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37th PARLIAMENT, 1st SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Tuesday, June 11, 2002

1530

The Vice-Chair (Mr. Mac Harb (Ottawa Centre, Lib.))

1535

The Vice-Chair (Mr. Mac Harb)

1540

1545

1550

The Vice-Chair (Mr. Mac Harb)

1555

The Vice-Chair (Mr. Mac Harb)

Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance)

Ms. Sheila Fraser

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Ms. Sheila Fraser

1600

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

1605

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

Mr. Philip Mayfield

The Vice-Chair (Mr. Mac Harb)

Mr. Gilles-A. Perron (Rivière-des-Mille-Îles, BQ)

Mr. Gilles-A. Perron

1610

The Vice-Chair (Mr. Mac Harb)

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Richard Neville

Mr. Shawn Murphy

Mr. Richard Neville

Mr. Shawn Murphy

Mr. Richard Neville

Mr. Shawn Murphy

Mr. Richard Neville

Mr. Shawn Murphy

Mr. Richard Neville

Ms. Roberta Santi (Associate Deputy Comptroller General, Treasury Board of Canada Secretariat)

1615

Mr. Philip Mayfield

Ms. Roberta Santi

Mr. Philip Mayfield

Mr. Shawn Murphy (Hillsborough, Lib.)

Ms. Roberta Santi

The Vice-Chair (Mr. Mac Harb)

Mr. Greg Thompson (New Brunswick Southwest, PC)

Ms. Sheila Fraser

Mr. Richard Neville

Mr. Greg Thompson

1620

Mr. Richard Neville

Ms. Roberta Santi

Mr. Greg Thompson

Mr. Richard Neville

Mr. Greg Thompson

Ms. Roberta Santi

1625

The Vice-Chair (Mr. Mac Harb)

Mr. Greg Thompson

Ms. Roberta Santi

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Ms. Roberta Santi

Ms. Val Meredith

Ms. Roberta Santi

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

1630

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

1635

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

The Vice-Chair (Mr. Mac Harb)

Ms. Val Meredith

The Vice-Chair (Mr. Mac Harb)

Mr. Alex Shepherd (Durham, Lib.)

Mr. Richard Neville

Mr. Alex Shepherd

Mr. Richard Neville

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Mr. Richard Neville

Ms. Sheila Fraser

Mr. Richard Neville

Mr. Alex Shepherd

Mr. Richard Neville

1640

Mr. Alex Shepherd

Mr. Richard Neville

Mr. Alex Shepherd

Mr. Richard Neville

Mr. Alex Shepherd

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. John Finlay (Oxford, Lib.)

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

1645

Mr. John Finlay

Ms. Sheila Fraser

Mr. John Finlay

The Vice-Chair (Mr. Mac Harb)

Mr. John Finlay

Mr. Richard Neville

Ms. Roberta Santi

Mr. John Finlay

The Vice-Chair (Mr. Mac Harb)

Mr. Philip Mayfield

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

1650

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Ms. Roberta Santi

Mr. Philip Mayfield

Ms. Roberta Santi

Mr. Philip Mayfield

Ms. Roberta Santi

Mr. Philip Mayfield

1655

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. John Wiersema (Assistant Auditor General, Office of the Auditor General of Canada)

The Vice-Chair (Mr. Mac Harb)

Mr. Greg Thompson

The Vice-Chair (Mr. Mac Harb)

Mr. Greg Thompson

1700

Ms. Sheila Fraser

Mr. Greg Thompson

Ms. Sheila Fraser

Mr. Greg Thompson

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

1705

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

1710

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

1715

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

Mr. John Finlay

Mr. Richard Neville

Mr. John Finlay

The Vice-Chair (Mr. Mac Harb)

Ms. Sheila Fraser

The Vice-Chair (Mr. Mac Harb)

Mr. Richard Neville

The Vice-Chair (Mr. Mac Harb)

CANADA

Standing Committee on Public Accounts

NUMBER 060

1st SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, June 11, 2002

[Recorded by Electronic Apparatus]

¹ (1530)

[English]

The Vice-Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): Good afternoon, everyone. It being 3:32, I call this meeting to order. We do have a quorum in order to conduct hearings, but we don't have a quorum to pass any motions.

I would like to welcome the witnesses today.

The order of the day, pursuant to Standing Order 108(3)(e), is consideration of chapter 1, “Financial Information Strategy Infrastructure Readiness”, of the December 2001 report of the Auditor General of Canada, and consideration of chapter 7, “Strategies to implement Modern Comptrollership”, of the April 2002 report of the Auditor General of Canada.

We have with us the Auditor General, Sheila Fraser, and some other witnesses we will introduce as we go along.

Ms. Fraser, welcome. The floor is yours.

[Translation]

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada): Thank you Mr. Chairman. We are pleased to meet with the Committee to discuss the state of financial management in government. With me today are John Wiersema and Doug Timmins, the assistant auditors general responsible for this area.

In my recent reports, I have raised financial management issues, and my predecessors, various Royal Commissions, and others have been raising them for over forty years. There have also been a number of government-wide initiatives designed to address the lack of strong, effective financial management capabilities. Yet today, the Office and others continue to comment on the gaps in capabilities. It is time for the government to maintain momentum to make financial management and comptrollership a real priority, and simply complete the work. These are complex projects that take a lot of time to do properly. A detailed action plan and focussed follow-through for central agencies and departments is needed.

Two recent audits, our December 2001 chapter on the government's Financial Information Strategy, or FIS, and our April chapter this year on comptrollership strategies, confirmed that the pace of improvement continues to be slow. I am very concerned that this lack of progress, coupled with what appears to be a low priority, places at risk the introduction of comptrollership principles, the development of the needed capabilities and the provision of meaningful results for Canadians.

When the push to implement the government's Financial Information Strategy was restarted in 1995, the objectives of FIS were to put in place new financial systems across government, to introduce accrual accounting policies similar to those used by the private sector and, more important, to get this better financial information into the hands of managers for decision making.

[English]

On April 2, 2001, the government stated that it had successfully implemented the infrastructure necessary to support FIS. In a nutshell, this meant that all departments and agencies had put in place their new financial systems and were able to send summary information to the central systems. It also meant that the government had developed accrual accounting policies. However, departments and agencies are at varying stages of applying them and the government has not yet used them in its summary financial statements.

FIS is not yet complete. The progress achieved deals only with the first two objectives: systems and some aspects of accrual accounting policy. The use of this financial information by managers in day-to-day decision-making calls for continuing effort and follow-through. Much remains to be done to achieve the objectives of FIS. The new systems need to be stabilized and data quality must be ensured. Accrual accounting policies need to be fully applied and full accrual financial statements must be produced, both by departments and government-wide.

Managers need to be provided with complete, accurate, and timely information that meets their needs for day-to-day decision-making, and decisions on accrual budgeting and appropriations need to be made and implemented. The government has frequently said that the remaining aspects of FIS, particularly the use of financial information, will be rolled into the modern comptrollership initiative. We are, however, concerned about the rate of progress on the comptrollership modernization initiative.

As indicated in our April chapter, only three of the seven departments we audited had comprehensive strategies for implementing modern comptrollership. We found that many departmental improvement plans did not specify timelines, nor did they provide for a measure of progress. Equally of concern was that many managers did not sufficiently understand the concept of modern comptrollership to be able to translate modern comptrollership concepts into better management practices.

¹ (1535)

[Translation]

The successful implementation of modern comptrollership will enable departments and agencies to manage the resources entrusted to them more effectively, to improve the delivery of their programs, and to account for their use of resources better to Parliament and to taxpayers. Other government initiatives, such as Results for Canadians, depend on the success of modernizing comptrollership.

The Treasury Board Secretariat must provide leadership, clear direction, and guidance to departments and agencies on how to put into practice key aspects of comptrollership. Clear expectations and the dates by which they are to be met must be set.

In our view, there is an urgent need for strong commitment and support from senior management in departments and agencies, from the Secretariat, and from Parliament to implement modern comptrollership and to complete the work on FIS. The two are linked, with FIS as a necessary prerequisite of comptrollership.

[English]

FIS has been underway since 1989 and modern comptrollerships since 1997. Both have consumed a significant investment of time and resources. Recently the government has initiated results for Canadians to provide more meaningful information for decision-making and for better reporting of results.

The government must not lose sight of the key objectives and expected benefits of all of these initiatives as it moves forward. There is a risk that the momentum created in the last few years may be lost. An aggressive plan to implement these initiatives is required. Goals and timelines need to be established, the proper expertise needs to be applied to the tasks, and progress needs to be monitored.

Mr. Chair, your committee can play an important role in this process by monitoring the progress and by ensuring that the completion of these initiatives is a high priority of the government.

Some of the issues the committee may wish to discuss today with government witnesses include what resources of the secretariat and departments and agencies are made available to complete FIS and modern comptrollership and whether they are sufficient; what steps are being taken to demonstrate secretariat leadership on these projects; whether there is a detailed action plan with milestones and deliverables for all remaining aspects of FIS and comptrollership; when the government will adopt full accrual financial statements at a departmental as well as a summary level; and when a decision will be made as to how budgeting and appropriations will work in an accrual environment.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the members of the committee may have.

The Vice-Chair (Mr. Mac Harb): Thank you very much, Ms. Fraser.

We have with us, from Treasury Board of Canada Secretariat, Mr. Richard Neville. I understand you have some opening comments.

[Translation]

Mr. Richard Neville (Deputy Comptroller General, Treasury Board of Canada Secretariat): Yes, Mr. Chairman. Thank you.

[English]

Mr. Chairman, I welcome this opportunity to meet with you and this committee and to present to you information on how we at the Treasury Board Secretariat are moving forward to implement the vision of Treasury Board ministers as it relates to modern management practices in the Government of Canada.

This afternoon I have the pleasure of being accompanied at the table by my colleagues, Roberta Santi, associate deputy comptroller general, and Ivan Blake, the executive director of the Comptrollership Modernization Directorate, Comptrollership Branch. As well, I'm pleased to have with us Mr. Peter DeVries, director of Fiscal Policy Division, Economic and Fiscal Policy Branch, Department of Finance.

I am pleased today to be able to address the financial information strategy, which we call (FIS), and the modern comptrollership initiative, (MCI), together. Discussing them in the same session is a visible demonstration of how complementary they are and how vital they are to the modernization efforts of the government.

¹ (1540)

Both FIS and MCI are about modernizing management and providing the necessary tools, but it should be noted that this process of modernizing management in the Canadian federal public service did not start with the FIS initiative and will not end with the modern comptrollership initiative. It is, rather, an evolutionary process.

First let me deal with FIS. Mr. Chairman, on Monday, June 3, 2002, in the House of Commons there was a thorough debate on motion 437, that the government take immediate measures to ensure that the FIS is fully and completely implemented. Members of this committee participated effectively in that debate. One of the key issues that emerged was whether the government should move to accrual-based estimates and appropriations. It is our view that this issue was never intended to be resolved in the context of the financial information strategy. Others may disagree, but it is unproductive to debate whether it is or is not part of FIS. What is important for the committee to know is that we continue to work on that issue.

I am pleased to report that steady progress is being made. Research has been done on the best practices of other countries, and a framework to review the accrual budgeting concepts has been developed. The Treasury Board Secretariat is currently engaged in consultations with the Privy Council Office and the Department of Finance to discuss how these might work within the current expenditure management system. Consultations with departments and development of recommendations are planned for the fall and winter of 2002-2003.

[Translation]

FIS provides the technical infrastructure--business-like accounting policies, modern financial systems and trained staff--that is necessary to support financial decision-making and modern comptrollership. As the Auditor General, herself, notes in her December 2001 report, FIS is a prerequisite to the success of other federal initiatives--Modern Comptrollership and Results for Canadians - A Management Framework for the Government of Canada

In fact, the successful completion of this complex strategy, with the exception of the introduction of full accrual accounting for the consolidated financial statements of the Government of Canada, has enabled the Government to implement the biggest change in accounting policy and financial reporting since Confederation.

Already we are seeing improvements in areas such as financial reporting, transaction processing and controls, asset management, and the management of the government's extensive holdings of real property.

I want to assure the Committee members that the momentum started with FIS will not be lost. FIS has enabled us to put in place the essential systems to move forward with modern management. Going forward, FIS will enable the provision of ever more useful financial information, as these systems are improved to facilitate the integration of financial and non-financial performance information.

As the Auditor General has noted, the Treasury Board Secretariat has demonstrated commitment to both FIS and MCI. With FIS, we have established the foundation that will enable departmental managers to use financial information in their day-to-day operations. FIS started the process of information gathering for integrated decision-making, MCI has built on this and expanded it to include other factors important to the management community of government.

[English]

Now let me turn to the modern comptrollership initiative.

Modern comptrollership is about ensuring that the four components required to support integrated decision-making are present and operating as they should. The four elements of modern comptrollership are linking financial and non-financial performance information; ensuring sound risk management; enabling flexibility within a context of appropriate control; and grounding choices in clear public service values and ethics. The modern comptrollership initiative goes far beyond being just a time-bounded project of the Treasury Board Secretariat. It is a core part of the Treasury Board's agenda for change.

With their decision to move forward with government-wide implementation of modern comptrollership in June 2001, Treasury Board ministers have adopted modern comptrollership as a foundation for modern management practices throughout the federal public service. In fact, at the Treasury Board Secretariat we have adopted modern comptrollership as the fundamental core of one of our three business lines, the stewardship business line.

I would like to take the opportunity to explain to members how, based on the foundation established by FIS, the Treasury Board Secretariat is moving forward in implementing the vision of ministers for modern comptrollership.

We are taking actions in three areas so as to advance the MCI agenda: one, building commitment and capacity; two, developing tools to support management efforts; and three, ensuring that we have credible accountability mechanisms available to enable us to track and report on progress.

As the Auditor General herself states, “Modernizing and strengthening comptrollership capabilities is an integral part of many government initiatives now underway and is essential to their success.”

Treasury Board ministers decided that participation in the MCI would be mandatory for government departments and agencies in June 2001. To date, we have a total of 75 departments and agencies that are working to implement modern comptrollership. Departments are involved in such activities as raising awareness, conducting baseline assessments, and working on specific projects to enhance modern comptrollership in their department or agency. We expect the overall level of participation to be approximately 90 departments and agencies by the end of the fiscal year 2003-2004.

¹ (1545)

[Translation]

At the Treasury Board Secretariat, we have also moved forward to address one of the key findings of our own internal assessment of the pilot phase of the MCI, the aspect of management awareness and learning. We are implementing, in partnership with the Canadian Center for Management Development (CCMD), a comprehensive learning strategy. This learning strategy will include over 100 events, targeting more than 5,000 managers in the public service over the next two hears. In addition, in 2004, the courses developed will become a permanent part of CCMD offerings. This is one of the key ways we will ensure the sustainability of the commitment established.

We also value the experience and insights of the private sector; consequently, we have established a Standards Advisory Board (SAB), composed of private and public sector senior executives. The role of this group is to provide up-to date information on advances in the private sector and offer suggestions for how to move the modern comptrollership initiative forward.

We had the pleasure of having the Auditor General, Sheila Fraser meet with this Board in November of last year. At that time, she observed that while departments had undertaken a good deal of planning in the area of Modern Comptrollership, the continuing challenge will be to follow through with the implementation of the reforms proposed.

[English]

This is the first time that any public service in the world has undertaken a process of management improvement quite like this. With the MCI we are requiring departments and agencies to systematically assess their capacities for modern management and then to ensure that they undertake actions to address the weaknesses found.

Treasury Board Secretariat has provided to departments a tool called the capacity check to facilitate this assessment. We have also provided assistance to departments in developing action plans to strengthen management practices. We are also supporting projects in departments and among groups of departments--as an example, a project with the Quebec Federal Regional Council to identify workable models for linking resources and results in a horizontal environment.

We are also working with our colleagues at the Office of the Auditor General to merge the thinking between the financial management capacity model of the OAG and the capacity check model of modern comptrollership. We have been working on this merger for the last few months and have made progress in streamlining terminology and establishing common criteria. One issue noted by the Auditor General in her report was the need to be clear on the desired outcomes, so that the Treasury Board Secretariat can hold departments accountable for achieving them.

While this figures heavily in the next topic I wish to cover, it is also appropriate to note here, since the Treasury Board Secretariat is developing an evaluation framework in cooperation with departments. This framework will allow the Treasury Board Secretariat to clearly communicate to departments where we expect them to be in the area of modern comptrollership as well as providing useful performance indicators to allow for the tracking of progress.

[Translation]

Measuring progress and demonstrating what we have accomplished is fundamental to any management improvement initiative. Departments are responsible for monitoring their progress and for reporting in their annual Departmental Performance Reports on the management improvements they have made.

In addition, we are responsible for monitoring and reporting on the progress of the modern comptrollership initiative, overall. The application of the evaluation framework will allow useful accountability information to be gathered and reported to Parliament.

[English]

In conclusion, Mr. Chairman, the vision of modern management takes time. We are not going to achieve it overnight. Again, the Auditor General herself notes, and I quote, “...strengthening comptrollership will entail making far-reaching changes. We know that making the changes and realizing the benefits will take time--perhaps several years.”

We at the Treasury Board Secretariat agree with this evaluation of the challenge before us, but I'm also convinced that both we and our colleagues in departments, with the continued strong support of the Auditor General herself and her office, are ready to continue moving forward with this important management reform.

Mr. Chairman, this concludes my opening remarks. My colleagues and I would welcome the opportunity to respond to any questions you or any member of this committee may have.

¹ (1550)

The Vice-Chair (Mr. Mac Harb): Thank you very much.

We have with us from the Auditor General's office Mr. Douglas Timmins and Mr. John Wiersema. From Treasury Board we have Roberta Santi as well as Ivan Blake. From the Department of Finance we have Peter DeVries.

I understand you will be supporting the Treasury Board in the event there are questions concerning your department as well as the Auditor General.

Just before we move on, because we have a quorum now, last meeting we had a letter from Mr. Neville to the committee concerning waivers to the publication of details related to ex gratia payments. We passed two parts of it. I think there was one missing part that we did not deal with--an omission. Perhaps one of my colleagues could move this motion, so we can comply with the requirement. At the same time, there's still a provision that the gross total amount will continue to be reported to the Parliament of Canada.

¹ (1555)

It's moved by Mr. Mayfield.

(Motion agreed to)

The Vice-Chair (Mr. Mac Harb): Now we'll go to questions.

Mr. Mayfield, eight minutes.

Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance): Thank you very much, Mr. Chairman.

I want to begin by thanking such large delegations from Treasury Board and the Auditor General's department for being here this afternoon to discuss this issue.

I have to keep reminding myself, as one of the laity, what this issue really is. I always hope I'm on base when I get here. But having said that and realizing that the chairman is watching his clock, I'm asking a question now.

To try to keep this in my mind, I see the FIS as kind of the structure that's being built. For example, when I was taking flying lessons, the first thing we had to study was the airplane. After we figured out what the airplane was and the theory of flight dynamics, we had to learn how to fly the ruddy thing. Would it be somewhat of an analogy to say the FIS might represent the airplane and the MCI might be the ability to get what you want out of the machine? Is that anywhere close?

Ms. Sheila Fraser: I think I'd phrase it a little bit differently. I see the modern comptrollership as much broader. If we start actually with results for Canadians, it's demonstrating to Canadians what government has basically achieved over the year. Modern comptrollership brings in the performance information--the financial information but also non-financial information, which is really important in government because much of government cannot be measured strictly in finances.

If you will, FIS is sort of below that in the systems to produce the financial information. I would say perhaps in some instances it's non-financial, but it's largely financial. It's the way the government records its transactions, and it looks at the systems and the controls largely around that financial information.

Mr. Philip Mayfield: So FIS would be the basis for getting the comptrollership issue going. Is that correct?

Ms. Sheila Fraser: A part of it, yes. There's obviously all the non-financial information, but FIS would be the systems and the basis for that, and the way in which the financial information is recorded.

For instance, things like buildings or capital assets or inventories are all expensed when they're bought. Under this new accounting they will be recorded as an asset and then managed. That brings in new aspects of financial management.

Mr. Philip Mayfield: In listening to you offer your remarks, Mr. Neville, from my point of view I was somewhat concerned that you said it is your view that this issue--and I presume that's FIS--was never intended to be resolved in the context of the financial information strategy. What context are you thinking of? Are you diminishing the importance of the FIS in that statement?

Mr. Richard Neville: No, Mr. Chairman. I think what was meant was that when we started off and we had our vision of FIS, as we progressed, it did not include the accrual budgeting concept as being dealt with through FIS.

Mr. Philip Mayfield: That is news to me, because as I listened to Mr. Desautels, and as I have since listened to Ms. Fraser, it seemed to me that the whole accrual concept was really the underpinnings for getting into this financial information strategy. Is that not correct, Ms. Fraser? Am I off base again?

Ms. Sheila Fraser: Certainly accrual financial information is an important part of FIS. The Office of the Auditor General has from the very beginning said that the whole question of budgets and appropriations has to be addressed.

Mr. Neville would probably want to elaborate on the position of the government. To date, I think the government has largely focused on the financial information, the financial statements, and not on the budgets and the appropriations.

Mr. Philip Mayfield: Let me ask you this, then. I'm sorry to rush you, but I'm being rushed by the clock. Will this whole FIS work the way it was intended without accrual being fully implemented?

Ms. Sheila Fraser: We're of the opinion that the question of accrual budgeting and how appropriations are going to be dealt with in the future is critical to the success of this project. You cannot have financial information reported on a basis that is different from the way in which the budgets are established, because then they're not comparable. There has to be a resolution as to how appropriations are going to work in this. We think it's essential that this be resolved.

I'm sure Mr. Neville will have something to say on that.

º (1600)

Mr. Richard Neville: Mr. Chair, thank you; I appreciate the opportunity to comment as well.

There is no question that we certainly feel that accrual accounting is a significant component of FIS and has been right from the beginning. But we have implemented accrual accounting across government, at the departmental level as of April 1, 2001. That has in fact been done. What is really being discussed at this moment in time is the next step: what about accrual budgeting and then accrual appropriations? We have not finalized our position as to whether we wish to accept fully accrual budgeting and appropriations as part of the Canadian expenditure management system.

Other countries have mixed reviews and have had mixed experiences in terms of their application of accrual budgeting and accrual appropriations. So it isn't as if we can say all countries have done it and we have not. Very few countries have gone down the road of full accrual budgeting and appropriations. Therefore we want to be very careful ourselves before we pronounce ourselves on that important issue.

Mr. Philip Mayfield: But this is a proven strategy in the private sector, is it not?

Mr. Richard Neville: The private sector I think is different from the government sector in many ways, and one of them would be in this case, yes.

Mr. Philip Mayfield: But they're not totally separate, I don't think.

Anyway, I want to ask you, on page 3 of the statement you made you say that successful completion of this strategy has enabled the government to implement the biggest change in accounting policy and financial reporting since Confederation. I would like you to point to what data or evidence you have that would show the committee how true this statement really is.

Mr. Richard Neville: I'd make a couple of points if I could, Mr. Chair.

First of all, we just finished talking about accrual accounting. Since 1867, the government has not had an accrual accounting basis of operations. Basically we have been on either a cash basis or a modified cash basis for a great many years. We were on a cash basis for a great many years, probably the bulk of those 130 some years. Then we moved to what we call modified cash. Then we moved to modified accrual, and now, as I said earlier, across government at the departmental level we're on a full accrual basis. This means that we are in fact picking up all of the assets of the government, which we have never done before. We used to expense them as we acquired them, and now we capitalize them, so we set them up in the proper manner, as the Auditor General mentioned a few moments ago. Therefore, we are changing the culture and changing the way in which we will be managing those assets over time. That's one significant change.

The second significant change I want to share with you is that we had in 1995 approximately 60 different financial systems across government. As you can appreciate, that's not really efficient, and we made a decision to reduce those financial systems to seven clusters. Today we have seven financial clusters, which again is a significant change in that context.

I would also go so far as to say that the clusters reflect state-of-the art--I repeat, state-of-the-art--financial systems as good as anywhere in the world. So I think those are some changes we shouldn't lose sight of.

The Vice-Chair (Mr. Mac Harb): Ms. Fraser had a comment to make. Then, Mr. Mayfield, if you have a short question, you may continue.

Mr. Philip Mayfield: I want to wrap it up with a question if I could, Mr. Chair.

The Vice-Chair (Mr. Mac Harb): Let Ms. Fraser go first.

Mr. Philip Mayfield: Yes.

Ms. Sheila Fraser: I'd like to clarify: there has been much progress made, but the government has yet to publish summary financial statements on an accrual basis of accounting.

Mr. Richard Neville: I thought I made it clear, Mr. Chair, that I said we have implemented full accrual accounting as of April 1, 2001, at the departmental level. All departments are required to have prepared fully accrued financial statements.

We have not made a decision yet as to--

Ms. Sheila Fraser: Publishing them.

Mr. Richard Neville: --publishing them.

The Vice-Chair (Mr. Mac Harb): Ms. Fraser wants to see the beef.

Ms. Sheila Fraser: No, I think departments are working very hard to introduce this, but until statements are actually produced on that basis, and people manage totally that way, I wouldn't declare it a success.

º (1605)

Mr. Philip Mayfield: I'll wrap up, Mr. Chair.

We've gone a long way, from what I understand, and I believe that. But there have to be some decisions made, I think you said, before the process.... And you're working on those decisions, is that correct?

Mr. Richard Neville: That is correct.

Mr. Philip Mayfield: How long is it going to take for those decisions to be made? At what level are those decisions made? Why is the whole process being made up--because the decision managers have not got around to making their decisions? And how much money is it going to take to do that?

Mr. Richard Neville: Mr. Chairman, I can't speak for--

The Vice-Chair (Mr. Mac Harb): That will be for the second round, Mr. Neville. But if you have a brief response, please, go ahead.

Mr. Richard Neville: The government is discussing those questions. Hopefully we'll have some answers shortly.

Mr. Philip Mayfield: Are you saying that's a government decision?

Mr. Richard Neville: It's a government decision.

Mr. Mayfield: Thank you.

The Vice-Chair (Mr. Mac Harb): Thank you, Mr. Mayfield.

Monsieur Perron, eight minutes.

[Translation]

Mr. Gilles-A. Perron (Rivière-des-Mille-Îles, BQ): I don't know what to say to Ms Fraser. I don't know what to say because it appears to me that we are at the same point, more or less, as we were 40 years ago, notwithstanding the government's political stripe. We are waiting for decisions and nothing has been published, but we are being told nice stories. It seems to me that you are very patient, both you and your predecessors, dear Madam Fraser.

Ms Sheila Fraser: Mr. Chairman, first of all, I have not been around for 40 years, but you must recognize that a lot of progress has been made. I think we should not minimize the government's effort in this regard and the progress that has been accomplished in the past few years. What concerns us is that it is a significant project that will go on for several years. We cannot change the whole management overnight. We must maintain the momentum and not loose sight of the objective. I am sometimes concerned when I hear people say that a particular project is finished and is a success, well before everything is finalized. I believe that there are still several steps to go before everything is finalized, but I also think that a lot of progress has been made in the past few years.

Mr. Gilles-A. Perron: I can recall Mr. Desautels appearing before us. This is the third or fourth time that we discuss this matter since 1997--I am not quite sure, because we talk about it way too much, as far as I am concerned, and it is not working out. Accountability is easy: how much money goes in, how much is being spent, and the amount that remains. It's as simple as that.

In paragraph 9 of your statement, you said that only three out of seven departments that you have audited had put in place some control. That is 42%, or about the same number that Mr. Desautels quoted to us two years ago.

Ms Sheila Fraser: Indeed, that is what concerns us. Since this is a significant project, one would have tought that there would be some planification and clear objectives with deadlines so that we can measure the progress. When we made our audit, there were only three departments out of seven that had some plan in place.

Mr. Gilles-A. Perron: Mr. Chairman, I would like to say a few words about the conclusion. It says that it will take some time, several years. I think that we can talk about decades, given the way things have been going in the past and the way things are going presently. I would have preferred to be told that it will take a few months. When we talk about a few years, I hope that does not mean another 40 years. I really hope so, because you are crawling along at a snail's pace, if not even slower, my dear friend.

Mr. Richard Neville: Mr. Chairman, I am pretty sure that we can give you the assurance that it will not take another 40 years to complete that project.

Mr. Gilles-A. Perron: I am giving you a generous deadline. If I had said two years, for example, you would not have answered in this way.

Mr. Richard Neville: You did not say two years in your question.

Mr. Gilles-A. Perron: I can do so now. What will be the status of the project in two years?

Mr. Richard Neville: Mr. Chairman, I believe that there are still some decisions to be made, but we are hoping to be able to complete this contract. Of course, all agree that this is a long term job and that it will still take some time to complete everything. However, we have already taken steps to be able to measure the progress. I hope that you have heard the auditor general when she said that a lot of progress has been made up to now.

Mr. Gilles-A. Perron: But Mr. Desautels had said the same thing, sir.

Mr. Richard Neville: We have made some more progress since then...

Mr. Gilles-A. Perron: Ms Fraser said that last year.

Mr. Richard Neville: But if we continue to make some progress, it means that we are moving along and that all is fine.

Mr. Gilles-A. Perron: It is moving along at a “dammed” slow pace, in my view. I am fed up with this discussion. That's it; I won't talk about it anymore. I am even tempted to go home.

º (1610)

[English]

The Vice-Chair (Mr. Mac Harb): Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman.

Again, I want to thank each and every witness for their excellent presentations.

Mr. Neville, like a lot of initiatives in government, this initiative seems to be getting bogged down. The first question I ask in a situation like this is who is the person in the system who is responsible for making the changes that have been agreed upon? Are you that person?

Mr. Richard Neville: First, I don't agree with the initial statement that this seems to be bogged down. I was certainly hoping we hadn't left you with that impression. There's been a lot of progress. We've made the timelines we said we would on some of the activities. There's obviously other work still to be done. We've enunciated those timelines as well. Modern comptrollership is still a few years away from being well established in departments across government. So I have a problem with terminology like “this is bogged down”, because I don't think it is.

Mr. Shawn Murphy: But you didn't answer my question.

Mr. Richard Neville: On your second question, there are a number of individuals who are accountable, at the end of the day.

Mr. Shawn Murphy: Excuse me if I said it seemed you were bogged down, but I got that impression from reading the Auditor General's report. That seems to be the impression coming out of the Office of the Auditor General.

Again this comes back to a problem I have. I ask these questions about different initiatives and no one ever answers me. I ask who is responsible, and I always get the same answer. Basically, the answer is no one's responsible. If no one's responsible, then on my concept of management, it's almost impossible to get anything done. Somebody has to be responsible.

Mr. Richard Neville: I guess in that sense I am responsible. I am the Deputy Comptroller General of Canada, so I have responsibilities. But the responsibility is shared with others: the President of the Treasury Board, the Comptroller General, and deputy heads across departments. There are individuals in departments carrying out the modern comptrollership initiative. It really is a shared responsibility. I certainly have a major part of that responsibility, and I don't want to shy away from it.

Mr. Shawn Murphy: So you will accept the statement that you're ultimately responsible.

Mr. Richard Neville: I think “ultimately responsible” is a strong term. I'm a key player in the chain of accountability.

Mr. Shawn Murphy: On the next issue, is there such a thing as a critical path or detailed action plan that would outline the detailed steps required to implement this initiative and the dates when your secretariat expects to complete them? Who is responsible for implementing that stage in the process?

Mr. Richard Neville: If we're talking about the modern comptrollership initiative, I'll ask Roberta Santi to comment on that.

The Vice-Chair (Mr. Mac Harb): Ms. Santi.

Ms. Roberta Santi (Associate Deputy Comptroller General, Treasury Board of Canada Secretariat): Yes, in terms of the critical path, the modern comptrollership initiative is actually split into two phases. Phase one is the actual subject of the report of the Auditor General that looked at the 15 departments that participated in the pilot phase, if you will.

About a year ago Treasury Board ministers set aside $30 million to go government-wide with this particular initiative. Since last June, when we've actually had this initiative up and running in terms of phase two, we've been able to bring on stream a total of 70 departments and agencies. Largely what they're doing as a first step is setting up project offices and undergoing a capacity check. They're looking at their internal management practices. They're determining where they have weaknesses, and they're developing action plans in terms of how to address these weaknesses over the longer haul.

Once these capacity checks are completed, as we move into this next year, we will be largely focusing departments on action plans. With respect to that, one of the key changes we've made from phase one is to set out some very clear expectations in terms of how those action plans should be developed. They should focus on the areas of greatest weakness; there should be some sense of what's going to be worked on first, second, and third; they should be costed out; and there should be milestones, timelines, and accountability with respect to progress.

In addition to that, we're developing an evaluation framework, and a lot of the evaluation and performance indicators will be, I think, moved out into the third year, as most of the departments get beyond the action plan and get into implementing the initiative.

I think when this initiative first started, if you go back to the blue ribbon panel that was launched in 1997, which provided us with some private sector advice as to how we should move this initiative out, they basically said they thought it would take about seven to ten years to really, truly get embedded within departments.

So we have a lot of the phase one departments, though they started at different times, hitting around their fourth year, and we have the current departments, the 70 to 75, that have just started moving on stream within the past year.

In terms of our own responsibilities within the Treasury Board Secretariat, we see that we have a key role on three fronts. We see a key role in terms of building understanding across the public service in terms of what we mean by modern comptrollership. We have a responsibility to provide key tools and guidance for departments to support their efforts to implement modern comptrollership. And third, we have a responsibility to ensure there's an accountability framework and guidance for departments so that the results of this initiative can be reported to Parliament in a way in which parliamentarians can understand it and so we are truly focusing on results.

º (1615)

Mr. Philip Mayfield: Mr. Chairman, I'd like to clarify, did Ms. Santi say $3 million or $30 million was set aside?

Ms. Roberta Santi: It was $30 million, for phase two.

Mr. Philip Mayfield: And we're talking about MCI?

Ms. Roberta Santi: Yes.

Mr. Philip Mayfield: Thank you.

Mr. Shawn Murphy (Hillsborough, Lib.): Is this document something you can share with this committee? I think that's what everyone here is looking at.

Ms. Roberta Santi: Yes, we have a strategic plan that we would be very happy to share with the committee.

The Vice-Chair (Mr. Mac Harb): Yes, the committee would like to receive that, please, Ms. Santi.

Thank you.

Mr. Shawn Murphy: I have nothing further, Mr. Chairman.

The Vice-Chair (Mr. Mac Harb): Very well, we'll go to the second round.

Mr. Thompson, do you have anything?

Mr. Greg Thompson (New Brunswick Southwest, PC): Yes, Mr. Chairman, I do. Thank you.

There is one thing I want to focus on, and I'm not sure if we can do it today or not.

Ms. Fraser, could some of the messes or errors we see in government today, particularly in Public Works, have been avoided if we had had a system in place that actually worked, a modern system to deal with such things as value for money spent?

That's just one example, but I would like to bring that into what we're experiencing on Parliament Hill today. I guess some of these presentations are something that managers and bean counters are interested in, but for the average Canadian who's watching and listening, what are some of the lessons we could learn from some of the points you brought forward today in your presentation and those brought forward by Mr. Neville in terms of spending by government, how things can quickly get out of hand, and how we can modernize the system to eliminate those kinds of problems?

Ms. Sheila Fraser: One of the key elements of FIS is stronger systems and controls. Now, I think there can be errors in any system, and if people are not following rules and the system does not have the checks and balances in place to detect that, those kinds of incidents can occur anywhere.

But this really is talking about much better performance information, much better reporting of results, clearer objectives, and how those have been achieved. And I would hope that kind of reporting would be able to indicate areas where there may have been problems with value for money.

I don't know if Mr. Neville wants to add something.

Mr. Richard Neville: I wish I could give the assurances the member is looking for. Unfortunately, I don't think I can, but I am certainly of the view that the new clusters of financial systems we have are going a long way towards providing managers with better information, and hopefully they can manage better.

Mr. Greg Thompson: One of the things you had mentioned, Mr. Neville, was about changing the culture of how departments operate. Could you elaborate on that somewhat, because what we often see here as parliamentarians is the culture of secrecy, the culture of preservation, the culture of not full transparency. Could you comment on that, please?

º (1620)

Mr. Richard Neville: Mr. Chairman, I would love to have Ms. Roberta Santi respond to that.

Ms. Roberta Santi: Modern comptrollership is often referred to as a cultural change, and I think that the blue ribbon panel actually envisioned it as a cultural change that would take seven to ten years. In modern management practice the thinking is changing out there in terms of the complexity of issues folks have to deal with. One of the key elements of this is that financial management and sound stewardship of resources are not the purview only of the financial manager in organizations but are the responsibility of every employee in an organization.

Beyond that, the decision-making has to encompass four key pillars of modern comptrollership. Those four key pillars have to be brought together in decision-making by each public servant who is working with public resources. The pillars are that you have the right performance information to make decisions; that you have sound risk management practices in place; that the appropriate systems of control are in place; and that decisions reflect appropriate public service values and ethics. What this change is really about is advancing this thinking in the minds of all public servants.

I would also say that this kind of cultural change in terms of modern management is something that is being moved forward in the public sector as well as in other countries around the world. It's pretty basic good management, but what's new about it is how we're asking people to integrate these four components at one time rather than looking at things from very narrow lenses.

Mr. Greg Thompson: Mr. Chairman, I want to get down to one of the basic problems we're confronting with a particular department and just see how Mr. Neville might respond to this. For example, for something as basic as missing documents, what type of system is in place today in Public Works? Many documents are missing, possibly thousands or even truckloads of documents, and we have a deputy minister sitting here at the table not able to explain where those documents are. Were they shredded? Did someone take them out in a half-ton truck? Did they go out piecemeal, briefcase by briefcase? For something as fundamental as that, it seems as if the entire system of reporting has broken down within some of your departments.

Mr. Richard Neville: Mr. Chairman, I don't necessarily agree with that statement. I think there have been some deficiencies. There probably have been some deficiencies in the past, and there probably will be deficiencies in the future. But one has to look at it in a broader context. We have not seen this as being systemic across departments or across government. I don't believe that the Office of the Auditor General or the Auditor General herself has come to that conclusion.

There are problems, and I believe they have been addressed. They are being looked at very seriously. There are action plans in place to remedy the problems identified, but I don't think this is pervasive across government.

Mr. Greg Thompson: Again, for what we're focusing on, I'm not sure that systems can change this. Today we're talking about implementing a modern comptrollership. How do you change that culture of secrecy, that culture of cover-up, that culture of protecting somebody else if there's wrongdoing in a particular department? Again, I refer to missing documents the Auditor General has referred to as well in her report on that particular department, Public Works.

Ms. Roberta Santi: I can only speak to some of the initiatives the Treasury Board Secretariat is working very closely with departments on. One of the issues is to improve reporting to Parliament, and one aspect of this is strengthening our performance on information that goes to parliamentarians. We've issued new guidance on this front. We're really working with departments to move away from activity-based reporting and move more closely to outcome-based reporting. We're not there yet but we're making progress.

In terms of the modern comptrollership initiative, departments are required to make the results of their capacity check public, to provide as much information as possible on websites, and to make information public on action plans and on what actions are taken to correct management weaknesses. Our emphasis is on public accountability and on transparency. We're working very closely with departments to do this, and we feel that many departments are moving along the spectrum in a very active way.

º (1625)

The Vice-Chair (Mr. Mac Harb): You have 25 seconds left.

Mr. Greg Thompson: My question has to do with the implementation of a modern comptrollership, as referred to by the Auditor General in chapter 7 of her report. But that is not going to cure all the ills within government, correct? The issue seems to be the lack of transparency, lack of ownership of a problem, lack of accountability of individuals within a department. You covered it in broad strokes, but if you're taking a look, very carefully, at a government department, it appears there is nothing in this that's new in terms of the sense of decency and accountability and taking responsibility for your actions.

Ms. Roberta Santi: I actually think that is the core of modern comptrollership. I think that's in the context of the fourth pillar of ensuring a solid framework of public service values and ethics. It is about accountability.

I think the modern comptrollership initiative is about looking internally and asking, “How can we strengthen this organization for the public good?” To me, if we achieve anything through this initiative at all, it's really imbedding in organizations a desire for continuous improvement and making sure that management concerns and how we do things is front and centre in everyone's mind as we carry out the work of the government.

The Vice-Chair (Mr. Mac Harb): Ms. Fraser.

Ms. Sheila Fraser: I'd just like to add one element, to respond to the questions.

As Ms. Santi said, I think a large part of what Mr. Thompson is getting at is in the values and ethics component of this initiative. In our chapter, we publish some of the results of departmental self-assessments, and one of them is on shared values and ethics. You can see there that in those self-assessments, certain of the departments have indicated there are deficiencies in the whole question of values and ethics, which we can maybe say is a terrible thing, but it's maybe a good thing they're recognizing there is work that needs to be done there.

I would think if we see perhaps harsher ratings than we would like to see, we should probably view it as being positive, in that there is a recognition that there is work that needs to be done there.

The Vice-Chair (Mr. Mac Harb): Mr. Neville.

Mr. Richard Neville: Mr. Chairman, I would like to add a qualifier to that.

Although the capacity checks have shown that there is a lower rating with respect to values and ethics, it's mainly, if one reads the documentation, in the fact that documents or a code of ethics may not have existed. I don't think that should be interpreted in any way, shape, or form, just for the record, as there not being values and ethics across government and across departments.

The Vice-Chair (Mr. Mac Harb): Thank you very much.

On the second round, Ms. Meredith, you have four minutes.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Thank you, Mr. Chair.

I want to clarify the action plan Mr. Murphy asked for. Is it for phase one and phase two--the pilot project and the second project as well? Is that what you are going to be providing us with?

Ms. Roberta Santi: Basically, what we're working on is phase two. What we did was an assessment of phase one.

Ms. Val Meredith: So are you including it in his request for those documents to be tabled with the committee? Are you going to include the summary of the pilot project, as well as the action plan for the second project?

Ms. Roberta Santi: Yes. We will provide our assessment of what came across in the capacity checks for the pilots, as well as our plan for implementing phase two of the initiative.

Ms. Val Meredith: Thank you.

Mr. Neville, you made a statement earlier when we were talking about FIS that you hadn't made a decision as to whether you were going to use the accrual principle in your budgeting and appropriation. I'd like to ask you what, specifically, would be a reason why you would not use it?

Mr. Richard Neville: I don't recall saying we were not.

Ms. Val Meredith: You said a decision had not yet been made as to whether or not you would be using the accrual system in budgeting or appropriation.

º (1630)

Mr. Richard Neville: Correct.

Ms. Val Meredith: What specifically would cause you not to agree to use the accrual method in budgeting and appropriations?

Mr. Richard Neville: It's a very complex issue, first of all, and it could have an impact on the way we budget and the way we currently present information to parliamentarians.

Ms. Val Meredith: Isn't that why people are suggesting you should be using it?

Mr. Richard Neville: As I said earlier, we haven't said no; we just said we haven't made a decision yet.

Ms. Val Meredith: I'm asking you specifically what would cause you to decide not to use it? What are you afraid of?

Mr. Richard Neville: We have to look at what is best for the Government of Canada. It comes down to a policy decision of the government, and the government has not made a decision yet as to whether it's applicable or not.

Ms. Val Meredith: Why would it not be applicable?

Mr. Richard Neville: As I said, there are a number of components. You could have a scenario where the way in which we present our budgets for the government would be different, and you could have a different approach to how we present the appropriations to Parliament.

We have to assess the implications of each one of those components before we arrive at a recommendation to parliamentarians as to what approach to take.

Ms. Val Meredith: You also mentioned you got the initial 40 financial systems down to seven financial clusters. Why would the government not be operating with one financial management plan? Why are you allowing seven different systems to be used in one organization?

Mr. Richard Neville: That's a very good question. On a point of clarification first, we had about 65 systems in 1995. When you have 103 departments and agencies, there are always changes, so 65 was the number we used. We were looking at reducing that to an appropriate number, in terms of the change that had to take place.

You can appreciate we're talking about some large departments, whether it be Department of National Defence or Human Resources Development Canada. So we tried to minimize the impact on the departments concerned, but at the same time look at the most efficient number of systems to function appropriately.

We decided on six clusters at that point, which gave us a good representation of what was out there, with one exception. A number of departments wanted the most modern system possible, so we went to the marketplace, went through the request for proposal process, and contracted with SAP as the seventh cluster. That allowed us to have state-of-the-art financial systems and position ourselves to be as effective as we could at that time.

Having said that, seven may seem like a high number when you could say “Would you not want to go to one or two or three?” The problem there is you'd have to look at the cost of converting from the current systems we have today, to arrive at a lower number of clusters. That cost is still very prohibitive, although we are looking at it, as well as what it would gain us in terms of efficiencies we don't have today.

So from 65 down to seven was a big jump. We're now stabilizing those seven clusters and working with them on an ongoing basis to determine if they're as efficient as they can be. We'll see where that leads us.

Ms. Val Meredith: Have you any working documents, any progress reports, on the development of those seven clusters? Is there any rationale as to what institutes the seven clusters, how they vary from each other, and how they're similar?

º (1635)

Mr. Richard Neville: Yes, there are.

Ms. Val Meredith: Could you maybe table that information here, so members can look at it?

Mr. Richard Neville: There are documents that categorize each of the clusters, the suppliers, the number of departments within each cluster, and some of the peculiarities of those clusters. I wouldn't mind sharing them with the committee, Mr. Chairman.

Ms. Val Meredith: Thank you.

The Vice-Chair (Mr. Mac Harb): Ms. Meredith would like to receive them, so that's fine.

Ms. Val Meredith: Through the committee.

The Vice-Chair (Mr. Mac Harb): Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): Mr. Neville, let's go back to our hesitancy to proceed with accrual accounting on the budget. When I think of the word “budget”, I think of something that by its nature means we're trying to predict the future. For that reason, I presume that accrual accounting is somewhat difficult to overlay on the budgetary process. We have to predict our revenues coming in, and we have to predict our expenditures and our capital assets. Is that part of the hesitancy for applying accrual accounting to budgets?

Mr. Richard Neville: It's part of the hesitancy, Mr. Chairman, but again, I think it's a broader issue than just that. It's the implication that we will look at the long term in terms of changing the budgetary process within government. It's also, again, that the estimates process may be implicated, i.e. the blue books, and it's about changing the way we structure appropriations. There's a significant change that would be required to the expenditure management system if we actually went to a full accrual budgetary process.

Again, it's not that we're saying that we're not going to do it; all we're saying is that we're studying it. We will come up with some recommendations, and the government will make a decision.

Mr. Alex Shepherd: In your study of this, do you see the users of those financial statements making erroneous decisions based on the fact that entries represent accrued values as opposed to a cash basis?

Mr. Richard Neville: Mr. Chairman, I don't think so. A number of countries have accrual accounting in their reporting and have not adopted accrual budgeting and appropriations as part of their system. We haven't seen evidence that it's a problem.

Mr. Alex Shepherd: So there's no bogeyman out there that's telling us not to do this per se?

Ms. Sheila Fraser: Mr. Chair, could I just add something?

We're concerned that as long as people continue to manage appropriations as they do now, they will be largely focused on cash accounting--as they are now. One of the real benefits of moving to accrual accounting is to get a broader sense of costs and costs of service, and the gains that can be realized from doing that won't be realized if the managers still manage on a cash basis. It's a question of how do you get them to use this new information if they're going to be managing cash, as they have done traditionally?

Mr. Alex Shepherd: The Auditor General thinks that cash basis is a form of crutch. It's easy because it's easily predictable, correct? Cash in, cash out.

The other, accrual accounting, is less predictable but requires governments to make some serious assumptions about where they're going. For that reason it requires more management. That's where we're getting back to why we're having the modern comptrollership initiative.

Mr. Richard Neville: Mr. Chairman, accrual budgeting does imply some subjectivity, obviously, because you are talking about the future. When you're working with cash, there is some definitive--

Ms. Sheila Fraser: Could I just interrupt? I think budgeting is subjective; I'm not sure that accrual or cash is really....

Mr. Richard Neville: I'm pleased that the Auditor General has made that statement, because it answers the question as to whether there is some subjectivity in this discussion. Again, I think that's a factor, as the committee member has pointed out. Is it a consideration? Yes, it is a consideration.

Mr. Alex Shepherd: On another issue, it appears to me, as we've studied government financing over the years, that part of the problem is that the individual departments have too much to say. In other words, the Treasury Board doesn't have a lot of control over some of the other departments. The departments by themselves express a very independent point of view sometimes. Therefore, sometimes it's difficult for Treasury Board to impose their will on these departments. Do you have any comment on that?

Mr. Richard Neville: I'm biting my tongue, Mr. Chairman.

Let me say that we like to consult with departments. We certainly treat them as colleagues, but at the end of the day, Treasury Board decisions are Treasury Board decisions. If a hard decision has to be made, a hard decision is taken by the Treasury Board minister. So yes, departments have a say, and yes, departments are an integral part of the process, but at the end of the day, the Treasury Board ministers make the decisions they believe have to be made.

º (1640)

Mr. Alex Shepherd: I may be getting into terrible territory here, but the reality is, some of the things that are going through today are just the reverse of that, that departments don't really respect Treasury Board policy.

Mr. Richard Neville: Well, Mr. Chairman, if we encounter that kind of a scenario, then disciplinary action would probably have to be taken where required, but at this point, the departments are required to follow Treasury Board policy.

Mr. Alex Shepherd: What's your hesitancy for publishing the financial statements that have been prepared on an accrual basis? You haven't gone to publishing them. You've actually prepared financial statements on an accrual basis, but you're refusing to disclose that to the public.

Mr. Richard Neville: The Minister of Finance, in his budget speech of November 2001, made a statement that the government was deferring the publication of its consolidated financial statements for at least one year. I think part of that decision was based on the fact that the budget speech was planned earlier than originally is the case, so a number of components were still subjective in terms of how far we had progressed. I think one has to factor in the date of the budget speech. Therefore that was an important aspect of the decision to defer the full publication of the consolidated financial statements for at least a year.

Mr. Alex Shepherd: In other words, because the budget speech was based on cash accounting and the consolidation is based on accrual accounting, you don't want to actually publish the consolidated statements because you can't tie them into the budget.

Mr. Richard Neville: Not quite. Think of it more in the context that in November 2001 we didn't have the confidence level as high as we would have liked, to be definitive on going with the consolidated financial statements on a full accrual basis for the 2001-02 fiscal year. So to make sure that we would have that assurance, a statement was made by the Minister of Finance that we would be deferring the publication for at least one year.

The Vice-Chair (Mr. Mac Harb): Mr. Finlay.

Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman. It has been most interesting.

I'm in fact a little bit at square one, and I'm looking for some information, please.

I'm looking at Mr. Neville's report. I don't think my colleague across the room has been around for 40 years, but he says this has been going on for 40 years. It's not what I read in here. It says, “One of the key issues that emerged was whether the government should move to accrual-based Estimates and appropriations.” That was in June 2002, the debate on motion 43. Then Mr. Neville says, “It is our view that this issue was never intended to be resolved in the context of the Financial Information Strategy; others may disagree.”

So I thought it had to do with the financial information strategy and with the modern comptrollership, but as you say later in your paragraph:

“Research has been done on the best practices of other countries and a framework to review the accrual budgeting concepts has been developed. The Treasury Board Secretariat is currently engaged in consultations with the Privy Council Office and the Department of Finance to discuss how these might work within the current Expenditure Management System.”

I guess that's what my friend Mr. Shepherd is talking about, and what departments are doing.

“Consultations with departments and development of recommendations are planned for the fall and winter of 2002- 2003.” That leads me to believe we're talking about something that's quite recent, quite new, that hasn't been done before, and maybe we don't know how it's going to turn out. Maybe you should comment on that.

The Vice-Chair (Mr. Mac Harb): Mr. Neville.

Mr. Richard Neville: Thank you, Mr. Chairman.

I guess it comes down to, in 1997-98, were we talking of implementing accrual accounting? Absolutely. Were we talking of implementing accrual budgeting and accrual appropriation? I don't think so. That issue came about in the context of, as we were coming close to closing on accrual accounting, the next question was, what are you going to do about your budgets? What are you going to do about your appropriations? Are you going to put them on a full accrual basis as well? We said what's before us as a challenge is accrual accounting in terms of reporting, and we'll meet that challenge and carry that out as per our commitment, which was April 1, 2001. We would at that point, and maybe a little earlier, start thinking about accrual budgeting and accrual appropriations.

So we have started the process. There have been consultations. There has been a lot of research done. As you mentioned, we are in consultations, as we speak, with the Privy Council Office and the Department of Finance. Obviously it does involve the expenditure management system, which is a government-wide approach to how we manage our resources. We are optimistic that we'll carry out consultation with departments, and hopefully we'll be in a position to have recommendations in the fall and winter of 2002-03.

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Mr. John Finlay: Ms. Fraser, do you have any comment?

Ms. Sheila Fraser: I would just add that the committee has already studied this. I would remind the committee that it has already made recommendations about implementation of accrual budgeting and appropriations. I am concerned that the question does not appear to be getting resolved, and we would have liked to have seen it resolved more quickly than this.

Mr. John Finlay: Do I have more time, Mr. Chairman?

The Vice-Chair (Mr. Mac Harb): You still have seven seconds.

Mr. John Finlay: On page 4, I read the four elements of modern comptrollership. The first one is linking financial and non-financial performance information. This is one of those little bones I worry about, and Ms. Fraser will remember. What is included in non-financial performance information?

Mr. Richard Neville: I'll ask Ms. Santi to respond to that.

Ms. Roberta Santi: Essentially, it means a number of things. It means integrated performance information. It also means linking the resources you have at hand with the results and outcomes you're producing.

So the non-financial information has two meanings. It's the cash and it's the assets. But it also refers to linking your resources to your outcomes, and providing a clearer picture between the resources you're putting into an activity and the results and outcomes you're achieving.

Mr. John Finlay: Thank you very much.

The Vice-Chair (Mr. Mac Harb): Mr. Mayfield, four minutes.

Mr. Philip Mayfield: The Auditor General, in concluding her statement, asked five questions. I am not about to ask those questions of you, but they are on the record. I would like to ask Mr. Neville or his staff if they would agree to supply our committee with an answer to those five questions, specifically.

The Vice-Chair (Mr. Mac Harb): Do we have those questions--paragraph 15--from the Auditor General's statement?

Mr. Richard Neville: I believe I'd like to see those officially, Mr. Chairman.

The Vice-Chair (Mr. Mac Harb): Okay. Maybe the clerk will provide you with a copy of it.

If it is the wish of the committee that you will provide the committee with written answers.... Or would you like him to answer now?

Mr. Philip Mayfield: I would like written answers to those, please, because I have other questions I want to ask you.

Mr. Richard Neville: Fine. We would be pleased to.

Mr. Philip Mayfield: They will be considered in the preparation of our report.

Ms. Fraser in her statement said that MCI and FIS are linked, with FIS being a necessary prerequisite of comptrollership. I would like to go through some of the same questions that Mr. Murphy raised with you concerning management comptrollership.

I hear you're going to be doing some things on this and you're working on it. But what I would like to know is, do you have a timetable of events, where you're going to complete these events in the completion of the FIS?

º (1650)

Mr. Richard Neville: I may have missed the last part. I apologize.

Mr. Philip Mayfield: I just want to know if you have a timetable of events for the completion of FIS.

Mr. Richard Neville: Let me just back up a bit then, Mr. Chairman.

Mr. Philip Mayfield: If you do, would you send a copy to the committee, please?

The Vice-Chair (Mr. Mac Harb): There is a question under item c in paragraph 15, the detailed action plan with milestones and deliverables for all remaining aspects of FIS and comptrollership.

Mr. Neville.

Mr. Richard Neville: Mr. Chairman, I thought we would be responding to those questions.

Mr. Philip Mayfield: That's fine, then. If you will do that, I would appreciate it.

Could you answer me, though, do you have a timetable?

Mr. Richard Neville: There is a timetable for MCI.

Mr. Philip Mayfield: How about FIS?

Mr. Richard Neville: We have said that on April 1, 2001, we completed that, with the exception of producing the consolidated financial statements on a full accrual basis.

Mr. Philip Mayfield: And you're not even agreeing to do that, is that what you're saying?

Mr. Richard Neville: When that will take place is a decision of the government.

Mr. Philip Mayfield: Okay.

On page 7 of your statement, Mr. Neville, you mentioned working with the Auditor General to merge the thinking between the Auditor General's financial management capacity model and the government's capacity check model of modern comptrollership.

Now I believe the government's position is that the Auditor General's model is too process-oriented. Is that the way it's described? It overemphasizes the problem of departments not having all the comptrollership elements. In fact, there's a larger question of how high a level of comptrollership is to be achieved. Departments differ in their capacities to embrace certain levels of comptrollership. I suppose there is a difference of opinion between the government and the Auditor General with respect to the capacity of different departments to embrace comptrollership.

Have I stated that correctly?

Ms. Roberta Santi: I think there's a recognition between the Office of the Auditor General and the Treasury Board Secretariat that we need to work toward a common model that better integrates some of the aspects of the financial management capability model and some of the elements of the capacity check. Our view of the financial management capability model is that it's a very important model, and it's very useful. I think that in terms of the capacity check, some of our thinking has moved beyond the capacity check since it was first put together. We feel that in terms of tools and guidance that are useful for departments, we need to come up with a model that merges these two.

There are a couple of things we would like to do, and I think these were included in some of the discussions that were happening with the Office of the Auditor General. We would like to have a tool that puts the emphasis for departments on practices that the management board expects, not necessarily processes or capabilities--that could come later--but the outcomes and practices we're expecting in terms of modern management. We think this is very consistent with results-based management and where the government is generally going to try to push government to more of an outcome-based reporting, if you will.

So we think there is value both in the capacity check and the financial management model, but we think we have to do more work on it, and we have to focus in on practices.

One of the reasons we want to merge both models is that we feel the capacity check takes a broader perspective of financial management than the financial management capability model, although the Office of the Auditor General's capacity model goes into greater depth on the issue of financial management. If we're going to provide guidance to departments, we want to blend these two together, articulate it in the context of the practices we're expecting, and provide consistent guidance so that departments have a clear picture of where we're moving.

Mr. Philip Mayfield: How are your negotiations going with the Auditor General's people?

Ms. Roberta Santi: We're engaged in discussions. I think they're very difficult discussions, because, as you can appreciate, we all kind of fall in love with our own models. But we're trying to rise above that.

We're trying to say that the definition of modern comptrollership has shifted. Let's give some clear direction to departments. I think there's a desire on the part of both our organizations to arrive there, and I'm hoping that by the fall we'll be able to achieve that. At any rate, the management board itself is very committed to putting out some clear direction on this front.

Mr. Philip Mayfield: I just want to clarify this, and then I'll be finished. Did I hear you say that your timeline is to reach an agreement by this fall with the Auditor General's people? Is that what you're saying?

Ms. Roberta Santi: Yes, it is. But we're also committed to completing our end of the work by fall. So we're working on two tracks, actually.

Mr. Philip Mayfield: I'd like to ask, Mr. Chairman, if there could be a--

º (1655)

The Vice-Chair (Mr. Mac Harb): Mr. Neville has a comment, and that might trigger your....

Mr. Richard Neville: It was a clarification in response to a previous question, Mr. Chair.

Mr. Philip Mayfield: I just wanted to ask if the committee could have progress reports on how this is going between the AG and the Treasury Board.

Are you going to respond to my first question?

Mr. Richard Neville: Yes.

Mr. Philip Mayfield: I'd appreciate that, Mr. Neville.

Mr. Richard Neville: I'd like to go back, if I could, to make a point of clarification.

You asked about timelines with regard to FIS. I said there was one outstanding component, which was the publishing of the consolidated financial statements on a full accrual basis, on which the government will make a decision.

There's another part I should have added. I apologize, Mr. Chairman. Basically, as part of FIS, we always had the intent that departmental managers would be using the new financial systems and information to manage departmental programs in a more holistic way and with better results. In all fairness, Mr. Chairman, we haven't completed that part of the FIS initiative. However, we have been working with the Canadian Centre for Management Development to develop and deliver a full range of learning programs for managers, and this will take place over the next two years. That will instill in the management cadre the wherewithal to manage better in the longer term.

I just wanted to clarify the statement I previously made.

Thank you, Mr. Chairman.

The Vice-Chair (Mr. Mac Harb): Thank you very much.

Mr. Wiersema.

Mr. John Wiersema (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chair, if I may, picking up on the deputy comptroller general's comments, I'm very pleased he pointed that out and I congratulate him for doing so, because this sort of goes to the essence of one of the concerns we have in our office. We have been working on the FIS initiative for a long time, and we've spent a lot of money on it, but, as the deputy comptroller general has indicated, it's not finished yet. There's a lot of work that needs to be done. We haven't yet published departmental financial statements on an accrual basis; we don't have summary level statements on an accrual basis; and, as the deputy comptroller general has just indicated, this information isn't yet being used in day-to-day decision-making.

We understand that much of this is going to be rolled into the modern comptrollership initiative, and that's fine. But the modern comptrollership initiative is a much bigger and perhaps sexier initiative, and it has a much longer timeframe, another seven to ten years, I've heard today. Our concern is that we don't lose sight of the more modest objectives we set for FIS. Those things still need to be done. Let's not lose them in the sexier modern comptrollership initiative.

The Vice-Chair (Mr. Mac Harb): Mr. Thompson, then Ms. Meredith.

Mr. Greg Thompson: Thank you again, Mr. Chairman. You're very generous.

I want to start by thanking the Auditor General; she's very good at educating members of Parliament. I'm looking at her report to Parliament. The strategy is to implement modern comptrollership, and the Auditor General tells us that modern comptrollership is comprised of four elements. Now, listen very carefully, Mr. Chairman. I know you're tired--

The Vice-Chair (Mr. Mac Harb): I'm not tired at all.

Mr. Greg Thompson: The four elements are integrated performance information, sound approach to risk management, appropriate controls, and, I think most importantly, a shared set of ethical practices and organizational values beyond legal compliance.

The reason I point that out and emphasize that last point, Mr. Chairman, is because from time to time, when we do uncover wrongdoing and where government departments routinely break Treasury Board guidelines--and I might even say Treasury Board rules--it appears as if nothing happens; that it gets sort of lost within the system. I don't want to use the word “punishment”, but it appears as if it's simply brushed over, Mr. Chairman.

What I'm coming back to is where I left off, Mr. Chairman, because again, if we're looking at systems, how systems change and how information technology changes and how accounting procedures change over time, it appears at the end of the day, despite all we might be able to build in terms of new accounting procedures, that it comes back to ethical practices--again, the point the Auditor General made, “a shared set of ethical practices and organizational values that go beyond legal compliance”.

It appears to me again, just as a parliamentarian--I'm not speaking as an accountant and I'm not speaking as a lawyer--speaking as a citizen who represents others in the House of Commons as a member of Parliament, it appears that nobody in government can ever stand up and say “We're wrong, we screwed up, this is how it happened, and this is how we're going to fix it”.

I'm still fixated on that ethical side of this whole thing. It appears that if the.... We see it with deputy ministers who come in and work overtime to patch and mend and fix. I hate to always use the term “cover-up”, but there are never any of the standards you'd expect in a business. Most of us have lived and worked in a business and have owned businesses. In a business, when you screw up you say, “We screwed up. How are we going to fix it? Let's fix it.” That's the point I'd like to hear the Auditor General comment on, if she could.

I know I've probably gone on here too long, Mr. Chairman. That sense of just for the public good, for the sense of running an organization that should run in a particular way.... We can bring in all the changes we want, but at the end of the day it comes back to human beings within a department who either want to do it the right way or only continue doing it the way they're already doing it.

Would you comment on that, please?

» (1700)

Ms. Sheila Fraser: Thank you.

I agree with you that values and ethics are fundamental to good management, and I think that's a prerequisite. Unfortunately, in this particular chapter we have not done any specific work on it. I know the office has done work on values and ethics in the past, but that being said, I would not share your skepticism that the public service is as bad as you may think it is--

Mr. Greg Thompson: I never used the word “bad”; I never used the word “bad”, Mr. Chairman.

Ms. Sheila Fraser: Anyway, there is a bit of perception.... I think that the vast majority of public servants are trying to do their job.

Mr. Greg Thompson: Could I just...? I know the Auditor General from time to time intervenes in the discourse of the change of information. I feel obligated to do that, and I don't want to put it in that sense, that there's evil going within it. No, it's not that at all. But it's the sense that when parliamentarians, for example, through question period--and I do have letters to you, Auditor General, on some of what I perceived as wrongdoing within DND and Public Works on how contracts were given--know full well that guidelines were broken, nothing happens. The minister will defend it in the House, the government will defend it to the end, and we truly do have to.... I guess you're in a sense.... I don't want to put a halo over your head, but it's the sense that we have to have help from people like yourself, departments, organizations like yours, I should say, that do want to basically get down fundamentally to what went wrong within a department.

I'm not saying that, and I hope I didn't imply that everyone is bad and evil is going on within government departments; I'm not a conspiratorial type. But it's the sense that when something is wrong and something has happened, it appears there's never any internal action taken by somebody who might have done that. It just appears that the approach is “We'll just go on and this is how we do business. Don't worry about it; we'll make sure you're not punished and nobody's punished; we'll just keep on with our sloppy management practices.”

The Vice-Chair (Mr. Mac Harb): Ms. Fraser, you have the floor. I'm sorry for the interruption.

Ms. Sheila Fraser: I can't respond to what actions are taken or not taken with regard to people who break rules. Unfortunately, I don't have any evidence to support what I could say.

I would say, though, I think we have seen evidence in several departments of very strong internal audit functions that have raised shortcomings in management procedures, which I think is a positive. I think it's actually quite positive that the internal audit function is there, and I would be a very strong supporter that it has to be strengthened across government. I think the kind of role we do is also there.

I would agree with you, though, as we have said in certain things, that there is a reluctance to report shortcomings. I look at departmental performance reports, and I think this committee has commented as well that there tend to be more of the good things reported, and there are not as many of the areas where objectives have not been met.

I think we can all speculate as to why that is, but we would certainly like to see more balance in performance reports. I think that would perhaps go some way to addressing the concerns Mr. Thompson has raised.

The Vice-Chair (Mr. Mac Harb): Thank you. Ms. Meredith.

» (1705)

Ms. Val Meredith: Thank you, Mr. Chair. I'm also going to go back to where I left off, and I'm going to refer to a question, or a response to one Mr. Murphy posed, about who makes the decision, who is responsible.

Mr. Neville, you acknowledged that you were one of a team or one of a group of people who would have to ultimately be responsible for the issues. When you said it's a policy decision as to whether or not you use accrual budgeting in appropriations, I would have to assume you're one of the individuals who would be making that policy or involved in the discussions to make it policy. Am I right?

Mr. Richard Neville: Yes, I think that's a fair statement.

Ms. Val Meredith: Then would you be able to provide this committee--and do it in writing, because I have another question and I don't want to take up the time--what the concerns are that you have, as one of the group making that decision, in not bringing consistency into the whole budgeting appropriation system?

Mr. Richard Neville: My concern--it's not that I haven't any wish to explain it further--is that a major change would be required in the budgetary process across government, in every single department and in terms of our budgetary process as a government. And there would be probably an impact on every appropriation that is presented to Parliament in terms of how it would be presented, how we would have to account for it afterwards; therefore, those kinds of changes, which we haven't seen in a hundred and some years, are major changes that I think have to be looked at very carefully before we move ahead.

Ms. Val Meredith: Just because it hasn't been done for a hundred and some years is no excuse not to consider doing it, though.

I understand that your predecessor, Mr. Colin Potts, told this committee the Treasury Board Secretariat was working on four models of accrual appropriation. What happened to those four models that you guys, the Treasury Board Secretariat, had been working on?

Mr. Richard Neville: That is correct; we did have models. We have refined them and we have a framework now that has been put forward, and that is what is being, as I said, discussed as we speak with the Privy Council Office and the Department of Finance.

Ms. Val Meredith: Is there any chance of our getting a copy of that framework?

Mr. Richard Neville: Until a decision is taken, Mr. Chairman, I don't think we're in a position to share that framework.

Ms. Val Meredith: Thank you.

The Vice-Chair (Mr. Mac Harb): Mr. Mayfield, you have four minutes.

Mr. Philip Mayfield: Mr. Neville, in your statement you say “I want to assure the committee members that the momentum started with FIS will not be lost.” Now, you've said there's not a lot you can do until certain decisions have been made by the government. How can you assure the committee this momentum will not be lost, considering that this seems to be a major roadblock that not only the committee is up against, but that you're up against?

Mr. Richard Neville: I think, Mr. Chairman, you heard this afternoon on numerous occasions that we have looked at the modern comptrollership initiative as a follow-on to FIS, and it has incorporated a lot of the components, the infrastructure, that was started through the FIS initiative. So I don't expect it to be lost.

I also mentioned that for the components that have not been finalized, especially the part dealing with the managers' requirements to use the financial information that's now available, we would be working with the Canadian Centre for Management Development to have it in their course curriculum over the next two years. I think that's going to embed into the overall process the necessary components that would allow FIS and modern comptrollership to evolve and be established government-wide.

Mr. Philip Mayfield: It seems to me that in an issue with as many facets as this that there would have to be a fairly in-depth conversation between the politicians and people like yourself--if by government you mean the politicians. Is that what you mean?

Mr. Richard Neville: Yes, Mr. Chairman.

Mr. Philip Mayfield: I've heard a couple of auditors general talk about some of the values of accrual accounting, of looking at not only what items cost but their continuing value and usefulness and the significance of loss, this in order to give the complete picture. Take DND, for example. They're always looking at new stuff and putting old stuff on the shelf, stuff we perhaps forget about.

The question I want to get to is, considering the value of accrual accounting, where are you in this argument in talking to your minister or your senior...? Is it fair to ask how hard you personally are pushing on this?

» (1710)

Mr. Richard Neville: I'm pushing as hard as I can. I believe in accrual accounting. I have been on record on numerous occasions as saying that I fully support full accrual accounting reporting across government.

Mr. Philip Mayfield: That's right through the whole thing from beginning to end--is that correct?

Mr. Richard Neville: Mr. Chairman, I've been on record as saying that.

Mr. Philip Mayfield: Well, it's certainly a great relief for me to hear you as an individual say that, because as you know, we took a motion to Parliament. As a matter of fact, you included that in your statement today. But now that we've finished that, I haven't a clue as to where we are. It's just so much “blowin' in the wind”, it seems. There's no response.

Part of my frustration in discussing this issue with you is that this is not the first time we've done it. As Mr. Wiersema said, how do we know what you're doing when there's never any evidence on the reports, the timelines, or the way points need to be identified? It seems so slow when there's such little feedback. Is that a fair statement?

Mr. Richard Neville: Mr. Chairman, I can understand why the member could be frustrated with--

Mr. Philip Mayfield: I think the Auditor General is too.

Mr. Richard Neville: However, there's been a lot of progress made. We have pretty well identified the assets of the Government of Canada. We have pretty well identified a number of contingent liabilities we hadn't previously. I think that in working with the Office of the Auditor General we're trying to get agreement on the correct amounts and the disposition of those liabilities.

Again, a lot of work has been done, but unfortunately I can't say to you that we have at this point made a decision as to the consolidation of the government's financial statements on a full accrual basis.

Mr. Philip Mayfield: I can't forbear asking Ms. Fraser if she would comment on the state of negotiations with Treasury Board on this issue. We've heard Treasury Board talk about those negotiations, and maybe you'd like to get your oar in the water on the issue Mr. Neville was just discussing.

Ms. Sheila Fraser: Could I just get clarification on whether it's the question of the model or the question of accrual accounting?

Mr. Philip Mayfield: It was the question of the models I believe you're discussing with Treasury Board. Is that not correct?

Ms. Sheila Fraser: We have, as you know, had the financial capability model, which has been published for about three years now. It has always been the desire on our part that there be one common model. I think that it's important that the audit office and the government agree on a model with which to assess capability.

Last fall I signed a protocol, a letter of agreement, with the then Secretary of the Treasury Board that we would merge the models. I'm still hopeful that will happen, although it's been a bumpy road at times. That's all I can say.

Mr. Philip Mayfield: I presume you'd like a standard to measure things by. Is that correct?

Ms. Sheila Fraser: We have it. It's just that it would be helpful to departments if there were clarity throughout, if there were one model both the audit office and government used to assess where departments are at in their comptrollership. I'm hopeful that we can still get this done. I don't think there are large differences--at least, I don't think there should be--and I'm hopeful that we can resolve this and have one model that can be used by everybody, not two.

The Vice-Chair (Mr. Mac Harb): I have a couple of questions, Ms. Fraser.

What system is your agency using now?

Ms. Sheila Fraser: At the Office of the Auditor General we're using Oracle Financials.

The Vice-Chair (Mr. Mac Harb): Is that along the same line?

Ms. Sheila Fraser: We went through the FIS project like all the other departments.

The Vice-Chair (Mr. Mac Harb): Do you use the management control initiative too?

Ms. Sheila Fraser: Yes.

The Vice-Chair (Mr. Mac Harb): Is that a system you would recommend for the departments to use all across the board?

» (1715)

Ms. Sheila Fraser: Oracle is one of the seven cluster groups. I think it depends very much on each department's needs. We are a fairly small organization. I'm not sure that Oracle would be appropriate for others. I think each one has to determine its own needs to see which system is most appropriate for them. We went through that process and decided that Oracle Financials would best suit our needs.

The Vice-Chair (Mr. Mac Harb): Mr. Neville, obviously there are some agencies in government that are already adopting the system and they are up and running and others are still working on it. How long will it be, would you say, before we will be able to see some tangible results and be able to tell the people about the good side of things on that front?

Mr. Richard Neville: In terms of accrual accounting, if that's what you're referring to, Mr. Chairman, of the 103 departments and agencies, they're all supposed to be on full accrual accounting as of April 1, 2002, so I would expect that those benefits are already accruing to the majority of departments and agencies. There are obviously some areas that are probably not as advanced as others, but, all things being equal, every day they're getting progressively closer to the objective.

The Vice-Chair (Mr. Mac Harb): I think you realize that the committee, as well as the Auditor General, is quite eager to see some tangible results come out, hopefully within the next little while.

Mr. Richard Neville: I agree, Mr. Chairman. We get those pressures all the time.

The Vice-Chair (Mr. Mac Harb): Are there no further questions from colleagues?

Mr. Finlay, do you have a question?

Mr. John Finlay: I have one more question, please.

Who is the Comptroller General?

Mr. Richard Neville: Mr. Chairman, the Comptroller General is also the Secretary of the Treasury Board. The Secretary of the Treasury Board has a dual title. He is Secretary of the Treasury Board and Comptroller General, but only receives one paycheque, Mr. Chairman.

Mr. John Finlay: But does both jobs. Thank you.

The Vice-Chair (Mr. Mac Harb): I want to thank both of you for showing up today. Certainly it has been one of the liveliest discussions we've had so far.

Madam Fraser, do you have some closing comments?

Ms. Sheila Fraser: Thank you, Mr. Chair.

I'd like to say that our office does fully support the financial information strategy and the modern comptrollership initiative. We think these are really important. They are initiatives that will take a long time to introduce, and it is difficult at times to maintain momentum when initiatives take time, so we feel it's critical that there be a plan and a path that shows clear benchmarks to ensure that progress is being made, and that the Treasury Board Secretariat monitor that and ensure appropriate progress.

I would caution that we shouldn't declare victory too soon on some of these things.

The Vice-Chair (Mr. Mac Harb): I can see Mr. Neville taking note of that.

Mr. Richard Neville: Mr. Chairman, I've taken note of that, thank you.

The Vice-Chair (Mr. Mac Harb): Thank you very much.

It being 5:15, the committee is adjourned.