PACP Committee Meeting

     I'm pleased to see that everyone managed to get into the public portion of our meeting. I know that we are all dismayed by these technical difficulties that are robbing us of our time. Having said that, I will move quickly into the business of this next hour.

    During the second hour of this meeting, we are meeting pursuant to Standing Order 81(4) to study the main estimates 2020-21, vote 1, under Office of the Auditor General.

    During the first hour of the meeting, we had Karen Hogan, Auditor General of Canada; Andrew Hayes, deputy auditor general and interim commissioner of the environment and sustainable development; and Kimberly Leblanc, principal. They are also joining us for this portion of the meeting.

    The Auditor General has, I'm told, about an eight-minute opening statement.

    Please begin.

    Yes, Madam Chair. If you'd like, I could try, on the fly, to cut out some paragraphs to give you some time. I think you all have a copy of the statement, so I think I'll try to do that as I progress through.

    Thank you. Go ahead.

    Madam Chair, we are pleased to have this opportunity to discuss the work of our office, including our most recent departmental reports.

    With me today are Andrew Hayes, Deputy Auditor General and Interim Commissioner of the Environment and Sustainable Development, and Kim Leblanc, Principal of Human Resources.

    The mission of the Office of the Auditor General Canada is to contribute to well-managed and accountable government for Canadians. We do this by providing Parliament and territorial legislatures with independent and objective information, advice and assurance about government financial statements and the management of government programs.

    Let me turn first to our 2018-19 Departmental Results Report. We provided this report to Parliament in December 2019. As shown in our financial statements, our net operating cost was $98.6 million, and we employed the equivalent of 552 full-time employees.

    With these resources, we completed a total of 21 performance audits, including six led by the Commissioner of the Environment and Sustainable Development and one reported to a northern legislature. In addition, the commissioner presented the annual report on environmental petitions, and we conducted nine special examinations of Crown corporations.

    In terms of our financial audit work, we issued clean opinions on 85 of the 89 financial statements of federal and territorial governments and of Crown corporations we audited. We also presented commentaries derived from our special examination and financial audit work.

    In the 2018-2019 fiscal year, we appeared before 11 different parliamentary committees, for a total of 46 hearings on our audit work. Parliamentary committees can use our reports to improve government management and accountability, mainly by inviting departmental officials to explain how and when they will address our audit recommendations and by following up on progress at a later date.

     In 2018, an international team led by the audit office of South Africa conducted a peer review of our office. In its 2019 report, the review team concluded that our office had adhered to relevant professional standards and that our system of quality control was suitably designed and effectively implemented. The peer review team also suggested improvements. Our action plan is available through our website.

    Let me now turn to our 2020-21 departmental plan. The Office of the Auditor General of Canada is funded through various appropriations and transfers. Under vote 1 of the main estimates, our program expenditures for the 2020-21 fiscal year are set at $78 million, and we plan to employ the equivalent of 585 full-time employees.

    Our departmental plan presents our three strategic objectives. We are now more than halfway through the current year. These objectives have driven our work, including the way we have responded to the COVID-19 pandemic and our funding pressures. Our office has had to adapt to COVID-19. For the most part, our employees have been working remotely since March.

     For our performance audit work, we have prioritized the motions passed by the House of Commons earlier this year. In particular, we have undertaken audits of the government's investing in Canada plan and the COVID-19 response. However, because of our funding pressures, focusing on this work has meant that we have had to defer other planned audits.

    Since my appointment in June, we have been working productively with the government to address our funding needs. In July, I submitted an updated funding request, and I have strong indications that our needs will be fully addressed. We are now working with officials at the Treasury Board Secretariat so that our additional permanent funding can be included in the next estimates for parliamentary approval.

    To be as well prepared as possible to serve Parliament in the future, we have taken a calculated risk to start hiring in anticipation of receiving additional funding. We are monitoring our spending, and we are ready to react if needed to ensure that we will not exceed our budget.

    We have also been focusing on the state of our IT environment. Like all organizations, we must invest on an ongoing basis to maintain and upgrade our systems. Our funding pressures have affected our ability to do some of this work. In the past, we have had to make difficult decisions to postpone some upgrades for our IT systems and processes that support our audits. Once we receive additional permanent funding, we will be able to act on our modernization plans.

    Madam Chair, we thank the committee for its ongoing support and the use of our work. We look forward to continuing to serve you in the coming year, and we are pleased to answer your questions.

    Thank you very much, Ms. Hogan.

    We will now move to questions from members, starting with our six-minute round.

    I believe we start with Mr. Berthold.

    Thank you, Madam Chair.

    Good morning, Ms. Hogan. Thank you for joining us today.

    Obviously, the issue that comes back and has come back several times over the past few years is that of your office's funding.

    In your opening remarks, you said that a number of audits had to be deferred because the funding was unavailable. I know that, since February 2016, the Office of the Auditor General has filed at least 15 requests for additional funding from the government.

    You are saying that the government seems to be on the point of responding positively to your funding requests. What has changed? What funding did you request, and what are you expecting to ensure that it's right this time?

    I remind you that, since 2016, 15 requests have remained without response.

    Ms. Hogan, you are still muted.

    As I mentioned, I submitted a new funding request in July.

    In that request, we were asking for $25 million. Employees' social benefits and accommodation costs are not included in that amount. Therefore, the $25 million was added to our permanent funding.

    What made you believe that you would get $25 million this time? We just received supplementary estimates (B), and they don't show any increase to your budgets. The year will be nearly done by the time you get the money, and people will have already done the work.

    The discussions I have had with senior officials in the government are very encouraging. They asked us a number of questions, which we answered, and we have provided the additional information requested. Those discussions with government senior officials lead me to believe that they have heard us and are open. Of course, I cannot say that with certainty.

    They are currently looking into whether the money could be found in supplementary estimates (C). I hope that's a positive sign. Of course, government will decide on our funding.

    What audits have you been unable to carry out and had to set aside since your funding is insufficient, especially as the House of Commons has given you new mandates this year because of the pandemic?

    I have a few details for you, but I will ask Mr. Hayes to complete my answer if I forget anything.

    We have had to defer a few audits, including those on cybersecurity and protecting the north. Those are the two that come to mind. We have also pushed back certain audits, which will be submitted later this year, as the moment is not ideal to do so.

    Have I forgotten any, Mr. Hayes?

    Apparently not.

    Ms. Hogan, in closing, do you think the Office of the Auditor General can do its job for Canadians properly or is that money absolutely necessary?

    That money is necessary for us to fulfill our mandate in the way we want to. As you said, our work is really focused on activities related to the pandemic and on the investing in Canada plan.

    The government is doing many other things. There are expenditures, purchases, information on cybersecurity and technology we would like to look into. We need money to modernize our office and expand on the topics we study.

    Thank you.

    Ms. Hogan, what study do you think would be more important for Canadians? You talked about cybersecurity. That is a very important issue. Why are you so interested in it?

    Cybersecurity and Internet access are two issues that worry me. During the pandemic, that service is practically essential, especially in the education of children and medical visits. It is very important for us to be able to look into improvements to be made or shortcomings in that area.

    Thank you very much.

    Thank you.

    We'll now go to Ms. Yip.

    Welcome back to the committee, Ms. Hogan, Mr. Hayes and Ms. Leblanc.

    How has the pandemic impacted the OAG? To what extent has the OAG been able to maintain its audit activities during the pandemic?

    Like several organizations and a good part of the public service, for the most part our employees have been working remotely since March. That brings about the need to adapt to so many different ways of working. Coaching and mentoring employees is different in a virtual world. Accessing the entities that we audit and the information they need to provide in order for us to do our audits is different, not only for us but also for folks in the public service.

    How have we been able to maintain our work? At first, I think, it was a little difficult. We needed to find the right collaboration tool and the right ways to have conversations with public servants that are sometimes protected. We needed to find creative ways to find audit evidence, because we might not have access to the traditional information that we would normally have been looking at in our financial audits and our performance audits.

    When it comes to the work that we're now doing on the COVID response, I think the biggest impact is capacity, both in the departments and within our office. As you can imagine, the Public Health Agency, Health Canada and ESDC are departments that are key in providing COVID response measures to Canadians. That was in addition to their regular work. Then you add the demands of an audit.

    What we're seeing is that it's taking us a lot longer to deliver audits. We are mostly motivated by the desire to find the right balance with departments as they provide much-needed assistance to Canadians and try to help us deliver on our mandate, which is to provide some reports to Parliament to hold government to account.

    Do you feel that these delays and technical difficulties will impact the quality of these COVID audits?

    Not at all. Our audit reports will still be based on strong evidence. They will be cleared with the entities. I do believe that the issues we're encountering are just slowing us down a little. What we might see, in order to ensure that we have good quality of audits—and we're actually doing that in an audit on CERB—is that we're going to split it into a few pieces. We're going to start now and look at the design and implementation of a program. Then we will wait for data to accumulate, for time to have passed so that we can look at the effectiveness of the program and whether or not controls were in place to do what it should do.

    I think that will allow us to maintain a good-quality audit, if we're able to divide it into parts that are more manageable and that make sense given where we are, real-time, still responding to a pandemic.

    Will you be able to meet the deadlines, given the slowness or the delays?

    I'm happy that you asked.

    On the investing in Canada plan, I wrote last week to the Speaker to say that we have run into some issues with the timing. The motion that was passed in the House asked us to report on the investing in Canada plan by January. Unfortunately, the pandemic has impacted our capacity and that of the departments we're auditing. We indicated that we would be tabling that report in March instead of January.

    Right now, we have a plan for the COVID audits that sees some being completed in late January, some in March, and some in May. Again, we have to recognize that we need to be fluid and ready to respond and adjust, as everyone tries to deal with the waves of the pandemic. They go up and down as we enter into the winter, and we need to see how that might impact our work.

    We will keep you informed if we anticipate some additional delays.

    Those delays will impact the remaining, non-COVID audits.

    Absolutely they will, which is why I am hopeful that funding will come soon.

    As I mentioned, having a decision about our funding is one thing. Then you need a parliamentary vote, and then you need the funds to flow to us. All of that adds to the time it takes for us to ramp up and be ready. As I mentioned, we've taken some actions to start our recruitment processes, but we do have to be careful. We can't over-commit when we don't have the funds yet.

    We are ready, but delays, unfortunately, are inevitable.

     You've already mentioned in your comments the calculated risk about hiring. Surely, with the pressure of COVID, I hope that.... Do you feel you will be successful, using COVID as a means?

    I am very optimistic. COVID has taught us that we don't need to have all our auditors in a location where we have bricks and mortar. We have our main office here in Ottawa, and we have regional offices across the country. COVID has demonstrated to us that we can recruit and hire individuals from across the country, not just in the provinces where we might have a building. We're hopeful that this will bring a group of individuals who have never thought it possible to work for our office.

    Thank you, Ms. Hogan.

    We will now move to Mr. Blanchette-Joncas.

    Thank you, Madam Chair.

    First, I want to say hello and thank you to Ms. Hogan.

    Ms. Hogan, I congratulate you again on your appointment to the position of auditor general. You are a graduate of the Quebec university network. Quebeckers are proud of you being auditor general.

    Ms. Hogan, we see that the government is currently too lax about the issue of underfunding. At our meeting last May, you said that you would continue to work on that aspect and that you were asking the government for the money you need to do your work. It was mentioned earlier that, since 2016, 15 requests were submitted to the government to increase the funding provided to the Office of the Auditor General. In May, you talked about a mechanism that would help avoid having to constantly keep requesting money from the government. Do you have a mechanism to suggest that would make your funding statutory and permanent?

    As you mentioned, we have been asking for an increase to our funding for years. As I said earlier, I really see openness and progress in terms of access to funding now that we are at mid-term. The mechanism that will ensure we have access to funding is one that is independent and will avoid us requesting money from the department again. I intend to continue with those steps in the long term, but so far, our efforts have mainly focused on immediate funding. As soon as we have established that process, we could discuss how to have an independent and stable mechanism for the future.

    That's great.

    Ms. Hogan, speaking of money, your predecessor, Sylvain Ricard, who was acting in that position, was asking for an additional $10.8 million for the Office of the Auditor General's annual budget, which was $88 million. You said earlier that you requested an additional $25 million in July. What explains that increase from $10.8 million to $25 million?

    Thank you for your question.

    The explanation can be found in the passage of time. The $10.8 million was based on projections done by Mr. Ferguson, in 2017. Costs have obviously increased with time. When it comes to IT, we have really not invested in our technological systems over the years. In terms of technology, we are not just talking about a gap, but rather a cumulative lack of growth and, the longer we wait, the more it will cost to modernize our systems.

    I would also like our performance audits to return to their pre-2017 levels. As a newly appointed auditor general, I would like to improve other aspects, such as our way to communicate our reports and modernize our communications with Canadians, so that our reports would be more accessible.

    Those are the three main components that have contributed to the increase.

    Thank you for the clarifications.

    Last May, we were already looking into various government programs that had to be implemented quickly to respond to an unprecedented and unique situation. You then mentioned that, when the government must make decisions quickly, the risk of error is higher and the margin of error increases. You said that mechanisms should be implemented to identify potential abuse and fraud.

    Since we spoke in May, what have you done on your side to implement mechanisms to identify the source of problems and avoid their recurrence?

    It is not up to our office to implement those mechanisms. Departments must ensure to have the necessary mechanisms to detect payments made in error. I know that the department that is managing the CERB has those mechanisms.

    As I said earlier, in the case of the audit on the CERB, we will begin by implementing controls. However, we have to wait a little to allow mechanisms the time to detect fraud and payments made in error. The department needs information and time to identify payments made in error, and to react and collect data.

    I promise you that we will carry out that audit, but it won't be done right away.

    Okay.

    Ms. Hogan, you had a rather global vision in the past as assistant auditor general.

    What priorities have you identified in terms of areas requiring improvements since you have been in your new position?

    Are you talking about our office's priorities?

    Yes.

    I think modernization is one of them. Our IT has to be modernized, but also our methods, especially the way we publish our reports. That is part of discussions on our board of directors, and our entire team agrees on the areas where the office should move forward.

    I think that the pandemic has also shown us that....

     Thank you very much, Ms. Hogan.

    We will now need to move to Mr. Green.

    Madam Chair, I thank my friend from the Bloc Québécois for his solid questions.

    I want to allow you the opportunity to continue in that vein, to identify what you consider to be urgent and important. When you state that you want to modernize the systems and principles, what exactly do you mean by “modernize”?

    Thank you for following up with the same question.

    We need to modernize our IT systems in order to.... If I look at audit work, we already have systems that allow us to do data analytics, but that side of the audit world is evolving rapidly. Artificial intelligence is being used. There are large amounts of data, so we need to make sure we have the systems and capability to analyze the data that the government is generating and using to inform its decision-making.

    Ms. Hogan, who would be the gold standard internationally in using the most cutting-edge technology to provide what you just described to us?

    That's a great question. I'm not sure I know who the gold standard would be, but I can tell you that we are consulting internationally with other countries and other audit offices across the world. We are not going to be developing our own programs; we are not going to recreate the wheel. We are going to find out what's working well in other audit institutions and make sure that we can adopt software and tools that are already being used and are proven to be effective.

    We also want to modernize our own processes. As I said, the way we communicate is really important, so that our audit work can reach more Canadians rather than just be used by the departments we audit. Outreach is important, so that Canadians understand that the government is honouring its commitments to them.

    Let's pull this back and internalize it. You talked about the use of the information with our committees. Would you care to comment on whether you feel that all of our departments and committees are using the data you provide them in meaningful and effective ways?

    Well, the data that we provide to committees is really our audit reports, and the best way you can use them is to study them in a timely fashion, to invite departmental officials to discuss how they plan to address the recommendations we may have identified, and ask them for action plans. It shouldn't, however, be a “one and done” deal. You should make sure that you follow up with them, because the outcome is really to improve the lives of Canadians and the programs and services that are provided. Sometimes a continuous pressure is needed.

     According to the 2018-19 departmental results report, 58% of reports presented to Parliament were reviewed by a parliamentary committee. It has your target as being 65%. How can parliamentary committees, other than our committee, of course, the gold standard of the Standing Committee on Public Accounts, be encouraged to further review your reports to guide their work?

    When you look at that statistic, you see that it might make it look like reviewing our work went down. But you also have to recognize that in the past we did not table all of our special examinations on Crown corporations. We have started to table those with Parliament, so that they're all accessible in one place for committees to study. It looks a little worse than it really is.

    That's fair. We'll keep that for the record.

    There was talk about fair mechanisms. You started down that line on fair mechanisms for funding. Certainly having to go to the Department of Finance currently to get your funding.... Back in May, you talked about the need for long-term, predictable funding. What are the independent mechanisms that could be implemented, and what are similar mechanisms that are used in other jurisdictions?

    There are independent funding mechanisms that can be used. As an example right in our own country, some of the provinces function that way, and other countries, I believe Australia and the U.K., function that way as well.

    One of the options would be for a special committee or the public accounts committee—the committee to which we as an office typically come—to have an opportunity to review our funding and ensure that we get access to funds in a timely fashion. This would allow us to rightsize—not just upwards, but upwards and downwards—to deal with perhaps temporary issues, for example the pandemic.

    If a special request is there to audit something that would be above and beyond our planned work, an independent mechanism that's a little more agile than the traditional mechanism used for the departments and agencies would enable us to respond better and deliver better quality faster to Parliament.

    With that being said, given the scope of work that we've laid out.... I don't even know if this is a question, but certainly a consideration for all of the committee that this would be something we look for in a study to ensure that the foundation, perhaps, of this department is set up in a way that is impartial and independent as a mechanism.

    I would—

    Thank you very much, Mr. Green. Your time is up.

    Madam Chair, I have a point of order.

    I am being told that translation is not working on Zoom. It is working well on the floor, but I am being told that the translation is not working for my colleagues.

    Would you be able to check with the technical team, please?

    I apologize. I think I made a mistake, as I did not select English. I apologize; I won't do it again.

    Thank you very much.

    Colleagues, we have five minutes left. We have two questions that we have to entertain prior to adjourning.

    I would like to suggest that with the time left we split it between the two speakers on the five-minute round and give each of them one to two minutes to ask a question. Would you agree with that, Mr. Webber and Mr. Longfield? Thank you.

    Mr. Webber, please go ahead.

    Thank you, Madam Chair.

    Thank you, Ms. Hogan, and best wishes in your role as Auditor General.

    In your statement earlier, you said you are hiring currently in anticipation of additional funding. You're asking for $25 million, as you mentioned, but that does not include the benefits for your employees, and no accommodations are included in there either. Can you please give us an idea of what those costs would be for the benefits and the accommodations as well?

    Absolutely. Our ask was for $25 million. When you include employee benefit programs and accommodations, it's $31.6 million. However, the $25 million is the only amount that gets added to our funding on an ongoing basis.

    Okay. How many full-time equivalents would that include in addition to what you have right now? Back in 2018-19, you had 552 FTEs. That decreased by 16 in 2017-18, and you plan on using, I guess, 585 this current year. I guess I just answered my own question there.

    Do you still plan on getting to about 585 FTEs? That additional funding obviously is there. Is that correct?

     The 585 FTEs is without that additional funding. That is our normal workforce. We're usually somewhere between 575 and 600 people. The additional money we asked for would see us adding about 150 FTEs, or 150 individuals, to our workforce. Obviously that will be over time, and the split is between some auditors and support services to be able to continue to support our auditors.

    That's not going to happen in one year. It's definitely going to take some time to get there. I would imagine it will be a few years.

    In the meantime, if we do get all the funding, our intention is to use some contractors in order to be able to build up our capacity and deliver on some performance audit work. We will also use some of the funds in the first few years to invest in some of our IT projects.

    Thank you, Ms. Hogan.

    Madam Chair, I have a point of order.

    Yes, go ahead.

    I think we can just check the blues, but the Auditor General referenced some numbers at the beginning, $25 million and $31 million. Can the Auditor General quickly encapsulate those numbers again? There were an awful lot of numbers thrown out there at the beginning.

    Mr. Sorbara, we could perhaps move to the next questioner we have on the list.

    Thank you very much.

    Mr. Longfield, go ahead.

    Thank you, Madam Chair.

    Ms. Hogan, it's great to see you again, and congratulations. I know there's been tragedy in the department, and I know on a personal level that people have carried on very professionally.

    I have a very short amount of time, but I'm looking at the 2018-19 departmental results report. It shows there was a lapse of $3.5 million. I know funding has been an issue, but we were looking at carrying forward $3.5 million into 2019-20. Was that actual lapse the amount that went forward or was it a different amount? Why did we have it in the first place?

    I believe that amount is correct. Andrew can let me know if I'm wrong.

     It was carried forward. Why did it happen? I think a lot of it has to do with the fact that the majority of our funding is human capital. It is individuals. People come and go, and you can't always predict that. When you bring them on, you get funding for them at the beginning of the year. If they arrive halfway through the year, then half of their salary is unused.

    Right.

    It just normally happens. We also have to monitor when we get our supply. There's a bit of a risk, and a bit of the funds are always left unspent at the end of the year.

    There are external factors, then.

    I was very interested in your comment about the implications of technology, showing that you could hire auditors from across Canada. I'm thinking that in Guelph we have some federal offices for agriculture.

     As the gold standard of auditing, you always think of the Auditor General's office. Internationally, we're also thought of that way. This could really create an audit community across Canada. Could you comment on that?

    Please give a very short answer, Ms. Hogan.

    It absolutely can. I'll selfishly ask all of you to let people know we're hiring. They should check out our website.

    Thank you very much, Ms. Hogan.

    Thank you.

    Thank you so much for joining us today. We really appreciate the opportunity, even though we had so many technical difficulties.

    Colleagues, I do have two questions for you.

    Shall vote 1, less the amount of $58,563,393 granted in interim supply, carry?

    (Vote 1 agreed to)

    The Chair: Shall I report the vote on the main estimates to the House?

    Some hon. members: Agreed.

    The Chair: Thank you very much, colleagues. I appreciate that.

     Is it the committee's will to adjourn the meeting?

    Some hon. members: Agreed.

    I'm not done my lunch but....

    I hear you.

    I'd like to go on the record and say that it's nice not to finish with a filibuster.

    Thank you, Auditor General.

    I agree. In the spirit of bipartisanship, I agree.

    She's a Montrealer. What do you expect?

    I know Montrealers. I hear you.

    Mr. Sorbara, I can give you those numbers really quickly. They are $25 million and $6.6 million for a total of $31.6 million.

     Thank you.

    Thank you to Andrew Hayes and Ms. Leblanc as well.

     We are adjourned.