The Legislative Assembly of British Columbia

Select Standing Committee on Public Accounts

Report

2nd Session, 39th Parliament

TABLE OF CONTENTS

Composition of the Committee

Terms of Reference

The Work of the Committee

Carry-over Items

Review of Resolutions for Records Retention and Disposal Authorities (continued)
Public Accounts Overview (continued)

Financial Audits

OAG Report 2, 2010/11 Observations on Financial Reporting: Summary Financial Statements 2009/10
OAG Financial Statement Audit Coverage Plan for Fiscal Years 2011/2012 through 2013/2014
OAG Report 4, 2010/11 Aspects of Financial Management
Report 4a: Management of Working Capital by Colleges and School Districts
Report 4b: Infrastructure Grants
Report 4c: Year-end Government Transfer Expenditures
Report 4d: Managing Fraud Risks in Government

IT Audits

OAG Report 15, 2008/09 Wireless Networking Security in Victoria Government Offices: Gaps in the Defensive Line; OAG Report 10, 2009/10 Wireless Networking Security in Government: Phase 2
OAG Report 7, 2009/10 The PARIS System for Community Care Services: Access and Security
OAG Report 1, 2010/11 IT Continuity Planning in Government

Health, Education and Social Services Audits

OAG Report 9, 2009/10 Electronic Health Record Implementation in British Columbia
OAG Report 7, 2008/09 Home and Community Care Services: Meeting Needs and Preparing for the Future
OAG Report 10, 2008/09 A Major Renovation: Trades Training in British Columbia
OAG Report 12, 2008/09 Planning for School Seismic Safety
OAG Report 16, 2008/09 Homelessness: Clear Focus Needed

Governance Audits

OAG Report 13, 2008/09 Public Sector Governance: A Guide to the Principles of Good Practice;
How are We Doing? The Public Reporting of Performance Measures in British Columbia
OAG Report 4, 2009/10 British Columbia Crown Corporations Executive Arrangements - A Work in Progress
OAG Report 6, 2009/10 Making the Right Decisions: Information use by the boards of public sector organizations

Environment Audits

OAG Report 8, 2009/10 Oil and Gas Site Contamination Risks: Improved oversight needed
OAG Report 5, 2008/09 Removing Private Land from Tree Farm Licences 6, 19 & 25: Protecting the Public Interest?
OAG Report 5, 2010/11 Audit of the Agricultural Land Commission
OAG Report 3, 2010/11 Conservation of Ecological Integrity in BC Parks and Protected Areas
OAG Report 8, 2010/11 Management of Groundwater Resources in British Columbia

Transportation Audit

OAG Report 7, 2010/11 Upkeep of the Provincial Roads Network by the Ministry of
Transportation and Infrastructure

Miscellaneous Items

OAG Follow-up Reports
Good Practice Guides
Management Letter
Summary Report

Documents Distributed

May 19, 2011

To the Honourable
Legislative Assembly of the
Province of British Columbia

Honourable Members:

I have the honour to present herewith the Select Standing Committee on Public Accounts that contains the annual summary of its activities during the second session of the 39^th Parliament.

Respectfully submitted on behalf of the Special Committee,

COMPOSITION OF THE COMMITTEE

MEMBERS

CLERK TO THE COMMITTEE
Craig James, Clerk Assistant and Clerk of Committees
Kate Ryan-Lloyd, Clerk Assistant and Acting Clerk of Committees

COMMITTEE RESEARCHERS
Josie Schofield, Manager, Committee Research Services
Kathryn Butler, Committee Researcher

TERMS OF REFERENCE

On March 24, 2010, the Legislative Assembly agreed:

1. That the reports of the Auditor General of British Columbia deposited with the Speaker of the Legislative Assembly during the first session of the thirty-ninth parliament be deemed referred to the Select Standing Committee on Public Accounts, with the exception of the report referred to in section 22 of the Auditor General Act which is referred to the Select Standing Committee on Finance and Government Services; and in addition that the following reports of the Auditor General of British Columbia be referred to the Select Standing Committee on Public Accounts:

• Report No.  5, 2008/09: Removing Private Land from Tree Farm Licences 6, 19 & 25: Protecting the Public Interest?
• Report No.  7, 2008/09: Home and Community Care Services: Meeting Needs and Preparing for the Future
• Report No.  10, 2008/09: A Major Renovation: Trades Training in British Columbia
• Report No.  12, 2008/09: Planning for School Seismic Safety
• Report No.  13, 2008/09: Public Sector Governance and How Are We Doing?
• Report No.  14, 2008/09: Grant Administration of the BC Arts Council; 2010 Olympics and Paralympic Games
• Report No.  15, 2008/09: Wireless Networking Security in Victoria Government Offices: Gaps in the Defensive Line
• Report No.  16, 2008/09: Homelessness: Clear Focus Needed
• Report No.  4, 2009/10: British Columbia Crown Corporations Executive Compensation Arrangements: A Work in Progress
• Report No.  6, 2009/10: Making the Right Decisions: Information use by the boards of public sector organizations

2. That the Select Standing Committee on Public Accounts be the committee referred to in sections 2, 6, 7, 10, 13 and 14 of the Auditor General Act.

In addition to the powers previously conferred upon the Select Standing Committee on Public Accounts, the Committee be empowered:

1. to appoint of their number, one or more subcommittees and to refer to such subcommittees any of the matters referred to the Committee;
2. to sit during a period in which the House is adjourned, during the recess after prorogation until the next following Session and during any sitting of the House;
3. to adjourn from place to place as may be convenient; and
4. to retain personnel as required to assist the Committee,

and shall report to the House as soon as possible, or following any adjournment, or at the next following Session, as the case may be; to deposit the original of its reports with the Clerk of the Legislative Assembly during a period of adjournment and upon resumption of the sittings of the House, the Chair shall present all reports to the Legislative Assembly.

THE WORK OF THE COMMITTEE

During the second session, the Select Standing Committee on Public Accounts (PAC) held ten meetings (February 11, May 26, June 9 and 10, October 20, November 16 and 17, December 7, 2010; February 9 and 10, 2011).  The agenda and procedure subcommittee was also active, with the Chair and Deputy Chair in frequent communication on how best to manage the workload.

On April 30, 2010, the Clerk to the Committee and research staff briefed an 11-member delegation of CCAF International Fellows visiting Canadian legislatures as part of their training.
The Chair and Deputy Chair, accompanied by the manager of committee research services, attended the 31st Annual Conference of the Canadian Council of Public Accounts Committees held in Québec City from August 29 to 31, 2010. 

On October 25, 2010, BC’s Comptroller General, Cheryl Wenezenki-Yolland, was appointed the new Associate Deputy Minister to oversee the Environmental Assessment Office.  Her successor, Stuart Newton, is now serving in an acting capacity as the provincial government’s senior accountant.  The Committee would like to express its sincere appreciation to Ms. Wenezenki-Yolland for her contribution to the work of the PAC.

Two matters were carried over from the previous session: the briefing on the Province’s Public Accounts and review of resolutions for records retention and disposal authorities.  During the second session, the Committee also approved the Auditor General’s annual financial statement audit coverage plan for the next three fiscal years. 

For the first time in some years, the Committee has succeeded in eliminating the backlog of audit reports.  During the second session, the PAC received and reviewed 24 full-length reports, two follow-up reports, a summary report, two best-practice guides and a management letter.  This achievement was made possible through the collegial approach of committee members and the cooperation of the offices of the Auditor General and Comptroller General.

Copies of the Auditor General’s reports are available at: http://www.bcauditor.com/. 

Minutes and transcripts of PAC public meetings and PAC reports are available on the Legislative Assembly’s website at: http://www.leg.bc.ca/cmt/pac.

CARRY OVER ITEMS

Review of Resolutions for Records Retention and Disposal Authorities (continued)

In accordance with section 3 of the Document Disposal Act (RSBC 1996, c. 99), the Public Documents Committee submits each year for consideration and approval by the Public Accounts Committee (PAC) a copy of each of the records and retention and disposal authorities it has recommended for approval by the Legislative Assembly.  Once approved, those authorities govern the retention and final disposition of the government records described therein.

The Public Documents Committee is made up of the Provincial Archivist, the Comptroller General and three other persons appointed by order-in-council.  Its function is to review all records retention and disposal authorities proposed by ministries, agencies and boards.  The purpose of the review is to ensure that all legal, financial, fiduciary and historical values have been met.  Do the records, for instance, document how a program was developed and implemented?  Have the accountabilities the Crown has to its citizens been discharged?

If all of these values are addressed, the Public Documents Committee presents the PAC with a list of authorities to consider and approve so that these resolutions may be submitted to the Legislative Assembly.  Once approved by the House, these authorities will govern how the records are to be treated: either transferred to the government archives or disposed of confidentially.  The Ministry of Citizens' Services is the corporate overseer of the information management process within the executive of government and is in part responsible for the administration of the act.

Committee Review

November 30, 2009 Meeting

At the November 30, 2009 meeting, the PDC Chair (Provincial Archivist) briefed committee members on the role of the PAC in the process of regulating the retention and final disposition of government records.  He then presented five resolutions identifying the records retention and disposal authorities for their consideration.  The first authority covers corporate financial management records in all the line offices, agencies and boards of the BC government.  The second authority deals with Ministry of Citizens’ Services records relating to accommodation and real estate services, dating back to 1871.  The other three resolutions relate to records under the purview of the Ministry of Health Services, including Conversation on Health records.

January 26 and June 9, 2010 Meetings

The PDC Chair presented further information at the PAC meetings of January 26 and June 9, 2010 regarding the five resolutions for records schedules.  For the June 10 meeting, the package of additional material contained four summaries outlining the overall changes in the records schedules presented to the Committee.
The question-and-answer session focused on the following topics: the financial records schedule and the case for the retention of submissions received by the Conversation on Health.

Committee Recommendation (June 9, 2010)

At the meeting on June 9, 2010, the Public Accounts Committee agreed, on division, to recommend to the Legislative Assembly acceptance of the following five resolutions for retention and disposal authorities:

1. That the management of the retention and final disposition of the financial management records of the ministries of the Government of British Columbia be amended in accordance with the Administrative Records Classification System (ARCS):  2008 Amendment – Section 4 Financial Management.
2. That the management of the retention and final disposition of the operational records of the Accommodation and Real Estate Services, Ministry of Citizens’ Services, be in accordance with the records schedules, standards, and guidelines described in the Accommodation and Real Estate Services Operational Records Classification System, as amended.
3. That the management of the retention and final disposition of the operational records of the Emergency Health Services Commission, Ministry of Health Services, be in accordance with the records schedules, standards, and guidelines described in the Emergency Health Services Operational Records Classification System, as amended.
4. That the retention and final disposition of the operational records of the Home and Community Care and Performance Accountability, Ministry of Health Services, be in accordance with the records schedules, standards, and guidelines described in the Health Authority Performance Management Operational Records Classification System, as amended.
5. That the retention and final disposition of the Conversation on Health, Ministry of Health Services records be managed in accordance with the ongoing records retention and disposal authority for those records.

February 10, 2011 Meeting

The Public Documents Committee Chair presented 16 additional retention and disposal schedules at the February 10, 2011 PAC meeting, explaining that 14 schedules cover operational records, and two administrative records.  He also informed committee members that a review has been undertaken of the administrative records classification system (ARCS), first approved by the PAC and Legislative Assembly 21 years ago.
The question-and-answer session focused on the following topics: the PDC review process, the ARCS review and the disposal of duplicate records.

Committee Recommendation (February 10, 2011)

At the meeting on February 10, 2011, the Public Accounts Committee agreed to recommend to the Legislative Assembly acceptance of the following 16 resolutions for retention and disposal authorities:

1. That the management of the retention and final disposition of the general administration, building and property, equipment and supply, and information and technology records of the ministries of the Government of British Columbia be amended in accordance with the Administrative Records Classification System (ARCS): 2009 Amendment – Section 1 Administration; Section 2 Buildings and Properties; Section 3 Equipment and Supplies; Section 6 Information Technology.
2. That the management of the retention and final disposition of the operational records of Workplace Technology Services (WTS) and the former Information Technology Services Division (ITSD), Ministry of Citizens’ Services, be in accordance with the records schedules, standards, and guidelines described in the Information and Technology Services Operational Records Classification System, as amended.
3. That the management of the retention and final disposition of the operational records of the Banking and Cash Management Branch, Ministry of Finance, be in accordance with the records schedules, standards, and guidelines described in the Banking and Cash Management Operational Records Classification System.
4. That the retention and final disposition of the operational records of the Emergency Health Services Commission, Ministry of Health Services, be in accordance with the records schedules, standards, and guidelines described in the Emergency Health Services Operational Records Classification System, as amended.
5. That the retention and final disposition of the administrative records of the Emergency Health Services Commission, Ministry of Health Services, be in accordance with the records schedules, standards, and guidelines described in the Emergency Health Services Administrative Records Classification System Supplement.
6. That the retention and final disposition of the operational records of the Pharmaceutical Services, Ministry of Health Services, be in accordance with the records schedules, standards, and guidelines described in the Pharmacare Services Operational Records Classification System, as amended.
7. That the retention and final disposition of the operational records of the Emergency Medical Assistants Licensing Branch, Ministry of Health Services, be in accordance with the records schedules, standards, and guidelines described in the Emergency Medical Assistants Licensing Operational Records Classification System, as amended.
8. That the retention and final disposition of the Patient Care Quality Review Boards Secretariat records be managed in accordance with the ongoing records retention and disposal authority for those records.
9. That the retention and final disposition of the Corporate Software Licence Management, Corporate Asset Management, Ministry of Citizens’ Services records be managed in accordance with the ongoing records retention and disposal authority for those records.
10. That the retention and final disposition of the operational records of the Risk Management Branch and Government Security Office, Provincial Treasury, Ministry of Finance, be in accordance with the records schedules, standards, and guidelines described in the Risk Management Operational Records Classification System.
11. That the retention and final disposition of the operational records of the Tobacco Control Program, Population and Public Health, Ministry of Healthy Living and Sport, be in accordance with the records schedules, standards, and guidelines described in the Community Health Programs Operational Records Classification System, as amended.
12. That the retention and final disposition of the operational records of the Archaeology Branch, Ministry of Tourism, Culture and the Arts, be in accordance with the records schedules, standards, and guidelines described in the Archaeology Operational Records Classification System, as amended.
13. That the retention and final disposition of the Community Development Trust, Ministry of Community and Rural Development records be managed in accordance with the ongoing records retention and disposal authority for those records.
14. That the retention and final disposition of the operational records of the Parks and Protected Areas Division, Ministry of Environment, be in accordance with the records schedules, standards, and guidelines described in the Parks and Protected Areas Operational Records Classification System.
15. That the retention and final disposition of the operational records of the Public Affairs Bureau, Ministry of Citizens’ Services, be in accordance with the records schedules, standards, and guidelines described in the Government Communications Operational Records Classification System.
16. That the retention and final disposition of the operational records of the Employment Standards Branch, Employment Standards and Industrial Relations, Ministry of Labour, be in accordance with the records schedules, standards, and guidelines described in the Employment Standards Operational Records Classification System.

Public Accounts Overview (continued)

As reported in last year’s annual report, the-then Comptroller General, Cheryl Wenezenki-Yolland, presented an overview of the Province’s Public Accounts on December 1, 2009 and January 26, 2010.  Following a brief recap of her presentation at these two PAC meetings, a summary of committee members’ questions concerning the public accounts is provided below.

Summary of Comptroller General’s Presentation

December 1, 2009 Meeting

The Comptroller General’s presentation began with a high-level overview, describing the Public Accountsas an “extremely important” accountability document that represents the final reporting process in the annual provincial budget cycle.  The witness explained how the Public Accounts are prepared on a summary basis and then listed the document’s key components.

The Comptroller General also reported on the role of her Office in regards to financial reporting, which is defined in the Financial Administration Act.  She informed the PAC that preparation of the financial statements is done in accordance with Canadian GAAP, as recommended by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA).  Next, she identified the four accounting standards for reporting entities:

• Public sector accounting standards used by ministries (PSAB Handbook)
• Not-for-profit accounting standards used by government organizations (CICA Handbook)
• Small enterprise standards used by government organizations (CICA Handbook)
• Commercial standards used by government business enterprises (CICA Handbook)

The Comptroller General anticipated that the introduction of international financial reporting standards in 2011 for government business enterprises will complicate matters for these commercial Crowns.  One key difference between Canadian and international standards is rate-regulated accounting.  Also, in the evolving reporting environment, not-for-profit guidance will disappear and public sector not-for-profits will most likely use modified public sector standards.

January 26, 2010 Meeting

The Comptroller General reviewed the various components of the 2008/2009 Public Accounts, a document produced by her office on an annual basis.  Her presentation focused on the following sections: Highlights 2008/09; Financial Statement Discussion and Analysis; Audit Opinion; Financial Statements; Notes 1, 2, 7, 16, 17, 18, 19, 24, 25, 31, 36 and 37 to the Financial Statements; Schedules to the Financial Statements; Supplementary Information; Consolidated Revenue Fund Extracts; Provincial Debt Summary.

Summary of Members’ Questions

Committee members asked a series of questions relating to the public accounts over the course of three meetings (December 1, 2009; January 26 and June 10, 2010).  A summary of the main themes of their inquiry is presented below. 

Taxpayer risk

One line of questioning focused on the risks facing BC taxpayers that had emerged from the overview of the public accounts.  At the January 26, 2010 meeting, one Member asked:

• What is the risk exposure for BC taxpayers of providing an unlimited guarantee of credit union deposits?
• What are the costs to taxpayers of litigation between Powerex, BC’s power-trading desk, and the State of California, and of litigation related to our public health care system?
• What is the risk exposure arising from public-sector pension plans and health benefits, and decisions made by investment managers at some post-secondary institutions?
• What is the amount of risk for taxpayers of various Crown corporation operations, including Ferries and BC Hydro, and of major capital infrastructure projects?

Contractual obligations

Some committee members asked questions about the contractual obligations with outside entities that are referenced in the public accounts.  These spending commitments range from routine undertakings (eg, vehicle leases) through to public-private partnerships. The costs ($58 billion) now exceed the total provincial debt ($38 billion); however, these amounts relate to future expenses and therefore are classified as future obligations and not as debt.

Learning that the public accounts document provides no tally of contracts smaller than $50 million, individual committee members requested a detailed breakdown.  In response, the PAC Chair asked the Comptroller General at the January 26 meeting to report back with an estimate of how much it would cost her Office to compile information on the magnitude of the Province’s contractual obligations and the quality of the available data.

At the meeting on June 10, 2010, the Comptroller General provided the following information to the Committee.  The estimated cost would be $200,000 for her Office directly.  For the 200 entities that would also have to gather information, their costs would be an additional $200,000 to $400,000.  So the total cost would be somewhere in the order of $400,000 to $600,000.

The Comptroller also reported that her Office had asked for some extra information as part of this year's public accounts to try to get a feel for the quality of information it would get back from the organizations, and to determine how good its preliminary assessment was.  This review had identified that there would be a considerable amount of work to identify a real contractual obligation.  So the higher-end estimate is probably more realistic about what that would cost.

FINANCIAL AUDITS

OAG Report 2, 2010/11 Observations on Financial Reporting: Summary Financial Statements 2009/10

The Public Accounts Committee (PAC) met on October 20, 2010 to review the annual audit report on the Summary Financial Statements.  The PAC heard presentations from the Office of the Auditor General (OAG) and the Office of the Comptroller General.

Summary of OAG Report

Each year, the OAG is required to audit the government’s Summary Financial Statements (SFS), which are a consolidation of the audited financial statements of 147 government organizations, plus the Consolidated Revenue Fund composed of 8 legislative offices, the Legislative Assembly, Office of the Premier and 20 ministries.  The audited SFS are included in the public accounts. 

The Executive Director, Financial Audit explained that the OAG report on the 2009/10 Summary Financial Statements identifies five key issues: SFS audit opinion reservations, changing accounting standards, rate-regulated accounting, government’s response to changing standards, and working capital management. 

The witness then reported that the audit opinion on government’s 2009/10 Summary Financial Statements contains the same three reservations as those included in the 2008/09 audit opinion – namely, oil and natural gas producers’ royalty credits are inappropriately netted from revenue; liabilities are not recorded for deep-well credits owed to oil and natural gas producers; and there is improper consolidation of the Transportation Investment Corporation. 

On the second key issue, changing accounting standards, the report identifies the timeline for implementing the International Financial Reporting Standards (IFRS), as beginning January 1, 2011.  In addition, government has recently directed government business enterprise to implement IFRS, and directed other organizations to implement PSAB standards, for fiscal years beginning after January 1, 2011, and after January 1, 2012 for the SUCH sector. 

The witness reported that there is still an outstanding issue respecting government’s use of rate-regulated accounting because IFRS does not currently allow deferral of rate-regulated expenses.  As a result, Canadian standard-setters allowed rate-regulated entities to defer IFRS implementation by one year, to January 1, 2012.  At March 31, 2010, BC Hydro held $1.7 billion in rate-regulated (deferred) assets.

The witness explained that in response to changes in accounting standards, government enacted amendments to the Budget Transparency and Accountability Act allowing government to choose accounting policies outside of Canadian GAAP.  If standard-setters do not allow rate-regulated accounting, government could decide to follow a non-GAAP basis of accounting that could have an effect on the audit opinion that is provided on government’s SFS.

On the fifth key issue, the report noted that government had significantly improved its management of working capital between 2009 and 2010, decreasing cash and short-term investment balances from $7 billion to $3 billion.      

The report discusses seven other issues and makes eight recommendations to government (pp.  23 to 27).  The issues are: complete disclosure of prior year adjustments (recommendation 1); ministry financial statements (recommendation 2); accounting for First Nations settlement costs (recommendation 3); accounting for inherited Crown land (recommendation 4); classification of debt (recommendation 5); disclosure of contractual obligations (recommendations 6 and 7); and pension plan disclosures (recommendation 8).

Other report topics are: issues of interest without recommendations; management letters; governance survey results, a new feature of the report; and accounting for and auditing the SFS.   

Summary of Government Response

The Comptroller General responded on behalf of the government, indicating that the SFS audit opinion with reservations is a concern.  She reported that government continues to believe that modified equity is the appropriate basis for consolidation of the Transportation Investment Corporation.  Next, she explained the government’s position on provision for deep-well credits and on oil and natural gas producers’royalty credits. 
The Comptroller General’s presentation included the government’s response to the OAG report’s eight recommendations, and also discussed management letters.  She explained the rationale for continuing with existing accounting standards practice and policy, with the exception of recommendations 6 and 7, which government has already acted upon. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the following topics: the issue of rate-regulated accounting; the report’s recommendations relating to ministry financial statements; the existing threshold for disclosure of contractual obligations; and the impact of including universities in the government reporting entity (GRE). 

Specific questions were also asked about how to access accounting-standards documents; the three audit reservations; accounting for inherited Crown land (recommendation 4) and classification of debt (recommendation 5); the exclusion of BC Ferries from the GRE; outsourcing of government operations and the impact on the audit; accounting for payments for the 2010 Olympic security costs; management letters; and governance survey results for school boards. 

Rate-regulated accounting

Members sought clarification on the impact of changes in accounting standards for BC utilities.  Their understanding was that BC Hydro will no longer be able to smooth out expenses over a number of years and so $705 million would be added to the current deficit.  They asked if they were also correct in thinking that the recent legislative amendments would enable government to stray away from GAAP in terms of how it reports this expense. 

In response, the Auditor General indicated that the changes in standards pose a major problem not just in British Columbia but in other jurisdictions.  The Comptroller General added that deferral accounting permits utilities to have stability in pricing for consumers and so the proposed changes in accounting standards would have very significant policy implications. 

Ministry financial statements

Some Members supported the report’s second recommendation that there should be fully audited financial statements for each government ministry, and consolidated statements showing the financial results of the sectors they are responsible for.  The Comptroller General explained that ministries are not separate legal entities from core government, and that they are cost, not revenue, centres.  To construct a complete set of financial statements would require a shift in how government actually operates – for example, debt would have to be attributed to each ministry rather than centralized in the Ministry of Finance. 

Contractual obligations

Recommendation 7 of the report proposes that government use a lower cutoff for collecting and assessing disclosure of financial obligations in the Summary Financial Statements.  The Comptroller General informed the Committee that the current review process involves a significant amount of work, and that her Office hopes to complete it this fiscal year.  (The review process is described earlier in this report, see page 6).   

Inclusion of universities in GRE

Committee members, who also served on the Select Standing Committee on Finance and Government Services, reported to their PAC colleagues that the inclusion of universities in the government reporting entity had emerged as “a significant irritant” during the prebudget consultations around the province.  This legislative requirement was preventing post-secondary institutions from using their “good entrepreneurial instincts” to access private capital. 

The Auditor General explained that exclusion of universities would be contrary to Canadian Generally Accepted Accounting Principles, which BC is legally required to utilize in the construction of Summary Financial Statements.  The Comptroller General added that the inclusion of universities in the GRE reflects a level of government control that universities in other provinces are not subject to. 

OAG Financial Statement Audit Coverage Plan for Fiscal Years 2011/2012 through 2013/2014

Section 10(6) of the Auditor General Act stipulates that the Auditor General must provide to a committee of the Legislative Assembly each year a plan for the appointment of auditors for government organizations and trust funds for the following three fiscal years.  Section 10(9) requires this committee to approve the plan, including any amendments the committee makes before giving its approval. 

Section 10(7)(d) requires committee approval for the Auditor General to continue as the appointed auditor for a term exceeding five consecutive fiscal years.  Section 14 requires the Auditor General to obtain the committee’s prior consent to accept or continue an appointment as auditor for an organization outside the government reporting entity. 

In the terms of reference adopted by the Legislative Assembly on March 24, 2010, the Public Acccounts Committee (PAC) was identified as the committee to review and approve the financial statement audit coverage plan, to sanction appointments beyond five years and to endorse audits outside the government reporting entity.  The PAC review of the plan took place on November 16, 2010, with staff from the Office of the Auditor General (OAG) in attendance.     

Summary of Proposed Plan

At the start of his presentation, the Executive Director, Financial Audit explained that the summary financial statements audit is the largest in the province and combines the work of the OAG and private sector auditors.  The three-year rolling coverage plan sets out auditor appointments in the government reporting entity.  The witness then asked the PAC to:

1. approve the proposed plan, as shown in Appendix A (pages 17-25 of plan);
2. consent to the Auditor General continuing as the appointed auditor for 15 government organizations, where the engagement term exceeds five consecutive fiscal years ( pages 10-13 of plan); and
3. consent to the Auditor General being appointed auditor for three organizations outside the government reporting entity: WorkSafe BC, Provincial Employees Community Services Fund and Science and Community Environmental Knowledge Fund (page 15 of plan). 

The Executive Director explained that the plan proposes three levels of audit involvement by the Auditor General for the 147 entities that form the government reporting entity and prepare annual summary financial statements.  The first level of involvement is limited: no field work; the OAG directs and reviews other auditor files as required (2011/12: 101 organizations).  The next level is oversight: OAG reviews other auditors’ plans and files; attends audit committee meetings (2011/12: 20 organizations).  The third level is direct involvement: OAG conducts audit with own staff or with staff contracted from private firms (2011/12: 26 organizations). 

The Executive Director also summarized the changes from the prior year plan presented to the PAC on November 5, 2009.  The changes in the current year plan include: an increase from oversight to OAG direct involvement for School District No.  35 (Langley), beginning in 2010/11.  For the health sector, there is an increase from limited involvement to oversight for the Nisga’a Valley Health Authority, and planned direct OAG coverage of the Vancouver Coastal Health Authority has been moved ahead by one year.  For the BC Assessment Authority and the Industry Training Authority, the OAG plans to rotate these audits into the private sector.  For BC Rail and BC Transit, the plan is to increase coverage from oversight to direct audit coverage. 

The witness reported that the proposed changes will have a negligible impact on the OAG budget for 2011/12 because changes to audit coverage levels are small and incremental over time.  However, the future conversion to different financial reporting frameworks will increase the quantum of work (and cost) for both the OAG and private sector audit firms.  The increased complexity of government operations – for example, complex financial arrangements like P3s –also increases the amount of time auditors require to fully assess risks.

Committee Inquiry

Questions were asked about the Consolidated Revenue Fund organizations listed on page 25 of the original version of the plan.  In the proposed plan, under rationale for exceeding five years, questions focused on the two non-active companies (British Columbia Enterprise Corporation, BCIF Management Ltd) (page 12); the plan to rotate the audit of Community Living British Columbia to a private sector auditor in 2011/12 (page 12) and the plan to rotate the audit of the Industry Training Authority to a private sector auditor in 2012/13 (page 13).

Some committee members reiterated their concerns about endorsing the request for extending auditor appointment beyond five years, proposed in recommendation 2 of the plan.  They were not persuaded that there was a need for this continuing trend, even if a rotation of senior staff occurs on audit engagement, nor by the rationale for exceeding five years in the case of SFU.  They also questioned whether it was necessary for the OAG to continue to be the appointed auditor for WorkSafeBC, proposed in recommendation 3 of the plan. 

Regarding the detailed plan in Appendix A, specific questions were asked about the level of audit involvement with colleges (page 17), Vancouver Board of Education (page 18), British Columbia Railway Company and Forestry Innovation Investment Ltd.  (page 24); and the absence of audits for hospital societies (pages 22-23) and trust funds (page 23).  Clarification was sought on the criteria used to define relevant risks and hence level of audit involvement (pages 6-7), the confidential reports produced by OCG internal audit and advisory services, and the differential between audit fees charged by OAG and private firms.

Committee Decision

The Public Accounts Committee endorsed the three recommendations, listed above and on page 3 of the plan, as required by sections 10 and 14 of the Auditor General Act.

OAG Report 4, 2010/11 Aspects of Financial Management

The Public Accounts Committee considered the OAG compendium report on aspects of financial management over the course of three meetings (October 20, November 16 and 17, 2010).  This report brings together four separate projects, three of which relate to effective management of working capital.  Report 4a covers: Management of Working Capital by Colleges and School Districts; 4b: Infrastructure Grants; 4c: Year-end Government Transfer Expenditures; and 4d: Managing Fraud Risks in Government.

Report 4a: Management of Working Capital by Colleges and School Districts

The Public Accounts Committee (PAC) met on October 20, 2010 to review the compendium’s first report on the topic of management of working capital by colleges and school districts.  The PAC heard presentations from the Office of the Auditor General and the Ministry of Finance. 

Summary of OAG Report

When explaining the origins of the audit, the Auditor General pointed out that each year government provides funds to educational institutions for construction and major equipment, as well as normal operating expenses.  The published financial reports clearly show that an excess of working capital has developed over time, and this now needs to be addressed.

The report explains that management of working capital requires balancing the need for liquid assets to operate with the cost of holding excess liquidity.  Cash in excess of operating requirements should be invested or used to reduce or avoid additional debt. 

The audit team found that working capital is not always being effectively managed in colleges and school districts.  Government does not provide enough direction nor adequately monitor the costs associated with excessive liquidity across the system.  The majority of colleges and school districts are holding more cash and short-term investments than they need.  Government provides funds to colleges and school districts in excess of their current cash flow requirements. 

The report recommends that government should:

1. Review accountability frameworks and the mechanisms for delivering funds
2. Pursue opportunities to access and reduce excess liquidity in colleges/school districts
3. Improve investment management
4. Consider opportunities to allow colleges and school districts to share purchasing power and investment expertise

Summary of Government Response

Ministry of Finance officials presented the government’s response to the report.  The A/Executive Director, Fiscal Planning and Estimates began the presentation by reporting that government is in overall agreement with the report findings to strive to improve and strengthen current cash management practices. 

Next, the witness indicated that government has initiated reviews and projects related to the report findings, including reviews by the Office of the Comptroller General of cash management in the education sector and by the provincial treasury of cash management in the health sector. The Ministry of Finance had posted its Good Practice Checklist for Investment Governance.

Turning to strategies recently implemented, beginning July 2010, the Ministry of Education has altered its timing of cash disbursements to better align with the requirements of school districts.  Also, effective April 2010, annual facility grants are being disbursed to school districts only as cash is required; and the ministry is considering school district applications on how to use their capital reserves.  Finally, there is a current review of just-in-time cash management funding.    

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on cash management practices.  Members also asked specific questions about capital funds and the partnership project with other western provinces for procurement of banking services (page 4 of the report).

Cash management practices

One committee member who believes in decentralized financial management was discouraged by the report’s finding on page 5 that school districts had cash and short-term investments equal to almost 19 percent ($1 billion) of their annual expenditures ($5.4 billion) as at March 31, 2009.  He asked if it would be a sensible budgeting strategy to cut school district grants until the surplus cash is used up to, say 10 percent of revenue.  In response, the Auditor General explained that cutting the operating budget is not a solution since most of the stranded cash cannot be spent in the current year but in a subsequent year. 

Another Member who was a trustee voiced a concern about school districts losing a source of revenue for investment, if the money was clawed back or not forwarded by the Ministry.  The Auditor General explained that if investments can generate more income through centralization, that option should be considered, adding that the business of school districts is to deliver educational services, not to be quasi-investment managers. 

In response to a follow-up question, the Auditor General provided a breakdown of the $1 billion surplus: districts that had sold school land or buildings that were allowed to retain the funds until the Ministry gave permission to reinvest the funds in infrastructure; districts given funds for a specific purpose but had not yet spent the money; and expenditures on an operating statement but no cash was actually spent.

Report 4b: Infrastructure Grants

The Public Accounts Committee (PAC) met on November 16, 2010 to review the compendium’s second report on the topic of infrastructure grants.  The PAC heard presentations from the Office of the Auditor General and representatives of the Ministry of Community, Sport and Cultural Development and the Ministry of Transportation and Infrastructure. 

Summary of OAG Report

The report points out that since 2001 the Ministry of Community Development and the Ministry of Transportation and Infrastructure have allocated more than $900 million in federal and provincial funding to municipalities, regional districts and non-government organizations to support community infrastructure throughout British Columbia. 

The purpose of the audit was to examine how the two ministries are managing their grant and transfer-under-agreement programs to meet the Province’s goals and objectives.  The audit team selected six programs approved from April 2005 to March 2009 that collectively funded 574 projects across the province amounting to approximately $446 million.    

Two were Canada/British Columbia cost-shared local government infrastructure grant programs:  Canada/BC Municipal Rural Infrastructure Fund and Building Canada Fund – Communities Component.  Four were provincially funded local government infrastructure grant programs: the $80 million BC Community Water Improvement Program, the $71 million Towns for Tomorrow program, the $40 million LocalMotion program and the $20 million Spirit Squares program.  The six programs were selected because they were the latest versions of long-term infrastructure funding programs and a key part of federal/provincial stimulus, and infrastructure deficit strategies, and also expected to be good examples of mature, fully developed programs.

The audit team found that the grant and transfer-under-agreement programs were providing useful infrastructure, with limited risks to the Province.  These programs were well promoted to intended audience, and good screening and evaluation processes were in place.

The audit team, however, found that the programs need to better define program success during development rather than wait until the end of the program.  Several examples were also found of incomplete or insufficient documentation.  Better reconciliation of funding sources was needed in construction/post-construction phases.  The monitoring of provincial programs was not as vigorous as shared federal-provincial programs, and was not sufficient.  Working capital management needed to be improved. 

To address these findings, the report contains five recommendations: specific, measurable outcome-oriented goals be set for each program; ministries employ principles of proper records management; procedures be established to enable the Province to reconcile sources of federal and provincial funding for each project; an overall plan for monitoring projects be established for provincial programs; government not advance government transfers until funds are needed.

Summary of Government Response

The ADM, Local Government Department, Ministry of Community, Sport and Cultural Development and the Executive Director, Infrastructure Development Branch, Ministry of Transportation and Infrastructure presented the government’s response to the report.  The ADM began by reporting that the two ministries agree with the principles underlying the report’s recommendations, and the report will assist with ongoing program improvements.

Next, the ADM outlined the steps taken to implement the five recommendations.  He reported that the two ministries will continue to improve the use of measurable program outcomes, and to build on OAG audit findings regarding records management.  Both ministries are committed to improvements to monitoring of funding sources and to program monitoring and audit.  They will continue to evaluate costs and benefits of advancing capital on a case-by-case basis. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on quantifiable program goals, funding decisions, funding guidelines, and monitoring procedures.  Members also asked specific questions about the total costs of some provincial programs and individual projects for selected years; the total cost, overhead rate and review process for infrastructure grant programs; and the ministry strategy for risk management.

Quantifiable program goals

One line of questioning focused on the challenge of designing quantifiable goals against which to measure the success of a grant program.  Members questioned the example of effective goals for the LocalMotion program, cited on page 39 of the report, pointing out that the specific target proposed to reduce greenhouse gas emissions may not be attainable by local governments, whereas a more general objective, such as lowering emissions, may be achieved.  In response to a follow-up question, the PAC learned that ministry staff usually has the technical expertise to develop the criteria, but sometimes external stakeholders are consulted. 

Funding decisions

Some members were concerned about the audit team’s finding, cited on page 41 of the report, that funding was awarded to seven projects that were not recommended for funding by the Ministry of Community and Rural Development, and financed by a committee of cabinet members reallocating funding from future years of the provincial programs.  In response, the ADM noted that all these projects met the eligibility criteria and were put forward for the cabinet committee’s consideration – two were water-improvement projects in 2005 and five wereLocalMotion projects in 2008.  The Auditor General added that there is nothing wrong with a cabinet committee making a decision about the disbursement of funds within an overall envelope, but the audit found no documentation to support the approval of these projects. 

On a related topic, the PAC Chair had questions about the inadequate records for LocalMotion 2007 funding awards.  He cited page 41 of the report that refers to the audit team receiving 11 pages of handwritten notes on local government’s project ideas to support the distribution of $20 million.  The ADM acknowledged the deficiencies of documentation in 2007 and reported that this has been remedied in subsequent years.  He reiterated that government is committed to acting on the OAG report’s recommendations and is improving its documentation processes.   

The government witnesses were also asked questions concerning the proportion of successful applications for infrastructure grants, and if municipalities can find out why their applications for infrastructure funding were rejected.  The ADM responded that about 10 percent of applications receive funding.  Projects are ranked against the eligibility criteria, but there is always greater demand than there are funds.  He also reported that the Ministry provides feedback to a local government on how it might improve its next application. 

Funding guidelines

One committee member inquired about ministry compliance with funding guidelines in line with the OAG report’s third recommendation to reconcile federal and provincial funding sources for each project.  She was informed that the ministry has a pretty good procedure in place to assist local government to identify all funding sources, but it has to draw a line somewhere in terms of following the money.  The Auditor General, though, queried why it would be so difficult for a local government organization to be accountable.

Another member raised the concerns of mayors of northern communities that the timing of the grants for infrastructure projects does not always align with construction windows.  The ADM reported that steps have been taken in the Towns for Tomorrow program to guarantee a 60-day turnaround in terms of the close date.

Monitoring and reviewing procedures

The Auditor General was asked if local government should be more involved in monitoring the progress of the projects.  He replied that if local government receives money, there is an accountability link back to the grantor in regard to how the grant money is deployed.  In response to a follow-up question, he explained that in cases where the original grant is paid out and stays in a local government’s bank account, the lump sum advance payment becomes an issue of working capital management.

The PAC Chair asked the ministry officials for a response to the audit findings on page 42 of the report that expenditure claims for the provincial grants program were not always adequately reviewed, and that a significant portion of the agreements lacked a recovery clause enabling the Province to recover funds if recipients did not comply with the funding conditions.  The Director of Local Government Infrastructure and Finance explained that annual financial compliance audits are done on ministry programs.  If an ineligible claim is noted, payments can be withheld to that applicant in future claims, or a recovery requested of the local government.

Report 4c: Year-end Government Transfer Expenditures

The Public Accounts Committee (PAC) met on November 16, 2010 to review the compendium’s third report on the topic of year-end government transfer expenditures.  The PAC heard presentations from the Office of the Auditor General and the Office of the Comptroller General. 

Summary of OAG Report

The audit purpose was to explore whether government demonstrates effective management and control over public money by focusing on March 2009 government transfers.  The audit team asked three questions: are year-end government transfers being made using specific elements of sound financial management practices? Are these transfers complying with normal financial content provisions? Are they including appropriate accountability provisions?

The overall conclusion of the audit team is that for most of the audited March 2009 samples, normal financial practices were followed.  Cash flow management was not a main focus at the ministry level.  In one case, accountability was reduced to allow early payment.  There were many samples where senior financial staff was unclear on how to record government transfers.
The report contains three recommendations relating to cash flow management, accountability and recording government transfers.  The recommendations are:

1. that government not advance significant transfers until the funds are needed, unless a cost analysis shows a net benefit;
2. that transfer agreements include requirements and provisions to recover or redirect funds not spent for the intended purposes; and
3. that transfers are recorded consistently to provide better information for financial management and decision-making.

Summary of Government Response

The Executive Director, Financial Reporting and Advisory Services, Office of the Comptroller General presented the government’s response to the report.  He began the presentation by pointing out that the report acknowledges the strength of government’s controls and the variety of mechanisms already in place to ensure value is received for taxpayer-funded grant programs.  The report’s recommendations would support continued improvement.

The witness then explained that the current policy covers a broad range of transfers and recipients; is based on traditional accounting definitions (grants/entitlements/agreements); provides guidance on accounting and classification, general payment standards, documentation and payment management, repayments; and requires judgment of delegated authorities.  After outlining the government position on each recommendation of the report, the witness informed committee members that accounting guidance on government transfers is still in transition. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the extent of accountability over transfers under agreement.  A question was also asked about the specific year-end payment decisions in March 2009 (page 27 of the report).

Transfers under agreement

Some committee members inquired if accountability over transfers under agreement is an issue only in the March scramble or occurs at other payment periods during the fiscal year.  The Executive Director responded that the general practice is to monitor the volume and amount of all transactions.  While there is obviously more risk of error or failure within the internal control system, particularly with a large amount of government transfers in a short period of time, the Ministry of Finance works with Treasury Board staff and ministries to try to mitigate the risk up front.  The Ministry has not identified any systemic patterns for different times of the year.

Report 4d: Managing Fraud Risks in GovernmenT

The Public Accounts Committee (PAC) met on November 17, 2010 to review the compendium’s fourth report on the topic of managing fraud risks in government.  The PAC heard presentations from the Office of the Auditor General (OAG) and the Office of the Comptroller General (OCG). 

Summary of OAG Report

The report points out that British Columbians trust their government to safeguard public resources from all potential threats of theft and misuse, including fraud.  Fraud can take many forms: employee-related (falsifying expense claims, creating fictitious suppliers, theft of assets); outside parties (billing for services not provided, falsifying eligibility claims, theft of services); and corruption-related fraud involving collusion between employees and outside parties (conflict of interest, kickbacks).

The audit team set out to do an assessment of fraud risk management guidance used by the BC public sector but found no such guidance existed.  Therefore the focus of the audit shifted to drafting five good-practice principles and using them to assess government’s performance.

The report concluded that although government has a number of embedded controls designed to detect and prevent fraud, it needs to improve its oversight and management of fraud risks by taking a more strategic, comprehensive approach in accordance with good practices.  It recommends that government adopt the five fraud risk management principles and use them as a basis for developing and implementing a comprehensive fraud risk management strategy that would include establishing a fraud hotline and whistleblower protection.

Summary of Government Response

The A/Comptroller General presented the government response to the report, since prior to his appointment, he was the head of the OCG internal audit and advisory services.  After reviewing existing controls, he reported that government was moving forward by undertaking an analysis of the report’s recommended principles and also developing a fraud risk management strategy.  The elements of this strategy are: fraud policy, training, fraud risk assessment, preventive and detective controls, monitoring, audit and compliance, investigation, and reporting.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the fraud risk management strategy, purchase card fraud and reporting practices.  Members also asked specific questions about fraud awareness training programs for ministry staff; reports of internal audit and advisory services; disciplinary action and criminal referral for fraudulent activities.

Fraud risk management strategy

The A/Comptroller General was asked for an update on the status of the government-wide fraud hotline and whistleblower protection, two tools recommended by the OAG audit team to develop and promote an anti-fraud culture.  He reported that the cost of setting up the hotline is an issue and so part of the project plan is to consider how practical it would be.  The issue of whistleblower protection needs to be revisited and to include consideration of what formal avenues would be available for contractors or the public.

Members also asked how much revenue could be saved if the government implemented a really strong fraud strategy.  The A/Comptroller General advised that this calculation will become available once a complete picture of fraud emerges.  The Auditor General added that it is almost an impossible process to work out what the savings would be, unless a megafraud is identified. 

Purchase card fraud

Some committee members had concerns about the OAG report’s finding (page 52) that one of the most common cases of fraud in the BC public sector is purchase card misuse by employees, and asked if there are universal standards for credit card usage.  In response, the A/Comptroller General explained that there are central standards for the use of a purchase card.  Individual card holders sign agreements stating they will not use them for personal purposes.  Transactions are reviewed by the corporate compliance and controls monitoring branch within his office that provides feedback to ministries and the individuals around problem transactions.  Later in the committee inquiry, the witness clarified that the ministry, not his office, cancels or disposes of purchase cards; however, monthly limits above $100,000 require OCG approval.

In response to a follow-up question, the A/Comptroller General reported that some ministries have compliance and enforcement groups to deal with other high fraud-risk areas such as forest practices, the medical services plan, income assistance, taxes, and student loans.  He added that he did not believe it would be appropriate for every ministry to have a specific fraud group but coordination needs to occur to find out how much fraud in general is occurring in government.  Later, the witness explained the role of the investigative unit within the Comptroller’s office. 

Government reporting practices

One committee member expressed concern about the gap in reporting practice referenced on page 58 of the report.  The text indicates that the Auditor General has not received a report from the OCG for the 2008/09 fiscal year or recent prior years on any significant irregular government expenditure and payments, as required by the section 35 of the Financial Administration Act.  In response, the A/Comptroller General stated he would provide the OAG with that information. 

IT AUDITS

OAG REPORT 15, 2008/09 WIRELESS NETWORKING SECURITY IN VICTORIA GOVERNMENT OFFICES: GAPS IN THE DEFENSIVE LINE; OAG REPORT 10, 2009/10 WIRELESS NETWORKING SECURITY IN GOVERNMENT: PHASE 2

The Public Accounts Committee (PAC) met on May 26, 2010 to review two IT audit reports on wireless networking security.  The PAC heard presentations from the Office of the Auditor General (OAG) and representatives of the Ministry of Citizens’ Services. 

Summary of OAG Reports

Wireless computing uses radio waves to transmit data between wireless-enabled devices, such as laptops and wireless access points.  These wireless devices have the same risks attached as wireless networks, plus more: attacks on data transmissions, control of wireless-enabled devices and unauthorized access points can be installed inside networks without anyone knowing it.  Data traffic can be intercepted, read, altered or copied if the data are not adequately encrypted; and userids and passwords could be compromised.   

The first wireless security audit involved external scans of government buildings in the Victoria area.  The report published in February 2009 identified some significant gaps that provided government with an opportunity to remedy.  Follow-up information provided by government led to the second wireless security audit which had broader and more in-depth coverage.  The audit team scanned signals inside government office buildings at different locations (5 ministries, 153 offices, over 3,500 signals) and expanded its review into the buildings of two post-secondary institutions (SFU and BCIT).

In the second-phase audit, the audit team found that government has closed some significant gaps noted in the first report.  Comprehensive policies, standards and procedures have been developed and adopted; and Greater Victoria wireless access devices were adequately secured.  However, many questionable signals were noted outside the Greater Victoria area.  The report concludes that government needs to do a better job in monitoring wireless network activities, ensuring policy compliance and no rogue access points. 

The second report recommends that government establish procedures to monitor policy compliance; update job descriptions of key IT personnel; improve monitoring and detection activities to a real-time basis; and keep an up-to-date inventory of wireless access devices.  Looking ahead, the OAG plans to embed this type of review on a rotational basis across the government reporting entity into its annual financial audits, and examine the security of other wireless technologies, such as Blackberrys.

Summary of Government Response

The Director of IT Security Operations, Shared Services BC – Technology Solutions presented the Ministry of Citizens’ Services response to the two audit reports.  He reported that the Office of the Chief Information Officer and Shared Services BC had responded quickly to the vulnerabilities identified in the first audit and closed some of the gaps before the OAG report was published in February 2009.  As a result, significant improvements have been made in the security of government’s wireless circuits, with three recommendations of the first report fully implemented, and one partially implemented.

Turning to the March 2010 audit report, the witness reviewed the status of the three recommendations relating to effective management of wireless security.  He informed the PAC that two other recommendations in the audit area of monitoring wireless security were being addressed.  In terms of next steps, Shared Services BC will complete the Network Access Control proof of concept and seek funding approval to implement a Network-Access-Control solution across government.  The Office of the Chief Information Officer (CIO) will continue to work with Shared Services BC and ministry CIOs to identify and review areas of risk, and with the Public Service Agency to educate staff on information security policies and best practices.   

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the ongoing challenge of maintaining data security.  Members also asked specific questions about enforcement of wireless security in contracted agencies; the timing of the Blackberrys audit; the selection of cellular providers; the security of government wireless infrastructure; the Network Access Control proof of concept; and the registration process for new wireless access devices.

Data Security

The PAC Chair asked if there was an ongoing mechanism for monitoring encryption, since this is an effective way to achieve data security.  In response, the Shared Services BC official reported that his office works very closely with the Office of the CIO on standards and currently use the highest encryption available for wireless access points.  As for monitoring, one tool being implemented for the Payment Card Industry Data Security Standard compliance project will ensure that no device on the network can be reconfigured without government’s knowledge.

Some Members asked the witnesses whether the two audits revealed any glaring security gaps.  The Auditor General explained that it was not possible, with the original level of monitoring, to detect the footprints of someone who came in and extracted information.  He did not expect that the usual follow-up process would reveal anything untoward now that management had responded so well to the audit findings.  The Shared Services BC official added that a layered approach to data security is taken since it is impossible to develop a bulletproof system.

OAG REPORT 7, 2009/10 THE PARIS SYSTEM FOR COMMUNITY CARE SERVICES: ACCESS AND SECURITY

The Public Accounts Committee (PAC) met on May 26, 2010 to review the IT audit report on the PARIS system for community care services.  The PAC heard presentations from the Office of the Auditor General (OAG) and representatives of the Vancouver Coastal Health Authority (VCHA). 

Summary of OAG Report

The report explains that the Primary Access Regional Information System (PARIS) is designed for community-based health care and used by the VCHA in over 75 community locations in Vancouver and Richmond.  This system links healthcare information throughout the region for more than 620,000 clients, and it is used by about 4,000 health care providers across six community programs (primary health care for adults; primary care for infant, child and youth, mental health; addiction services; preventative health; residential care).  Clients’ healthcare information from these programs is processed and stored in the PARIS.

The audit focused on the management of access to health information in PARIS and the adequacy of controls in place to protect sensitive client information.  The audit team concluded that almost all system users had excessive access, that the controls in place were insufficient to detect and prevent unauthorized access or attacks, and that there was a risk that inappropriate disclosure or theft of information could take place without VCHA knowledge.

The report contains ten key findings.  The executive summary lists ten key recommendations condensed from 127 recommendations of a separate detailed report to VCHA management.  All the recommendations were accepted by VCHA management.

Summary of VCHA Response

The Chief Financial Officer and Vice President, Systems Development and Performance presented the response on behalf of the Vancouver Coastal Health Authority.  He reported that 100 percent of the high-risk security recommendations have been implemented (65 out of 65); 81 percent of all recommendations completed (103 out of 127), at a cost of $1.1 million to date; and that the VCHA was moving quickly to close out the balance. 

The witness also informed the PAC that Vancouver Coastal Health is now a top quartile performer in terms of external network security and best-practice ISO standards.  The authority has piloted and implemented an enhanced access model across 85 percent of groups that provide team-based care, which is a cornerstone of sustainable and quality healthcare provision.  The VCHA was now in a position to say that its patient records are safe. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the implications of the audit findings.  Members also asked specific questions about another PARIS user, Community Living BC, and the Meditech system used by the Fraser Health Authority.

Audit findings

The PAC Chair expressed interest in the lessons other agencies could learn from the audit that uncovered a series of deficiencies in access and security of PARIS, which was initiated in 2001.  In response, the Chief Financial Officer’s advice was to test the security of electronic record systems and to deal with any vulnerabilities quickly and responsibly; and another VCHA official stressed the importance of investing in IT infrastructure.

Some committee members voiced concern about the level that information may be compromised in, say, a privatized long-term care facility with a high turnover of contractors.  They were informed by the VCHA officials that contracted agency employees do not have access to PARIS.  Further, there was no evidence that any VCHA employee who had access to the database had corrupted or retrieved unauthorized data, and an audit process is now in place to deal with inappropriate access.  The Auditor General added that PARIS now looks like a functional, properly appropriate system to hold sensitive patient information. 

OAG REPORT 1, 2010/11 IT CONTINUITY PLANNING IN GOVERNMENT

The Public Accounts Committee (PAC) met on February 9, 2011 to review the audit report on IT continuity planning in government.  The PAC heard presentations from the Office of the Auditor General (OAG), Emergency Management BC and Shared Services BC – Technology Solutions.

Summary of OAG Report

Information technology (IT) continuity planning addresses IT system disruptions – caused by a minor localized disruption (e.g., a power outage or system failure) or a major disruption (e.g., a fire, an extended power failure or a natural disaster).  It is an important part of business continuity planning due to government’s increased reliance on IT to deliver services, involving shared access to complex systems and program applications.  Recent international disasters like the earthquakes in Haiti and Chile have demonstrated the need to have plans in place so that services can continue.  To support IT continuity planning, government has established the business continuity management program and identified “mission-critical” business functions.

This IT audit looked at the plans for recovery and resumption of systems and services required for 11 ‘mission-critical’ business functions: eight government-wide support functions provided by Shared Services BC; and three program-specific systems, the Vancouver ambulance call centre, children and family services, and government payroll and human resource function.  The audit also examined whether the business area had identified risks and prioritized the recovery of services, developed IT continuity plans, ensured plans are appropriate and complete, and tested and updated the plans regularly.

The overall conclusion of the audit team was that processes are in place for the recovery of systems from a minor localized disaster but not from a major disaster.  Two particular weaknesses were identified: the lack of an overall strategy for prioritizing the recovery of shared systems and program applications, and the lack of clarity by each ministry about whether the necessary arrangements have been made for recovery of operating environments within timelines required by ministry programs.

The OAG issued detailed management reports of its findings and recommendations to senior management in each ministry audited.  The public report contains nine key recommendations:

1. Prepare impact analyses and risk assessments annually
2. Prioritize recovery of mission-critical applications
3. Establish realistic and achievable recovery timelines
4. Assess risk associated with alternate arrangements being in the same geographical area as the primary operations
5. Finalize business continuity plans for all mission-critical functions
6. Prepare disaster recovery plans
7. Include provisions for preparation and testing business and IT continuity plans in contracts with external service providers
8. Test continuity plans and restoration procedures regularly
9. Update continuity plans for all mission-critical functions annually

Summary of Government Response

The Director of IT Security Operations, Shared Services BC presented the government response on behalf of his branch and Emergency Management BC.  The witness reported that the recommendations of the OAG report are consistent with the business continuity core policy and initiatives currently underway.

The witness then identified the three entities that share provincial business continuity management responsibilities.  Emergency Management BC coordinates provincial BCP initiatives, sets policy and provides assistance to ministry business continuity management programs (BCMP).  Shared Services BC – Technology Solutions manages government’s shared IT infrastructure and related service-provider contracts.  Ministries manage compliance with BCMP core policy requirements and fund enhanced ministry IT recovery strategies.

Next, the witness reviewed the status of each of the nine key recommendations of the OAG report.  In regard to assessing the risk, he reported that Shared Services BC has entered into an agreement with HP Advanced Solutions to provide two new data centres, one in Calgary that came on line in September 2010 and the other in Kamloops, scheduled to come on line in April 2011.  These centres are geographically diverse and state-of-the-art with regard to security and survivability.  In addition, a revised core policy will require regular testing of continuity plans.

Committee Inquiry

After hearing from the witnesses the committee inquiry focused on the data centres, emergency response management and the recovery of mission-critical applications.  Members also asked questions about emergency preparedness tools for small- and medium-sized businesses; the BC government’s computer crash on January 31, 2011; data storage capacity; and the government’s back-up plan for Vancouver Island, if cut off as a result of an earthquake.

Data centres

Some committee members shared the concern of the audit team that the current data centres are located in Victoria and Vancouver, within British Columbia’s most active earthquake zone.  They asked the Auditor General if the plan to relocate these centres to Calgary and Kamloops addresses the concerns raised in the report, as both locations are outside of the geographic earthquake area,.  He responded that his Office has not done any work on the alternative site, but the expectation is that it will be an appropriate response to the risk.

In a follow-up question, clarification was sought on whether the infrastructure contracts of Shared Services BC now included the formal business continuity plan policy requirement.  The Director of IT Security Operations informed the PAC that far more is being done today with regard to disaster recovery than was being done previously when services were provided internally.  Also, when the joint solutions procurement was entered into, Shared Services BC made it clear to all of the vendors that any new data centre must be located off a fault line, and that the new service provider contract includes obligations for the regular testing of continuity plans and restoration procedures.

Later in the inquiry, in response to another follow-up question, the witness noted that the infrastructure within the current data centres, two in Victoria and one in Vancouver, is physically being moved to Kamloops and Calgary, and that there will be no critical data housed on the Island or the Lower Mainland once those data centres are fully populated three years from now.  He added that many Crown Corporations are taking advantage of the facility in Kamloops.

Members were concerned about the physical security of the new data centres, if under attack.  They were informed that the centres meet the Province’s best-practice security standards.  The identity of the sites is protected.  The data centres are close to telecommunications carrier facilities; they are not on a flight path or a floodplain; and they are close to highways and rail lines but not so close as to be involved in an accident or other disaster.  Should one of the data centres go down, the surviving data centre will have the information it would require to function while the other centre was brought back on line.

Later in the inquiry, the PAC learned that the new data centres are owned by a company called Q9, which builds and runs them, while the server infrastructure is being managed under contract with HP Advanced Solutions.  The data is still owned by government, and the contract stipulates that HP staff is prohibited from accessing the data unless there is a specific requirement for them to do that.

Emergency response management

After describing his recent experience with a power outage, one Member inquired about the coordination of an emergency when the municipal fire department, the regional emergency dispatch service (E-Comm 911) and the BC Ambulance Service are all involved.  In response, the official from Emergency Management BC reported that support to local governments has been well-refined and an international best practice now for a number of years.  The provincial role is to support local governments and first-response communities as and when required, knowing that they most likely will have their own ability to work on their own or through mutual aid or support through their other local governments.  The support comes through six provincial regional centres and also into a central facility.

Recovery of mission-critical applications

Members were interested to learn how close government is to prioritizing the recovery of mission-critical applications, particularly in the case of the Vancouver ambulance call centre.  The Director of IT Security noted that the work is ongoing.  In response to a follow-up question, he explained that prioritizing simply means system A will be recovered before system B and so there is no guarantee that any critical application would be back operating in three hours.

On a related topic, the PAC Chair asked how BC’s recovery times compare with real events that have occurred in the last ten years (e.g., Québec ice storm, San Francisco earthquake).  The Executive Director replied that British Columbia is a national leader in emergency management practices, and that the system in the province is tested routinely.

HEALTH, EDUCATION AND SOCIAL SERVICES AUDITS

OAG REPORT 9, 2009/10 ELECTRONIC HEALTH RECORD IMPLEMENTATION IN BRITISH COLUMBIA

The Public Accounts Committee (PAC) met on May 26, 2010 to review the audit report on electronic health record implementation in British Columbia.  The PAC heard presentations from the Office of the Auditor General and the Ministry of Health Services. 

Summary of OAG Report

The report explains that an electronic health record (EHR) is a secure and private lifetime health record available to authorized health care providers and the individual.  An EHR system is being established across Canada, and BC’s initiative is the end result of multiple individual projects.  It is expected that EHRs will solve a number of challenges: accuracy, accessibility and legibility of data; and efficiency and effectiveness of care.

The report explains that the OAG chose to audit EHR implementation because it is complex, high risk, involves significant public funds (over $220 million in capital) and has a national impact (concurrent auditing in six provinces and by OAG Canada).  The purpose of the BC audit was to assess whether the Ministry of Health Services has appropriate and effective mechanisms in place on EHR implementation – particularly about setting clear direction, coordinating multiple projects as well as managing each project individually, and reporting on progress and outcomes. 

In terms of the audit timeline, the audit team shared its initial findings with the Ministry that committed to address the four recommendations.  Evidence-gathering was extended to November 2009; as a result, many issues initially found have now been addressed.  The final report was issued February 17, 2010; OAG Canada issued a Canada-wide synopsis April 20, 2010.

The report’s key findings and overall conclusion are that the planning by the Ministry was initially poor, but has improved.  Progress has been made and a tactical plan now developed.  The Ministry, though, needs progress measures enhanced and outcome measures completed to improve reporting about the EHR. 

Looking ahead, the report recommends that the Ministry provide six-month updates to the OAG to review and report to the Legislature.  The first follow up is scheduled to be reported in October 2010.

Summary of Government Response

The ADM, Health Sector IM/IT presented the response of the Ministry of Health Services.  She pointed out that EHRs are a global trend, with more than 40 countries implementing or developing EHR strategies.  Canada is part of a small group of countries considered challengers in terms of EHR progress and momentum, with Denmark considered the world leader.  As of November 2009, Infoway ranked BC third out of 13 Canadian jurisdictions in terms of EHR.

The ADM reported that the Ministry responded quickly in addressing interim recommendations, as reflected in the final report.  Several actions are complete or underway to address the report’s one recommendation.  These include a revised tactical plan for e-health completion, enhanced quarterly executive reporting for key stakeholders, and a completed benefits evaluation plan.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the anticipated cost savings of EHR implementation and the procurement process.  Members also asked specific questions about the BC program to convert physicians to EHRs, the national transferability of e-health records, and contract timelines.

Cost savings

Some committee members inquired whether the audits of EHR implementation and the PARIS system for community care services have provided any opportunities for information convergence and hence cost savings.  The ADM reported that all the health authorities have initiated an annual process, called the system health check, as a result of the PARIS audit.

Others voiced concerns about the rising costs of implementation.  In response, the ADM clarified that the project is not over budget.  For this challenging new area with the health care sector, the total cost of capital expenditure is estimated to be $262 million, with the Province recovering $110 million from the federal funder, Canada Health Infoway.

Finally, the Chair inquired when Canadian jurisdictions will establish baselines to start measuring the benefits of implementing EHRs, which are estimated to save $6 billion annually.  The ADM reported that securing agreement on a baseline measure remains a challenge.

Procurement process

Some members sought clarification on the implementation process – in particular, how the work is contracted out by government.  The ADM explained that three large, complex procurements for initiatives currently underway were completed in 2007.  In response to a follow-up question, she reported that the Office of the Comptroller General’s audit of the already completed procurement process would be finished shortly. 

OAG REPORT 7, 2008/09 HOME AND COMMUNITY CARE SERVICES: MEETING NEEDS AND PREPARING FOR THE FUTURE

The Public Accounts Committee (PAC) met on June 9, 2010 to review the Auditor General’s audit report on home and community care services.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Health Services.

Summary of OAG Report

At the time of the audit, the Ministry of Health Services allocated approximately $2 billion to the five regional health authorities to deliver home and community care services to over 100,000 clients.  The purpose of the audit was to assess the effectiveness of the Ministry’s stewardship role in planning for these services to meet the needs of BC residents now and in the future.  The audit team looked at whether the Ministry had set a clear direction, had the necessary management information systems and planning framework in place, and provided adequate accountability information to the public.   The overall conclusion was that the Ministry was not adequately fulfilling its stewardship role and that initiatives were in progress but not completed. 

The report contains four recommendations for the Ministry of Health Services:

1. Set timelines and complete the work on the new strategic direction
2. Set timelines for information systems replacement
3. Finalize planning framework and improve planning tools
4. Improve performance measures, and publicly report results

Summary of Government Response

The ADM, Health Authorities Division presented the response on behalf of the Ministry of Health Services.  She reported that the Ministry has done considerable work in the last couple of years to move forward on all of the recommendations.  Concerning strategic direction, the Ministry has engaged with the health authorities and other key stakeholders in a collaborative process to develop a shared strategic vision and an integrated planning process to support innovation and community integration of care and support services. 

The PAC also learned that three of the five health authorities have developed updated management information systems that allow them to comply with Home and Community Care (HCC) Minimum Reporting Requirements, and the other two authorities are in the planning phase for replacement of their existing systems.  Also, HCC is fully engaged in the Ministry’s new health system planning, and HCC performance indicators are being finalized and incorporated into the current planning cycle. 

The ADM concluded by reporting that the Ministry is working towards full implementation of all the recommendations over the next three years.  Major activities are: finalizing strategic direction and action plan for the redesigned HCC continuum to address projected service needs; completing the infrastructure to support proper monitoring and planning; and ensuring all health authorities comply with Ministry performance and reporting requirements.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the new management information systems being developed by the health authorities and performance measures.  Members also asked specific questions about the stakeholders involved in the Ministry’s new health system planning, the extent of public input with the residential care system, the recent cutbacks to home care, and the number of new residential care beds.

Management information systems

Some committee members inquired about the use of HCC minimum reporting requirements and asked if it is less expensive to ask the health authorities to develop management information systems, as opposed to the Ministry having one system across all the health authorities and dictating what they use.  The ADM explained that the Ministry does not require the same level of detail that the authorities need for care management of clients, and that the minimum reporting requirements outline the essential data elements.  The implementation dates in the Ministry’s recommendation status summary as at January 31, 2010 were also clarified.  The Executive Director of the Ministry’s HCC Branch added that the authorities are learning from each other and sharing information on the systems they use.  She also reported that the use of Canadian definitions enables the Ministry to compare BC outcomes and performance across Canada and internationally.  British Columbia is the leader in the home health area.

The PAC Chair asked the witnesses what assurance the Committee and the public can have that the kind of oversight that is now in place for this $2 billion program would routinely be in place for other programs of this financial magnitude.  In response, the ADM reported that steps have been taken within the Ministry to do much more integrated planning and development as well as system monitoring.  The Auditor General reported that OAG staff performs a sector span to inform what future work should be done on the health care system within a risk-based process.

Performance measures

Another theme of the committee inquiry focused on the performance measures used in British Columbia, as compared with Ontario’s definitions of appropriate services.  In response, the Executive Director explained that three performance frameworks are being implemented for residential care, assisted living and home health.  These frameworks will include such measures as number of direct-care hours per resident, incidence of falls and client satisfaction.   

In response to a question about the adequacy of performance information available to the public, the Auditor General explained that a decision about any further audit work would not be made until the follow-up process is completed.  Members also asked the Ministry officials if the documents identified in the recommendations would be made public.  They learned that the overall strategy is to provide much more information about services to enable seniors and their caregivers to determine what services are appropriate and to promote self-managed care. 

OAG REPORT 10, 2008/09 A MAJOR RENOVATION: TRADES TRAINING IN BRITISH COLUMBIA

The Public Accounts Committee (PAC) met on November 17, 2010 to review the Auditor General’s audit report on trades training.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Industry Training Authority.

Summary of OAG Report

In 2004, the Industry Training Authority (ITA), a Crown Corporation responsible for trades training oversight, was created to design and implement solutions to key issues within the trades training system: trades training flexibility, industry involvement in trades training and improved outcomes.

The purpose of the audit was to examine how well the provincial government and the ITA were leading and managing BC’s trades training system.  The overall conclusion was that while a new model had been established, the changes were introduced without sufficient guidance, direction or consultation with partners and stakeholders to put the model into practice.  Recent efforts by the ITA to improve communication and coordination showed promise, but improvements were still needed in a number of areas. 

Specific audit findings were that the Industry Training Organization (ITO) model was launched without adequate risk assessment or implementation supports, and plans were based on limited consultations with industry and insufficient consideration of options.  A well defined and comprehensive quality assurance program was not in place nor inspection programs to monitor program delivery.  While funding allocations for trades training were consistent with priorities, the information supporting funding decisions was weak, and the effort to coordinate funding insufficient.  Performance reporting could also be enhanced. 

The report contains 11 recommendations.  Results of follow-up self-assessments show three recommendations fully implemented, and eight substantially and one partially implemented.

Summary of Government Response

The ITA CEO presented the response on behalf of both the Ministry of Regional Economic and Skills Development and the Industry Training Authority.  He described the audit, undertaken from June 2005 to June 2008, as “a constructive review” with helpful recommendations that aligned with many actions that were already underway.  He reported that the Ministry and the ITA have made significant progress and remain committed to fully addressing the 11 recommendations.

Next, the CEO updated committee members on the actions taken to consult with key stakeholders on audit findings and with industry to clarify roles and responsibilities.  As well, he reported on the steps to ensure the ITO funding model is appropriate and sustainable, to develop a comprehensive quality assurance program, and to strengthen compliance monitoring mechanisms.  Other actions have been taken to produce high quality information for assessing demand, to assess the capacity of the trades training system, to ensure funding decisions are informed and funding allocations coordinated with the ITA.  Finally, improvements have been made in internal controls and performance measure disclosure, and ITA records management. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on apprenticeship completion rates and stakeholder consultation.  Members also asked specific questions on the impact of ministry reorganization and funding of ITOs; employer satisfaction survey; private trainer designation and monitoring; labour market forecast scenario; and the Red Seal Program.

Apprenticeship completion rates

Some committee members asked how the apprenticeship completion rates in British Columbia compare with other jurisdictions across Canada.  The CEO replied that the current completion rate for BC is 43 percent for the most recent six-year cohort of apprentices, which is 10 percent above the national average, but that it is difficult to make national comparisons because jurisdictions have different ways of measuring completion rates.  He added that whatever definition is used, the BC rates can and must be better.  To that end, the ITA has commissioned the Canadian Apprenticeship Forum to conduct a study looking at best practices across the country, which will inform the ITA action plan.  The CEO also reported that British Columbia has the highest growth in apprenticeship registrations in Canada. 

In terms of participation rates of immigrants, the CEO reported that due to the federal points system, there is a relative lack of immigrants with skilled-trades backgrounds.  Currently BC is piloting and leading the way nationally with a series of assessment tools available for the high-volume trades – such as the cook training program and heavy-duty equipment training.

Members also asked whether the ITA was comfortable with the 20 percent of completions obtained through course challenges rather than via the apprenticeship stream.  The CEO reported that in 2009 there were 1,407 challengers with 50 percent succeeding in obtaining a certificate.  In response to a follow-up question, the CEO added that the ITA is monitoring those numbers and intends to maintain a very healthy balance between those two routes – in particular, to use the apprenticeship stream to increase the participation of under-represented groups such as women and Aboriginals.  To enhance participation, the ITA has developed an Aboriginal advisory council.

In response to a question from the PAC Chair, the CEO noted that ITA’s plan in the next fiscal year is to conduct research that will look at not only counsellors but also the supports that are in place more generally for apprentices and employers to increase completion rates. 

Stakeholder consultation

Some committee members asked the CEO whether ITA plans to continue consultation with stakeholders.  They learned that ITA plans to enhance its communication capacity, particularly with organized labour that is interested in building a stronger training system in the future.  Also, there are now seven labour spots on two of the present ITOs (resource industry, transportation), following a 2009 ITA decision to rescind a policy dictating composition of ITOs.

Other committee members expressed concern about the complexity of the consultation process due to the layers of stakeholders in the trades training system.  The CEO commented that the key challenge facing the ITA is how it can develop a mechanism for collaboration and communication.  Both the CEO and Auditor General concluded that lessons have been learned from the creation of the ITA that could be applied to the creation of future agencies. 

OAG REPORT 12, 2008/09 PLANNING FOR SCHOOL SEISMIC SAFETY

The Public Accounts Committee (PAC) met on June 9, 2010 to review the Auditor General’s report on school seismic safety.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Education.

Summary of OAG Report

The report points out that historically, there has been significant public interest in earthquake preparedness because southwestern British Columbia is in an earthquake environment.  Following a review of the OAG’s 1997 report on earthquake risk, the PAC produced its own report in 1999 on earthquake preparedness in BC that contained 20 recommendations. 

In 2004, boards of education carried out assessments of structural risk in schools located in high seismic areas and identified nearly 750 schools in 39 school districts as being at medium or high risk.  In 2005, the Ministry of Education announced the Seismic Mitigation Program to be carried out over 15 years at an estimated cost of $1.5 billion, for remediation of school buildings.  In addition, the Ministry currently provides $5 million annually for seismic mitigation to non-structural parts of buildings (eg, ceilings, windows, furniture, office equipment, light fittings).

The purpose of the OAG review was to determine how well the Ministry has developed processes for managing the program.  It included visiting four school districts but did not look at new school buildings or independent schools.  Key findings on the ministry’s policy framework were that assessment tools and methodology were in place, but the funds committed were insufficient for the program’s goals.  Other findings related to program priorities, monitoring and evaluating performance for structural and non-structural mitigation, and the accountability relationship. 

The report contains six recommendations for the Ministry of Education:

1. Confirm future priorities and funding for structural and non-structural remediation
2. Consolidate current risk management activities into a comprehensive risk management strategy
3. Evaluate options for, then implement a program delivery model
4. Integrate seismic projects into a long-term capital planning framework
5. Collect information to assess the status and progress of non-structural mitigation
6. Develop and implement an information plan to inform the public, and provide future opportunities for public input

Summary of Government Response

The ADM of Resource Management presented the response on behalf of the Ministry of Education.  He reported that the Ministry has worked with the Association of Professsional Engineers and Geoscientists of BC (APEGBC) and UBC to complete seismic risk assessment of all schools in seismic zones and this assessment will be used to prioritize future upgrading projects and focus remediation on high-risk blocks within individual schools. 

Regarding the program delivery model, the Ministry has committed $1.5 billion to seismically upgrade BC schools.  To date, 120 seismic upgrade projects are complete, under construction, or proceeding to construction.  Funding is being provided to school boards this year to manage the seismic program.  The Ministry is allocating additional resources to the Vancouver school district to plan and manage its overall seismic capital program for mitigation of clay brick masonry structures, and working with this district to review a seismic project office based on the Seattle model.  The ADM also reported that action has been taken to ensure future seismic projects are integrated into long-term capital planning.  As well, web-based materials are under development regarding school seismic risk and program status updates for public access.    

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the program’s budget and the information plan.  Members also had questions on the current status of recommendations, the Ministry’s capital asset management framework, the Seattle model for funding structural upgrades, the budget for non-structural upgrading, and the responses of local school boards.

Program budget

Some committee members expressed concern about the finding on page 27 of the OAG report indicating that the cost of the program far exceeded the original estimate.  In response, the ADM explained that since 2004 there has been unprecedented cost inflation in the construction sector that has had a big impact on schools.  Following a request for clarification of actual cost, the ADM informed the PAC that the budget to finish off all 750 schools in the 39 school districts at risk could probably be in the $3 billion to $4.5 billion range over the next few years. 

In response to follow-up questions, the ADM explained that to determine whether a capital upgrade would be more costly than replacing a school, the Ministry uses a rule of thumb of 70 percent.  In the case of heritage schools in the Vancouver school district, the decision would typically be made by the Minister of Education as long as the budget for renovation stays below the cost of replacing the building.  If the upgrading project is higher than replacement value, a broader discussion within government would be needed to make that call.

Information plan

Another line of questioning focused on the status of the report’s final recommendation for the Ministry to work in partnerships with school boards to develop and implement an information plan to facilitate public input on program objectives and priorities.  The ADM reported that the Ministry is working with each school district, the primary agency for delivering the project.  There is a significant amount of public consultation that goes on with parents and the community in reviewing the options, particularly in Vancouver.  In response to a follow-up question about the public’s lack of opportunity to talk to “the banker,” the ADM explained that the tension in the system between boards and the Ministry exists to minimize renovation costs.

OAG REPORT 16, 2008/09 HOMELESSNESS: CLEAR FOCUS NEEDED

The Public Accounts Committee (PAC) met on June 9, 2010 to consider the Auditor General’s audit report on homelessness.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Housing and Social Development.

Summary of OAG Report

Homelessness is a growing societal concern with a high cost to government.  The provincial role encompasses policies, programs and funding for housing, support programs and health services.  The purpose of the audit was to assess whether provincial leadership was adequate to reduce homelessness, through asking four main questions: was a clear direction established? Was there adequate information available to make effective decisions? Were appropriate strategies in place to reduce and prevent homelessness? Was there adequate reporting on results? 

The audit team found that a clear direction was not established, and that the lack of adequate information hampers decision-making.  As well, despite government’s many initiatives, homelessness appears to be growing, and there is inadequate reporting on results. 

The report contains seven recommendations for the Ministry of Housing and Social Development:

1. Develop a comprehensive plan identifying expectations, targets and timelines
2. Designate a lead agency and assign accountability for results
3. Provide guidance on homeless counts and encourage their use
4. Identify key gaps in service
5. Ensure that strategies are consistent with targets, once the targets are defined
6. Strengthen the approach to prevention
7. Improve reporting on results

Summary of Government’s Response

The ADM of Policy and Research presented the response on behalf of the Ministry of Housing and Social Development.  She reported that British Columbia is widely recognized across Canada as a leader in addressing homelessness.  The Province’s approach goes beyond providing shelter to providing integrated support services, including mental health and addictions treatment, access to income assistance, life skills training and job counselling.

Based on the actions and results since 2004, the ADM concluded that it is clear that government has a provincial housing strategy: Housing Matters BC.  The Ministry of Housing and Social Development has been designated as the lead agency and is coordinating an unprecedented approach to integrating services to reduce chronic homelessness through the homelessness intervention project (HIP).  This project has exceeded its targets for housing the homeless and has been able to provide more accurate homelessness information at the local level. 

Finally, the Province has a wide range of base programs and strategies that are working, and it has also led the way in innovative integrated service delivery to improve client flow (to and from the 100-bed Burnaby Centre) and support partnerships.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the counts of homeless people and the effectiveness of ministry strategies.  Members also asked specific questions about the situation in the Downtown Eastside and shelters in suburban areas.

Homeless counts

Some committee members were concerned that there is no clear target date or plan for ending homelessness in the province, or actual numbers of how many homeless people there are.  In response, the ADM reported on the provincial strategy and information-sharing agreements being developed, and the progress made in reducing street homelessness.  This prompted one Member to ask the ADM to explain why there is an increase in the ranks of homeless people, including those with jobs.  The ADM reported that the Ministry does not have a firm number, although it does have data from the most recent homelessness counts done in all the municipalities.  The aggregate of those counts in the various communities would suggest that about 6,000 people are homeless, with about 1,760 within the city of Vancouver. 

In response to a follow-up question, the ADM advised the Committee that the Ministry is considering requiring a specific identifier number for each person, to reduce duplication.  As well, through the HIP, the Ministry has done data cleansing to make sure the same person is not being counted as ‘housed’ repeatedly.  The CEO of BC Housing added that his organization assesses applicants during the intake process to be assured they can live independently.  If not, they are referred to a case manager in the health system.

Ministry strategies

In response to questions on the strategies employed by the Ministry to reduce the number of homeless people, the ADM informed the PAC that there are a number of reasons why people are on the street.  The Ministry has taken an integrated approach with wraparound services, and is going out and using outreach services to actively contact people rather than waiting for people to come to them.  The process is bringing people into a shelter initially, then actively working to move them into supportive housing and to provide the services they need.  It is an active engagement with local governments and community agencies at every step.

GOVERNANCE AUDITS

OAG REPORT 13, 2008/09 PUBLIC SECTOR GOVERNANCE: A GUIDE TO THE PRINCIPLES OF GOOD PRACTICE; HOW ARE WE DOING? THE PUBLIC REPORTING OF PERFORMANCE MEASURES IN BRITISH COLUMBIA

The Public Accounts Committee (PAC) met on June 10, 2010 to consider two audit reports on different aspects of public sector governance.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Finance.

Summary of OAG Reports

In the introductory comments section, the Auditor General points out that the document comprises two separate reports, each of which reflects a different aspect of public sector governance within the Province of British Columbia.  The first report, Public Sector Governance, describes a “House of Governance” best-practices governance model for public sector entities.  The second report, How are We Doing?, reflects the results of the OAG survey of performance measures being reported by BC public sector entities in the summer of 2008.

The good-practices study was conducted because there was no universal set of governance principles for the public sector.  The OAG wanted to write good-practice guidelines that were appropriate to the environment in British Columbia and to signal the types of areas the Office would be looking at in subsequent governance reviews. 

In the second report, the purpose of the survey was to gain insight into performance measure reporting across the BC public sector.  The intent was to compile baseline understanding and to identify areas for further investigation.  The survey results indicated an encouraging picture of the maturity of performance reporting. 

This report contains three general recommendations: keep the number of performance measures in annual reports to a minimum; increase the number of efficiency measures within annual reports; and develop more measures looking at accuracy and timeliness.  The second report also identifies specific areas for improvement in the health and education sectors. 

Summary of Government Response

The Comptroller General presented the response on behalf of the Ministry of Finance.  She described the first report as a practice guide on governance that complements existing government documents, including a paper looking at the government’s management and accountability framework.  The Comptroller General also pointed out that this report does not include an assessment of government’s practices or any recommendations.  It concludes that government has established structures and decision-making processes, core values, reporting requirements and other principles and elements of good governance.

The Comptroller General then discussed the second report, which evaluated 1,404 performance measures reported in 71 public sector organizations.  She noted that in developing the survey, the audit team had referred to the the BC reporting principles, adopted by the PAC in 2003.  The Comptroller General informed the Committee that government has made excellent progress in implementing the recommendations, either fully, substantially or partially. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on performance measure reporting in other jurisdictions and in the BC health sector.  One committee member also asked a specific question about the role of the opposition in public sector governance.

Comparative ranking

Some committee members inquired how BC performance measure reporting ranks, compared to other jurisdictions.  In response, the Auditor General reported that the audit found a large number of entities are benchmarking their performance against other organizations within or outside the province.  In terms of ranking, British Columbia is actually in a good position.

Health sector measures

Other members suggested having a few more measures in the health sector, since it represents some 40 percent of all program spending.  They then inquired about the balanced scorecard approach that the Ministry of Health is moving towards to keep track of its measures.  The Comptroller General responded by saying this approach is something she has championed for a very long time, and that the balanced scorecard is absolutely consistent with the principles that are recommended in the OAG report.  This approach forces staff to look at their organizations from multiple disciplines and to consider different measures, and this process produces service delivery or outcome measures, efficiency and effectiveness measures and financial measures. 

In response to another question, the Comptroller General reported that the Ministry is working on a strategy with the health authorities to improve how information is collected and shared, which will take some time to complete.  The Auditor General described the challenge as one of marshalling information required to track performance and utilizing it in the best possible way.

Finally, the Comptroller General was asked if there was a process of alignment wherein the Ministry could set broard priorities and then the health authorities would develop performance measures that fit within those priorities.  She explained that the Ministry of Health sets very broad, higher-level objectives and priorities for specific areas of health care, and engages in a consultative process with the health authorities to identify measures that are reasonable.

OAG REPORT 4, 2009/10 BRITISH COLUMBIA CROWN CORPORATIONS EXECUTIVE ARRANGEMENTS - A WORK IN PROGRESS

The Public Accounts Committee (PAC) met on June 10, 2010 to consider the audit report on Crown corporations (CCs) executive compensation.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Public Sector Employers’ Council Secretariat.

Summary of OAG Report

The purpose of the audit was to assess the management of executive compensation by government and a sample of Crown corporations (CCs), as well as to develop a better-practice guide to executive compensation and performance-related pay management. 

The audit team found a system that is in transition.  Government is exercising more control over executive compensation by capping what CEOs can earn.  In 2007, the Cabinet set total CEO compensation caps for each Crown corporation, and CEOs earning more than the caps at that time were red-circled, which means they stayed on their current salary.  Since 2007, six new CEOs have been hired (5 under and 1 over the cap).  In 2009, 54 percent of CEOs were compensated more than the caps set for the positions.  As most CEOs have indefinite-term employment contracts, it will take several years to fully implement total compensation caps. 

The overall conclusion of the audit was that clear direction has been established to manage executive compensation, but more consistent planning and management is required.  Executive compensation disclosure is consistent with good practice, but some improvements are needed. 

The report contains eight recommendations for government:

1. Put better mechanisms in place to resolve executive compensation issues with CCs
2. Improve compensation proposal submission and approval requirements and maintain a formal record of all decisions made
3. Put better monitoring systems in place to ensure compensation plans are followed
4. Conduct periodic reviews to ensure CCs performance-related pay programs achieve intended results
5. Develop performance pay measures that reflect an CC’s long- and short-term objectives
6. Demonstrate and document the links between performance payments and results
7. Provide better government oversight of compensation reporting
8. Crown board chairs sign executive compensation disclosure statements and assure that
   payments are within plans

Summary of Government Response

The Vice-President of the Public Sector Employers’ Council Secretariat (PSECS) presented the response on behalf of the government, and noted that the OAG report was fair and balanced.  Further, it provides good advice on how to improve executive compensation arrangements beyond the Crown corporation group to other public sector employers, such as the health authorities, universities and colleges.  After reviewing the key findings and recommendations, the witness reported that the Minister of Regional Economic and Skills Development, who chairs the Council, has accepted all the recommendations.

The Vice-President then outlined the implementation plan.  This includes: updating the web-based executive compensation guidelines; better documentation/communication of process; posting performance pay guidelines on the web; and updating the membership of the Council, which will meet more often.  He also reported that the PSECS will consult with public sector employers, support a reinvigorated Crown Corporation Employers Associationl (CCEA), ensure disclosures meet standard, complete an employee database and communicate regularly.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on fixed-term contracts, performance-based payments and CEO compensation caps.  Members also asked specific questions about executive compensation frameworks in the public and private sectors; incentive pay; succession planning; and the effectiveness of employers’ councils, the PSEC and CCEA. 

Fixed-term contracts

The PAC Chair inquired how the move to fixed-term contracts, discussed in the report, would affect the issue of severance pay.  In response, both the PSECS Vice-President and the Auditor General agreed that the use of fixed-term contracts may involve additional compensation and that the best approach would be to deal with sub-optimum performance.

In response to a question about built-in sunset clauses, the PSECS Vic-President reported that there are restrictions on future employment that preclude an employee from working for a competitor for a period of time after they leave (e.g., Powerex) but it is not common practice.

Performance-based payments

One PAC member who had also served on the Crown Corporations Committee was particularly interested in the report’s sixth recommendation linking performance-based pay and results.  She asked if other Crowns besides BC Hydro and the Lottery Corporation use public opinion surveys as measures of performance and lower the targets (e.g., from 60% to 50% awareness) to obtain the desired results.  The PSECS Vice-President explained that this recommendation would go a considerable way to address this type of situation because in a case where the performance standard is low and the performance pay is awarded anyway there is now a public spotlight.

The Auditor General reported that the audit team had in fact found that in two Crowns there were inadequate linkages between the performance plans and the payment results.  He added that his office would provide the information to government to end the the practice of “painting the target around the arrow.” Also, the OAG plans additional work to ensure that incentives are provided for good performance, and the targets are objective and include long and short-term.

The Auditor General was also asked if succession planning (below the Cabinet-appointed CEO) should be considered a performance measure within a Crown corporation.  He explained that it was not a topic considered in this audit report.  If work on succession planning were to be done in the future, he would expect boards to have either a formal or informal succession plan as part of their key risk assessment, which is an important part of governance.

Compensation caps

Some committee members inquired why the dollar figures for CEO compensation caps set by the Cabinet in 2007 were not included in the audit report.  The PSECS Vice-President explained that OAG staff was asked not to include that information because it would then become a floor for negotiations between a board and a CEO when they are negotiating compensation, rather than a ceiling.  In response to a follow-up question, the witness reported on the exceptional case of the BC Lottery Corporation, where the cap was exceeded as the corporation required some special skills for the CEO at the time.  This compensation is disclosed publicly every year. 

OAG REPORT 6, 2009/10 MAKING THE RIGHT DECISIONS: INFORMATION USE BY THE BOARDS OF PUBLIC SECTOR ORGANIZATIONS

The Public Accounts Committee (PAC) met on June 10, 2010 to consider the survey report on information use by public sector boards.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Finance.

Summary of OAG Report

In his introductory comments, the Auditor General explained that the subject matter of the report is a first for his office.  It was based on the premise that since Crown agencies and other entities account for half of all public-sector spending, it is critically important that board members have access to accurate, reliable, timely and complete information to make informed decisions.  The OAG conducted a survey to create a set of good practice guidelines around information use by boards and to gauge current use of good practices in the BC public sector.    

All board members in the government reporting entity were asked to provide a self-assessment of the information they received and how they used it.  A set of guidelines was created and used to structure the survey questions.  The survey was distributed in June 2009 to over 1,000 board members in 141 government public sector organizations, and 70 percent responded.

The project produced five products:

• Formal report on survey findings
• Document containing good-practice guidelines around use of information by boards
• Document containing board self-reported practices
• Overall survey results
• Summary report comparing each board to sector average

In terms of the overall findings of the survey report, it appears public sector boards are receiving and using the information required.  Boards in the health sector and Crown corporations report that they are using information well.  Boards in the K-12 education sector have room for improvement, and report an inappropriate mix of education and experience.  The report does not contain any recommendations. 

Summary of Government Response

The Comptroller General presented the response on behalf of the Ministry of Finance.  She began her presentation by thanking the OAG for its development of the guidelines, noting that these complement the existing resources already available in regard to boards and board governance.  Although there are no recommendations for government in the report, the self-assessment contains some interesting observations – particularly, the differences between boards in different sectors, and the responses of first-year board members.

The Comptroller General concluded by stating that government remains committed to ensuring the various Crown agencies’ boards receive the information they need to make appropriate and timely decisions.  She added that British Columbia one of the few provinces in Canada with a publicly documented competency-based process for appointing board members.   

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the follow-up process.  Members also asked specific questions about the availability of demographic data on board members’ length of experience and the provision of cooling-off periods for former directors.

Follow-up process

Since the survey is the first undertaken on this topic, the Auditor General was asked what the follow-up process would be.  In response, the Auditor General suggested that the best way to track changes is to conduct a longitudinal study in a year or two.  The question of whether the OAG or government conducts the survey in, say, the middle of next year remains to be decided.  

On this topic, the PAC Chair requested that the next survey distinguish between appointed and elected boards.  From his perspective, this omission in the first survey report minimizes the democratic process and democratic values.

In regard to a follow-up plan for the K-12 education sector, the Comptroller General reported that the Ministry of Education has committed to making a greater effort.  She has also recommended mandatory orientation and training for all new school board members.  In response to a follow-up question, committee members learned that the Ministry is considering using the BC School Trustees’ Association to provide the training. 

To minimize the influence of senior administrators in decision-making, the Comptroller General proposed that new board members receive generic training on how to evaluate financial information.  In addition, a school board could appoint one or two independent experts with a financial background to its audit and finance committee.

ENVIRONMENT AUDITS

OAG REPORT 8, 2009/10 OIL AND GAS SITE CONTAMINATION RISKS: IMPROVED OVERSIGHT NEEDED

The Public Accounts Committee (PAC) met on June 10, 2010 to consider the audit report on oil and gas site contamination risks.  The Committee heard presentations from the Office of the Auditor General (OAG) and the BC Oil and Gas Commission.

Summary of OAG Report

In introductory comments, the Auditor General explains that the oil and gas industry is a key component of the provincial economy and a significant provincial revenue source, contributing $2.3 billion in 2008/09.  The environmental and financial risks accompanying the rapid growth of the industry over the past decade are managed by government via the Oil and Gas Commission (OGC).  As the primary regulator, the OGC seeks to ensure that industry complies with the standards to protect the environment and meets its financial obligations to restore well sites. 

The audit purpose was to assess whether the OGC is providing adequate oversight of upstream oil and gas site contamination risks, by asking three questions: are agency responsibilities clear? Is the OGC fully aware of the environmental and financial risks, and has it established appropriate oversight procedures? Does the OGC provide adequate accountability reporting?

The overall conclusion of the audit was that OGC oversight of the environmental and financial risks needs improvement.  The effectivenesss of a memorandum of understanding between the Commission and the Ministry of Environment had not been assessed.  Information related to environmental and financial risks and associated oversight procedures could be better, and the accountability information reported to legislators and the public also needed to be improved. 

Summary of Government Response

The Commissioner and CEO of the OCG presented the response on behalf of the BC government.  He reported that the annual Site Restoration Report, published since 2008, addresses the audit findings and recommendations on transparent reporting, performance measures, professional assurance, well site contamination risk information and inactive, legacy and orphan sites. 

Next, the Director of Waste Management and Reclamation outlined ongoing and future work to specifically address the OAG audit recommendations, including an industry-funded Orphan Site Reclamation Fund to enable the OGC to designate an oil and gas site as ‘orphan’ in order to pay for the restoration work that is deemed necessary.  There is also a separate government fund for remediation of orphan wells.  The OGC will also have enhanced administrative tools when the new Oil and Gas Activities Act comes into force.  Other actions involve implementing a liability- rating system to manage security deposits; issuing well suspension requirements; implementing a new remediation site classification tool, developed in consultation with the Ministry of Environment; and increased engineering capacity for site restoration. 

The Committee was also informed that currently there are 3,814 sites that were restored prior to the establishment of modern Contaminated Sites Regulation standards.  Of those, close to 90 percent are linked to companies that have active operations in BC and good asset/liability ratio.  Liability parties for 93 wells have not yet been identified.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on overseeing financial risks via the liability-rating system, operator security deposit and the Orphan Sites Reclamation Fund.  Members also asked specific questions about the historical Comission statistics (Figure 2, Cumulative number of wells plugged and restored); OGC definition of transparency; composition of the BC upstream petroleum environmental task group; and the skill sets of audit team.

Liability-rating system

Some committee members asked the OGC witnesses how the liability-rating system fits with the Ministry of Environment site risk classification guidelines referred to on page 30 of the report.  They learned that the liability-rating system is a financial test that measures the ratio of oil- and gas-producing assets relative to their reclamation estimate, and that the ministry protocol is related to the potential impacts from that site of say, hydrocarbon contamination.  In response to a follow-up question, the Director of Waste Management and Reclamation confirmed that the site classification protocol for the restoration of contaminated sites is now implemented.

In response to another question, the Commissioner expressed confidence that the actions taken by the OGC would deal with the issue of future liability in an effective way that protects the public treasury.  He informed the PAC that there are a number of safety nets available which will be enhanced with the new regulatory regime, and it would require a breakdown of some or all of these safety nets for any liability to pass to the Crown at this point.

The Commissioner’s response prompted a request for clarification of the liability question.  The Commissioner reiterated that the OGC’s first obligation is to ensure that any contaminated site does not pass to the Crown as an obligation.  The tools at the Commission’s disposal to achieve this include: the operator security deposit and the industry-funded Orphan Sites Reclamation Fund to ensure there is sufficient availability of funds, and the final backstop, the retroactive powers of the Environmental Management Act that allows the Ministry of Environment to go back to any industry operators and tell them to clean up contamination that is different or new. 

Operator security deposit

The PAC Chair inquired if the security deposit of $7,500 set for an operator is sufficient to help manage the financial risk of an operation not meeting its site restoration responsibilities.  He was informed by the Commissioner that the OGC is developing a system to monitor the adequacy of each operator’s net assets and to request an additional security deposit if necessary.

Orphan fund

Some committee members asked about the adequacy of the Orphan Sites Reclamation Fund.  The Auditor General explained that because of the relatively high cost to remediate a particular site, the audit team was concerned that there may not be enough money available at a given time to remediate, and that not all orphan sites had been assessed regarding cost.  In his response, the Commissioner explained that the government, not the OGC, establishes the orphan-fund amount and can increase the levy to replenish the fund via an order-in-council.  As well, the Commission has the ability to take control of an operator’s producing asset, operate it and use the proceeds to fund any of the remaining remediation work that needs to be done.

OAG REPORT 5, 2008/09 REMOVING PRIVATE LAND FROM TREE FARM LICENCES 6, 19 & 25: PROTECTING THE PUBLIC INTEREST?

The Public Accounts Committee (PAC) met on December 7, 2010 to review the audit report on the removal of private land from three coastal tree farm licences.  The PAC heard presentations from the Office of the Auditor General (OAG) and the Ministry of Forests, Mines and Lands.

Summary of OAG Report

The report concerns a 2007 decision made by the-then Minister of Forests and Range to approve the removal of approximately 28,000 hectares of private land from three tree farm licences (TFLs) held by Western Forest Products on Vancouver Island.  In response to many requests, the Auditor General decided a review of the decision would be in the public interest. 

The purpose of the audit was to assess whether due regard for the public interest was exercised when approving the removal of private land from TFLs 6, 19 and 25, by asking three questions: was the decision adequately informed? Was there effective consultation and communication with stakeholders? Does the ministry effectively monitor its land removal decisions?

The report’s overall conclusion was that the private land removal was approved without sufficient regard for the public interest.  Specific findings were that the decision was not adequately informed, consultation and communication were insufficient, and the Ministry was not monitoring previous land use decisions effectively.

The report contains no recommendations because at the time it was released there was little private land left in TFLs.  The Ministry adopted lessons learned from the report’s findings and conclusions in a subsequent decision, the removal of 4,341 hectares of private land from TFL 23 in the Kootenays.  As well, the audit report led the OAG to produce a best-practice guide to public participation, reviewed by the PAC in December 2008.     

Summary of Government Response

The ADM, Forest Tenure and Timber Pricing Division presented the response on behalf of the Ministry of Forests, Mines and Lands.  He began the presentation by making the following comments on the audit process.  The Ministry initially embraced the audit as an opportunity to learn and evolve; OAG staff varied from identified audit process and so no ministry response is included in the report; and the OAG report contains no recommendations. 

The ADM also commented on the report’s conclusions that reflect a definition of public interest based on elements of the government’s strategic plan and the Ministry’s service plan.  He suggested that inclusion of other elements of both plans related to job creation and maintenance of a competitive forest industry may have resulted in a different definition which, in turn, may have led to a different conclusion than the report’s overall conclusion.

The ADM reiterated the Ministry’s concerns about a number of unsupported statements in the OAG report that were unrelated to the decision and led the reader of the report to question the integrity of the public servants and the statutory decision-maker.  As an example, he cited the sidebar, “Unusual Stock Trading Patterns,” on page 30 of the report that referred to some large trading of Western Forest Product (WFP) shares shortly before the announcement by the ministry and WFP of the land removal decision.  In the Ministry’s view, references to insider trading or to political donations, ownership of the company or potential conflict of interest that cannot be substantiated or are not relevant should not be included in an objective report.

The ADM concluded the presentation by stating that the OAG report did provide some useful insight into the need for a more inclusive process leading to decisions related to public interest.  In response, the Ministry has improved the processes for consultation, communication and documentation of similar decisions and will continue to assess the need for further improvements, with the understanding that there is not a lot of private land left for removal.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the reference to WFP trading patterns and the process leading to the land removal decision.  Members asked specific questions about the gross value of WFP land; the purchase price for Sandcut Beach and Jordan River lands; and the corporate linkage between WFP and Brookfield Asset Management Corp. 

WFP trading patterns

Some committee members asked for an update with regard to the unusual stock-trading patterns referenced in the sidebar on page 30 of the report.  The Auditor General explained that the issue was raised because unusual trading of WFP stock had occurred, and it featured in a number of letters sent to the OAG.  As the office was not equipped to examine the issue, the OAG referred it to the BC Securities Commission.  The Commission decided not to proceed with an investigation and informed the Ministry but not the OAG at the time the report was released.

Other members reiterated the Ministry’s concerns about the inclusion of unsupported statements regarding WFP trading patterns.  They suggested the Auditor General had an obligation to bring such a serious allegation to a conclusion once the appropriate agency had dealt with it.  After revisiting the sequence of events leading to the referral to the BCSC, the Auditor General stated that had the BCSC communicated its decision, the OAG report would have referenced that the matter had been examined by the BCSC and a decision was made not to proceed with further work.   

In a follow-up question, one Member asked if the Auditor General would be prepared to release the letters that led to the decision to refer the matter to the BCSC.  He was informed that the letters would not be provided because documentation received and evidence collected by the OAG is protected by legislation.  The Auditor General, though, offered to provide the PAC with a media scan on the unusual stock transactions so committee members may draw their own conclusions.  He was asked to include media coverage of the release of the report as well.  (This follow-up information was subsequently circulated to committee members.)

The Deputy Chair inquired if the unusually high volume of WFP stock traded that day was simply a block trade, followed by a very quick return to normal trading patterns.  The Auditor General replied that his understanding was that a number of individual companies were trading.  He had expected a quick reply from the BCSC about the transaction, but was told it would take months.

Land removal decision

Another theme of the committee inquiry focused on the costs to government incurred as a result of the land removal decision.  One Member was particularly interested in the final tally since the Ministry had provided no analysis of expected future costs to government.  In response, the Director, Resource Tenures Branch clarified that the $150-million figure is the value of the private lands that were Crown-granted over a century ago and so that is not a cost to government.  He acknowledged that there may some downsides, such as the forestry research sites, but the recreation sites are still there and there have been no watershed issues.  The Auditor General added that the potentially undesirable impacts of allowing the private land removal from the TFLs were identified in the Ministry’s business case (see pp.  37-39 of report).  In subsequent discussion, committee members asked questions about the impacts on allowable annual cut; wildlife habitat (ungulate winter range); and old-growth management areas. 

The PAC Chair asked the ADM to clarify the Ministry’s definition of public interest, because the references in its governing statute to job creation and the maintenance of a competitive forest industry were not reflected in the approval recommendation.  He cited the conclusions on pages 9 and 40 of the OAG report that the recommendation placed greater weight on assisting the licensee’s financial restructuring, with no ministry analysis of when or by how much such a restructuring could benefit British Columbians.  In response, the ADM explained that WFP, the largest forest company on the coast, was just coming out of creditor protection at that time. 

The Director, Resource Tenures Branch added that the briefing note provided to the Minister contained the incremental information he needed to make an informed decision, and took into account what he already knew about the state of the coastal forest industry and the situation facing WFP.  This response prompted the Auditor General to report that the audit team was unable to find any analysis of the financial health of this company.

In regard to the audit process, the PAC Chair inquired if the Auditor General has the authority to speak directly with the Minister in such circumstances.  He was informed that even though the Minister was not available for a face-to-face meeting, his office provided the audit team with all the information on the process that was followed.  Further, the Auditor General has the mandate to ask any member of government or any public servant for information related to his duties. 

In response to a follow-up question, the Auditor General expressed confidence in the Ministry’s professionalism and its enhanced decision-making process for private land removal.  At a later stage of the committee inquiry, the Auditor General reviewed the circumstances that resulted in the OAG receiving “no response from the Ministry.”

One committee member sought clarification on the timing of the initial decision to remove the private lands.  In response, the Director, Resource Tenures Branch informed the PAC that the the decision to proceed with the evaluation and the impact analysis of the private land withdrawal came about as a result of a request made by WFP in a letter, initially sent to the Minister in 2004 asking for creditor protection and ‘reinvigorated’ in April 2006.  The latter gave the branch its marching orders to undertake the process that resulted in the briefing note to the Minister leading to the land removal decision. 

OAG REPORT 5, 2010/11 AUDIT OF THE AGRICULTURAL LAND COMMISSION

The Public Accounts Committee (PAC) met on December 7, 2010 to consider the report on the audit of the Agricultural Land Commission.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Agricultural Land Commission.

Summary of OAG Report

In introductory comments, the Auditor General explained that the Agricultural Land Commission (ALC) is an arm’s-length tribunal responsible for administering the agricultural land reserve (ALR).  The ALC makes decisions on applications for non-farm uses of the land, subdivisions and adding or removing land from the reserve.  It also works with local governments on land use planning, as well as on compliance and enforcement activities.

The OAG conducted its first audit of the Commission’s performance in 1994 and found, upon re-examination in 2010, that the ALC is still experiencing significant challenges.  The purpose of the second audit was to determine if the Commission is: effectively preserving agricultural land and encouraging farming; adequately protecting the ALR through compliance and enforcement activities; and adequately evaluating and reporting on effectiveness.  The audit team found that the ALC is challenged to effectively preserve agricultural land and encourage farming.  The Commission’s compliance and enforcement activities are inadequate.  The ALC is not evaluating the results and impacts of its decisions, and it reports only on some aspects of its success. 

The report contains nine recommendations.  The first five focus on preserving agricultural land and encouraging farming.  Recommendation 6 addresses the compliance and enforcement program, and the last three deal with evaluating and reporting on effectiveness.  The report recommends that the Agricultural Land Commission:

1. Ensure that ALR boundaries are accurate and include land that is both capable of and suitable for agricultural use
2. Seek government’s support to make changes that will allow it to more effectively preserve agricultural land and encourage farming through the application process
3. Engage in proactive long-term planning with local governments to encourage farming
4. Work with Fraser Fort George Regional District to address concerns it has with the District’s processes
5. Work with the Oil and Gas Commission to develop an action plan to implement the recommendations of a 2009 audit
6. Ensure that it has a sufficiently robust compliance and enforcement program
7. Prioritize completion of new database and finalize conversion of original paper ALR maps into digitalized format
8. Evaluate collective impacts of its decisions on applications as well as its broader policy decisions
9. Report publicly on cumulative impacts of its decisions

Summary of Commission Response

The ALC Executive Director presented the Agricultural Land Commission’s response to the audit.   He began by reviewing the purpose of the Commission, as defined in its governing statute, and reporting on the size of the ALR (4.7 million hectares representing 5% of the land area of BC). 

Turning to the OAG report, the Executive Director reported that the recommendations capture the essence of the commission’s work and some of its challenges.  In the course of discussing the ALC’s response to recommendation 2, he referred to a recent report, prepared by the ALC Chair for the Minister of Agriculture, which, if implemented, could go a long way to addressing the application process.  The Commission is also starting to look at legislative options.

The Executive Director concluded the presentation by reporting that the ALC is in the process of working on a Treasury Board submission identifying the resources it needs to move forward.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the agricultural land reserve boundaries, and the ALC’s budget, independence and enforcement tools.  Members also asked specific questions about the digital conversion of paper ALC maps; the ALC delegation agreement with the BC Oil and Gas Commission; and the ALC role in treaty negotiations. 

ALR boundaries

One committee member asked the ALC representatives whether they had considered juxtaposing the current area of land within the ALR (5%) and the land area that might have been within the reserve, absent any development – such as the city of Richmond.  From his perspective, this comparison would be more meaningful than referring to the province’s geography and topography, because it would provide some context within which to judge how much agricultural land has been lost over the years.  The ALC Executive Director reported that such an analysis is doable, using soil capability information to define what could have been farmland, adding that it would be a good contextual piece to understand where that balance is.

On a related matter, another committee member pointed out that by removing land deemed unsuitable for agricultural production from the ALR, the Commission is, in effect, reducing the size of the existing land reserve.  In response, the ALC Chair indicated that defining the ALR through the application process is a major concern and probably working counterintuitively to the ALC mandate.  He plans to change this practice by moving away from individual applications towards planning on a much broader basis, by including local governments in the process. 

In response to a follow-up question, the ALC Chair indicated that it would be possible in some parts of the province to adopt hard-edge boundaries, but not in the north or Kootenays.  In another response, he also indicated that legislative amendments would be needed to protect ALR lands that have prime agricultural capability.

This discussion prompted one member, with considerable experience in municipal office, to propose that there could be a remarkable reduction in the flow of applications to the ALC and a resultant clearer definition of that hard edge if ALR boundaries were rationalized.  Another member suggested that one way to increase farmland is to consider expanding the concept of agriculture and utilizing the land more efficiently in certain areas for, say, greenhouse farming.

Later on in the inquiry, the ALC witnesses were asked if there should be recognition of regional differences within the policy framework governing the ALR.  The ALC Chair’s perspective was that the Commission needs a single overarching statute that recognizes the province’s distinct regions have to be treated differently.  In response to a follow-up question, the Chair reported that BC’s legislation is coming to the forefront, but pales by comparison with California’s.

ALC budget

Members asked if the report prepared by the ALC Chair recommends financial support to enable the Commission to fulfil its three-part mandate.  They were informed by the Chair that the Minister of Agriculture will decide when, or if, the report will be made public.  As far as dollars are concerned, the ALC is working very closely now with Treasury Board, putting together a business plan to make the organization as effective as possible.  In response to a follow-up question, the Chair reported that the funding issue is not a factor influencing land-use decisions. 

When asked if the OAG report’s recommendations have been prioritized in the case of a stand-pat or lower budget, the ALC Chair explained that until the funding decision is made, the current focus is to address the issues that the audit team has brought up, plus the other things the Commission needs to do, within the existing budget of $2.1 million.   

ALC independence

The ALC Chair was also asked how he deals with the public’s perception that the Commission is not as independent as its mandate suggests.  He replied that the Commission does guard its independence very seriously, and it is his job as Chair to let commissioners know that decisions are to be made at arm’s length.  Members of the Commission have to understand that they are appointed on behalf of the people of the province and decisions have to be made on that basis.

ALC enforcement tools

Some committee members asked questions about the Commission’s compliance program.  One inquired if the ALC had approached government about making legislative changes that would enable the ALC to implement the additional, cost-effective tools to enhance its compliance and enforcement activities.  Another member asked a series of questions relating to the challenges of dealing with violations, such as landfills.  In response, the ALC Chair reiterated that the Commission needs some tools to do the job properly and end the abuse of farmland, which is used as a parking lot for 18-wheelers plus a garbage-dumping ground in some cases.

OAG REPORT 3, 2010/11 CONSERVATION OF ECOLOGICAL INTEGRITY IN BC PARKS AND PROTECTED AREAS

The Public Accounts Committee (PAC) met on December 7, 2010 to consider the audit report on conserving ecological integrity in BC parks and protected areas.  The PAC heard presentations from the Office of the Auditor General (OAG) and the Ministry of the Environment.

Summary of OAG Report

In introductory comments, the Auditor General pointed out that the province has identified the ecological integrity of BC’s 1,000 parks and protected areas as a key focus.  These areas regulate the climate, purify the water, protect biodiversity and preserve some of the last remnants of wilderness in North America.  The audit purpose was to assess whether the Ministry of Environment has a vision, plans and operational policies for the conservation of ecological integrity, and if it is conserving and reporting on the state of ecological integrity.

The audit team found that the Ministry has a clear vision, but its program plans were incomplete and lacked adequate performance measures; and the conservation policies established in 1997 have not been upheld consistently.  Further, the Ministry was not ensuring that ecological integrity is conserved; inventory information on species, ecosystems and ecological processes was incomplete, and no strategy was in place to address this.  Lastly, the parks year-end report provided no information on the state of ecological integrity. 
The report recommends that the Ministry of Environment:

1. Update its BC Parks Program Plan to clarify ecological integrity and performance targets
2. Complete the strategic direction and guidelines for its conservation management program and consistently uphold program policies
3. Develop a plan that addresses gaps in the system
4. Obtain the information needed for management actions and ensure that the 5-year conservation management activities plan is met
5. Review and update its Master Plans policy
6. Conduct annual planning to determine priority actions and monitor/evaluate against conservation objectives
7. Report periodically to the Legislative Assembly and public on its progress in conserving ecological integrity

Summary of Government Response

The Director, Parks Planning and Management Branch presented the response on behalf of the Ministry of Environment.  He reported that for recommendation 1, a definition of ecological integrity and the context for management are to be added to the Program Plan.  This strategic plan will also clarify where ecological integrity drives management decisions; and performance measures will be reviewed and refined to a final state. 

On recommendation 2, the strategic direction for ecological integrity and conservation management, procedural guidelines and program policies will be completed by March 2011.  Also, the criteria for maintenance or enhancement of land acquisitions related to ecological representation are to be enhanced by fall 2011 (recommendation 3).

To implement recommendation 4, there will be staff training for use of the conservation risk assessment tool, and a new Citizen Science Monitoring Program (approaches for staff, stakeholders, and volunteers).  Management planning policy updates are planned for recommendation 5, and revisions to the annual management planning process for recommendation 6.  Finally, comprehensive reporting will be done across program areas and include the annual report and information on measurable program outcomes. 

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on the concept of ecological integrity, the Citizen Science Monitoring Program, management plans, and ministry reporting.  Members also asked specific questions about audit methodology, the facility management program and the invasive plant management program.

Ecological integrity concept

The witnesses were asked to define the concept of ecological integrity and ecosystem management.  The A/ADM reported that the Program Plan would include a made-in-BC definition of integrity based on key indicators of a healthy ecosystem.  He added that the provincial parks system is one part of the province’s ecological integrity that is managed through an integrated resource management regime.  In his response, the Auditor General announced that now the audit team had determined there were some gaps in the process, the intention is to look at the outcomes over this period of stewardship and determine if ecological integrity has been maintained.

One committee member also asked what kind of measure can be attached to ecological integrity so as to optimize the whole ecosystem.  The A/ADM explained that a combination of indices is used.  In an ideal world, there would be a baseline measure of what everything looked like when it came into the park system.  One benchmark used in new protected areas is the amount of disturbed land versus undisturbed land. 

Citizen Science Monitoring Program

Some committee members asked what percentage of the parks system the new Citizen Science Monitoring Program would be able to cover, given the scope of the challenge to protect ecological integrity.  The Director explained that he did not know what the percentage might be, because the system ranges from large, intact ecosystems in remote northern areas through to provincial parks close to urban centres.  He reported that his branch is trying to find linkages between the community groups that are willing to help the branch with monitoring and the long-term direction in management planning.  In response, one committee member referred to a recent report recently released by the Stanley Park Ecology Society. 

Management plans

One committee member noted that the Ministry is moving from prescriptive management plans to outcome-based policy statements addressing natural, cultural and recreation values, and asked for clarification.  The Director reported that management plans will be developed and reviewed on a priority basis using a risk management approach, subject to available funds. 

Other members voiced concern about the audit finding that the Ministry was not adequately addressing the following threats to the biodiversity in Class A parks and ecological reserves – human use, invasive species and adjacent land uses activities (listed on page 22 of report).  They were not convinced that the ministry proposal to revise the annual management plan process would be sufficient to address these very real threats.  In response, the Director identified the facility management program as part of conservation use, adding that it was the subject of a recent effectiveness audit. 

Ministry reporting

Another line of questioning focused on the Ministry’s plans to improve the reporting process.  The Director informed the PAC that the Ministry is going to consider what kinds of information the public is quite interested in knowing about within the parks-system context, and then will collect that information and provide it as part of their annual reporting.  A start has been made this year using selected subjects, such as fire management and invasive plant management.  The Ministry recognizes that the reporting mechanism does need to evolve over time and so also needs to consider how to report at perhaps a more regional level.

OAG REPORT 8, 2010/11 MANAGEMENT OF GROUNDWATER RESOURCES IN BRITISH COLUMBIA

The Public Accounts Committee (PAC) met on February 10, 2011 to review the audit report on the management of groundwater resources in British Columbia.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Environment.

Summary of Report

The report points out that approximately one million (or 25%) of British Columbians rely on groundwater for drinking, agriculture and industry.  However, about 35% of wells monitored from 2000 to 2006 showed declining water levels as a result of human activities.  Of the 916 aquifers identified in the province to date, 77 are rated as heavily used and 243 as highly vulnerable to contamination.

The purpose of the audit was to assess whether the provincial government is ensuring the sustainability of groundwater resources in British Columbia.  The audit team concluded that the government was not effectively ensuring the sustainability of groundwater resources.  Government, though, has made protection a priority, and this is reflected in the Ministry of Environment being charged with leading the Water Act modernization initiative.

The specific findings of the audit team were that:

• the Ministry’s information about groundwater was insufficient to enable it to ensure the sustainability of the resource;
• groundwater was not being protected from depletion and contamination or to ensure the viability of the ecosystems it supports; and
• control over access to groundwater was insufficient to sustain the resource and key organizations lacked adequate authority to take appropriate local responsibility.

The report makes seven recommendations for the Ministry of Environment.  Of these, four focus on improving groundwater information, one on improving groundwater protection, and two on groundwater access and authority to manage the resource.

Summary of Government Response

The Director of the Water Protection and Sustainability Branch presented the response on behalf of the Ministry of Environment and explained that the report’s recommendations are also applicable to the Natural Resource Operations portfolio.  To protect the quality and quantity of the province’s groundwater, government is addressing the audit recommendations through a number of initiatives: review of the Groundwater Program, commitments in Living Water Smart: British Columbia’s Water Plan released in 2008, and modernization of the Water Act and Ground Water Protection Regulation. 

The Director also reported that full implementation of the seven recommendations will have significant fiscal implications.  Next, she presented a conceptual map identifying some provincial pressures and local factors affecting the sustainability of water resources, including increasing urban and resource developments, climate change, and population and economic growth.  Areas of the province with low water flows were highlighted in green, along with the need for more complete information-gathering.  Finally, she updated the PAC on the status of each of the seven recommendations.

Committee Inquiry

After hearing from the witnesses, the committee inquiry focused on information management, groundwater protection and the governance structure.  Members also asked specific questions about the conceptual map’s colour scheme, the Provincial Observation Wells Network and the Township of Langley water management plan. 

Information management

Some Members asked for clarification of the fiscal implications arising from the OAG report recommendations.  In response, the Director reported that on the information management side, significant improvements in systems and monitoring are needed, and that the work is estimated to cost in the range of $4.5 million to $5 million.  Later in the inquiry, the Director stressed that the information-management recommendations are “foundational” and that their implementation is not dependent on the modernization of the Water Act.  On a related topic, one committee member asked the government witness if the Ministry of Environment had considered the cost of not dealing with aquifers vulnerable to contamination.

Groundwater protection

During the inquiry, committee members learned that an owner of an aquifer has no protection if the aquifer is depleted because of an excavation in an adjacent property or subdivision.  They were informed by the Director that the issue of depletion is to be addressed through regulations and licensing of groundwater withdrawals.

The PAC Chair commented on the lack of discussion in the OAG report of the very water-intensive fracking process used to extract natural gas in the Peace River region, and asked what regulations or fees may be attached to withdrawals of groundwater for industrial purposes.  He was informed that the Oil and Gas Commission regulates water withdrawals for industrial use.

Governance structure

Another theme of the committee inquiry focused on the governance structure for managing groundwater resources provincially.  Members were particularly interested in the impact of the recent restructuring of responsibilities for natural resource policy and operations.  The Director explained that under the new governance model, policy remains with the Ministry of Environment, with operations transferred to the Natural Resource Operations portfolio.  In response to a follow-up question regarding oversight, the witness reported that there is a cabinet committee dedicated to environment and land use and the natural resources board that includes DMs from all sector ministries. 

TRANSPORTATION AUDIT

OAG REPORT 7, 2010/11 UPKEEP OF THE PROVINCIAL ROADS NETWORK BY THE MINISTRY OF TRANSPORTATION AND INFRASTRUCTURE

The Public Accounts Committee (PAC) met on February 10, 2011 to consider the audit report on upkeep of the provincial roads network.  The Committee heard presentations from the Office of the Auditor General (OAG) and the Ministry of Transportation and Infrastructure.

Summary of OAG Report

The Ministry of Transportation and Infrastructure is responsible for the provincial public road network that covers 84,415km (single lane) and includes roads (paved and unpaved), bridges, tunnels and other structures and equipment.  This road network is an essential part of community and commercial wellbeing in BC.

The purpose of the audit was to assess whether there is effective upkeep of the road network, by asking three questions: does the Province plan adequately for roads upkeep?  Does the Province adequately manage the activities of the contractors who do the upkeep work?  And does the Province know how well it is meeting its responsibilities for roads upkeep?

The key findings of the audit team were that overall, the Ministry has been doing a good job of managing its road upkeep programs, demonstrating careful regard for cost, efficiency and effectiveness.  However, while real-time work is well managed, the audit team identified opportunities to improve how the Ministry plans network upkeep to achieve the greatest long-term value, as well as improve its practices for measuring results and reporting performance.

The report contains ten recommendations focused on improvement of long-term planning, life-cycle costing, relation of upkeep to safety and enhancing how contractors are managed.

Summary of Government Response

The Assistant Deputy Minister, Highways Department presented the response on behalf of the Ministry of Transportation and Infrastructure.  He began his presentation by reporting that all the OAG report recommendations are appreciated and in the process of being implemented.  After presenting an overview of audit findings and potential improvements, the ADM reviewed the OAG report’s conclusions that centre on three key areas: planning work priorities and standards; managing routine maintenance; and developing performance measures. 

Regarding planning current and future work priorities, the ADM informed the Committee that the Ministry will update its inventory database by spring 2012 and complete the network level planning tool currently under development by fall 2012. 

For managing day-to-day road and bridge maintenance, the Ministry is undertaking service area and incentive reviews and expects to complete these by the fall of 2012; a review of stakeholder feedback methods will also be undertaken. 

For the third area, monitoring and improving performance, the Ministry will review industry best practices on maintenance and safety performance measures, develop internal maintenance administration performance measures by spring 2012, and consider opportunities for further stakeholder involvement into programming.

Finally, the ADM informed the PAC that providing a safe, reliable and efficient highway system is a top priority for the Ministry, which is working to develop and implement a plan of action to address the ten recommendations and ensure continuous improvement.

Committee Inquiry

After hearing from the witness, the committee inquiry focused on the effects of truck traffic on the road network, the siting of inspections stations, and performance measures.  Members also asked specific questions about environmental management plans during and after construction; the classification system for road maintenance; capital improvements involving municipal road networks; the extent of public input on road quality; and the use of winter tire regulations.

Truck traffic

Some Members had concerns regarding the capacity of existing roads to deal with both the increase in and change in type of truck traffic.  One Member reported that truck trains are being introduced in his community on the Lower Mainland and travel all the way up to Kelowna.  He asked if the use of huge road trains has been adequately addressed in current and future plans.

In response, the ADM stated that the Ministry does a number of things on an annual basis to monitor and assess the condition of the roads and bridges and to review the deterioration curve.  The Ministry has an electronic roadway management system that defines and monitors both the distress of the pavement and the condition of the ride surface and the Ministry assesses the pavement condition of the main highways every two years.  It also does a full, detailed inspection of each major bridge on an annual basis and secondary bridges on a semi-annual basis.

This discussion prompted one Member to question whether larger trucks, in fact, cause more damage to the roads, by pointing out that larger trucks have more axles and therefore cause less damage, if loaded properly.  The ADM agreed the size of a truck can at times reduce the impact on the road if it is managed with lower axle loadings, or results in fewer trucks on the road. 

Inspections stations

Related to the issue of truck traffic were questions regarding the locations of weigh scales (electronic and stationary).  One Member cited a California study attributing 80 percent of road maintenance costs to trucks and showing that trucks pay for only about 55 percent and many fail inspections.  Another Member asked the ADM why the Ministry did not locate weigh scales at the large industrial depots like the port and rail yards that are off-loading goods.

The ADM reported that the Ministry reviews, on a regular basis, weigh scale locations and tries to find locations for inspections stations that best capture the largest component of truck traffic.   While it was a good suggestion to locate more stationary facilities in the Lower Mainland, the experience in other parts of the province (e.g., northeastern BC) is that mobile enforcement is more effective.

Performance measures

Another theme of the committee inquiry focused on performance measures.  In response to constituents' concerns, one Member asked how maintenance contract performance was rated, using the Contract Assessment Program.  On related matters, the PAC Chair asked about the incentives to encourage road-maintenance contractors to exceed performance (referenced on pp. 25-26, OAG Report), and if ICBC was involved with the measurement of safety results.  He learned that the Ministry works very closely not only with ICBC but also with the RCMP.

MISCELLANEOUS ITEMS

OAG FOLLOW-UP REPORTS

OAG REPORT 11, 2009/10 FOLLOW-UP REPORT: UPDATES ON THE IMPLEMENTATION OF RECOMMENDATIONS FROM RECENT REPORTS (APRIL 2010)

The Public Accounts Committee (PAC) met on May 26, 2010 to review the fourth, semi-annual follow-up report produced during the current Auditor General’s term.  It includes detailed updates on ten reports and a new section, a cumulative update on the implementation of all the recommendations covered by OAG follow-up reports since October 2008.  Of the 467 recommendations in 28 individual reports, only two remain significantly outstanding.

The Comptroller General reported that ministries have made substantial progress in implementing the 51 recommendations from recent OAG reports.  She added that the follow-up reports provide valuable information to the PAC and to government to monitor actions taken by ministries that are accountable for determining the most appropriate response.

In the question-and-answer session, committee members learned that government does share information, observations and findings from the OAG reports with the chief financial officers from across government, as well as a group of ADMs of corporate services who have responsibility for strategic planning within the ministries.  One member also asked if the Auditor General was satisfied with the alternative actions proposed in some ministry responses to the OAG report’s recommendations and was informed that the adequacy of the management assertions would be addressed in the next stage of the follow-up process.

OAG REPORT 6, 2010/11 FOLLOW-UP REPORT: UPDATES ON THE IMPLEMENTATION OF RECOMMENDATIONS FROM RECENT REPORTS (SEPTEMBER 2010)

The Public Accounts Committee (PAC) met on February 9, 2011 to review the fifth, semi-annual follow-up report produced during the current Auditor General’s term.  It contains detailed updates on 12 reports representing 66 recommendations and the cumulative results of follow-up reports since October 2008.  Of the 511 recommendations in 33 individual reports, there is only one where no substantial action has been taken.
The A/Comptroller General reported that ministries have made substantial progress in addressing virtually all the recommendations.  He explained that some recommendations may understandably take longer to implement, and that ministries or agencies may choose alternative actions to address the issue.
In the question-and-answer session, some committee members asked if the OAG had considered spot checks of agency self-assessments in regard to the reports on the PARIS system for community care services and trades training.  Members also asked about the follow-ups of OAG reports on oil and gas contamination risks, homelessness and school seismic safety.

GOOD PRACTICE GUIDES

OAG REPORT 5, 2009/10 MANAGING KNOWLEDGE: A GUIDE TO GOOD PRACTICE

The PAC met on June 9, 2010 to review the OAG good-practice guide to managing knowledge.  This innovative web-tool contains guidance to aid public sector organizations in both evaluating and improving their strategic management of knowledge.  It includes an interactive self-assessment tool, released in February 2010, which has been used by 14 organizations.

A senior official in the Office of the Chief Information Officer, Ministry of Citizens’ Services presented the government’s response.  She noted that this guide emphasizes the strategic use of knowledge assets which helps to create efficiencies in government and prepare for the future.  It includes two examples of knowledge management: the Bridge, a web-tool based on UK Policy Hub, to help the public service share information resources; and EBSCO, a cross-government initiative that gives all public service employees access to academic journals and other studies.

The question-and-answer session focused on the following topics: the guide’s case studies (BC Forest Service and BP); the balance between FOI and privacy protection; MLA and public access to the Bridge; ministry training in use of guide; and use of secondment for information-sharing.

OAG REPORT 10, 2010/11 GUIDE FOR DEVELOPING RELEVANT KEY PERFORMANCE INDICATORS FOR PUBLIC SECTOR REPORTING

The PAC met on February 9 and 10, 2011 to review the OAG guide containing guidelines to help public sector organizations develop relevant key performance indicators (KPIs) to evaluate performance and hold management accountable for the results achieved.  The guide contains five steps to creating relevant KPIs, developed in collaboration with the Ministry of Education.

The ADM, Partnerships and Planning Division, Ministry of Education presented the government’s response.  She reported that the summary report that accompanies the guide includes an assessment of the Ministry of Education’s KPIs.  This report’s four recommendations will be addressed, either fully, substantially or partially over the next two years.

The question-and-answer session focused on the following topics related to K-12 education: the adequacy of KPIs as measures of student achievement and teacher effectiveness; the comparability of ministry KPIs with national and international educational benchmarks; the different types of student assessment; the data tracking system; and the relevance of performance information used in the education system.  Members also asked specific questions about the application of KPIs to independent legislative offices and across government.

MANAGEMENT LETTER

OAG REPORT 14, 2008/09 SUMMARY OF FINDINGS: BC ARTS COUNCIL AUDIT; SUMMARY OF A 2010 OLYMPIC & PARALYMPIC WINTER GAMES AUDIT

The PAC met on November 17, 2010 to review an OAG report that combines the results of two audits in a single management letter.  The focus of the first audit was the BC Arts Council’s grant programs, and the second the results of an audit of 2010 Olympic and Paralympic Games costs. 

BC Arts Council audit

The first page of the management letter summarizes the OAG review of the BC Arts Council audit, which was undertaken following a request from an MLA.  Due to the small size of grants for arts funding ($13.9 million), the Auditor General felt it was inappropriate to issue a full-length audit report.  The audit team that the BC Arts Council programs have well-defined eligibility criteria and clear processes for monitoring the use of grants, but the documentation was insufficient and the funding agreements were seldom used.  Nine recommendations were made to improve the administration of grants, and presented in an appendix to the letter.

Representatives of the Ministry of Tourism and the BC Arts Council informed the PAC that they agreed with the principles underlying the recommendations, and that six recommendations have been fully implemented and three partially implemented.

The question-and-answer session focused on the peer adjudication and documentation of grant applications, Council’s outreach to cultural communities, and a future audit of BC gaming grants.

2010 Winter Games audit

The second page of the management letter relates to the costs and risks to the Province associated with the 2010 Winter Games.  The Committee learned that the Auditor General’s original intention was to provide an update on the recommendations contained in the OAG’s previous reports on the Games, issued in 2003 and 2006 and reviewed by the PAC in previous parliaments.  However, fundamental differences of opinion between government and the OAG remain unresolved concerning BC’s share of the final cost of the Games and related risks.

Accordingly, the Auditor General decided not to issue a full-length report in December 2008 to detail yet again the ground that has already been covered.  Instead, the letter contains one recommendation that government expand its definition of Games-related costs to include all items that are reasonably attributable to hosting the 2010 Winter Games, and report publicly on the costs and risks associated with them.  The Vancouver Organizing Committee’s revised budget will present an ideal opportunity to update the disclosure when its report is released.

The Director of Strategic Initiatives in the Ministry of Finance reviewed the sequence of events leading to the OAG decision not to publish a third report in 2008.  He then reported that Games-related costs are published in the annual public accounts and on the Ministry web site, and that the VANOC report would provide further information.

SUMMARY REPORT

OAG REPORT 9, 2010/11 SUMMARY REPORT: RESULTS OF COMPLETED PROJECTS

The PAC met on February 9, 2011 to review for the first time a report that contains short summaries of seven different pieces of work where the organizations involved were able to move forward well before a public OAG report was written.  This summary report covers seven projects: hand hygiene; governance and internal controls in school district 35 - Langley; the 2008 incident at the ICBC Material Damage Research and Training Facility; relevant key performance indicators for public sector reporting; natural resource information; management of oil and gas incentive programs; and information security management.

In the question-and-answer session, committee members asked for more information on the role of the Integrated Land Management Bureau in the natural resource information project.  Questions were also asked about the information security management project and, in particular, the harmonization of IT across government.

DOCUMENTS DISTRIBUTED (BY MEETING DATE)

May 26, 2010 Meeting

Office of the Auditor General of British Columbia (OAGBC) Report, Wireless Networking Security in Victoria Government Offices: Gaps in the Defensive Line (February 2009)

OAGBC Report, Wireless Networking Security in Government: Phase 2 (March 2010)

OAGBC Presentation to Select Standing Committee on Public Accounts re Wireless Networking Security: Gaps in the Defensive Line, May 26, 2010

Shared Services BC – Technology Solutions, Presentation to Select Standing Committee on Public Accounts May 26, 2010 re Office of the Auditor General Reports: Wireless Networking Security in Victoria Government Offices: Gaps in the Defensive Line; Wireless Networking Security in Government: Phase 2

OAGBC Report, The PARIS System for Community Care Services: Access and Security (February 2010)

OAGBC Presentation re The PARIS System for Community Care Services: Access and Security, May 2010

Vancouver Coastal Health Presentation re Auditor General Review The PARIS System for Community Care Services: Access and Security to Public Accounts Committee, May 26, 2010

OAGBC Report, Electronic Health Record Implementation in British Columbia (February 2010)

OAGBC Presentation re Electronic Health Record (EHR) Implementation in British Columbia

Ministry of Health Services Presentation re Auditor General Report: Electronic Health Records in British Columbia, May 26, 2010

OAGBC Follow-up Report: Updates on the implementation of recommendations from recent reports (April 2010)

OAGBC Presentation re Spring 2010 Follow-up Report, May 26, 2010

Comptroller General, Ministry of Finance, Presentation to the Select Standing Committee on Public Accounts re Office of the Auditor General April 2010 Follow-up Reports, May 26, 2010

June 9, 2010 Meeting

OAGBC Report, Planning for School Seismic Safety (December 2008)

OAGBC, A Review of Planning for School Seismic Safety

Ministry of Education, School Seismic Safety Action Plan Update, June 9, 2010

OAGBC Report, Managing Knowledge: A guide to good practice (December 2009)

OAGBC Presentation for the Public Accounts Committee re Managing Knowledge: A guide to good practice, June 2010

Wendy Taylor, Executive Director, Office of the Chief Information Officer, Citizens’ Services, Presentation to the Select Standing Committee on Public Accounts re Office of the Auditor General Managing Knowledge: A guide to good practice, June 9, 2010

OAGBC Report, Home and Community Care Services: Meeting Needs and Preparing for the Future (October 2008)

OAGBC Presentation to the Public Accounts Committee re Home and Community Care Ministry of Health Services 2008 – Meeting Needs and Preparing for the Future, June 2010

[OAGBC] Update on the implementation of recommendations from Home and Community Care Services: Meeting Needs and Preparing for the Future (October 2008), April 2010

Heather Davidson, Presentation to Select Standing Committee on Public Accounts re Home and Community Care Services: Meeting Needs and Preparing for the Future, June 9, 2010

OAGBC Report, Homelessness: Clear Focus Needed (March 2009)

OAGBC Presentation re Homelessness: Clear Focus Needed (March 2009)

[OAGBC] Update on the implementation of recommendations from (March 2009), April 2010

Ministry of Housing and Social Development, Presentation to Select Standing Committee on Public Accounts re Auditor General’s report, Homelessness: Clear Focus Needed, June 9, 2010

Resolutions for Records Retention and Disposal Authorities tabled on 30th November 2009 before the Public Accounts Committee

Summaries of Records Schedules before Public Accounts Committee, submitted by Gary Mitchell, Chair, Public Documents Committee, May 6, 2010

June 10, 2010 Meeting

Ministry of Finance, Office of the Comptroller General, Public Accounts For The Fiscal Year Ended March 31, 2009

Comptroller General, Public Accounts Overview, Select Standing Committee on Public Accounts

OAGBC Report, Public Sector Governance: A Guide to the Principles of Good Practice; How are We Doing? The Public Reporting of Performance Measures in British Columbia (December 2008)

OAGBC Presentation to the Select Standing Committee on Public Accounts re Public Sector Governance: A Guide to Good Practice & How Are We Doing: Public Reporting of Performance Measures in BC, May 26, 2010

Cheryl Wenezenki-Yolland, FCMA, Comptroller General, Ministry of Finance, Presentation to Select Standing Committee on Public Accounts re Office of the Auditor General Public Sector Governance and How Are We Doing?, May 26, 2010

Governance, Accountability and Financial Management, Prepared by Office of the Comptroller General, January 2010

OAGBC Report, British Columbia Crown Corporations Executive Arrangements – A Work in Progress (November 2009)

OAGBC Presentation re Crown Corporation Executive Compensation Arrangements, June 10, 2010

[PSECS] Presentation to Public Accounts Committee re Auditor General Report on Executive Compensation in Crown Corporations Summary and Follow-up, June 10, 2010

OAGBC Report, Making the Right Decisions: Information Use by the boards of public sector organizations (December 2009)

[OAGBC] Presentation to the Select Standing Committee on Public Accounts re Making the Right Decisions: Information use by boards of public sector organizations, June 10, 2010

Cheryl Wenezenki-Yolland, FCMA, Comptroller General, Ministry of Finance, Presentation re Making the Right Decisions: Information Use by the boards of public sector organizations Office (OAG Report 6 – December 2009), June 10, 2010

OAGBC Report, Audit of Oil and Gas Site Contamination Risks: Improved oversight needed (February 2010)

OAGBC Presentation re Audit of Oil & Gas Site Contamination Risks: Improved oversight needed, February 2010

BC Oil and Gas Commission, Presentation re Auditor General Report, Audit of Oil and Gas Site Contamination Risks: Improved oversight needed, June 2010

October 20, 2010 Meeting

OAGBC Report, Observations on Financial Reporting: Summary Financial Statements 2009/10 (August 2010)

OAGBC Presentation re Observations on Financial Reporting: Summary Financial Statements 2009/10, October 20, 2010

Office of the Comptroller General, Government response to OAG report, Observations on Financial Reporting

OAGBC Report, Aspects of Financial Management (Report 4, August 2010)

OAGBC Presentation re Report 4a: Aspects of Financial Management Management of Working Capital by School Districts, October 13, 2010

Office of the Comptroller General, Government response to Management of Working Capital by School Districts, October 20, 2010

November 16, 2010 Meeting

OAGBC Financial Statement Audit Coverage Plan for Fiscal Years 2011/2012 through 2013/2014, Revised Copy, November 16, 2010

Financial Statement Audit Coverage Plan 2011/2012 – 2013/2014, OAGBC Presentation to the Select Standing Committee on Public Accounts, October 20, 2010

OAGBC Report, Aspects of Financial Management (Report 4: August 2010)

OAGBC Presentation re Report 4c: Aspects of Financial Management Infrastructure Grants, October 14, 2010

Ministry response to OAG Report Infrastructure Grants, November 16, 2010

OAGBC Presentation re Report 4b: Aspects of Financial Management Year-end Government Transfer Expenditures, October 14, 2010

Office of the Comptroller General, Government response to OAG Report Year End Government Transfer Expenditures, October 20, 2010

Summary of 31st Annual Conference of Canadian Public Accounts Committees, Aug.  29-31, 2010

November 17, 2010 Meeting

OAGBC Report, A Major Renovation: Trades Training in British Columbia (November 2008)

OAGBC Presentation re A Major Renovation: Trades Training in British Columbia, November 10, 2010

Industry Training Authority, Ministry of Regional Economic and Skills Development, Presentation to Select Standing Committee on Public Accounts re Office of the Auditor General’s Report 2008/09 A Major Renovation: Trades Training in British Columbia, November 17, 2010

OAGBC Report, Summary of Findings: BC Arts Council Audit; Summary of a 2010 Olympic and Paralympic Winter Games Audit (December 2008)

OAGBC Presentation re BC Arts Council Grants Administration and 2010 Olympic and Paralympic Winter Games, November 10, 2010

BC Arts Council, Presentation to Select Standing Committee on Public Accounts re Response to the Auditor General Report on BC Arts Council Grant Administration

OAGBC Report, Aspects of Financial Management (Report 4, August 2010)

OAGBC Presentation re Report 4d: Aspects of Financial Management Managing Fraud Risk in Government: Good practice guidelines, October 13, 2010

Response from Government to Managing Fraud Risks in Government, November 16th, 2010

December 7, 2010 Meeting

OAGBC Report, Removing Private Land from Tree Farm Licences 6, 19 & 25: Protecting the Public Interest? (July 2008)

OAGBC Review of the Removal of Private Land from TFLs 6, 19 & 25: Protecting the Public Interest? December 2, 2010; and Summary of Media Coverage (distributed February 10, 2011)

Tom Jensen, ADM and Jim Langridge, RPF, Ministry of Forests, Mines and Lands, Government Response to OAG Report on Deletion of Private Land from TFL 6, 19 and 25, December 7, 2010

OAGBC Report, Audit of the Agricultural Land Commission (September 2010)

OAGBC, Audit of the Agricultural Land Commission

ALC Presentation to Select Standing Committee on Public Accounts re 2010/2011 Audit of the Agricultural Land Commission, December 7, 2010

OAGBC Report, Conservation of Ecological Integrity in B.C.  Parks and Protected Areas (August 2010)

OAGBC, Conserving Ecological Integrity in B.C.  Parks and Protected Areas, December 2, 2010

[Ministry of Environment] Presentation re Auditor General Report, Conservation of Ecological Integrity in B.C.  Parks and Protected Areas, December 3, 2010

February 9, 2011 Meeting

OAGBC Report, IT Continuity Planning in Government (April 2010)

OAGBC, IT Continuity Planning in Government, February 7, 2011

Emergency Management BC and Shared Services BC – Technology Solutions, Presentation to Select Standing Committee on Public Accounts February 9, 2011 re OAG Report, IT Continuity Planning in Government (Report 1 – April 2010)

OAGBC Follow-up Report: Updates on the implementation of recommendations from recent reports (September 2010)

OAGBC Presentation re Follow-up Report Fall 2010, February 7, 2011

A/Comptroller General, Ministry of Finance, Presentation to the Select Standing Committee on Public Accounts February 9, 2011 re OAG September 2010 Follow-up Reports

OAGBC Summary Report: results of completed projects (December 2010),

OAGBC Presentation re Summary Report: results of completed projects, February 7, 2011

OAGBC Guide for Developing Relevant Key Performance Indicators for Public Service Reporting (December 2010)

OAGBC Presentation re Guide for Developing Relevant Key Performance Indicators for Public Service Reporting, February 7, 2011

Ministry of Education, Presentation to Select Standing Committee on Public Accounts February 9, 2011 re OAG Guide for Developing Relevant Key Performance Indicators for Public Service Reporting

February 10, 2011 Meeting

OAGBC Report, Upkeep of the Provincial Roads Network by the MInistry of Transportation and Infrastructure (November 2010)

OAGBC Presentation re Upkeep of the Provincial Roads Network by the MInistry of Transportation and Infrastructure, February 7, 2011

Ministry of Transportation and Infrastructure, Upkeep of the Provincial Road Network

OAGBC Report, An Audit of the Management of Groundwater Resources in British Columbia (December 2010)

OAGBC Presentation re An Audit of the Management of Groundwater Resources in British Columbia, February 7, 2011

Ministry of Environment Response to An Audit of the Management of Groundwater Resources in British Columbia, February 10, 2011

Recommendations of the Public Documents Committee to the Public Accounts Committee, February 2011