap up around 9:45, 9:50 at the latest, as there is a committee that follows right after us. So when we get to the Q-and-A portion, if we can keep our questions tight…. We’ll make sure we get through all the questions if everyone keeps them tight.

Then we’ll move forward with that. So Sheila.

Consideration of
Auditor General Reports

Financial Statement Audit
Coverage Plan

Sheila Dodds: Thank you very much, Chair, and good morning, Members.

I will begin by acknowledging with respect that we are living and working with gratitude and respect on the traditional territories of the First Nations peoples of British Columbia. Our work takes us all around the province, and we specifically acknowledge that our office is located on the traditional territories of the lək̓ʷəŋən-speaking peoples, the Songhees and SXIMEȽEȽ Nations.

Thank you for the opportunity to present our financial audit coverage plan for the fiscal years ended 2026, 2027 and 2028.

Joining me here this morning are Lisa Moore, to my right, who is an acting assistant Auditor General with our financial audit portfolio, and Danielle Bligh, who is a director with our financial audit portfolio.

[9:05 a.m.]

My office is mandated to conduct the annual audit of the summary financial statements. The summary financial statements consolidate the results for what is referred to, in accounting standards, as the government reporting entity.

That government reporting entity consists of central government, which is mainly ministries, as well as 138 controlled government organizations, including Crown corporations, health authorities, school districts, universities and colleges.

The audit of the summary financial statements is the largest financial audit in the province and is completed through the combined work of my office and the work of private accounting firms who are appointed to audit the financial statements of individual government organizations.

The Auditor General Act requires that the Auditor General provide to the Select Standing Committee on Public Accounts, during each fiscal year of the government, a plan for the appointment of auditors for government organizations for the following three years. The document we’ve presented outlines that plan.

It outlines which government organizations in the government reporting entity that the Auditor General — me — proposes to audit directly, and which will be audited by firms who are their appointed auditors.

The plan outlines the level of involvement the office will have with the audits of each organization. Our involvement will be one of three levels: direct, oversight or limited.

Direct involvement means that we are conducting that financial statement audit using our staff. We directly audit all ministries and a select number of government organizations.

Oversight involvement means that the audit is conducted by a firm — we refer to them as appointed auditors — but we perform oversight procedures, including attending board meetings and reviewing the work of the organization’s appointed auditor.

Limited involvement means that the audit is conducted by a firm, an appointed auditor, and our involvement is limited mainly to written communications with the organization’s auditor.

This plan is presented to you for approval, which is required by section 10 of the Auditor General Act. I would like to acknowledge the effort of the many staff who put this plan together, including Lisa and Danielle, but there’s a whole team there.

I will now turn it over to Lisa, who’s going to walk you through the details of the three-year coverage plan.

Lisa Moore: Thank you, Sheila.

Good morning, Chair, Vice-Chair, members of the committee.

We are here seeking the approval of our financial audit coverage plan for the fiscal years ending in 2026, 2027 and 2028.

As Sheila noted, the annual audit of the summary financial statements conducted by the Office of the Auditor General is the largest audit performed in British Columbia. It is conducted in accordance with Canadian generally accepted auditing standards.

At the end of the audit, based on the audit evidence obtained, the Auditor General issues an independent auditor’s report on whether the government summary financial statements present fairly the financial position and operating results of the province. Given its size, the audit of summary financial statements is accomplished through the combined work of our office and private sector accounting firms appointed to audit the financial statements of government organizations. We refer to these firms as appointed auditors.

The Office of the Auditor General is responsible for the overall audit of the summary financial statements. Canadian generally accepted auditing standards require us to be sufficiently and appropriately involved in the audits of government organizations consolidated into the summary financial statements. This plan has been developed to provide us with the appropriate understanding of government and its environment.

The Auditor General involvement in government organization financial statement audits. In deciding our level of audit involvement in each government organization, we look at risk factors, including complexity, level of public interest, financial size, likelihood of issues that would materially affect the summary financial statements. We look at these risks both at the individual organization level and at the sector level — for example, across the health sector.

We also look at the capacity of our office. We are the auditor of the ministries, and we have one of three levels of audit involvement in the 138 government organizations that are consolidated into the summary financial statements.

There is the direct involvement, where our office performs the audit with our own staff. In 2026, this will be ten organizations.

The oversight involvement, where there is an appointed auditor, and we conduct extended procedures. In 2026, this will be 24 organizations.

And the limited involvement, where there’s no fieldwork done by our office. We do, however, communicate with the appointed auditor and may direct audit work as required. In 2026, this will be 104 organizations.

For new organizations. When a new government organization is created, it is assessed whether it is controlled by government. This determines if its financial statements will be consolidated into the summary financial statements.

Under Canadian public sector accounting standards, government has control of an entity if it has the ability to direct the use of the economic resources and either receives the benefit or the loss from those resources.

[9:10 a.m.]

Under our act, we can elect to be the auditor of any new organization. As noted on page 8 of our report, there are no new organizations since our last coverage plan.

Changes to the previous coverage plan. There have been two changes to our coverage plan from what was included in the last one. The changes are aligned on page 10 of the report. These are: in fiscal 2026, our involvement with school district 63, Saanich, will move from direct to limited involvement; and, in fiscal 2027, our involvement with InBC Investment Corp. will move from direct to limited involvement. These two changes were made to reallocate resources due to the office taking on the audit of B.C. Housing Management Commission in fiscal 2026.

In addition to the financial statement audit of B.C. Housing, there will be other engagements that we will perform due to professional obligations from being their financial statement auditor.

Auditor General appointment exceeding five years. One area to note is the request as required by section 10(7) of the Auditor General Act to be appointed as auditor for government organizations for a period of more than five consecutive fiscal years. In order to fulfil our mandate, we have to balance the benefits achieved through auditor rotation with professional standards that require us to maintain appropriate knowledge and experience.

The provision in our act recognizes the need to manage the risk of auditor independence by providing a mechanism to extend the Auditor General’s involvement beyond the five years where necessary. Where we have been the auditor of a government organization for more than seven years, we employ senior staff rotation and other safeguards. This is required by the auditing standards to ensure that our objectivity is maintained. In the preparation of this plan, we reviewed each audit of a government organization where our direct involvement exceeded five years and considered if rotation to another appointed auditor would be necessary.

As presented on page 9 of the report, we are requesting approval to continue as the auditor of two organizations where we have been there for more than five years. The first is the British Columbia Transportation Financing Authority. This organization holds a significant portion of the province’s capital assets and is closely connected to the Ministry of Transportation and Transit. As a result, there are efficiencies with us as auditor of the ministry in performing this audit of the B.C. Transportation Financing Authority.

The second organization is the Provincial Health Services Authority. We have chosen to extend our direct involvement to ensure audit consistency during the year of conversion for the new human capital management system.

Organizations outside the government reporting entity. For organizations that are outside the government reporting entity, the Auditor General Act allows us to be appointed auditor of an organization not part of the summary financial statements with consent of the Select Standing Committee on Public Accounts. As noted on page 10 of the report, we request approval to continue with one engagement outside of the government reporting entity. This is the provincial employees community services fund. It is a small charitable employee trust that collects donations from the provincial employees and distributes them to B.C. charities. We conduct the review of their annual financial statements and do not charge a fee for this work.

The plan for 2026, 2027, 2028. Preparing this financial audit coverage plan for 138 government organizations is not a small task. There is a lot of work that goes into planning the rotation of audit involvement, including consideration of our history of audit involvement, our group audit responsibilities, the risk of material misstatement, geographical location, involvement across all the sectors and the impact of new accounting standards, just to name a few of the considerations.

On page 12 of the report is a summary table of our proposed audit coverage for those 138 entities, by fiscal year and by level of involvement for the fiscal three years ending in 2026, 2027 and 2028. This table is a roll-up of the detailed plan as shown in appendix A, starting on page 15 of the report. We have not included trust funds in this table as the trust funds are not consolidated into summary financial statements. They are included by note disclosure only.

We have grouped 138 government organizations by organization type, including school districts, post-secondary institutions, health authorities, hospital societies and Crown corporations. This is done so the coverage is easily determinable across similar organizations.

[9:15 a.m.]

Our approach for each organization type is to rotate through being the direct auditor while considering past involvement, size of the organization, risk, the geographical location. We also communicate with the appointed auditors of the government organization to ensure that a change in audit involvement will not impede with current audit contracts.

Risk and material misstatements to the summary financial statements are considered when determining the office’s audit involvement. To meet Canadian auditing standards, we ensure that we have a minimum of oversight level of involvement with a government organization that is material to the summary financial statements.

That said, we do rotate our involvement in government organizations with lower risk and size. These are not chosen to address a specific risk, but rather to provide us with the appropriate understanding of government and its environment, and to ensure the cross-sector and geographical coverage.

For the school districts, our proposed plan is to move to auditing three school districts directly and have oversight involvement in four of them.

Our involvement in the 60 school districts in the province has fluctuated throughout the years. From fiscal 2021 through 2023, a decision was made to reduce the direct involvement to one school directly annually. However, in the 2022 financial audit coverage plan, we reassessed our decision from performing targeted work across several school districts to building up, over the next three years, to auditing three school districts directly and having the oversight involvement for another three.

This shift has allowed us to maintain our understanding across the education sector and to meet auditing standards. As well, the audits are off-cycle from the summary financial statement March 31 year-end and therefore do not create resourcing issues for the other audits.

As noted earlier, we have decided to end the direct involvement with school district 63, Saanich, a year early due to other audit commitments. However, you will note that in the plan we take on another school district in fiscal 2027, which will bring us back up to three.

Since our plan to take on three direct and three oversight in 2022, we have determined that there are three significant school districts. They are school district 36, Surrey; school district 39, Vancouver; and school district 43, Coquitlam. These could have a material impact on the summary financial statements. This means the office has to have an oversight involvement at a minimum, and therefore we have bumped up our oversight involvement up to the four districts to cover the three significant ones plus one more to be chosen on rotation.

For the post-secondary sector, we propose to audit Simon Fraser University directly for the duration of the plan. In addition, we propose to have an oversight role in five organizations within the sector, spread across universities, colleges and institutes, each year of the plan.

For the health authorities and hospital societies, we propose to audit the Provincial Health Services Authority directly for the duration of the plan. We propose to also have an oversight role in the five health authorities and one hospital society each year of the plan.

For the Crown corporations, we propose to audit five of them directly in 2026, four in 2027 and 2028. The reduction of the audits is due to the addition of B.C. Housing in fiscal 2026. It is a large audit with many pieces, and we want to ensure that we are performing a high-quality audit and meeting the professional standards.

Our proposed plan is to have an oversight role in eight to nine of the Crown corporations across the various sectors during the three-year plan. Oversight in fiscal 2027 was reduced due to the timing and rotation of other engagements.

We have attached appendix B, starting on page 20. It is included for information purposes. It highlights the number of subsidiaries, partnerships and joint ventures that are consolidated into the financial statements of government organizations that are then consolidated into the summary financial statements of the province.

Appendix C starts on page 25. It presents the other engagements that we are directly involved in due to the professional obligations that flow from being their financial statement auditor. This includes auditing statements and claims related to federal-provincial cost-sharing agreements, as well as the subsidiaries from appendix B, where we are responsible for completing a financial statement audit, including B.C. emergency health services and the Forensic Psychiatric Services Commission. Both are subsidiaries of the Provincial Health Services Authority.

There’s also the SFU foundation and the Transportation Investment Corporation, which is a subsidiary of the B.C. Transportation Financing Authority.

[9:20 a.m.]

That, then, concludes the overview of our plan, and I will turn it back to Sheila for closing comments.

Sheila Dodds: Thank you, Lisa, and thank you for the comprehensive overview of the plan. I think it really emphasizes the complexity of government's consolidated summary financial statements and the complexity of the audit.

As required by section 10 of the Auditor General Act, we are seeking approval of our financial audit coverage plan for the three fiscal years ending 2026, 2027 and 2028.

In conclusion, we appreciate your consideration of the plan and welcome your questions and comments. Thank you.

Peter Milobar (Chair): Thank you very much for that. Any questions?

I have one. On page 19, the Royal B.C. Museum is a direct for the fiscal year ending 2024. I'm assuming that's in its full kind of collating process, or whatever you want to call it right now, to get ready to come forward, because that would have been ending already. But then we also have InBC, where it's a three year. When would we reasonably be seeing the direct audit for the Royal B.C. Museum and then the one for InBC, given the way the timelines are highlighted on page 19?

Sheila Dodds: We, I think, tend to do five years as the direct auditor. But if we want to change that, that's part of the plan. The Royal B.C. Museum — that's the last year, in 2024. If you look back in time, you'll see that we were directly auditing the Royal B.C. Museum, and I think the same with InBC.

Do you want to add anything, Lisa?

Lisa Moore: No, I was going….

Yeah, that is correct. We did the museum, I think, more than five years. I seem to think six. Yes? Okay, six years. The 2024 audit was completed…. Last May, in 2024, it would have been completed, just with the timing.

When we go through all these audits, there's a bit of an order to get to the summary, right? We usually do…. Whatever entities, they're usually done mid-May to early June. Then the CRF work is completed throughout the summer. Then, of course, we finish with all the consolidation for the summary financial statement audit work. That's finished later in the summer. Government releases the public accounts with the audit report attached to it.

As a general rule, when we're directly the auditor of an organization, we tend to be there five years. That allows time for learning curve, efficiencies and making sure any recommendations sort of flow through. It also just tends to be a normal cycle with the firms that are out there, whether it's KPMG, MNP, Grant Thornton, Deloitte, any of those firms, the contracts tend to be on a similar basis. It makes it easier timing for when we rotate through entities.

Mable Elmore: Maybe you can help me. But with respect to just…. Peter was mentioning the audit for the Royal B.C. Museum. You mentioned the five-year period. Is that correct? Is that over five years, or is that annual? I just missed that.

Lisa Moore: The year-end for the museum is a March 31 year-end, just like the province. So it would be for the five fiscal — well, we did six fiscal years. That's my understanding. The last one was for the fiscal year ending March 31, 2024. They have a new auditor for this fiscal year that we're currently in. The work was wrapped up early last summer for that.

Mable Elmore: For the direct involvement, is that typically also a five-year period, or is it…?

Sheila Dodds: What we do is…. The plan we provide each year is to identify how we propose that we rotate through the different significant organizations that are consolidated into the province's statements. Typically, we plan for five years. As Lisa said, that aligns with the contracts that firms have with government organizations. I think quite often it's three years with the ability to extend for two, so our plan is based on that.

There are situations where we choose to want to spend another year with an entity, as we did with the Royal B.C. Museum, because we did do a sixth year. So we extended our involvement at that point.

[9:25 a.m.]

But yeah, we typically will rotate through five years. It gives us time to plan for when we rotate off, gives the entity an opportunity to go to tender to hire an auditor and allows us to pick up the next one.

Lisa Moore: I was just going to add, just for clarity, this is a three-year plan, right? And that's what's required under our act to bring to the committee is a three-year plan. So that's why you won't see a full five years even though we may have done some before, and we'll do some in the future.

Mable Elmore: So it's a three-year plan you're presenting. Typically, you operationalize it as five years, and so we see the three-year. You'll present us the three, but it's rolling in terms of the five. So every year could be…. And there's a different timing in terms of when they come off and when they come on in that rolling period generally?

Lisa Moore: Yeah. Every year we bring the report to committee. It's a three-year report. Every year one year will drop off; one year will be added. So yes, it's a rolling five years. And then the rotation, we tend to…. We try the best not to have everything go on and off in one year. It's too much for the staff for change.

Mable Elmore: And I had a question with respect to…. You referenced, under the health authorities, the transition period with respect to the human capital management system, and I'm just curious about that.

Lisa Moore: The human management capital system is an HR payroll system that's being implemented across all the health authorities. To try and not disrupt that process, where there are some auditors doing it in some health authorities, we thought it was best for us to finish it in PHSA as we go through it. Therefore, it's just an easier transition for the new auditor coming on.

Mable Elmore: When did that come in? Is it completed? And just with respect to…. Often it takes time in terms of transition to new systems.

Lisa Moore: Yes, no. It's in progress across the health authority sectors currently. I don't have all the details, but it's going in stages. Every health authority is sort of implementing the system at different times. This will allow us to be part of that transition with the Provincial Health Services Authority.

Mable Elmore: Yes, it's just interesting, in terms of the process, to bring on new systems, particularly around either new computing systems or new operational systems. It's just interesting.

Stephanie Higginson: I just wanted to go back to what you mentioned about the school districts, the three of them. Because of the size of their budget — they're probably the biggest ones — you're going to have either direct or oversight involvement in them. Did I hear “always”? Or just for the course of this plan?

Lisa Moore: The auditing standards do require us, if there is an entity that is material to the summary financial statements, to always be involved. Therefore, we would have to be the auditor directly or have that oversight involvement. So yes is the answer.

Sheila Dodds: I'm just going to add to that. When we're talking material, it's significant. The size of those organizations, if there was a material error in their accounting, when we consolidate them into the summary financial statements, it could have a material impact on the consolidated statements. That's what that significance is, the size of it and the impact that could flow right through to the consolidated statements.

As Lisa said, we will either be auditing those — we call them significant components, but — large school districts or be involved with their auditors in doing the oversight role.

Stephanie Higginson: Thank you for the clarification.

Kiel Giddens: Lisa, you did an excellent job of explaining how the decisions were made in this, so thank you very much, because it answered actually the majority of my questions.

But just to pick up a little bit on the last question, with regards to the school districts and the health authorities, it's very good to see how those decisions are made and including the material entities consistently. That's very good.

I'm just wondering, for the post-secondary institutions, given that there are significant changes happening in, I'd expect, the financial situation with a number of entities right now because of federal rule changes and all that and what that means for their enrolment and all that, has there been any of that taken into account in choosing oversight or even direct, as in this three-year plan, I guess, given that it's pretty active right now?

[9:30 a.m.]

This change is happening as we as we speak, I believe. A lot of this is pretty active, so I'm just wondering if you could speak to that at all.

Lisa Moore: Sure. Those kinds of risks are considered when we plan the audit work of an entity. They would be considered by the private firms, as well, because the risk is pretty common across…. It doesn’t necessarily play for us to pick one over another entity.

We do meet with the firms monthly to discuss these risks, so it’s not like we’re working in isolation. Our knowledge is kept whole, I guess we’ll just say, about those risks in entities where we’re not directly the auditors. Plus, we also, as we mentioned, have that oversight role, so we do have more one-on-one contact in some of them.

So it doesn’t necessarily play a direct involvement in selecting the entities that are in the plan, but it certainly does in how we carry out the audit work for those entities.

Kiel Giddens: Let me just follow up, I think. Thank you for the answer.

Just in terms of…. From a risk perspective, the community colleges will have a bit more challenge meeting their mandate as opposed to the full-fledged universities. So just adding that from an oversight perspective, they need some additional risk management tools and things like that to be able to complete their mandate in especially smaller rural areas in particular.

Peter Milobar (Chair): Any other questions? No?

Okay. We do have a couple of motions we need moved. Just one or two. Two.

The one is somebody to move that the Select Standing Committee on Public Accounts pursuant to sections 10 and 14 of the Auditor General Act approve the financial audit coverage plan for fiscal years ending 2026, 2027 and 2028, as presented on March 12, 2025.

Motion approved.

Peter Milobar (Chair): We have another one that says that should the Office of the Auditor General determine that amendments to the financial audit coverage plan for fiscal years ended 2026, 2027 and 2028 are required, the Office of the Auditor General will return to the Select Standing Committee on Public Accounts with any such amendments.

Moved by Stephanie.

Motion approved.

Peter Milobar (Chair): Okay. Thank you.

Any other business by anyone?

Okay. Motion to adjourn.

Motion approved.

Peter Milobar (Chair): We’re done.

The committee adjourned at 9:33 a.m.