CONTENTS
Thursday 13 June 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)
*Bassett, Isabel, (St Andrew-St Patrick PC)
*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)
*Kennedy, Gerard (York South / -Sud L)
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)
*In attendance / présents
Also taking part / Autres participants et participantes:
Erik Peters, Provincial Auditor
Ken Leishman, Assistant Provincial Auditor
Clerk / Greffier: Todd Decker
Staff / Personnel: Elaine Campbell, research officer, Legislative Research Service
The committee met at 1009 in room 228.
AUDIT ACT AMENDMENTS
The Acting Chair (Mr Bruce Crozier): It would appear that we have sufficient numbers in attendance, so we'll call this committee meeting to order. Consideration of possible amendments to the Audit Act is on the agenda. The first order of business would be the introduction of some amendments by the Provincial Auditor.
Mr Erik Peters: I hope that at this point you have a document before you. It's a letter of mine to Mr McGuinty. With your permission, because you have not seen it, these are the specific amendments that we are proposing to the Audit Act.
There are two documents in this package. The first one is the letter that we received from the office of the legislative counsel which contains the amendments, and it's from Mr Wood. The second document is an extended document. We have on the left-hand side a column that says "Proposed Amendment," and that's Mr Wood's letter reproduced. In the middle is a column called "Current Wording," and that allows you to relate the amendments to the current wording in the Audit Act. On the right-hand side is "Reason for Change," in which we provide a brief paragraph indicating why we are proposing the change.
With your permission, Chair, I would like to go through it, unless the members would prefer to read it and ask questions about it. I leave it in your hands.
The Acting Chair: Would the members of the committee agree that perhaps we should have the auditor walk us through this? What would you like? Questions as we go?
Mr Peters: Questions as we go. We'll certainly deal with them.
Mr Gilles Pouliot (Lake Nipigon): Good morning. With respect, Mr Chair, I expect that Mr Peters would walk us through in a broadly summarized form. He's already done so by way of what is written. I would side on, given the time limitation and constraints, that we asterisk, we make notes and then, not to break the flow, when the presentation is finished we can go back to page 1 or item 1 and question, as opposed to starting to highlight the questions and then lose the latter part of the presentation.
The Acting Chair: I'm open. Do the government folks have any comment? Does that sound --
Mr Toni Skarica (Wentworth North): I agree with Mr Pouliot. I think what he said was that he'll go through it and then we'll ask questions later?
The Acting Chair: That you make notes, yes.
Mr Pouliot: I make the same mistake in several languages. Thank you.
The Acting Chair: Okay, that's what we'll do then. The auditor will take us through this, you'll make your notes and then we'll use the balance of the time for questions and comments and discussion. How quickly they can change the Chair's mind.
Mr Peters: And mine.
The first item: We define "audit" for the first time -- this was not defined in the Audit Act before -- and replace the previous definition of something called an "inspection audit," which meant an examination of accounting records only. I've talked to that before, saying that this was a very limiting definition of audits of grant recipients. "`Audit' includes an examination of the matters mentioned in clause 12(2)(f)." I'd be very happy, if you wanted, to provide copies of 12(2)(f).
The second new item is the definition of a "grant recipient." We have not had that before. To give you a very quick background of it, if you recall, in the session on February 1 I presented to you a little schedule of the so-called grants or transfer payments made by the government, totalling about $38.9 billion, broken down into two categories -- the so-called schedule As, which we thought would be subject to audit, and the schedule Bs, which should not be subject to audit. The definition essentially deals with what we call the schedule As, which are the organizations funded by transfer payment or grant. We had to define a grant recipient.
To help you in some of your deliberations, there was also a definition of those grant recipients we did not want to audit. But the more the lawyers started to draft, the more complicated it got and the more easy it became for the grant recipients we thought we should audit to use any of the exemption clauses to escape audit. So we defined strictly those grant recipients which are associations, authorities, boards, commissions, corporations, councils, foundations, institutions, organizations or other bodies that receive "a payment in the form of a grant or other transfer payment from Ontario or any agency of the crown," which clearly by definition therefore exempts from any approach by my office welfare recipients, family benefits allowance recipients, people who receive unconditional grants and those organizations that are charging the government fee for service, such as medical practitioners and the like. That is what this grant definition means, and in the opinion of legal counsel it does the job.
The definition of the "inspection audit" is therefore repealed, because we don't need it any longer.
In the subsequent sections, very quickly, is the access to information. The only change is really that previously grant recipients were not included as organizations that have a duty to provide information to us, and that is now done. They're simply added in. That's what subsections 10(1) and 10(2) on page 1 do.
On the next page, the matter of stationing members of my office and providing accommodation is again the same thing, that we can actually have physical access to the premises of grant recipients and can have a desk or some place to work when we do the audit.
Those are the changes, and there are some minor housekeeping changes that deal with grant recipients. That is the one segment dealing with the principal purpose of the amendment, the grant recipients.
Interjection.
Mr Peters: As I said, there will be a little talk about section 13 later, but I'd like to follow the flow of the paper, if you'll permit me.
Section 3 deals with an anomaly that we were facing, and that is that the annual report, under the Audit Act as it exists now, had to be tabled after the public accounts were tabled. The government has up to 18 months to table the public accounts, which could therefore delay my report up to 18 months. We have put in a condition that we will now, in any event, be required to report by the end of the year, by December 31. March 31 is the year-end, and even if the public accounts are not tabled, I can table my annual report by December 31. It's very close to what was there before, but through the anomaly of wording, I could simply not table at all, and I would be prevented from tabling my report for a long period of time under the present setup. It hasn't happened, but under the finance act the financial statements can be delayed from tabling for quite an extensive period of time; and neither is, I feel, in the interest of your committee and the Legislature.
The other is merely that there was apparently an error in the French version. This was corrected, and the result of this is also a splitting up of this subsection 12(1) into several subsections, what was previously just a big subsection. There's no other change in there; the only change is this timing of tabling the report.
We then go into clause 12(2)c). This leads into another housekeeping change. Under the existing Audit Act, my office audits the consolidated revenue fund. With the changes made in the accounting in 1994 by the government, now the financial statements of the province are called, in technical jargon, "summary financial statements." They are no longer just the statements of the consolidated revenue fund; they now include so-called government organizations which are funded and are operating outside the fund, but are still under the financial supervision of the Legislative Assembly. These are put in on a line-by-line basis. They include so-called government enterprises -- for example, the capital investment corporations fell into that category -- which are now included on what is called the modified equity basis, and there are certain disclosure requirements for what are called trusts. An example of that would be the Workers' Compensation Board, which is not included in the accounts as such, but which is described in the accounts.
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In order to give my office the ability to provide an opinion on the financial statements of the province as they're now being structured, this amendment has been made. In other words, the short of it is that it formalizes the practice followed by the government since March 31, 1994, for which the act had not been amended. So we want to put this amendment through.
This is specifically reflected in the way we are giving the opinion, which is in the middle of the page, and this may be worth reading to you. It says, "In the annual report in respect of each fiscal year, the auditor shall express an opinion as to whether the financial statements of Ontario as reported in the public accounts are presented fairly in accordance with the accounting principles that the Canadian Institute of Chartered Accounts has recommended for governments."
That really puts into fairly precise legal langauge the practice that has been now followed by the government since 1994 and with which we wholeheartedly agree, and with which this committee has actually agreed. Just by way of a brief background, this committee at the time, in 1994, passed a motion that I was to pursue the use of more appropriate accounting principles in the government in 1994, and we have done so. That has been done since by the predecessor government of the current one, and the current one has now taken a very significant step further by even putting the budget on the same accounting basis. That was in the last budget announcement in May 1996.
In section 13, we're going back to some of the implications of now being able to audit grant recipients. In other words, it simply says that we are now being able to audit them to the extent considered necessary. Previously we had only the inspection audits, which were next to having no value to the process.
In subsection (2), the obstruction section remains the same, except "inspection audit" is again removed. We may not be obstructed.
Examination under oath, which I can do under the current act; again, it removes the term "inspection audit."
The powers of the auditor: There's no change. We just put it in for completion.
Next, item 6: We are dealing with a number of sections that we have to change to update the Audit Act in accordance with recent changes to the Public Service Act and the regulations under the Public Service Act. The key change is essentially that the Public Service Act now permits, under certain circumstances, the release of an employee in the public service, and we have imported the same right into my office.
Essentially, the following sections about grievances, and then if you proceed to the next page, the application of the Public Service Act, all flow from this change in their own way. Incidentally, I should assure you that these changes have been discussed with my staff, of course, because it affects the internal operation of my office, and they're fully informed of this.
In section 8, this is the new issue that was raised by a number of people who appeared before you and were concerned about how my office was going to deal with personal, confidential records that were held by grant recipients. The key concern expressed was medical records that may be accessed by my staff in hospitals and these organizations.
You heard as a committee from the privacy commissioner his concerns. These sections have been thoroughly vetted and we have agreement in writing from the privacy commissioner that these would meet all the requirements of the privacy act of the province of Ontario. We would be happy to table those further letters here. Two you have already and there have been minor changes made subsequently.
There are two particular aspects to it. Firstly, 27.1(1) is essentially not changing; it is just to align this provision with what we had before, but the most important change is really in subsection (2). Maybe this is worth reading to you, just for full understanding.
"No person shall collect or retain personal information within the meaning of the Freedom of Information and Protection of Privacy Act on behalf of the auditor unless the auditor determines that it is necessary for the proper administration of this act or a proceeding under it."
In other words, our access to this information is totally restricted to be carried out only for the sole purpose of following the Audit Act. No other rights accrue to the office or any member of my staff in that regard.
On the next page we deal with the personal identifiers; that is, what if we decided that it was necessary, for audit purposes, to retain certain records? How would these records be protected? We are talking here specifically now about medical, psychiatric or psychological history of people. If we decide -- and quite frankly, we are most reluctant to do even that, I should assure you -- we shall remove all references in the information to the name of the individual and shall retain the information by using a system of identifiers other than the name of the individual. That is the way it is done.
Essentially, that is a summary. We'd be happy to answer questions. If you'll permit me, though, to make another brief comment, before you this morning is also a letter from Michele Noble, which is in front of you. This is the letter that follows up on a letter from Ms Noble to the Chair of the committee of March 15, in which they indicated that the Management Board of Cabinet would be coordinating, essentially, the views of the ministries involved, which she lists: community and social services, education and training, health, municipal affairs and housing, and transportation. You may want to read this letter later on, but a quick read of the letter on my part has given me a reasonable assurance that there is nothing in the letter that would change any of the wording I've presented to you.
The issue most likely that is raised is the accountability framework and how complex it is to implement one, and that is something I alerted this committee to in my presentation on February 1 and I've been speaking to that continuously. What I suggest to you is to view actually the amendments to the Audit Act as a step to progress in this complex process towards overall better accountability.
If I may be permitted a last comment, or it will be elicited through questions, I just wanted to give you assurance that at least six of the provinces and jurisdictions in Canada have this kind of access to information that we're seeking already in their Audit Act. With that, Mr Chair, I'll turn it over to you.
The Acting Chair: Questions, comments?
Mr John Hastings (Etobicoke-Rexdale): There are a couple of items I'm interested in.
On page 1 in the reasons for changes under section 1, "inspection audit," the note I made to myself was with the change of "audit" to "inspection audit," how many new personnel are you planning to be required to undertake the inspection audit, or can you do this broader-scope activity within the existing personnel levels?
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Mr Peters: If I may go back to my presentation on February 1, and really, I stand by it, I made the same comment to the Board of Internal Economy, which as you know deals with my budget. What we are proposing at this time is that we simply change the mix of our value-for-money audits. In other words, we will do fewer audits of ministries and substitute one or two grant recipients in the audit process on an annual basis in order to minimize -- in fact hold the line on -- the resources given to me.
Mr Hastings: How many people do you have now who can undertake audits, or inspection audits should this act go through, approximately?
Mr Peters: Can I just get a clarification on this? "Inspection audit" is the term we are removing. We're now doing broad-scope audits.
Mr Hastings: I know.
Mr Peters: The total complement of my office is in the mid-80s in terms of staff.
Mr Hastings: In terms of trying to ascertain who's doing really well in an agency, board, commission or ministry, or one of those new outside groups you want to do an inspection audit of, do you have anything in mind -- I don't see anything in the proposed legislation -- that would set out a rating of these groups according to specific criteria? I think that was a question I alluded to last February.
I'll use an example. The WCB has considerable financial problems, I think; at least, most people would tend to come to that generally broad-based conclusion. Let's say you rated them right now, if you were auditing them, a C-, and then you did an inspection audit and you found that they had improved in certain ways and you could elevate them to a B- or B+. What do you think of the whole idea, first off, of that kind of a rating system? Do you think it's feasible, and if it is, what criteria would you apply? Fourthly, why isn't there such an idea like this proposed in the legislation?
Mr Peters: For the moment, may I deal with the illustration? Actually, under Bill 15 -- I don't know what it's called now but it was passed and proclaimed, I believe, in the last few months -- the Workers' Compensation Board has a specific provision in there that so-called value-for-money audits of the Workers' Compensation Board shall be conducted under the direction of my office. That is already put in law.
We are not very keen on rating an organization, simply because we feel that it is management's responsibility to make sure that controls are in place, that the place is properly run. It is essentially the responsibility of the accountability process for the organization itself, which goes from the management to the board of directors, through the ministry, to the minister, to the House, which is responsible for obtaining value for money. They must bear the responsibility of managing the place, with this concept in mind.
Our audit is essentially designed to assess what procedures they're following. If you talk about effectiveness, and this has not changed under the act, I can only assess if management itself has procedures in place to assess the effectiveness of its own organization. I can make recommendations. I am supposed to report to the House where we find that these procedures are not satisfactory. That is number one.
The second part of your question is that we essentially develop criteria for audit and we develop those together with management and, in the example you're describing, with the board of directors as well. We deal with those criteria under essentially seven headings. We have to break it down because most of these organizations are complex, so an overall rating would be -- to give you an analogy that I've used very often -- as satisfactory as your doctor telling you after your checkup that you are a B- or a B+. It doesn't help you very much. You may want to know how your circulatory system is going etc.
We break it down into essentially seven areas, what we call focus areas. Financial stewardship is one of them. Compliance with laws, regulations, bylaws, how well do they comply with the regulations and laws under which they're operating, would be the next. How well do their key systems of control function, would be the third. We also look at how well they're safeguarding the assets entrusted to them by the public in the overall.
We are then looking at these procedures that I mentioned as to how they know if they're doing the job well that they're supposed to be doing. Do they have procedures in place, is the next one. Then we are taking a look at how responsive they are in terms of taking corrective action when things do go wrong or how do they follow up, if they do something very well and make sure that it gets reported throughout the system. The last is: How well do they tell their own story? How well do they inform their constituents about the quality of their activities and the effectiveness of their operations?
That in a nutshell is the skeleton or the framework on which we build those criteria. When we rate whether something is satisfactory, we rate based on those criteria and then come back to our charge under the Audit Act, which has very specific areas and in fact, this is one of the things I'd hoped -- we make reference to clause 12(2)(f). I don't know, Todd, whether you would like to provide the members with a copy of that. It's in those two.
But that is the charge which I have from you as to the matters which I shall report on. That charge would not permit essentially that overall rating. I've been pressed in my press conferences all the time to rate the government on a scale of one to 10. To begin with, because of the resources I have -- I've only 85 people and I'm not saying I want more, but the fact of life is that in any one given year I can audit only about a dozen programs or so. It would be totally unfair to the government to give the whole government a rating based essentially on 12 out of hundreds of programs. On that score, as well, I'm reluctant to give a single score.
Mr Hastings: I can't understand your reluctance completely. I can see why you don't want to do it, because the public sector basically -- we're supposed to be accountable to the voters out there, but there's a curious reluctance, I would think, that the folks who populate all these agencies, boards and commissions don't want a similar performance evaluation that John Q. Public or Sally M. Public could say, "Mm-hmm, that's very interesting." I don't know what the curious reluctance is on that part. I have a good sense of what it is and I think we need to revisit this later.
My final question deals with the sensitivity of confidential information. Mr Peters, I'm curious as to why, under the information section of 27.1(2), and the part about personal identifiers in 27.1(3), the privacy commissioner didn't make any comment about the whole idea, when you go back to Miss Noble's letter of her comments, paragraph 2 on page 1, about the use of inspection audits that now allows you and your office to have all types of information. That means every relevant document dealing with these transfer partners, the accounting records, and I'm wondering what your thinking is to what the privacy commissioner would recommend that there shouldn't be some kind of restriction on the types of information you can get to evaluate the end of achieving value for money when it says "any information." Does "any information" include how badly or how effectively the executive director of agency Z is regarding their responsibilities in a social service sector, say, or in the delivery of moneys for a school board?
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I'm wondering whether we shouldn't reconsider some kind of restriction on information, particularly of a personnel nature if there is a potential lawsuit that could arise against your office and the provincial government in the context of wrongful dismissal where you may come across information regarding the performance of the senior management of an agency or organization that's outside our direct ambit. Do you think we ought to have some restrictions there?
The privacy commissioner was most concerned about having protection and safeguards on health information. Should we not take the same sort of approach in that section regarding inspection audit when it says "any information," which I would think means all information?
Mr Peters: To specifically answer your question, the act, as it is currently written, in our opinion has two major advantages: (1) It is a beautifully balanced act at the moment. What I mean by that is it says on the one hand that my office can have access to all the information that is necessary to conduct our audits. It includes, incidentally, the right that we can put people under oath, if we wish to do so, but to counterbalance that is very clearly section 27.1(1), which says that we cannot use the information we obtain for any purpose other than (2). It says that anything that comes to our knowledge in the course of employment or duties under this act and shall not be communicated to any person, except -- and those are the only two things we can use it for and that is the administration of the act or a proceeding under the Criminal Code. In other words, the Criminal Code is there, for example, if in accessing information we find out-and-out fraud. We should be permitted to turn the matter over to the police or the necessary authorities. We shouldn't be constrained in that regard.
That is where the balance is and I think anything that would disturb that balance would be viewed as being fairly negative.
Yes, we would not necessarily look at personnel records to look at potential misdeeds of an individual other than if there were fraudulent matters involved because the rest we are just looking at the procedures. How does the organization handle these kinds of situations? What sort of performance evaluation system do they have for their staff? Are they following it? These sort of things are what we're looking at. We're looking at the system; we're not looking at the cases of individuals.
The outcome very often is impact on individuals. In the special report authored by this committee, for example, in 1993 on the Workers' Compensation Board on the new building, we reported that the entire responsibilities of the board of directors should be reviewed. As you know, we have had, since that report has come out, a raft of boards and in fact they don't have a board right now to the best of my knowledge. So we're dealing with a system but, yes, it can have from time to time impact on individuals.
Mr Hastings, I hope I've answered your questions on that.
Mr Hastings: All I'm asking, I guess, Erik, is whether the personal identifiers on page 6 of 6 dealing with medical, psychiatric, or psychological stuff in a health care operation, I guess, should there be any kind of a personal identifier on information of a more broadly based situation where personnel, the people involved in senior management, and there may be references to their performances, not necessarily personal evaluation stuff in their personnel file but in other documents where it could be coming out?
Mr Peters: Reviews of that information may be in our working papers, but the other part of the balance that we have is that we also have under section 21 a very restrictive oath. Every person in my office signs on employment an oath that, "I, so-and-so" -- and I do it myself -- "do swear that I will faithfully discharge my duties as an employee of the Provincial Auditor and will observe and comply with the laws of Canada and Ontario and except as I may be legally required I will not disclose or give to any person any information or document that comes to my knowledge or possession by reason of my being an employee of the office of the auditor." That is an oath, so if that were violated, every one of us would break the oath if we were to abuse the information that you are referring to in any way, shape or form.
That again is what I'm referring to, the beautiful balance in my act, and this act has been in place now for 18 years and has served the office well.
The Acting Chair: Mr Pouliot, I believe you indicated you'd like to speak.
Mr Pouliot: Yes, I did so. Good morning. On page 2 of 6 about the auditor, subsection 3(1):
"The auditor shall report annually to the Speaker of the assembly after the end of each fiscal year by the later of,
"(a) a reasonable time...
"(b) December 31 in the year."
Then the current wording mentions not only the Speaker of the assembly, it also mentions tabled in the assembly. And when I looked at your reason for the current change, traditionally your annual report is tabled in the assembly. It's certainly one of the events, and if you say December 31, traditionally the assembly does not sit on New Year's Eve. We know that it does meet a calendar year and that gives you about -- well, it gives you nine months. The fiscal year beginning April 1. do you intend to depart or do you see a possibility -- not to avoid, not in that tone, but where the assembly would not be the récipiendaire, the recipient of your annual report as is the current practice?
Mr Peters: Two answers to that. The key phrase is really "by December 31." In other words, that's the latest by which. I intend no departure at all from the current practice of reporting in the fall, as soon as I can when the fall session starts.
The second one is just to underpin it. There is currently a standing order on the papers that I can theoretically table my report, although the House is not sitting, by tabling it with the Clerk of the House for distribution, but I find that practice is not very conducive. That is there, but it's not in the act; that's just the practice. But the key phrase is "by December 31." It simply gives a date before which I may table, even if the public accounts have not been tabled in the House.
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Mr Pouliot: Thank you.
I need your help again to develop the theme we are addressing. The proposed amendment to the Audit Act gives you the facility, gives you the tools to expand your mandate, to go beyond the ministries. You're going to the transfer payments, again people who are the recipients of the flow from the province to their commission, their agency. My distinguished colleague has made mention by way of a question that your budget -- you still have to live within your means -- is not necessarily or concurrently being expanded, which becomes a bit of a juggling act as you feel your way outside of these confines into your new expanded mandate.
You have mentioned that since you can only be at one place at one time -- you have the same budget -- it would mean that the scrutiny, your actual mandate, as you're about to venture beyond it, would suffer. I'm usually not political on a Thursday morning as we near 11 o'clock, and it's not the nature of this committee, but if I was to have a dark moment and if I was to impute motives, if I was inclined that way, and if I was to be lured, to be seduced by the invitation -- "What the heck, things are not bad at the shop. Why don't I focus, because the committee has asked me to do so, on" -- yes, the examples abound, on the welfare recipient, whoever is in charge of that, on the WCB.
Simply put, I would like to see the methodology of your rotation. Are you planning to go about attacking these things?
Mr Peters: I'd be happy to answer that question. Firstly, I do have a little bit of difficulty with the word "attacking."
Mr Pouliot: I have a dictionary of synonyms in three languages, sir.
Mr Peters: Okay.
Mr Pouliot: Please bear with me. It's not a problem.
Mr Peters: The key issue: What we are doing is we are under continuous development, what we call the audit universe. What we call the audit universe is actually breaking down the government operation into what we call auditable chunks, and we run on each of these auditable chunks what we call a risk assessment, where we take up to about something like 15 risk factors into consideration. We evaluate from knowledge of the entity or knowledge of the program that we develop from whatever is published, from whatever is available, from whatever we can find in the ministry. We run essentially a risk assessment. As a result of this risk assessment, we run a rating. I hear Mr Hastings getting excited about that rating. That is actually a three-letter rating: It is low, medium and high. In other words, a low-risk organization is audited less frequently and less thoroughly than a medium-risk, and again a high-risk is audited quite frequently, and to the criteria in those seven focus areas I mentioned.
We've developed essentially a five-year plan, currently reduced at the moment to a three-year plan to comply with the Ontario Financial Review Commission's recommendation of a three-year horizon. So we stick with that three-year horizon. It's based on that assessment that we are doing it. Previously, we had to exclude the grant recipients from these assessments, because there was no point and we were not going to audit them. That is certainly one area, that now they will be included. The selection of the very limited number of grant recipients we're going to do is going to be done based on the same kind of risk assessment. Does that answer your question?
Mr Pouliot: I have one short supplementary and then maybe a brief comment. You've mentioned the right to change and to suspend -- I'm quoting here -- "may for cause suspend, demote or dismiss an employee of the office of the auditor or may release an employee of the office of the auditor"
We're so few of us. The electorate has decreed that we should only have 16 by way of representation. That's a mere four above the requirements to be a party, so we don't party too much; we are a moving party. It's difficult. So some things skip us from time to time, and one of those is you now have the right to -- by virtue of what? You didn't have the right to do those things, but now you can exercise those rights to demote, promote. What has changed from the past year? Did you not have that right before, and you associate yourself with that of a title of a deputy minister?
Mr Peters: The rank of a senior deputy minister I already have under the act, so that's not new.
Mr Pouliot: So under disclosure we know how much you make?
Mr Peters: Absolutely. The press has been running down my door, surprised how little I earn.
The Acting Chair: Doesn't do any good to lobby.
Mr Peters: No, not at all, and I'm not complaining at all. I should make that point very clearly, having joked about it.
What is new is really the word "release." "Suspend, demote or dismiss" were in the old act; "release" is just paralleling what is now added to the Public Service Act. There is the permission granted to an organization to release people if there's a shortage of funds, if there's a shortage of work. To release with reasonable notice or payment in lieu is now something that is under the Public Service Act, and this is one of the updating features we're putting in. In other words, it essentially permits me the same rights as personnel management that a deputy minister has running a ministry. That's the update.
Mr Pouliot: On several occasions we have voiced a sincere concern. I know it's not easy when you have to look at the rights of individuals and the benefit of the collective. That's always the equilibrium. We are adamant and we're very pleased that it's been addressed, for we feel it serves no purpose to attach a name to a situation. Your mandate is, are the taxpayers getting value for money as you scrutinize due process to get the answer? The client, the individual attached to it is secondary and serves no purpose. We sought and we have all the guarantees, and the wording is simply expeditiously addressed to it, that anonymity will be preserved. I want to bring you just to conclude -- it's a true story -- an example that could happen.
In our riding, and it escapes no one, I have been informed, because we're all ombudsmen in our riding, of someone, a constituent of ours who began to lose a little weight so went to see our local doctor, expecting to be referred if something was complex, and tested HIV positive, and was referred because we don't live in large communities. It was a bit of a ping pong and then sought a second opinion -- nothing full-blown. Time is an element, and we keep our fingers crossed -- several tests. If someone was to look at -- tested for diabetes 18 different times; okay, I mean that's catastrophising, but quite a few times, went to two different urban locales. I don't think it was the best way to do business, a bit of a ping pong going on: "Go there, go there, go there."
Taxpayers do not get value for money? We know with the human dimension nothing else matters. The essence of life is what we're talking about here. It might be an extreme by way of example for some, but absolutely nothing can be served by attaching the name of the person to our quest for value for money. Right?
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We're satisfied with the presentation. It reads well and the three columns, the traditional, what the current act says, what is being proposed and why the proposal is -- something we always look forward to. It makes our job a lot simpler, and best wishes. Our party is in agreement with each and every clause, as presented.
Mr Peters: Thank you very much. If I may make a brief comment, I've brought along with me today John Sciarra and Ken Leishman and I want to pass that on to them.
The Acting Chair: Mr Kennedy. Or if it was short and relative to that?
Mr Marcel Beaubien (Lambton): It's going to be short because it's a follow-up.
The Acting Chair: Do you mind, Mr Kennedy, then because it is relevant --
Mr Beaubien: Oh, no, go ahead.
The Acting Chair: All right. Mr Kennedy.
Mr Gerard Kennedy (York South): Back to section 3, I understood from your remarks that the idea was to give you a finite date to present in case public accounts weren't presented, but it says "the later of" and so "the later of" infers that "a reasonable time after the public accounts" or "December 31." Shouldn't it say "the earlier of"?
Mr Peters: We had that debate yesterday and we went back to counsel and they said it's okay this way, but that's certainly a change that we would be happy to make to make it abundantly clear that it is --
Mr Kennedy: Yes, because I don't think it's abundantly clear unless --
Mr Peters: That's right.
Mr Kennedy: Okay. Then I just want some assurance on the language which is very open in section 4 of your explanation on page 3 that says, "audit a grant recipient to the extent considered necessary." Is that similar language to what exists for ministries and other areas where you've been able to do full-scope audits or is that new language?
Mr Peters: No, it is not new language and not a new concept essentially, because in value for money there are three elements. Sometimes value for money is referred to as the three Es: economy, efficiency and effectiveness. The concern is that essentially on economy and efficiency we can push the matter as far as possible because those are a real, direct responsibility.
On effectiveness, there are certain limitations and this is why "to the extent considered necessary" is in there because the effectiveness of an organization is not necessarily limited to the action of its management. It also has implications on government policy, if the Legislature or the legislation makes certain policy instructions to people that influences the effectiveness of the organization and of what they can do because we do not comment on government policy. Whether it's good, bad or indifferent, we do not comment on it. We can't push effectiveness so far down that we cross the line through our audit findings inadvertently commenting on what is government policy, because we have a very clear image here that our client, if you will, the client of my office is the Legislature. I'm an officer of the Legislature. My auditees are the ministries and if these amendments go through, also their grant recipients.
Now their action is prescribed by policies and if we get too far down into the effectiveness of what they're doing, we would tread on the judgement of the House, on the judgement of the government of the day, on the judgement of ministers etc. That's where we're limited and that's why specifically under clause 12(2)(f), I believe sub (v), we're limited to audit simply the procedures in place, to measure and to report on the effectiveness, but we cannot assess effectiveness ourselves.
Mr Kennedy: Thank you for that. Just in terms of a slightly narrower point, the wording "to the extent considered necessary," is that elsewhere in the act applying to the ministries and so forth? I didn't see it under the definition under 12.
Mr Peters: Interesting question. I haven't looked at that. I think that is the only --
Mr Kennedy: Otherwise the grant recipients might see this as differential.
Mr Peters: Was it in section 30?
Mr Kennedy: I have it here.
Mr Peters: I'll tell you what the thinking is behind it in some respect. Oh, yes. Sorry, John is just pointing out to me it is in another section. For example, the financial statements of the government -- section 9 says, "The auditor shall audit, on behalf the assembly and in such manner as the auditor considers necessary, the accounts and records of the receipt and disbursement of public money...." It is not new; it parallels another section.
Mr Kennedy: Which subsection under section 9?
Mr Peters: Subsection 9(1), the audit of the consolidated revenue fund.
Mr Kennedy: So "in such manner as the auditor considers necessary" and "to the extent considered necessary" are considered analogous wording?
Mr Peters: Good thought. We will have our counsel look at that.
Mr Kennedy: Because we are in new territory, I want to understand how new it is and so on, because I think the broad sweep of the change, if I understand the intent, is to give cause and effect to grant recipients having the same degree of scrutiny and the same latitude of scrutiny by the auditor's office as ministries do. If there are differences, I would like those pointed out in terms of a differential between the two.
Mr Peters: Very good. Excellent point. Thank you.
Mr Kennedy: I'd like to register an inquiry on a broader basis, not to take up questioning time now, but maybe in a further time. Has there been consideration done within your office about what kind of tradeoffs there will be if we look at your capacities as finite? The question of course has been raised, and it's been answered directly, but what will the cost be in terms of your contribution to overall accountability of the ministries? If you scrutinize fewer ministries to make room for the grant recipients, what will that cost be and how might that relate -- it was very interesting the relating you did about the audit universe and the kind of systems you'd have to select in there. What kind of tradeoff will we have? Because I think the style of the government of the day is about tradeoffs. How can we better understand what kind of tradeoffs you're going to be entering into as we give you this much larger amount of work with the same resources? Is there an assessment that you've done of that in your office? On the surface of things, obviously there will be less scrutiny of the ministries. There will be more scrutiny of grant recipients but at the cost of less review of the ministries. What does that means in terms of overall accountability as exercised for the Legislature by your office?
Mr Peters: An excellent question again. Yes, we have indeed looked at this. One of the concerns we have had all along and the reason we are proposing it -- firstly, let me go back very briefly to the political process. You were not in this committee on February 1 and may not have ever seen the paper.
Mr Kennedy: No. I'm trying to catch up with the background.
Mr Peters: One of the points I hope I made is that in bringing forward these proposed amendments we are reacting. It is not my office pushing for it necessarily, but there is a distinct will on behalf of all three parties in the House that we move ahead in this area. Specific documentation was presented from all three parties. We are following, if you will, our clients' wishes in this regard. That was number one.
Number two, I believe the tradeoff is very easily justified because it is really a step. I don't see it as an end but rather as a means to better accountability because one of the facts we're dealing with is that close to half of the government's expenditures are given to other organizations to implement acts passed by the House. The best illustration I always have is the Education Act of the province. The $4.5 billion that is turned over to school boards is given to them to implement the Education Act of the province. So if we audit at length the ministry's administration as to how it allocates these funds to the school boards, we really are getting only one end of the equation. We will only find out how they allocate it. We cannot pursue how the school boards are actually obtaining value for money in implementing the Education Act with the money that Parliament has given them.
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In a way, we're not viewing it as a tradeoff but rather as being able to perform our services better, because we can now in an audit not only incorporate what the ministry does, but also what the end spender of the funds actually does. In that regard, I wouldn't view it necessarily as a tradeoff but rather as a better pursuance on behalf of the Legislature.
Mr Kennedy: I certainly could see that it gives you a more complete mandate in a way.
Mr Peters: That's right.
Mr Kennedy: But at the same time, because you had an incomplete mandate before, there must be some cost in the sense of the rotation, the number of places you could visit.
Rather than take up more of the question time, if there is any documentation of that kind of thing -- in other words, I would like to become more familiar with the frequency with which you're able to examine the various ministries. I don't know if the risk levels are available to this committee, but that kind of thing so we could see how that might shift as you take on the larger audit universe.
Mr Peters: I confess to you that we have not put the numbers to paper on a very straightforward basis. These amendments to the Audit Act have been in the hopper now since 1990 and we were not going to develop numbers until we actually knew what was involved. In the alternative scenarios, I can only tell you that we would probably have to trade off some ministries, but some ministries we haven't been able to audit very effectively anyway because of this constraint. So it will work out.
Mr Kennedy: The point's taken.
Mr Beaubien: On page 4, section 26 -- I had thought my dear friend across the aisle, being so socially conscious, was going to bring it up -- under the current wording you mentioned that before you have to suspend or demote someone there's a hearing, but under the new wording you can suspend, demote or dismiss an employee. What would be the process under the new wording? Would there be a hearing? How would you suspend, demote or dismiss?
Mr Peters: The matter would certainly come to me as the head of the office, but there would no longer be a formal hearing. The formal hearing was, I believe, under some section of the Public Service Act. Generally these hearings have been found to be a rather fruitless waste of time, a waste of time and money in the government, because people had to hire lawyers and be represented by lawyers and the findings of the hearings were not conclusive. Now a less formal process has been put in place and at the other end the grievance process has been left as the determining factor. That parallels pretty well what is done in the public service.
Mr Ken Leishman: If I could add something, this is consistent with the changes that have been made in the civil service regulation. Instead of a hearing, the employee has the right to appeal the dismissal or the demotion to the deputy minister after the action has been taken, before it goes to the Public Service Grievance Board. That didn't used to be the case. That has taken over for what used to be the hearing.
The Acting Chair: Any further questions or comments? We have to deal with the auditor's recommendations and material.
Mr Steve Gilchrist (Scarborough East): As we discussed last week, it's quite important, as the auditor himself pointed out a minute ago, that this debate's been going on for nigh on six years. There's certainly a consensus within the three parties that this is an area we should bring closure to once and for all.
Given the infinitely higher prospect of having a bill successfully pass through third reading if the ministry supports it, in fact if the ministry sponsors it, I would like to suggest that we forward these proposed amendments immediately to the finance ministry and ask for their reaction to that. There have also been a couple of other comments made, such as clarifying the December 31 issue, that perhaps Mr Peters might want to put some final touches on. Not to unduly delay it, but looking realistically, there's zero chance of having a bill introduced in the next two weeks. The order paper is full. I would like to suggest that by our first meeting after the intersession the ministry be requested to have a detailed response and an action plan in our hands in order that we could make a decision at our first meeting back after the summer.
The Acting Chair: Would you make a motion to that effect?
Mr Gilchrist: I'd be pleased to move it.
The Acting Chair: We have a motion.
Mr Peters: If you have the motion, could you make the motion that it's the minister who has to sponsor it? I want to make that distinction. The ministry has been advised parallel; I could not table it with the ministry officially until I'd tabled it here. As Mr McGuinty opened his envelope, there was a messenger standing by to take this document over to the Deputy Minister of Finance, just for you to know.
The Acting Chair: So we can clarify, the motion would read "the minister."
Mr Gilchrist: Yes, that these proposed amendments be directed to the minister for his response both in the form of comment and a proposed action plan to deal with these amendments.
The Acting Chair: Questions or comments? All those in favour? Carried.
Mr Kennedy: Mr Chairman, I assume that the questions of a small nature brought up today would be rectified in advance.
Mr Gilchrist: Over the summer, I'm sure Mr Peters, if he wishes to clarify the date issue -- and if there are any other minor matters you would direct those directly to the --
The Acting Chair: The question the clerk has brought forward is whether the committee wants to meet next week or the week after and then the question of any meetings during the intersession.
Mr Pouliot: At the risk of sounding parochial, next week I think there is an acquiesence from all that we are beginning our convention so there will be no attendance on Thursday. The House will not be sitting.
The Acting Chair: Perhaps I could suggest that we meet the week after.
Interjection.
Mr Mike Colle (Oakwood): Yes, that's right. In other words, why would we meet? What's on the agenda?
The Acting Chair: Perhaps I can help. If there's nothing to deal with in the intersession, I guess we could agree to meet again at the call of the Chair, which will probably be in the next session. Is that okay? Any other matters for the committee?
Mr Pouliot: Yes, the annual meeting of the public accounts committees, provinces and federal government. My House leader has mentioned that, first of all, it's been passed by this committee. It's also been agreed by the House leaders and it's going to the Board of Internal Economy, made up of House leaders plus one, so it shouldn't be any problem there.
The Acting Chair: I understand that meeting is to be held next week, so we hope it will be on their agenda then. Just a clarification: How then would we communicate with the clerk if that passes in order that arrangements can be made for specific individuals?
Mr Gilchrist: I'd be pleased to undertake that the House leader would contact the clerk directly.
The Acting Chair: Okay, and from that point on you deal with it. Is there any other business? Seeing none, this committee is adjourned.
The committee adjourned at 1120.