CONTENTS
Friday 2 February 1996
Audit Act amendments
STANDING COMMITTEE ON PUBLIC ACCOUNTS
Chair / Président: McGuinty, Dalton (Ottawa South / -Sud L)
Vice-Chair / Vice-Président: Colle, Mike (Oakwood L)
Agostino, Dominic (Hamilton East / -Est L)
*Beaubien, Marcel (Lambton PC)
*Boushy, Dave (Sarnia PC)
*Carr, Gary (Oakville South / -Sud PC)
*Colle, Mike (Oakwood L)
*Crozier, Bruce (Essex South / -Sud L)
*Fox, Gary (Prince Edward-Lennox-South Hastings / Prince Edward-Lennox-Hastings-Sud PC)
*Gilchrist, Steve (Scarborough East / -Est PC)
Hastings, John (Etobicoke-Rexdale PC)
*Martel, Shelley (Sudbury East / -Est ND)
McGuinty, Dalton (Ottawa South / -Sud L)
*Pouliot, Gilles (Lake Nipigon / Lac-Nipigon ND)
*Skarica, Toni (Wentworth North / -Nord PC)
*Vankoughnet, Bill (Frontenac-Addington PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Kwinter, Monte (Wilson Heights L) for Mr Agostino
Also taking part / Autre participants et participantes:
Office of the Provincial Auditor
Peters, Erik, Provincial Auditor
Leishman, Ken, Assistant Provincial Auditor
Sciarra, John, executive assistant
Clerk / Greffier: Decker, Todd
Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service
The committee met at 1002 in room 151.
AUDIT ACT AMENDMENTS
The Vice-Chair (Mr Mike Colle): Today we're here to deal with the auditor's suggestions and pass suggestions on amendments to the Audit Act. I refer you to Mr Peters's presentation yesterday. Perhaps we could get Mr Peters to give us the perspective and the background on the proposed amendments.
Mr Erik Peters: Thank you, Chair. What I would like to refer to specifically is essentially appendix 2 to the document that we gave you. What this appendix does is it identifies the paragraphs. We, not all being accountants in my shop and not lawyers, were not presumptuous enough to draft actual wording, but we are just identifying the sections of the Audit Act that may be affected by amendment. Also please refer to appendix 3, which is the Audit Act itself. So let me just, very quickly, walk you through what we're talking about.
Firstly, in section 1 of the Audit Act you find the definition of an inspection audit. I should point out that out of all the provinces where the legislative auditors -- sometimes they're called auditor generals and in other cases provincial auditors -- have these inspection rights for grant recipients, Ontario is the only one which has restrictions in it. In other words, Ontario is the only province where it says that we can have only access to their accounting records.
British Columbia, Manitoba, Quebec, Nova Scotia and Prince Edward Island are the other provinces that have these provisions that they can look at the books of recipients of government funds, and in none of their cases is there a restriction as to the kind of records to which they can have access. In other words, in those provinces they have relatively free access and can carry out their duties under the Audit Act with respect to those recipients.
If we had a choice of amending this, if this were one of the ways of going, then we would be saying that inspection audits should be audit examinations in which the auditor has access to all records required to carry out his duties under the Audit Act; in other words, so that the full scope of audits that we can conduct under the Audit Act could also be carried out with respect to grant recipients.
Mr Chair, if somebody wishes to interrupt with questions, I am certainly free to entertain those.
The second area where inspection audits are mentioned is in section 10.
The Vice-Chair: Is that in appendix 3?
Mr Peters: I apologize. I stand corrected. Inspection audits are not referred to in section 10. However, section 10 deals with access to information and currently reads, "Every ministry of the public service, every agency of the crown and every crown controlled corporation shall furnish the auditor with such information..."
One other way of dealing with this is to just identify grant recipients as an organization that shall furnish my office with the information we require. So that would be another way of dealing with the situation and then the lawyers will have to give us advice as to how to do it. One may then want to wish to take out the definition of an inspection audit and take the word "inspection" out of section 13, which I'm coming to in a moment.
So these are some of the technical ways of dealing with it. In a way, I view the Audit Act as a very balanced document. It gives us, in section 10, very sweeping access to information. It says really that whomever you audit, they shall give us all the information we require to carry out our audits. But why I call it balanced, it then says very specifically what we can do with the information; in other words, it's very specific on us. It says, okay, once you get it, your people have to take an oath that you cannot divulge the information, you cannot discuss the information unless legally required to do so.
Secondly, it says very specifically, and I believe it's subsection 27(2), and I'll let you find the spot, that we shall preserve the secrecy with respect to all matters that come to our knowledge in the course of the employment or other duties under this act and shall not communicate any matters to any person, except as may be required in connection with the administration of this act. In other words, it's so binding right now, if this section weren't there, I couldn't file an annual report, so it gives me the freedom to issue an annual report.
1010
Any proceedings under this act, in other words, when we pursue an audit issue, we are allowed to disclose to the auditee what we have found and what our concern is -- or under the Criminal Code of Canada, of course, if we find a fraud situation, for example, or a violation of the Criminal Code then we can alert the authorities of that particular situation. But that's what I mean by the balance. Section 10 says you can have all the information you want, but you can only use it for these purposes specified in the act.
Mr Bruce Crozier (Essex South): Mr Peters, section 10 and perhaps section 27, would it be written in such a way -- I think we briefly discussed medical records yesterday -- to exempt personal medical records, that sort of thing? Would it have to be explicit in there that you would not have access to those? I think you said you really don't need them. How would that be addressed?
Mr Peters: I think we should hear the privacy commissioner on that to explain to us how we best do it because we certainly would like to be able to access them for statistical purposes, in other words, to assess the procedures that are followed in amassing medical statistics. We don't need to know the individual's name or whatever, but we would like, if somebody says, "We did 17 appendectomies," or something like that, that we can find a record that they actually did an appendectomy, if need be. It's, again, a matter of need.
What is of interest is that there is a little bit of a widening of a window in the FOI, the freedom of information act -- not necessarily brought in through Bill 26 but brought in through practice -- and that is that some rulings are now being made, if somebody wants the information for what is called a frivolous or vexatious reason. I doubt you remember one case where somebody asked the police department of a town as to how often they clean the latrine and wanted to have all the records, or something like that, that at one point somebody can just say, "Hey, wait a second; what's going on?" But essentially the freedom of information act has not focused on need at all. If somebody asked, they got, unless the recipient of the request availed themselves of some of the sections exempting them.
This matter of medical records is not in a way essential to our request to amend the Audit Act, and we would be very happy to accommodate any safeguards that the legislators would like to put into the legislation that we do not misuse this right of access in any way.
Mr Crozier: I think that addresses my point, and your comments about having the privacy official advise us on that would be appropriate.
Mr Bill Vankoughnet (Frontenac-Addington): Mr Peters, would there be any distinction between what we refer to as public funds -- which I have no objection, of course, to you auditing -- but how far would that go to private funds? For example, a trust or foundation, would you have to audit that also, or whatever they had in there to show that they came from some other private source, would that be sufficient?
Mr Peters: Not directly on the audit. What I tried to point out yesterday on that issue is that for university foundations, for examples, there are certain audit rights already built into the legislation. I'm not aware, and I stand corrected if somebody finds out, of any legislation that allows us to get into foundation records.
What we were also referring to, though, in response to Mr Hastings's questions, was that if we can establish a direct relationship between the funding of a foundation and government funds -- in other words, a hospital takes funds out of the operations of the hospital and puts them into a foundation -- I think the legislators may very well be interested in having us pursue the use of those funds. But that is up to you in the legislation that you would like to carry out. Currently, that's not in the books.
Mr Gilles Pouliot (Lake Nipigon): You will recall, Mr Chair, that yesterday we made a rather, if not passionate, certainly sincere plea for what has just been addressed by Mr Crozier, with caution not so much as to the ability of Mr Peters at present, of the office, to seek information -- I think you do address that. You need to shed the shackles, if you wish, to have more latitude. We had no quarrel with the endeavour and endorsing the changes to give you the tools to do that. Our caution, and our only caution, is once you have attained that, once you've reached that, once you have the information, what to do with it, and that's refreshing, so we certainly will side with Mr Crozier and some other members, I'm sure. That's exactly what we wanted to hear and very well done, very well said. That's all we have to say.
Mr Peters: I'd like to then carry on to section 13 of the Audit Act, if I may. Let's for a moment take a look at subsection 13(1), which says that, "The auditor may perform an inspection audit" -- and that's where the word is used -- "in respect of a payment in the form of a grant from the consolidated revenue fund or an agency of the crown and may require a recipient of such a payment to prepare and to submit to the auditor a financial statement that sets out the details of the disposition of the payment by the recipient."
These provisions are clearly written with the intent of the inspection audit being limited to accounting records, because the corollary reference is then made here to financial statements. As I pointed out to you yesterday, accounting records may very well show the disposition, but if we wanted to get into other underlying information which caused the decisions or on which the decisions were based to dispose of the funds in a certain manner, we could, under the current writing of the act, be stopped from taking a look at that information.
For example, donations were mentioned, where somebody had said, "I want to make a donation so that you can spend it on palliative care." We may have difficulty accessing the letter of that donor to determine that. All we have is an accounting entry that says, "Look, we were instructed and that's how we went," and then we say: "Well, how did you make that decision? Do you have any evidence?" We may find a break in the system if we do not have that access.
Mr Gary Carr (Oakville South): As you know, the government, in some of the statistics you gave us yesterday in terms of the block funding and so on in the grant structure -- I think some of that maybe even changed from what you'd proposed and put in yesterday, and I think we'll see more and more of just saying to municipalities, as an example, "Here's your money." I'm in favour of that, by the way, and I hope even at the federal level that will happen, where there will be less strings tied to the provincial government.
In doing that, it makes it a lot more difficult for your auditing process, because if we give Metro X amount of money -- before we were giving to specific programs. It gets very, very complex, particularly with the numbers in Metro, and I use the municipality as an example. Have you found out how you can balance doing the audit and sort of trailing the money out of a province when you go to block funding, which can be very, very, complicated and big, big numbers in a place like Metro? And even school boards are very large.
If we're going to just give them a certain amount and say, "Okay, you spend it the way you want," how do you see yourself being able to follow that trail of money throughout the system? It's difficult now, but I suspect it will get more difficult. Do you see a problem in that area? How do you plan on dealing with it?
1020
Mr Peters: I see both a problem and a solution, if you will. The way I view it is that if the government, on one hand, goes to a method of grant payment where the government says, "Look, the only thing you have to prove to us is" -- for example, say, a welfare recipient. "All you have to prove to us is eligibility, and we give you the money. You get the money, a stated amount, and as a government we back off." We have done our job as a government, and the bureaucracy has done its job. It has just determined that that person is eligible to receive this particular grant. That's part of the solution.
I think when I looked at the fiscal outlook statement that was made by the Minister of Finance, it had an interesting, if you will, interplay that we will be watching very carefully, because on the one hand the statement did talk to block funding -- in other words, giving grants without strings attached -- but in other sections of the document there was talk of strengthening the accountability. What we will be pursuing very closely in this audit, both as an office as well as if you decide to amend -- and I would like you to amend -- the Audit Act, is how we do it. In other words, we would have to take a look at virtually every grant and say: "What did the government say about this? Did the government truly put a document into being that says we only really care about eligibility?"
For example, just to use an illustration, if the government were to decide to give municipalities a per capita grant -- in other words, what they were saying is, "Look, you get this money because you're a municipality, and the amount of money is simply determined on how many people live in your municipality" -- and after that there's nothing, I would be wasting taxpayers' money if I went in to audit, because what am I auditing against? The government has not set out any criteria at all which I could use to determine how they use it. It said there are no strings attached. Essentially, you get the money because you are a municipality of a certain size. Full stop. Over.
But if, for example, this were done under the Municipal Affairs Act -- I'm not sure of the exact wording of that act -- and it said, "We want you to spend this money to meet the objectives of the Municipal Affairs Act," then all of a sudden we had a set of criteria and we may be responsible for the audit.
I agree with you. Your point is we will have to look very carefully at what audit techniques we're going to use, because I can pull out of my wallet two loonies and hold them up and I can't tell which one was given to the municipality by the province and which one was given to the municipality from property taxes. So these are all decisions made by their elected officials or by the bureaucracy of the municipality. So we would have to very carefully develop audit techniques that actually deal with the decisions that were made, as opposed to the funds themselves. So in a way I'm saying the solution is, once the decision is made, we would certainly take a close look at the budget when it comes down from that perspective and be saying, how far did the government go in removing the strings and what strings did they put in?
Mr Carr: Just so you know, I'm in favour of giving you the expanded powers and I think it's a good idea. I also, though, believe that probably the single biggest factor to ensuring the money is spent properly and efficiently is because of the dramatic cutbacks and the downsizing. That's forcing every municipality to go line by line with gut-wrenching decisions, as it will be with school boards. It's ironic that that will, I think, get more efficiency than any of the auditing techniques that are out there. Having said that, I still think you need the expanded power to be able to take a look at that.
But I can tell you this. After we go through this process, the municipalities and school boards -- some who have come from municipalities will know that the decisions on looking for the waste and inefficiencies are not just being done by the auditor; they're being done by every trustee, every municipal official, every fire department chief, right through the system. In some respects that's good, but I still believe we should be able to give you expanded power to look at it. I guess you're looking forward to the type of techniques that you can use to try and follow some of this money through.
The good news is that because of the reductions, everybody in this province is now doing a lot of what you do. They are reviewing plans, and I know in our ministry they're reviewing what their mandates are and re-reviewing them in light of fiscal necessities and spending priorities. So it will be a difficult time but I appreciate what you're trying to do and I think the things that you're asking for, this committee should give you.
Mr Pouliot: Back on the side of caution, you do not direct, by the Audit Act, the Legislature; you work for the Legislature. Your job is not to see what measures should be redefined or programs eliminated. When you enter this arena, you're often dealing with elected bodies which have their own accountability system. They have their own mechanism, if you wish. Not all the money they get comes from provincial grants. That has to be blended, to be understood.
Where I live, I vote for the reeve and council and I also vote for the school board, as a citizen and taxpayer. They conduct their own affairs. They come knocking on my door twice a year, for general purpose, through the interim tax levy -- they go to the maximum as fast as they possibly can -- and then they come back for the school and general purpose, the final adjustment. Twice. We sign two cheques. The municipality collects "on behalf of," to avoid duplication, but it's been a battle royal only in style. The bottom line hasn't changed since the word go. It's always the bloody -- and I'm kind and benevolent here -- the bloody school boards have really nixed the ability, restrained the ability, to provide general purpose. Consequently, in small towns you end up paying 50%.
Twenty-four per cent of the municipal expenditure, the fascinating world of sewer and water, comes from grants. Where do you stop? The rest of it, it's the knocking-on-your-door revenue style. Only 24% of the general purpose levy comes from a provincial grant, and now it's going to be a block grant, giving them more flexibility. So as you enter your value-for-money audit, I'll be curious as to what the underline is. Value for money, okay, but, "This program should be continued?" That's the government.
Yet I don't want the exercise to be that every time there's a new government, and sometimes a new auditor, the Audit Act amendment comes back on the table. I know it's not a dinosaur document and it should be given life from time to time, but there is a sense of déjà vu. They all try it, and I think that's good, and sometimes they should succeed. But I err on the side of caution to say that's okay, but others have a jurisdiction as well. We vote for the school board, we vote for the municipalities, and they have "other sources of funding" as well, and that has to be taken into account. They have their own accountability system and accounting system. They have their mechanism, and they're going to cry blue murder if we interfere too much, or it's going to be seen as being interfering. So I put on my municipal councillor hat of yesteryears and say yes, do it, but please --
The Vice-Chair: Don't do it to me.
1030
Mr Peters: If I may comment on that, we are quite willing, as an office, to err on the side of caution. What we do have to take into account, though, and very carefully take into account -- talk about the education system, for example. The Education Act in the province of Ontario is an act passed by this Legislature. It is an act that creates the school boards. The responsibility for the quality of education that is provided to school children in Ontario and at the post-secondary level rests with the Minister of Education under that act. The role of the elected officials is as determined under this act and as outlined under this act.
The question that still must remain is, to what extent is my office an instrument of the Legislature that can ensure -- and let me remind you, in a way, of two things. We have never said that we only want to do value-for-money audits. We have always said that we want to do two things: compliance audits and value-for-money. What I mean by compliance is essentially compliance with the legislation -- do the act.
Before this committee -- let me be illustrative for a moment -- when we brought up in our 1993 report that special education was provided in a totally inconsistent manner across the board, the government itself gave the same amount of money to each school board to deal with children with special needs, yet every school board had different action resulting from that. Some school boards dealt with special education only where children were gifted; others dealt only with special children who were on the slow learning side; others had disabilities or whichever. There was inconsistency.
It was around this room and it was a televised session, probably one of the least partisan meetings that I can remember. There was unanimity among the members on this committee, saying, "Look, this is something you really have to look into," and I had to say to them: "I can't, because I can only look at the accounting records. I cannot look at the records that a school maintains or a school board maintains to determine how they are actually allocating and how they are dealing with these special-education dollars they were receiving."
I use this illustration only to say that the brakes are on. We will be using virtually all the other sources that are available. The school boards all have auditors who audit the accounting records already. That's why I don't want to do it. There's no value added in me going in because there are already other auditors who are doing that.
I could ask on your behalf, but I can't right now, for example, when those auditors do the financial audits of a school board, to also audit whether they are in compliance with the Education Act and expand the audit scope and ask for a separate report to my office as to whether there's compliance. If we get into the picture of doing value-for-money audits -- as I pointed out to you before, those are very staff-intensive audits; they cost money. If we wanted to force a school board, for example, to have a value-for-money audit done by a private sector accounting firm, that is money that goes out of the system.
Mr Pouliot: We don't have a child psychologist in Manitouwadge. I'm happy to know that we should get one.
Mr Peters: Well, fair enough. Point made. We would look at all the sources and we would look, of course, at the initiatives that are taken in downsizing. So in a way, the brakes are totally on in terms of caution in that regard, but the one underlying, fundamental issue that I'd like to raise with you, and then I'll ask the assistant Provincial Auditor to comment further on this issue, is that in compliance audits it is legislation passed by Queen's Park for which ministers are responsible.
We are quite different from the federal government in this. These are all creations of the province. Every municipality is a creation of the province, of this Legislature. Every school board is a creation under the legislation of this board. Ontario, just to put it into contrast, is not a creation of the federal government. So there is a different relationship between the funds that we receive from the federal government and the funds that this province passes down to its own creations. With that, I turn it over to you, Ken.
Mr Ken Leishman: Just a few words to address Mr Pouliot's concerns, and Mr Carr referred to it earlier too. We recognize that municipalities and school boards have their own elected representatives. In the case of unconditional grants to municipalities, which have been made for years and years, we are not interested, and have never been interested to date, in doing an inspection audit of those funds because they are unconditional.
If the province gets into block funding, with no conditions attached, I wouldn't think they'd be any different than unconditional grants. But in the case of conditional grants going to school boards, we realize they have their own elected representatives that they are accountable to. On the other hand they are also -- I think they recognize -- accountable, and they should be accountable, to the province for the funds they get from the province. So that's why we would want to go in there. Is that okay?
Mr Peters: Certainly.
Mr Monte Kwinter (Wilson Heights): I have to apologize. I haven't been sitting in on these committees, so I don't know a lot of what's gone before. But just this morning, as I've been reading through the material, in principle I have no problem at all with a compliance audit or a value-for-money and management audit. I'm just thinking of the practicality.
A compliance audit should be a relatively simple thing as far as the concept of it. You know what the legislation says, you go in and look at areas that by experience or by investigation you find could be abused, where the receiving agency decides: "Notwithstanding that the money is supposed to be for this, we'll use it somewhere else. Who really cares? We're not squandering it. We're just using it in a different way." That may be contrary to the legislation and you want to address that.
Not the problem, because I'm totally in agreement with you, but the difficulty in the value-for-money and management audit is, to my mind, it's a given that if you hire an administrator, he's supposed to do his job. If he doesn't do his job, then somewhere along the line it should be quite apparent to the board of directors of the agency, to the local politicians, whoever, to the auditor himself who's doing the audit, that he's not doing his job. What I would like to know is, notwithstanding that you try to legislate it, how do you, practically, go in there and say, "Here is what you must do," and how do you establish criteria that you can compare or that you can use as a benchmark to decide whether or not this person in fact has provided proper money management or value for money and that you're not just second-guessing what the local officials, the elected officials, think is in the best interests of that particular region or area?
1040
Mr Peters: A very fair question. To begin with, we are not in the business of second-guessing anybody. The one thing we certainly don't second-guess on at all is the policy side. But as far as the three main criteria on value for money that we're looking for -- economy, efficiency and whether or not procedures are established and reported on to measure whether they're satisfactory to meet the effectiveness or meet the objectives that are legislated for the particular organization -- in those areas we rely essentially on two things.
First, we rely certainly on what we'll call for the moment the strings that the government attached. In other words, if the government says to a school board, for example, "Here is your special-education money; you shall provide special education," the first thing we look for is, what does the act say about special education? Therefore, we develop our criteria from the legislative objectives, and we certainly agree with management on those criteria.
The second set is in the economy and efficiency area. We normally use, most often, commonly used business criteria. Just to give you an example, we have audited conservation authorities, which we can audit; they're not grant recipients. For example, one of the areas we would look into is whether they give all their contracts under a proper bidding procedure, whether they call for tenders. What are the bidding processes? How do they go about that? A really common business approach to the economy would create the second set of criteria: What do we know are good business practices?
One very important feature on criteria is that we always attempt to agree with the managers on the criteria. We are very open about that. We are saying: "These are the criteria we are planning to follow. Do you have a problem with that?" Very often we use their own criteria. If we work to get, for example, access rights to carry out an audit on a hospital, I have no specialist on staff but I'm quite sure that the executive director and the executive team of a hospital are very well experienced and have their own set of criteria by which they manage. We would take a look at those and we would work with those, and we would look at such things as, for example, if the Ontario Hospital Association sets out criteria as to how a hospital should be run etc. So there are many sources that we use, but the most important feature of all those sources of criteria is essentially agreement with management.
It has happened, and then we have reported it, where we had no agreement on the criteria, where they disagreed with us. They said, "These are not our criteria." Then we report it and we come back to the Legislature and say, "Here's a situation where they disagree." Special education is a good example. We reported to you that the definition of what a child with special needs is had not been updated since 1984. Effectively, they did not have current criteria to determine what children were in need of special attention. They had not done so for nine years, and we felt that was out of date. So our criteria were not met and we had to report it as that. Does that answer your question?
Mr Kwinter: It does, but it raises more questions, and you raised what I think is a perfect example of my concern. There's no question that if funds are supposed to be allocated for special education, then you have every right to go in and see: Have those funds been used for special education, and are they using the criteria of what special education is? Are they using it, but not using the total ambit of what special education is?
But when you talk about the hospital and you say you have no particular expertise and you go in and say to the hospitals, "What are your criteria?" and the hospital says, "These are our criteria," and then you go in to audit to see whether or not they are following their own criteria, if you're following their criteria, that's fine. My concern is, then I ask myself, if they're setting the criteria, why do they need you to come in and check to see if they're following their criteria? It's their criteria.
Secondly, if you say, "Well, those are the criteria you're using but I don't agree with them," and on the other hand you say, "We don't have the expertise to decide what the criteria are," that gets back to my first question about the second-guessing. I just feel that it's a very difficult area to legislate because it's a moving target. Every situation is going to have to be tailor-made to that particular situation.
As I say, I'm not in any way critical of your desire to do it. I'm just trying to figure out how you can do it in such a way that it is consistent across all like institutions. You go to one hospital and these are their criteria; you go to the next one and they say, "We have different criteria, we have a different patient mix, we have a different environmental situation, we specialize in this, that other hospital specializes in something else." How do you do it, and how do you do it in a legislative way?
Mr Peters: Let me answer this on two levels. In the legislative way, the way we are suggesting is just let us have access to the broader bases of information than just the accounting records, because right now we can't do anything, virtually, beyond what is already being done for these organizations by the external auditors. We cannot help the Legislature to come to grips with the issues of economy, efficiency and actually whether they are meeting their stated objectives. The technical way of dealing with the legislation is to simply include the grant recipients in the legislation and give us access to the information.
But to give you the satisfaction I would demand and I'm sure Ken would demand -- between the two of us we are essentially running the office, with the other people in it of course -- the point is that where we are out of our depth, it's within our purview to engage specialists who can help us with that, and the other part that we often follow in these situations is what we call best practices. In other words, we identify what are best practices.
We would probably be fairly reluctant to audit, say, one school board at a time, but we may audit up to three school boards and go, with their agreement, into what are these boards doing well and what are they doing not so well. What they're doing well then becomes their best practices as criteria. We very often use that as another practice. In fact we have reported on that very often. Information technology is one of the areas where, for example, if we identify somebody who does a job particularly well, then they virtually set the standard or establish the criteria against which we can audit. So there is a raft of avenues open to us and we do them all.
If in value-for-money audits, for example, to give you some idea, the planning portion of the audit is vastly longer than it would be on an attest audit. On an attest audit virtually all the criteria are set by the Canadian Institute of Chartered Accountants or best practices in other governments and elsewhere and they're easily accessible. In value-for-money audits we spend an awful lot of time planning and surveying the situation, reading literature, trying to find out where the sources are for good practices, what are good sources for criteria.
It's a fairly complex audit, and that's why I'm saying it's very staff-intensive, and we only will undertake it if after that preliminary survey we really feel that we can add value to the process. We'll cease and desist if there's no point in going ahead. We feel we'd be wasting taxpayers' money if we did.
That helps you a little bit more?
Mr Kwinter: Yes.
Mr Crozier: Just a question, Mr Peters, that the other members may be interested in. Do you know of any boards, agencies, that now, on their own initiative, have value-for-money audits conducted as well as just their regular financial audit? Do you know of any?
Mr Peters: Let me answer that in another way. In the three years I've been Provincial Auditor, we have been three times approached by school boards and by a university interested in us doing a value-for-money audit of the organization in the education area. We had to turn them down, in the school board case largely because they happened to be school boards that were not funded by the province. They were boards that were essentially funded out of their own property tax bases, so I had to say, "Look, as the Provincial Auditor, I cannot. You are not funded."
Then in the other cases we had to turn them down because they are organizations under which we only have inspection audit rights and I had to point out to them that they already had external auditors who were conducting the attest audits. I'm not aware of other organizations -- certainly we are conducting audits of crown agencies and everybody else. The only block that is outside our purview right now are these grant recipients.
1050
There certainly seems to be a wish by these organizations -- as late as two days ago I had a fax from a trustee of a school board, which is 40% funded by the province, saying, "Would you consider doing a value-for-money audit in our organization?" I again have to say, "No, I can't help you." Does that help?
Mr Crozier: No, but I appreciate your answer and the way you've answered it. I thought you might be aware of some who have gone ahead on their own initiative and at their own cost who may be at present having value-for-money audits from an external auditor.
Mr Peters: Ken Leishman, the assistant Provincial Auditor, just reminds me, yes, the Workers' Compensation Board is having external auditors carry out value-for-money audits. I think currently a legislative proposal, Bill 15, has had at least first reading. Bill 15 makes a provision that these audits now --
Mr Steve Gilchrist (Scarborough East): It has been passed.
Mr Peters: Oh, thank you. I'm out of date and stand happily corrected. I'm not sure whether it was passed, but the version I saw had a provision in it that the value-for-money audits conducted by the external auditors should from now on be done under the direction of my office. I'm not sure whether that is in, but that was in the version I saw. So it's being done.
Mr Dave Boushy (Sarnia): Mr Peters, are you concerned that perhaps if you're given that much power to audit the school boards -- in some cases I believe they're doing things in their own way much cheaper and more efficiently than our way, and if you are given that much power to audit them, they would revert to our way of doing things that's not as efficient as you would want them to be.
They are closer to the system; they are doing things according to what's best for them. Maybe as far as we're concerned, we're too far away from the system. Are you concerned when they are obligated to be audited, that they shift their way of doing it and it will be more expensive, less efficient than we want them to be?
Mr Peters: Let me answer that in three ways. It's a very good question. The first answer is, I would very much like to encourage the committee to hold public hearings on this and invite school boards to speak to the issue and again also if you could invite any one of the CHUMS group -- colleges, hospitals, universities, municipalities, schools -- I really feel that it would be quite appropriate to hear from them and to hear their side of the story. If you would like to make a resolution to have me move ahead and amend the Audit Act, then it would be very worthwhile hearing from these organizations. That is the first statement.
The second one, if I may turn it around slightly, yes, I would be very happy if those audits made a difference for the better. I would be concerned if they made a difference for the worse. There is an idealist in me a little bit. I'd be absolutely delighted if I could conduct an audit of a school board and have a nil report: there's no recommendation to make, they're doing fine, thank you. It would be delightful.
Mr Boushy: Because I hear quite often municipalities and school boards tell you: "We do things better than the provincial government is doing. It's more efficient."
Mr Peters: I certainly wouldn't get into the comparative quality of government levels in those audits, because those are very often policy decisions, and I would stay out of this. But there are very basic difficulties already, many of which we have to address.
Let me just give you one that we reported in our 1995 report on the current accountability framework that exists between the Ministry of Municipal Affairs and the municipalities. As you know, it is an area that has been studied virtually to death. We have almost monthly reports coming out on dealing with those relationships, and they identify benefits of doing things.
Our concern was that things didn't get done. There was no action taken on the many reports that were out and the relationship was certainly in some difficulty. We had the disentanglement and then re-entanglement and unentanglement and all these various levels of how to deal with municipalities. One of the things we certainly hope, as we hope in everything that my office does, is that we are becoming a catalyst for action for the better. Hopefully, these amendments to the Audit Act can fall into that category. That's our fondest hope to get out of it.
The Vice-Chair: I just have a question on procedure here. You mentioned and we have talked about maybe inviting the privacy commissioner here and also inviting the MUSH or the CHUMS to come and make presentations. Then you talked about the possible resolution about amending the Audit Act. Do we call in the witnesses first and then make a resolution to amend the Audit Act? What is the process as you see it?
Mr Peters: It's a very good question. Very deliberately in my initial comments yesterday morning I outlined only the principles. I thought that the drafting of the specific wording or how best to go about it in legislative ways should be left to, essentially, legal counsel.
With this call for witnesses, I would suggest that maybe we deal with the principle with those witnesses and then hear what they have to say and get into the drafting afterwards, because then we know of their concerns. However, I can see the other side of the argument, where you're saying if we are too broad in our principle we may not get very much help; if we were specific in our wording, then maybe we could have them being more specific.
But I think overall the principle itself would be served if, for argument's sake, and this I can put out to you, we were to say for the moment what we should discuss is whether the definition of an inspection audit, as envisaged in subsection 13(1) of the act, were expanded and we can find the necessary wording, that "an inspection audit of a grant recipient" means "an audit examination of such information as the auditor considers necessary to carry out his duties under the Audit Act," if we just put that as the wording out there and use it sort of as the skeleton on which these organizations and the privacy commissioner could hang their comments, that may be helpful to them. I'm not sure how you, as the members of the committee, would feel about that approach, but I'm just putting it out in answer to your question.
Mr Kwinter: If I can be helpful, I think that the auditor has made a good recommendation. If we leave it open-ended and bring people in, they're going to be all over the place. In my opinion, the way to go is to draft some amendments, then call them in to comment on those draft amendments, and as a result of their input you may want to modify, change or delete those amendments. But at least you have a focus point for them so they know where the auditor and the committee are coming from and looking for input from those people that are going to be impacted by it.
1100
Mr Peters: That sounds very reasonable to me.
Mr Gilchrist: I would certainly concur with Mr Kwinter. We've had a good opportunity to debate the principle behind the need for openness and accountability, and I think we would all be more comfortable if we had an opportunity to see the specific suggestions and to allow the MUSH sector to comment on it directly. No one expects, necessarily, the final draft or anything approximating the kind of test legal counsel would put the words to, but if you would be kind enough to put your thoughts down about how you would amend the relevant sections, I'm sure we could debate them to the point that legal counsel would get clear direction about our collective intent in terms of taking this forward to a final resolution.
The Vice-Chair: I've been informed by the clerk that there has been a day set aside -- I think March 4 -- for witnesses from the transfer partners to come forward. I don't know whether that's too tight a timetable to get some kind of draft amendment together.
Mr Peters: We could probably have something in the hands of the clerk by this afternoon, if I have agreement. In the letter we wrote to Mr Cordiano when he was Chair, in May 1994, we made a proposal of wording.
The Vice-Chair: Here it is here.
Mr Peters: Yes. We would work from there. This is the definition. Can I read it into the record, Mr Chair?
The Vice-Chair: Sure.
Mr Peters: "`Inspection audit' means the audit of such records and information as the auditor deems necessary to perform the duties under this act." Section 13 would then virtually automatically be amended, because that would be a definition of an inspection audit, as stated in there. Section 10 would be amended to include transfer payment recipients in the audit domain, which is currently restricted to the consolidated revenue fund and all crown agencies and corporations. Grant recipients would most likely go into that. Section 10 I don't think we need to deal with under this scenario. John, am I right?
Mr John Sciarra: It might be helpful.
Mr Peters: We would have some wording changes to section 10, but they would not be such that they really require comment. They would just be companion to this amendment of the inspection audit. And the examination under oath, which is in section 14, would also have to be expanded to cover the grant recipients.
That would be fundamentally the amendment with which we go forward. I'm sure the clerk can give you the wording, and if there is any debate or discussion on this, I'd be open to suggestions.
The Vice-Chair: One thing might be helpful in terms of keeping people on track and letting people understand the direction the auditor wants to go. Touching on those areas Mr Carr referred to, that you're getting more block funding, it is not the intention of the auditor to get into the unconditional grant area. It's basically to focus on those narrow parameters that deal with provincial mandate. In essence, we're not going to be on a fishing expedition; we'll be able, with the changes coming forth from Bill 26 etc, to maybe have more strict focus. This is so we don't get the recipients, the transfer partners, all thinking there's going to be this contradiction taking place. Somehow, in a preamble or in terms of any communication we send forward, that should be made very clear.
Second, in terms of looking at hospitals and treatments etc, that also should be clarified so there is clear understanding that this is a statistical overview that does not deal with any individual records or anything of a private, personal nature.
If those preambles are put into any draft, it will avoid all kinds of confusion out there of what our objective is. That's my suggestion that might help in any communication.
Mr Kwinter: It would seem to me we could eliminate a lot of work if, in every section and section 13 where it refers to an inspection audit, the word "inspection" is just removed and somewhere earlier in the act there is a broader definition of what the audit encompasses. That's all we're talking about. An audit is an audit, and all we have to do is go to the act to see what is the audit, and what is the scope of the audit. All that has to be changed is what the scope of the audit is. It's just a matter of removing the term "inspection" and just saying it's an audit, and all you have to do is refer to the act to see what it encompasses.
Mr Peters: It's wonderful. I didn't dare push the envelope that far. I'm very encouraged by your comments. If I had my druthers, to have the word "inspection" removed and have an audit defined as "an audit means the examination of such records and information as the auditor deems necessary to perform the duties under this act," I'd be in clover. I'd be very happy with that. In other words, we'd have only one definition of "audit" and remove that; and in those sections where the audit domain is defined, we would have the grant recipients identified in addition to the consolidated revenue fund etc as an entity subject to audit. I think that would be very helpful.
With respect to the suggestion of medical records and others, there is already a raft of confidential records we have access to and use only for statistical purposes; for example, the filings by corporations with Consumer and Commercial Relations, which they consider on their own, where we use the statistics or whatever and how they're used. "Medical records" I know has this ring; people get more excited. In that regard, maybe we could just advise the people that we will be hearing from the privacy commissioner and that his comments will be taken into consideration, in answer to that question.
I would be delighted to get rid of a distinction between an inspection audit and an audit, rather to include these sections in the domain, for a very straightforward reason. The fundamental reason this whole proposal is being made is, as we have pointed out in schedule 1, $25 billion a year are turned over to other organizations by this government, and all of that money is turned over to achieve objectives set out in legislation passed by this Legislature. I still advocate very strongly that this Legislature should have all the tools at its disposal to ensure that the moneys it spends or turns over to anybody are paid out and are spent for the purposes intended by this Legislature. That's the underlying concept.
Mr Crozier: That would mean that whether you do a value-for-money audit or a compliance audit really wouldn't matter. That definition would cover both.
Mr Peters: That's right.
Mr Crozier: Second, will we be hearing from the privacy commissioner prior to the March 7 date?
The Vice-Chair: We're not sure of the exact date right now, but we have a number of dates set aside at the beginning of March where we're going to try and get the privacy commissioner and some of the CHUMS in here.
Mr Crozier: Perhaps the subcommittee could deal with the timetable.
The Vice-Chair: Yes. Unless there are any further questions or discussion, we've got a pretty good direction in terms of where we're going and our objectives. We're going to ask the auditor to proceed with some kind of draft changes and then we will invite the transfer partners and the privacy commissioner to appear before this committee on the March dates. We will meet again on February 28, the next date for this committee.
Mr Peters: Mr Chairman, before we close, may I ask a quick question? I made an offer to put something on the table this afternoon. Could we, by way of consensus of the committee, arrange that we make a proposal of specific wording to the subcommittee and that the subcommittee meet at its earliest convenience?
The Vice-Chair: If that's okay? Yes, that's fine.
The committee's adjourned till February 28.
The committee adjourned at 1111.