Crown Corporations - Issue No. 3 - Tuesday, November 6, 2001

2001 Legislative Session: 2nd Session, 37th Parliament
SELECT STANDING COMMITTEE ON CROWN CORPORATIONS
MINUTES AND HANSARD

Present: Ken Stewart, MLA (Chair); Bill Bennett, MLA (Deputy Chair); Dave Hayer, MLA; Ida Chong, MLA; Arnie Hamilton, MLA; Pat Bell, MLA; Daniel Jarvis, MLA; John Wilson, MLA; John Nuraney, MLA

Unavoidably Absent: Joy MacPhail, MLA; Randy Hawes, MLA

1. The Chair called the Committee to order at 9:05 a.m.

2. The Chair advised the Committee on the status of its work to date.

3. The Committee received a briefing from the Auditor General respecting the work of his office surrounding Crown Corporations.

Witnesses
    Office of the Auditor General:
    · Wayne Strelioff, Auditor General
    · Peter Gregory, Deputy Auditor General
    · Errol Price, Senior Principal
    · Morris Sydor, Project Leader
    · Mike Macdonell, Project Leader

4. Resolved, that the Chair, the Deputy Chair and up to two other members constitute a subcommittee on agenda and procedure for the purpose of proposing a workplan and a timetable for the committee to consider. (John Nuraney, MLA)

5. The Committee adjourned at 11:47 a.m. to the Call of the Chair.

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE
ON CROWN CORPORATIONS



CONTENTS

		Page

Expert Witness Briefings		27
	W. Strelioff	27
	P. Gregory	28
	E. Price	38

Chair:	* Ken Stewart (Maple Ridge–Pitt Meadows L)
Deputy Chair:	* Bill Bennett (East Kootenay L)
Members:	* Pat Bell (Prince George North L) * Ida Chong (Oak Bay–Gordon Head L) * Arnie Hamilton (Esquimalt-Metchosin L) Randy Hawes (Maple Ridge–Mission L) * Dave Hayer (Surrey-Tynehead L) * Daniel Jarvis (North Vancouver–Seymour L) * John Nuraney (Burnaby-Willingdon L) * John Wilson (Cariboo North L) Joy MacPhail (Vancouver-Hastings NDP) * denotes member present


Witnesses:	Peter Gregory (Deputy Auditor General) Errol Price (Office of the Auditor General) Wayne Strelioff (Auditor General)

K. Stewart (Chair): Good morning, everyone. I understand there are a few people still in transit this morning. Hopefully they can catch up. What I'd like to do first is touch on a few items before we have our presentation from the auditor general, which will take up most of our morning.

We talked earlier about the need for a subcommittee to set up the templates and agendas for our upcoming meetings. The purpose of this subcommittee will basically be to design a template that will be used by the organizations that come before us so they've got an understanding of what our expectations are, the types of things we're looking for and some of the specific questions that we may be looking at for their particular organizations.

I've asked Bill Bennett to look after setting up that committee for us. That will be a task he'll be doing over the next week or so. The issues that we're going to be looking at, again, are some of the background issues that are relevant to all of the Crown corporations and then those that are specific to the individual corporations. I'll leave that to you, Bill, to do.

Secondly, just a backgrounder. What we're trying to accomplish in the interim, before we start seeing the Crown corporations, is just to upscale our knowledge as to what the Crown corporations do, their role within government, some of the historical issues that may have relevance to what we're trying to do in the way of change, some of the governance issues and to look at how their business plans and financial forecasts will fit into the priorities of this government.

Today we have the auditor general, and hopefully he'll be able to give us quite a bit of background on his experience in dealing with Crown corporations. To start that off, Craig, if you could please introduce the auditor general, maybe with a bit of background. I think we'll start off with that.

C. James: Okay. I think it might be best if Wayne introduces himself and his officials, if that's all right with everybody here, and take it from there.

W. Strelioff: Thank you very much, Chair, members and colleagues. Good morning. I certainly welcome the opportunity to discuss with you the role and work of our office, particularly the part that relates to our work within the Crown corporation community. I also look forward to this opportunity to listen to your concerns and advice. You'll see three of my colleagues with me at the table today. One is not here yet. He'll be here for the second half of our presentation.

Peter Gregory, on my left, is my deputy auditor general. He is a chartered accountant and has been with the office for over 20 years. He's had much experience and expertise, particularly with respect to the examinations of government performance. His expertise is also recognized nationally. Peter is currently vice-chair of the assurance standards board of the Canadian Institute of Chartered Accountants. Of course, that board is the national board that sets the performance and work standards for those auditors carrying out examinations in the public and private sectors. In April, Peter will be the chair of that national board.

With me to my right is Morris Sydor, also a chartered accountant, who is a recognized expert in the field of governance, which is a key issue in the Crown corporations community. As well, he audits environmental matters and sustainability issues.

I have now had the responsibility of auditor general for 18 months. Before that I had the same responsibilities in Saskatchewan for about ten years. Although I have a small office in the context of our overall responsibilities, I do have an experienced and capable group of dedicated professionals. In a few moments Peter will explain our role and work, as well as our plans and priorities.

One of the lessons all of us have learned is that effective standing committees are a key ingredient to public confidence in our institutions of government. That is why my office and others, including legislators, have recommended for some time now that a more active and effective system of standing committees be put in place. That's what we see emerging.

Through such committees, legislators — you — have the opportunity to demonstrate publicly that a meaningful scrutiny of government management performance and accountability practices takes place and takes place in public. Your responsibilities will be particularly significant in the next few years as the business of government moves through what looks like a significant change. A key part of this transition will be your scrutiny of government management and accountability practices.

As you know, the new government has articulated a vision of an open and accountable government. One of your challenges will be to assess the extent to which that vision is realized and to offer advice on how to ensure that continued strengthening takes place. I also realize that an ingredient essential to your responsibilities and to public confidence is our independent advice and assurances. We provide assurances and advice on whether the performance information provided to you by government is valid and reliable and on the extent to which government is managing its risks well.

Much work is before all of us. We want you to have the best information possible for assessing the performance of government. Clear, relevant and reliable performance information is a necessary ingredient in your scrutiny of the planned and actual results of Crown corporations and in your assessments of their risk management practices. As you explore your role, you should consider providing your advice and recommendations to the Legislative Assembly on how Crown corporations can strengthen the quality of the performance information to you and thus to the public.

Our presentation today has two components. Peter will review with you what our office does in terms of

our role, our plans, our priorities and our past work within the Crown corporation community. Following questions and discussion, Errol Price, who is sitting behind me, will review with you our work and thinking related to the quality of public performance reporting.

P. Gregory: Thank you, Wayne, and good morning, Chair and members. It's a pleasure to be with you this morning.

We've put in front of you a package of material intended to just familiarize you with our office. You can read that at your leisure. Included in that package is a set of the slides that we'll be using this morning, along with some lines to the right which will provide you space either to note any comments you might have or to track any questions that you might like to ask at the conclusion of our presentation.

As Wayne has indicated, my presentation will explain our role and how we see the future. I will discuss the work we do, the challenges faced by government and the impact these will have on our work.

The auditor general of British Columbia is an officer of the Legislature. The Auditor General Act establishes his mandate. The auditor general is appointed by the Lieutenant-Governor on recommendation of an all-party committee of the House. Thus, the auditor general is independent of government and serves as the assembly's auditor. He is the only auditor with a direct reporting relationship to the Legislative Assembly.

Our independence gives us the freedom to choose where and what audits we will conduct, and our act gives us the authority to access information about decisions and actions. The primary function of the office is to help Members of the Legislative Assembly hold government accountable. We report directly to the Legislative Assembly, and, when tabled, our reports become public.

Our mission is to serve the Legislative Assembly and the people of B.C. by providing independent assessments and advice that enhance public sector accountability and performance. Our vision is to be valued for making a difference.

We maximize the value derived from our work in two ways. The first is by doing the right things. That is, carrying out a mix of audits and reviews that meet the needs and interests of legislators. Our goal is to ensure that legislators and the public receive the best information possible for assessing the performance of government. The second is doing what we do well. That is, using the right methodologies, employing competent staff and providing a sound working environment. Our goal is to become an exemplary organization serving the Legislative Assembly and the public.

Our internal structure is organized to enable us to focus on the key issues facing government. We have aligned our resources into five operating groups and an administrative unit. Each operating group focuses on a key sector of government and is also responsible for the Crown corporations that fall into that sector. These groups are health, education, finance, natural resources, economic development and the protection of people.

Our audit universe is extensive. Government collects, spends and administers in excess of $100 billion annually. It delivers programs through over 300 organizations, with a workforce exceeding 100,000 staff. All of these organizations are required to provide financial statements and most to prepare service plans and reports. All of these should be subject to periodic audit.

To assist legislators, we provide assessments and advice based on the following types of reviews. We audit the financial statements of the province and government organizations to assess whether they fairly reflect their financial affairs. We assess the extent to which government has managed its key risks and has used public resources in an efficient and effective manner to achieve intended outcomes. We review whether government has complied with legislation and related authorities governing its activities and has met standards for the proper conduct of government business. We assess the adequacy and appropriateness of the information provided in government service plans and reports.

An important part of our role is to work with select standing committees and assist them in fulfilling their roles. Traditionally, this has meant working with the Public Accounts Committee, as it has been the only active committee. We work with the committee members to help them review the province's public accounts, to support their review of other topics covered by our reports and to follow up on progress made in implementing our recommendations. After a review of our reports, the Public Accounts Committee reports to the House, indicating its acceptance of our reports and providing any other recommendations the committee wishes to make. We expect that we will also assist other select standing committees as they become active participants in the Legislative Assembly's oversight process. Today, for example, we are meeting with you to talk about your work in Crown corporations.

How well are we doing in carrying out our work? With respect to our financial statement auditing role, we have provided an audit opinion each year on the province's public accounts and on the financial statements of a significant number of government organizations. We have advocated enhancements to government's financial reporting practices such as summary-level budgeting, expansion of the government reporting entity and the use of generally accepted accounting principles. We perform a similar role to help government organizations improve their financial reporting practices. As a result of these efforts, we have issued very few qualified opinions. We have worked with government to provide a more timely publication of public accounts and have made significant progress. On November 30, 1997, the public accounts were signed off by the government. This year it was on July 30 — a reduction of four months.

In the area of service plans and reports, we have advocated open and accountable government by calling for legislated accountability for results. We worked with the deputy ministers' council to promote better performance, management and accountability. We carried out a comprehensive review of the estimates process and issued a report containing a number of recommendations for improvements. This work led to the establishment of the independent budget process review panel. The panel endorsed our recommendations, and its work resulted in the passing of the Budget Transparency and Accountability Act. Ministries and government organizations have published the first round of plans and reports required under the act. We will soon be reporting publicly on these and offering recommendations for improvement. Errol Price, my colleague, will be talking about this next.

In assessing how well government is managing its key risks, we have focused on key functions common to all government organizations, such as our study on human capital and training and development across government. We have also looked at a number of specific risk issues such as our work on drinking water quality.

The road ahead is challenging for legislators and for our office. There are a number of general challenges facing the province that can affect government's performance and that can present either opportunities or risks. Emerging technologies are changing how business is being conducted, from service delivery to the security of personal information. Changing demographics are a factor. The size of the aging baby-boomer generation will place increasing stress on health care services. Global economies are in a period of decline, and British Columbia is not immune. This places an additional strain on public sector resources.

The government has articulated a vision of an open and accountable government. Many changes are underway, and further changes are planned. The core services review will likely change government significantly in structure and size and in the programs it delivers directly.

Government will look for new ways of conducting business. Private-public partnerships and new contractual arrangements are being considered as new service-delivery methods. Any organization undergoing significant fundamental change encounters risks that need to be managed. One means of managing the risk is to have good accountability and an effective public scrutiny.

The BTAA has legislated new requirements for plans and reports. This will result in changes to how the assembly carries out its scrutiny of public administration. Legislators will need to know whether the information is complete and reliable. Under the BTAA, health authorities and school boards will be included in the government reporting entity. A key challenge will be to integrate this information into the budget process. An increasing focus on the concept of sustainability will lead to changes in how decisions are made and to the need for assurance on the accountability information based on results.

We have already started to define our future work profile. In our recently issued 2001-04 performance plan, we set out a number of priorities. We will need to focus on ensuring that there is a smooth transition to the broader reporting entity and the full implementation of generally accepted accounting policies. We will also encourage the preparation and use of financial statements for each sector of government. We will further our efforts in the health and education sectors to assess whether financial statements are reliable and understandable and whether financial management practices are sound.

We see a need to focus on infrastructure projects in health, education, energy and transportation. There are also issues around managing the use of information technology to achieve results efficiently and about the security of government information systems. The government has committed to sustainability of our economy and our environment. Legislators will need information about how decisions are being made and the results achieved. As the development of results-based reporting expands, we will need to build our capacity to provide audit assessments on these reports.

To assist in refocusing our efforts, we are seeking to revise our act. Among the key changes we are seeking is clear legislation on our role in assessing effectiveness: the degree to which government organizations are achieving their objectives. We are also seeking to have a clear role regarding assurance information about the service plans and reports prepared by government organizations.

We are and must be seen to be independent of government. Historically, our budget has been reviewed and approved by the government, whose activities are being audited and reported on. We are proposing that this process be assigned to a committee of the Legislative Assembly and that the information be provided to the Minister of Finance for inclusion in the estimates.

Our present legislation does not meet the current expectation regarding the auditor general's accountability. We believe that we should be subject to the same accountability expectations placed on government organizations. More information is available in the proposal to update the Auditor General Act document that was sent to all Members of the Legislative Assembly in September.

Our authority to conduct reviews in Crown corporations comes from our act. In our act the definition of a public body includes corporations in which the government owns, directly or indirectly, at least 50 percent of the shares. These are Crown corporations. Section 19 of our act gives the auditor general the authority to access and examine the records and operations of any public body the auditor general considers necessary or advisable to carry out his duties.

Our work with Crown corporations has not been as extensive as with ministries, but we have carried out work in several areas. These include financial statement audits, risk-based audits and accountability is-

We are the auditors for a number of Crown corporations. Among them are British Columbia Buildings Corporation, British Columbia Assets and Land Corporation and the Columbia Power Corporation. Where we are not the direct auditor, we provide an oversight function by providing advice in the selection of a private sector auditor for the Crown corporations.

We plan to extend our efforts in this oversight function. We believe this is a better use of our resources, compared to doing the financial statement audits ourselves. Our aim is to provide legislators and the public with assurances that the financial statement audit process for government overall is operating effectively and that the information needs of legislators are being adequately considered.

We have issued a number of reports on Crown corporations. These audits were undertaken in areas that were significant to legislators and the public and where we felt that information about how the corporation manages risk should be provided to the Legislature.

I will cover off the work we have done since 1996. In 1996 we reported on our work in B.C. Ferries. We looked at operational safety. Our focus was to assess whether the corporation was meeting the requirements for a safe coastal ferry transportation system.

In 1997 we reported on severance practices in ministries and Crown corporations. In this audit we considered whether there were proper guidelines, whether adherence to these guidelines was being monitored and whether the Legislature was being informed about these severance costs.

We carried out two projects at B.C. Transit. The first audit dealt with an important part of the company's efficiency: how it manages the productivity of its drivers. The second dealt with how well B.C. Transit had succeeded at attracting customers by becoming market-focused.

More recently we conducted two audits at Forest Renewal B.C. The first assessed whether FRBC had clearly established where it wanted to go and how it would get there and whether it had adequately reported on how well it was doing. The second audit assessed whether Forest Renewal B.C. was spending wisely on its silviculture program.

We also reported on B.C. Housing's process for paying subsidies to organizations that sponsor and manage social housing developments.

Each of these audits addressed a different issue. We have also carried out audits that looked at a particular theme, covering the same issue in several organizations. One example of a theme audit is our work in governance. As you may recall, governance issues became prominent in both the public and private sectors because of some high-profile problems, particularly in the financial sector. A number of bodies carried out reviews of governance issues and principles, and practices for good governance were articulated.

We felt we should provide legislators with information about governance matters in Crown corporations. Consequently, in 1996 we carried out a broad-based review of governance arrangements for Crown corporations. In that review we examined the governance relationships and practices that existed in the Crown corporation environment. More recently, we examined the governance arrangements over the fast ferry project to see whether the provincial government and its appointees exercised appropriate governance over the fast ferry project.

We looked at social housing because of its importance to the economic and social health of the province. One of the audits carried out examined the governance arrangements surrounding the two agencies involved in delivering the provincial government's housing programs, the British Columbia Housing Management Commission and the Provincial Rental Housing Corporation.

Another theme is capital and project management. We have carried out two audits that examined project management issues, both at B.C. Ferries. In 1996 we reported on our audit of B.C. Ferries' fleet and terminal maintenance program. We assessed the adequacy of the program and the extent to which it was measuring how well results were achieved. In 1999, as part of our fast ferry project review, we examined the risk management of the fast ferry project by considering whether the principles of good project management had been adhered to.

As mentioned earlier, our work with the deputy ministers' council led to the development of an accountability framework for ministries and Crown corporations. You will hear more about this in the next portion of this morning's presentation.

Our resources have not allowed us to examine issues in Crown corporations to the extent that we believe is needed by legislators. We have not carried out any work in some of the key corporations such as B.C. Hydro or ICBC. As our workplans are developed, we will assess opportunities to conduct future work in Crown corporations.

Earlier I referred to proposed amendments to our act. While there are no proposals specific to Crown corporations, the proposed changes will enhance our role. They will state more clearly the auditor general's right of access to records and information and will allow the auditor general to ensure that audits conducted by other auditors meet the needs of the Legislative Assembly.

That concludes my portion of the presentation, and we'd be happy to take questions at this time.

K. Stewart (Chair): Peter, thank you for your presentation. There was a lot of information there. I know that there's at least one question and maybe some more. Before we move on, Dan, have you got a question there?

D. Jarvis: Mr. Gregory, going over your presentation, I wanted to bring up a subject that I briefly mentioned earlier to Mr. Strelioff, about ICBC. You said: "doing the right things." As you're probably aware, I think ICBC is unique among insurance companies, even in North America, in the fact that they do not have to report to a superintendent of insurance.

Also, in looking at your appendix B, I understand that they have not been audited by you. I think you just mentioned that in your presentation. They have sort of in-house audits, which always leads me to suspect that there's no public accountability. They're dealing with public funds in that sense.

The situation is that I would like to know what we can do as a committee. Do we work together with yourselves? Is there an audit pending or down on your agenda for ICBC, for example? One of the things that does concern me about ICBC is the fact that even in this morning's papers they've announced that, due to their investment portfolios, they will require an additional increase in insurance to the policyholders, whereas last year they turned around and gave a rebate to everyone in British Columbia that was a policyholder on the premise that their great investment portfolio showed great returns.

I did some brief inquiries during that period of time and could never get the proper answers. From what I understand, most of their investments were through Nortel. I wanted to know when they invested in Nortel and at what price they bought. I could never find out. I wanted to find out how much they sold. I heard they only sold less than 50 percent of Nortel when it was at a high, so therefore, there was no profit made by them if they kept 50 percent of it. Subsequent to their sale, Nortel dropped considerably. With something like that, we just have no idea what's going on, and I don't think that's the proper way for things to be managed.

K. Stewart (Chair): I guess, if I can interject a bit, the question is…. I trust that when ICBC comes before us, Dan, you'll have a few questions for them. I think, very specifically, the question is: have you audited ICBC, or do you intend to in the near future?

D. Jarvis: Mr. Chair, if I can add to that. Do we wait upon yourselves? Which would be the best track to do — have yourselves audit ICBC or have ICBC in here, and you work in conjunction with us to ask them specific questions?

W. Strelioff: As I said earlier, one of the key things happening right now is that what's being put in place is an active system of standing committees, a Crown Corporations Committee with the mandate of asking various Crown corporations to come in and answer your questions. You also have referred to you their performance plans, or service plans, and performance reports. If they aren't providing the information necessary, you can ask for that information. The framework is being put in place to provide the mechanism for you to ask questions, in a public forum, of the management of all Crown corporations, including ICBC.

Our work that we've got on the table right now is assessing the quality of the performance plans and performance reports that you receive and trying to encourage a strengthening in those plans and reports. One of the key mechanisms or steps that we see in the future is that you'll want assurance from us that the information in those plans and reports is valid, relevant and reliable. As Peter mentioned, we are proposing changes to the Auditor General Act to make sure that we have clear responsibility for providing you that assurance and also to ensure that we have clear responsibility for the oversight of the audits that do take place within the Crown corporation community, including those at ICBC.

The framework for answering questions is moving forward. The role of this committee is going to be an important part of that framework within the Crown corporations community. We also are here to listen to your advice on what key issues, concerns and risks you wish us to examine in the future. Certainly, in your last comment about developing a stronger working relationship, that would be what's on our agenda as well.

Peter, are there any specific issues that you think we should bring to their attention?

P. Gregory: No, other than to add that ICBC, under the current arrangements, appoints its own auditor and sets its audit parameters. At this point, we don't have access to that, but we think that overall the Legislative Assembly's auditors should be overseeing that process to ensure it meets the needs and interests of legislators.

K. Stewart (Chair): If I can just continue on that, what you brought up, as to how this committee is going to work with your office to ensure that we get the accurate, timely information that we need with regards to the organizations that we're responsible for, was a very important point.

Just one more comment before I lead through the rest of the speaking list. The openness and accountability is really important to this committee. As I'm sure all the members are aware, we're on Hansard, so any discussion that comes here is immediately open to the public. That's what we'd like to ensure: that the public is aware of what Crown corporations…. Working with your office, we can ensure that the information that comes out is accurate on those financial issues.

For the speaking list, what I have so far is John, Ida, Bill, Pat and Dave — okay?

J. Nuraney: I would imagine that the role of the auditor general is an arm's-length role from the work of the government, as an overseer of the public treasury. So far the reports that I have seen are after the fact.

You go in and do your audit, which is what you're supposed to do, and report back as to the operations and flag some concerns, if you have any.

From the presentation that you made this morning, it seems to me that you would like to extend that role in terms of not only auditing after the fact but providing some kind of a future trend, the feasibility of projects that government may undertake, and that you also want a legislated authority to have access to Crown corporations like B.C. Hydro and ICBC. Is that a barrier right now, that you cannot go and audit these Crown corporations?

W. Strelioff: We do have the right to access Crown corporations right now. Our resource capacity in the past has led us to focus mainly on risks related to the programs carried out through government ministries. In terms of the change to our Auditor General Act, what we're asking for is the oversight responsibility for the audit of the financial statements of all Crown corporations so that we are actively involved in overseeing those audits. Part of your questions and discussion had to do with: do we look at issues that have already taken place, or do we look at issues in the future? We do both. We do look at what's happened in the past, but those types of examinations almost always lead us to making recommendations and providing advice on what should happen in the future. It is a proactive, future-oriented office.

The last question you had. Yes, we can carry out examinations in the Crown corporations community. We have been asking for legislative changes for a clear mandate to do so but also to make sure that as your auditor we do have the oversight responsibility on the financial statement side as well.

I. Chong: I've got a number of issues I'd like to raise with the auditor general. Some of them have already been raised and parallel what my colleagues are saying. First of all, we all have a rather keen interest in the area of auditing those Crown corporations — two in particular that you mentioned, B.C. Hydro and ICBC, I think, because those are our larger Crown corporations.

Just for a point of clarification. Mr. Jarvis mentioned that they're audited internally. I think, just for correction and for the record, that they are audited externally versus internally. It's just that they hire private sector auditors to do that. They do have an external auditor, as I understand it. Therefore, the question that I have is whether you as the auditor general receive those external audit reports and have a look at those and whether you offer recommendations or have the opportunity to bring them forward to a select standing committee, to suggest that you perhaps play a role there.

In the past there hasn't been a select standing committee. I understand that that is a barrier. But now that there are a number of select standing committees, whether it's this one, Public Accounts or Finance and Government Services, that opportunity is now available to you, whether or not you're going to see that as an opportunity.

Linking that to the request for a new act, Mr. Strelioff, perhaps you could explain at a future meeting — and arrange that with the Chair and put it on our agenda, whether it's this committee or Finance and Government Services — the highlights of the changes in the new act, whether in fact you are looking at having barriers removed so that you can play a more active role so that the governance of a number of Crown corporations can be reviewed and scrutinized. I would ask you if you can comment on that before I continue, if that's appropriate.

W. Strelioff: I certainly welcome the opportunity to attend a future meeting of your committee to explain the changes to the Auditor General Act that we're proposing and how those relate to our work within the Crown corporations community and, therefore, how we could help your committee do your work as well.

You're right that the auditors of Crown corporations are private accounting firms. One of the key issues where we're asking for change is that we oversee that appointment process to make sure there's an effective audit environment within the Crown corporations community. As you might know, the auditors of Crown corporations are appointed by the boards of directors of those corporations. Therefore, the link to the Legislative Assembly is not as strong as we think it should be.

The thrust of the changes we're proposing to the Auditor General Act that relates to Crown corporations is mainly removing barriers and making it clearer that as your auditor we are the auditor of all parts of government. In terms of our plans and strategies, with that change in the mandate we plan to take a stronger oversight role on the financial statement side and then also on examining their risk-management practices — you'll hear later this morning — as well as the work we've done on the quality of the service plans and performance reports provided to you by Crown corporations.

I. Chong: Just further to that, I do acknowledge that our Crown corporations have boards appointed. I would imagine the board of directors, the chairman and CEO would probably attend these meetings, where we can question them more thoroughly, rather than asking you to do that as your oversight role. That is the job of us here at this committee.

I believe that determining which Crown corporations are being audited externally by private sector auditors or whether they're audited by your office is a choice that is available. Maybe you can clarify whether there are certain Crown corporations or commissions, trusts, etc., which are mandated that must be audited by your office. Again, with that, perhaps you can explain why the distinction is made or why there are such criteria. Is it because of cost? Is it because the cost of auditing through your office is more expensive than that of private sector auditors? What would be the determinants of that?

P. Gregory: Perhaps I could provide a little information on that. I would describe the financial audit process we have now as being in some respects an accident of history. It goes back some period of time. British Columbia was the last province to get a legislative auditor — an auditor general. Prior to that, the comptroller general was undertaking some audits, although they didn't express an opinion on the financial statements in the way that's required now. Many organizations have had private sector auditors.

When our office was formed, we took over the work that was formerly done by the comptroller general, and the private sector work remained where it was. As I understand it, a lot of that had to do with where the Crown corporation came from. B.C. Hydro was already existing when it was purchased, and the audit arrangements continued.

What we were left with was an audit process where the logic or rationale wasn't very clear, nor did it necessarily serve Members of the Legislative Assembly very well. Now we've tried to rectify that in some respects by an agreement with the government of the day, which we call the memorandum of understanding, which allows us to become involved in audit decisions around certain things that government decided. There's section 6(1) of the Financial Administration Act, which means that the Minister of Finance is involved in some audit appointments, and we now advise the Minister of Finance around those.

That moves us ahead some from where we were, but it still doesn't provide a base that provides good logic and a strong and sound financial audit process for legislators. What we'd like to do through our act is to get to that sound base so that legislators know their auditor is in a position to provide them with assurance that the audit process is working effectively and that their needs and interests are being met through that process.

I. Chong: Okay. Just one final thing, Mr. Strelioff. You mentioned having an oversight in the audits being undertaken by the private sector. Maybe you can provide clarification. If it means that you would have input as to which private sector auditors would be permitted to audit various Crown corporations — if that's what you're saying — then my concern is that you would open yourself up for some risk and liability if someone felt they were being unduly barred from performing an audit. I guess what I'm asking is for clarification as to what kind of oversight you were referring to when you said you wanted that link with these external auditors. You did indicate that a few minutes ago.

P. Gregory: The process we would use is the same process that is generally used for the appointment of auditors in that there's a request for proposals. No one is excluded. There are criteria set out. It's the general standard that is used everywhere. All auditors who are qualified to provide opinions would be able to express their interest in doing that.

What our office would do is ensure that the design of the audit — some of the fundamental audit parameters, what gets looked at — was inclusive of the issues Members of the Legislative Assembly need assurance about and that in the way issues get resolved when there are matters open to some interpretation, those interpretations are made keeping in mind the legislators.

B. Bennett (Deputy Chair): Thanks for your presentations. The first thing I wanted to say was that as chair of this little subcommittee we've just struck, my main responsibility will be to develop a template that we can use in examining all the Crown corporations we examine over our mandate. It seems to me that you folks are probably eminently qualified to help us with that, so I would ask that we get together soon and talk to you — well, get some suggestions, I guess, as to the kinds of things you think we should be looking for and how we can organize our investigations.

I have three specific questions. One of them is a bit of a blue-sky question. I'd like you to comment, if you can, on the risks that you see to the province from the rapid and fundamental changes we are implementing right now and are about to implement. I'm sure that you must have some thoughts on that — just some speculation, maybe, on your part.

Secondly, with respect to the sustainability audit portion of your job, I'm curious as to whether or not there are any sort of inlaid value judgments involved with that. How do you go about determining how you perform that part of your job? Maybe that's going to come up later.

Thirdly, just following up on what you were talking about a second ago, I'd like to know how you choose what you audit and what you don't audit. Do you accept tips, like Revenue Canada? What is the process for choosing what sort of organizations and ministries and portions of ministries you would audit?

W. Strelioff: Thank you for the questions and comments. We'd welcome the opportunity to provide your subcommittee with advice. That's good, and I would welcome that opportunity.

First, the blue-sky question on the key risks that are emerging both in the economy and as well in the restructuring that is taking place. Certainly any organization undergoing significant change encounters risks that need to be managed well. The fact that this committee is becoming active is one of the key mechanisms that you can mitigate those kinds of risks with, by an effective public scrutiny and, also, the emphasis on making sure that all organizations provide you with good performance information, both on what they're planning to do and what they've actually done — their key risks, as they see them, and how well they're managing them and the environmental scans and chal-

The quality of the performance plans and reports that you receive: if they're good quality, you'll have the information that will provide you with a means for discussing, deciding and assessing whether the plans and priorities of each Crown corporation are in what you think is the right direction.

The sustainability part. We are beginning to develop a work program on sustainability — the idea that decisions should encompass the variables of the economy and the environment, as well as impact on the community. Our initial focus will be, once again, on the performance information that you receive from individual government organizations, which should include their thinking on the sustainability parts of their business.

The way we decide what issues to focus on, of course, has to be within our resources. We have, in the past, focused on the programs carried out mainly through the ministries. That has been of particular interest to legislators. As Peter explained, we are setting out our priorities. They are the overall performance plans of government, the health and education sectors — that's a key part of what government does — how government manages its IT capacity, as well as infrastructures, capital projects, the environmental risks and sustainability thinking of government, and, in all places, trying to encourage a move to stronger performance plans and reports.

In our work we receive all sorts of questions from the public. They can be from phone calls or from letters. We do factor those requests and questions into our work program. Sometimes they're folded into an existing audit. Sometimes it's an issue we explore to see whether there is substance to it and whether we should adjust our audits. Sometimes it's a matter of referring people to the right place for the information they're asking for. The tips and phone calls and letters do impact our work program.

P. Gregory: If I could just add a little bit, our program is designed to meet the needs of our customers, who are you folks here — the legislators. To the extent that we understand those needs, the better our program. What we want to do is ensure that legislators and the public are receiving the best information possible for assessing the performance of government so that when you get information, you know it's reliable and complete. If you're not getting information, we may do work that tries to provide that information to you.

P. Bell: Thank you for the presentation. I have three questions. The first one pertains to the Workers Compensation Board. I'm wondering if you've done any work with that particular organization. I didn't note it on your presentation.

W. Strelioff: The answer to that question is yes, we are. That's one of the financial statement audits we do directly, and we have carried out work at that organization.

P. Bell: Given that we're currently in the process of doing a review of the Workers Compensation Board, one might think it would make sense to fold in the information that you have from the past. Is that an accurate assessment?

P. Bell: We're currently engaging the Workers Compensation Board in three levels of review. I'm wondering if you think that the information you have from the past should be added to those reviews currently so that we have, maybe, a broader assessment. How old is the information that you have?

W. Strelioff: My understanding of the question is that within the Crown Corporations Committee you're going to be reviewing the Workers Compensation Board and that when you do that, you're asking whether we can provide you advice as legislators when you carry out that review.

P. Bell: It would be inappropriate, then, for you to provide that information. Is that right?

W. Strelioff: A recent update. My colleague Errol Price is responsible for our work at the Workers Compensation Board, and he has advised me that we have been asked to meet with the government's WCB review team to provide that team with various perspectives on what we've done in the past.

Second question. I'm wondering how you feel that we as a group could augment the work you do. This is probably going to require some thought over time, and perhaps you could come back to us. As much as you can assist us in our work, I'm sure there are areas where we could engage some of the Crown corporations that might assist you in the work that you do. I don't know whether you want to deal with that now or if you'd like to maybe get back to us at some point on how you think we might be able to augment your office.

W. Strelioff: Thank you for that question. Certainly, I'd be happy to discuss that with you in the future as well as right now.

One of our key focuses is on the quality of the performance information that you receive. We want you to have the best information possible for assessing the performance of all of government ministries, Crown corporations and all sorts of Crown agencies, boards and commissions that exist. We put pressure on the system of government to improve the quality of the information that it provides you.

Supporting us in that pressure and in looking for opportunities to make sure that all parts of government know it's important that they provide you and, therefore, the public with quality information on their performance is key. We need your support in pushing that forward. When they know it's something that's important to all legislators, that becomes important to officials of Crown corporations, agencies and ministries. So that's an important part.

As we've discussed before, we are asking for changes to the Auditor General Act to build in the responsibility that you also want from us so that you know whether the information you're receiving from all parts of government, including Crown corporations, is reliable. You get a performance plan or performance report, but does it include all the right features of what you would expect in a performance plan or report? How do you know whether that information is reliable? That's a key part of the future that we certainly need your support for.

My colleague Errol Price is also going to note that we will be recommending that there be changes to the Budget Transparency and Accountability Act, to state that the performance reports that you receive do have audit assurances that that information is reliable. That is consistent with the government's announced intention over the past few months that the annual reports of all government organizations be audited. That's consistent with that. That requires legislators to step forward and say: "We think that's important." How you do that is through your questions but also through enacting legislation or changing existing legislation. There are some important mechanisms by which you can help yourselves and also ensure that we are better positioned to help you.

As we move through the performance of various Crown corporations, you'll no doubt identify issues or risks that you want to have examined more carefully. The starting point would be to ask the Crown corporations how they identify their key risks and how they ensure they're being managed well. Then the next question is getting assurance on that information.

P. Bell: Okay. Just a final question. In terms of this committee having input on who it might audit on an annual basis, is there some flexibility in that area? How would we go about that?

W. Strelioff: Yes, there is flexibility as it pertains to what we audit. One of the things we do is listen to you, and that helps shape where we think we could serve your interests. As Peter mentioned, we are your auditor. Therefore, our work program is driven by what you advise us.

K. Stewart (Chair): Just prior to moving on to the next speakers, I've got Dave, Dan and John up next. Arnie, you haven't made any comments yet. Do you have any questions at this point? I'm just going to finish up the speakers list and then close off, because I trust that we should be moving on. We do have other things. John, do you have any questions?

K. Stewart (Chair): Sorry. I was talking to John Wilson. I've got you on the speakers list already.

Just as we move on, obviously there's a connection between your interests and our interests. Again, the purpose of today was to help us become more aware of what it is you're doing and how that can help us. We've touched on the fact that we would be forming a committee. Some of these things, I trust, will be discussed when we're designing the template as to your involvement with the committee and how we can do that. We will have to do a motion at the end of the meeting. Right now we haven't struck the committee yet, but we certainly have the intention. If it is the will of this group, near the end of the meeting we will formalize that process.

D. Hayer: Most of my questions have been asked by my colleagues. One question that I specifically still want to ask you is: who has authority to ask you to do specific audits on Crown corporations? You said that you report to the Legislature. Is there a specific committee in the Legislature? Who can actually make requests of you? Can you go and do audits on the specific Crown corporations, or is there any specific committee?

W. Strelioff: Thank you for the question. In the Auditor General Act, as it is now, it does contemplate Lieutenant-Governor-in-Council — cabinet — asking us to carry out examinations, and we can choose to do so or not. We also accept requests in a more informal way.

In our proposed change to the Auditor General Act we are asking for that to be opened up more, so it would include legislators asking us in a direct sense to carry out a specific examination. For example, one that seems quite logical to me, given the past working relationship that we've had, is the Public Accounts Committee. It would be a logical one that would ask us to do particular examinations. That isn't contemplated in our current legislation, but that is certainly a committee that we work with and that we have worked with in a very direct way. It certainly makes sense that the Auditor General Act would state that.

K. Stewart (Chair): If I could just clarify, then, Wayne. Basically, you have the autonomy to audit

whoever you wish, when you wish. If someone makes a request, if cabinet requests it of you, you may or may not do that. That's your prerogative. Is that clear?

W. Strelioff: Within the context of our resources we do have the ability to examine a wide array of issues. As it pertains to cabinet asking us to do a particular examination, our act says that yes, cabinet can do that. We make sure those kind of requests are more public, and we do have the ability to say yes or no to that request.

K. Stewart (Chair): I would suspect, generally speaking, that you would do it, but you have the prerogative not to.

P. Gregory: I wonder if I might just add to that. Currently, we do get queries and requests from a wide array of people. Although the act states that we are expected to receive requests, perhaps, from one group, we get requests from a wide range of people. All of those are considered quite carefully. There is a fair amount of discretion, as Wayne has pointed out, in the work that the auditor general might carry out. We consider all of those requests. Clearly, as the Legislative Assembly's auditor, a request from legislators is considered quite seriously. That's our customer, our client.

D. Jarvis: Mr. Strelioff, Mr. Gregory, in light of Ms. Chong's statement about auditing, I am wondering if I could get some clarification about auditing. I'm just a poor little city boy, you know, and I don't understand all these big words. First of all, we have auditing, and then we have internal, external and private. Then there's forensic auditing. I'm just wondering what stage we go to, to get really reliable information as to whether the risk managements for someone like ICBC are there.

I'll give you a quick example. ICBC said they don't go outside, because they don't have to report to any superintendent or anything like that. Are the general standards or practices of auditors sort of reliable, even though they have chosen their auditors? It's been said it's self-serving. Does it go out to competition?

Secondly, they told me they do internal auditing in the sense that when the pool of money comes in from premiums, literally millions of dollars come in. They have a situation that they call claims reserves, which they set aside for pending losses. Now, I've noticed in their statements over the last five, six, seven years that they've literally moved almost a billion dollars. They move it back and forth the way it suits them.

I'm talking about risk management. I've asked them how they satisfy themselves that this is in order. They say: "Well, we do our own internal audit." In other words, they are reducing claims reserves that are there specifically to protect us out in the streets, and they're moving it over into showing their profit and loss — using it for their own self-serving means, I guess, in that sense. Hopefully, it's for us. That's what my concern was. That's an internal audit as far as I'm concerned. When you're explaining audits as private, external, forensic, can you tell me what you think they should do with regard to the really specific risk management problem I can see?

W. Strelioff: Given the fact that this committee is created with the mandate to review the performance plans and reports of organizations like ICBC and with the opportunity to call in officials from that organization, you have the opportunity to ask them about their practices on all fronts, including how they ensure that their financial risks are being well managed.

One of our general proposals is to ensure that the overall audit practices carried out in the public sector, including those at ICBC, are overseen by our office so that we're in a better position to make sure the audits carried out throughout the public sector are done with your needs in mind.

Now, the internal audit is the function created within an organization to help management examine specific issues that they think should be managed. Normally the role of that internal audit function is decided by senior management, quite often in consultation with the board of directors, but it's designed to serve their needs. It's important, but it's focusing on what issues those groups of people think are important, and the reports go there.

As Peter mentioned, the system of external auditing that we have in place now is a function of the historical nature of our office, which was established in about 1977. The board of directors, by law and cabinet, has been given the authority to appoint public accounting firms to do audit examinations of Crown corporations. Then there's our office, which is your eyes. We're out there trying to make sure that your information, needs and assurances are met. One of our proposals within the Auditor General Act is consistent with thinking that the audit system needs your eyes there, your oversight, to make sure that the audits that are carried out are focused on the issues, risks and assurances that are important to you.

P. Gregory: The other thing I would just add is that there are things in process, as Wayne indicated earlier, which, if they reach fruition, as people expect they will, will address a number of your concerns. I mean, ICBC is required to prepare a performance plan and report. In that plan and report it should be talking about its

performance and its risk management, including the issues that you've raised. I think that having audit assurance that the information you get is complete and is reliable will assist you and other members of the committee to undertake their role of reviewing that performance.

D. Jarvis: Mr. Gregory, could you explain the difference between, say, forensic audit and an audit?

W. Strelioff: I'll take a cut at it, Peter. In general, forensic audit is usually focused in a very detailed sense, tracing transactions in a very, very labour-intensive, detailed way and trying to move them all the way through where the transactions go. There's usually a sense of potential illegal activity that's associated with it, so it's a very intense examination of a particular transaction or range of transactions.

P. Gregory: Forensic audit is one that generally relates to the courts and to legality. They are usually undertaken when there is a suspicion that there may be illegal activity. That's when a forensic audit, as it's called, is undertaken. It is for the purposes of legal matters and preparation for court proceedings.

K. Stewart (Chair): With regard to some of the questions that seem to be a bit specific to particular organizations, I would hope that as we get our schedule and agenda up and we know when particular Crowns are going to be coming before us, we'll be able to do a little bit of homework on those particular Crowns. If we need some advice, or if you have some information on that, hopefully we would be able to come to you ahead and say that in two weeks we have this particular Crown coming to us and have that opportunity to maybe look to your office for some specific information that you have of that Crown, too, which would help us in preparing.

Just moving on to John, and then I see Ida has one final question before we move on to the next section. Thank you.

J. Nuraney: I just have a quick, short question. I hear you saying that you want to create some kind of parameters and strengthen the mandate of your office in terms of oversight. Now that we have the truth-in-budgeting legislation in place, if these measures were in place, would that have prevented a fudge-it budget?

W. Strelioff: One of the key things that past legislators did through the Budget Transparency and Accountability Act and then also through its amended version was to require by law that the budget of the government be based on…. The language is a summary budget which includes all organizations of government and which makes sure that there is a comprehensive view, a picture, of the planned financial course that the government intends to lead. That wasn't in place several years ago. That change is an important ingredient to making sure that that confidence in the financial planning framework will increase. The Budget Transparency and Accountability Act also asks that the key advisers to the government — I think it's named as the secretary to the Treasury Board — provide assurances to you within that budget of the nature of the assumptions that underlie the budget. That's an important step forward.

I. Chong: I'm mindful of the fact that this is the first time that this select standing committee has ever been convened. I realize that we had an orientation at the beginning of the convening of this committee, but just to again clarify, for my understanding, what will be undertaken over the course of the year?

Our job is to have Crown corporations come to this committee, and they would be represented by the board of directors. They would be the people we would be questioning. In response to your question to Mr. Strelioff, his office presence at this committee would then be to provide clarification or support in that, as opposed to questioning the auditor general as to what was going on with the Crown corporation.

I just want to have that understanding, because I'm serving on two other committees which interact, as well, with the auditor general's office. I want to be clear on what our function is so I don't overlap in those other areas. I know that Finance and Government Services and Public Accounts use the auditor general's office as well, but their role in this committee would be in response to questions that we may have or in assistance when we ask the people that we have to ask questions of. That would be the board of directors of those Crown corporations. Is that clear enough? I want that for my clarification more than anything.

K. Stewart (Chair): From my perspective as Chair, the intention of our association with the auditor general is to ensure that when we have Crown corporations come before us, the type of financial information we're getting from them is accurate. What we're really trying to do is be able to exhibit in a clear way, through our committee to the Legislature and openly to the public, what our Crown corporations are doing and why they're doing it and that what they're doing is in the best interests of our government.

One of the things that's crucial in this is to ensure that the financial information we're getting is accurate so we know the financial status of these organizations, and we have the support of the auditor general's office to help us ensure that the information we're getting is accurate. Would that appear to you, Wayne, to be a fair relationship with your group?

W. Strelioff: As the discussion indicates, the relationship is very much a work-in-progress, because the role of the committee hasn't really formed. A key part of the role of this committee is to make sure, at least from my view, that a strong public scrutiny of the performance of Crown corporations takes place. You do have referred to you the service plans and performance reports of Crown corporations. One of the things we do is examine the quality of the information that is within

those service plans and reports to make sure that you have the best information available to you for assessing the performance of Crown corporations.

My colleague is going to be discussing, in the second part of this, what work we're doing in that area. One of the actions you might want to consider is to ask the Crown corporations to provide you with an assessment of how they think their performance information meets best practices and best standards. My colleague will be describing to you the principles that we use when assessing the quality of performance plans and reports.

Part of the information requests, and something that your subcommittee may want to consider, is asking the Crown corporations to do a self-assessment of the quality of the information that they're providing you and, where they see gaps — no doubt, there will be gaps — what they're planning to do to strengthen it. That will give you a good basis for exploring how our system can be strengthened. We can provide and will be providing you with some advice later this morning as well.

I. Chong: I just want to be clear on our focus on this committee. I am concerned that if we use the auditor general's office in a more expansive role than it should be for this committee, then we are moving along the lines of what the Public Accounts Committee will be doing in asking for the auditor general to provide this or provide that or do this audit or that audit. I think that direction comes from the Public Accounts Committee.

At the same time, if those Crown agencies or commissions or boards that come before us have an external auditor versus the auditor general, I would expect or hope that we would then call those external auditors as witnesses to this committee. If they were not able to come to this committee, then, in their absence, perhaps the auditor general would give clarification to the audit report or the scope of the audit that was prepared by those external auditors.

As I say, I just wanted that for clarification. I'm concerned that, being a new committee, we may all be encouraged by the auditor general here, but he is linked very much to two other committees which I think have responsibility or authority to direct the auditor general to conduct audits. I don't know if that's really meant to come out of this committee. If it is, then I apologize, but I would like clarification on that.

K. Stewart (Chair): If I may, one of the luxuries that this particular committee has that not many other committees have had is time. As a result of the core reviews that are going on within the Crown corporations, which will be a basis of our further evaluation of these organizations, we have the luxury, if I can call it that, of being able to educate ourselves and equip our committee with as much of the resources and knowledge as time allows. You never have enough time. We do have that opportunity. I would hope that as part of the subcommittee's work in working with the auditor general's department, they will be able to pick up some of these things.

Again, I appreciate the fact that being a new committee, there are a lot of committees that have not been functioning that actively over the years. I think it is incumbent on us to ensure that we cover what we need to cover under our mandate, but we don't want to stray off and be duplicating work. One of the things that we'd really like to see in government is that any duplication of services doesn't occur. We want to be as effective as possible with our time. I hope that helps, in the fact that we will be aware of what these other committees are doing.

I trust, Wayne, that you and your people will be able to assist us as to how you can best assist us without duplicating the work. Also, we will have to make it very clear to the CEOs, before they come before us to present their plans, as to what our expectations are with regards to the area of audit and accountability. Wayne, did you have a comment on that?

W. Strelioff: Well, just generally, we do, as I said, work for you. We welcome the opportunity to serve you in any way we can.

We're now about halfway through our meeting. If anyone would like to just quickly grab a coffee or whatever, then, Wayne, you can certainly continue on with what you think will be the priorities for us for the next hour and a half. Thank you.

W. Strelioff: Thank you once again, Chair, members and colleagues. The second part of our presentation this morning is to review with you what we are doing to encourage strong public sector performance reporting. As you know and as we've discussed already, the service plans and performance reports of Crown corporations are now referred to your committee for your scrutiny.

Now with me to discuss our work is Errol Price. Errol is a chartered accountant and has been with our office for nearly 20 years. For the past several years Errol has led our work to encourage government to strengthen its performance reporting practices, particularly by focusing on the achievement of results.

Errol's expertise is also recognized nationally. He has participated in many national forums and task forces that have been put in place, particularly to explore how best public sector performance reporting can move forward. Recently Errol completed a one-year term as the president of the Institute of Public Administration of Canada. I'm going to turn over the next part of our review with you to Errol.

Good morning, Chair, and good morning, members. I thank you for the opportunity to be able to speak to you today on the subject of public performance reporting — my favourite topic, at least in my professional life. I look forward, certainly, to supporting the committee as it carries out its work.

We've just distributed another package to you. I guess it looks remarkably like the one you had first thing. I'll be talking about the contents as I go through the presentation. Again, copies of the slides are in the left-hand side of the pocket if you wish to refer to those.

My presentation is really in four parts. First, I'd like to put some context around the Budget Transparency and Accountability Act, the BTAA, and the subject of public performance reporting. Second, I'd like to review a little bit of the history behind the BTAA. I'll be fairly brief with both those subjects, but I think there's some important material there. Then I'll move on to preview some work we have just completed concerning a review of the current performance plans and reports, focusing first of all on the criteria we established for our review. Then, finally, I'll summarize the results.

In total the presentation lasts, I think, for about 25 minutes. What I will do is stop at the end of each part and see if there are questions, just to break it up a little bit. Some of the issues I'll raise you may wish to discuss as a committee in more detail at your future meetings.

The BTAA is an important piece of legislation that will have a major impact on how the public service manages public resources. As you know, it requires government as a whole and all ministries and government organizations to report publicly on their plans and achievements against those plans. In other words, it requires public reporting of performance.

British Columbia is not unique in requiring this. Over the last ten to 15 years many countries have moved in this direction, including New Zealand, the United Kingdom, the United States and Australia. With respect to the States and Australia, the requirements have been not only at the federal level but also at the state and provincial level. In Canada the move happened relatively more recently, in the last five or six years or so, with Alberta, the federal government and Ontario being at the forefront.

Public reporting of performance is important, and as elected officials you will obviously appreciate that. It's an important instrument of accountability both to the Legislative Assembly and to the public. Also, it should facilitate public engagement in performance matters. But public accountability for results — public performance reporting — is really just the tip of the iceberg. To support it, there needs to be a culture that is focused not on measuring and managing for inputs and processes but on managing for performance or managing for results, as it's sometimes called.

This diagram shows the key components of performance management. In the top left-hand corner it shows that the starting point is to establish clear objectives. Next, there need to be effective strategies in place, developed through sound policy development and strategic and business planning. Management systems such as human resources, administrative and financial need to be aligned with those strategies. Performance needs to be measured in an ongoing way and monitored by management, as well as being reported publicly on a regular basis.

Finally, there needs to be learning from actual performance in a way that has real consequences, whether it be through adjusting funding levels or the adjustment of strategies and program design.

Fundamental to performance management, then, is performance measurement. This is where many of the challenges lie. It's commonly said that public reporting of performance is new, it's difficult, and it will take time to get right. Certainly, there are issues to be resolved regarding public reporting. I'll touch upon some of those a little later.

The fact is that public reporting can only be as good as the information available within the system. It's getting to grips with measuring and managing performance that is the really difficult part. It's difficult because measuring performance in the public service is complex. Organizations may have multiple and even conflicting objectives. There are strong public expectations regarding how public business should be conducted. Performance measurement, especially outcome measurement, takes money, time and skill. Some measures can be complex and elusive, especially in the human service area, which, of course, represents a significant portion of government services.

A fundamental principle of accountability for results is to balance responsibility and authority. Public servants have been reluctant to be held accountable for high-level outcomes over which their programs have only partial influence. This has led, perhaps, to an emphasis on inputs and activities as measures of performance. Often a final outcome is well beyond an organization's control, and the most that can be demonstrated is an output or an intermediate outcome. Ways will have to be found to measure results on a governmentwide basis.

Focusing on robust and meaningful performance measurement and reporting brings new risks to be managed. For example, being open about intended results and then measuring and reporting actual results is somewhat contrary to human nature. People will be resistant to having their efforts judged in this way.

Behaviour around performance measures can be perverse. Information can be misused both by the providers and by the users, particularly in a transitional period. For example, providers may drop or change measures when results turn bad or may set overly easy targets. On the other hand, users may unfairly blame individuals or organizations without understanding the context of the results, or they may choose simply to ignore the information.

So why do it? Why manage for and report publicly on results? In the general sense, one needs to look at motions of public confidence, good governance, accountability and stewardship and the public's right to know what government is doing for them. Performance measurement is an essential tool in decision-

making concerning government programs. It supports evidence-based management regarding what activities are producing good results and why.

It's not going to cure all ills, but it can help make our public service stronger and more effective in what it does. It has been said that changing to a results focus, simple though it seems when one says it quickly, is in fact a significant culture change. Organizations need to be challenged to move forward as quickly as possible, but they also need to be supported with training and other guidance. Expectations do need to be realistic because it will take some time to get it right.

That's the end of the first part of the presentation, just providing a little bit of context for performance reporting.

B. Bennett (Deputy Chair): I'm unclear as to whether this is an approach that you're just starting to implement or something that you've been working on for the last few years.

E. Price: If I may, that leads nicely into the next part of the presentation. Now I will spend a couple of minutes looking at some of the buildup, some of the history to the BTAA and some of the work that we've done.

For a long time my office has been promoting better performance management and reporting in the B.C. public sector. In 1994 the then auditor general embarked on a joint initiative with the deputy ministers' council to enhance accountability for and management of performance. Three joint reports were issued to the Legislative Assembly between 1995 and 1997. The main report, issued in '96, was entitled Enhancing Accountability for Performance: A Framework and an Implementation Plan. The framework called on government to account publicly for its organizational and program performance, its financial performance and its conduct of business performance.

In the package there are details of how you may access these and other relevant reports, should you want more information about them. One of the ways you can access them, of course, is to simply ask our office, and we'll provide them for you.

The Select Standing Committee on Public Accounts of the day, under the chairmanship of the late Fred Gingell, actively supported this initiative. In 1996, after holding a series of public hearings, the committee in effect endorsed the accountability reporting framework proposed by the auditor general and the deputy ministers. As well, it made some recommendations about the committee system employed by the Legislative Assembly. I've included a summary of the committee's recommendations in the package that you have in front of you.

In 1999, as Peter mentioned earlier, the auditor general issued a report on the estimates process. That report recommended some significant changes to the way government plans, budgets, measures and reports on its performance. Soon after that, government established the independent budget process review panel. In its report the panel, which is often referred to as the Enns panel, after the name of its chair, also called for fundamental changes to the way government reports on its use of public funds. Those recommendations, in effect, endorsed those made previously by the auditor general and the Select Standing Committee on Public Accounts. I think it's fair to say that there was consensus around what needed to happen.

Overall, progress had been slow. We think that the slow progress was due in part to the human factors associated with change, such as incentives and perceptions of risk regarding being more specific and upfront about intended actual achievements. We also sensed some discomfort within government around the idea of reducing central controls to give greater flexibility to those managing in a results-based culture.

Perhaps cost was a factor. No doubt there will be certain investments involved in enhancing information systems and developing and training staff, but perhaps the real costs result from missed opportunities, from not knowing what works and what doesn't. Also, we concluded that legislation requiring accountability and, therefore, managing for results would provide a significant boost to the initiative.

In his last report on the subject early in 2000, entitled Towards A More Accountable Government: Putting Ideas into Practice, the previous auditor general called for action to move things ahead, specifically recommending a legislated framework. Later in 2000 the government of the day introduced the Budget Transparency and Accountability Act. Of course, as I've said before, it requires government as a whole — ministries and government organizations — to publish annually the three-year performance plans and then to report annually on actual performance in relation to those plans.

Earlier this year the new assembly approved amendments to the act. Among those amendments, the names of the plans and reports required were changed from performance to service. Ministerial sign-off will be required now for ministry plans and reports, and specified government organizations will be required to hold public meetings to discuss their results.

The first three-year service plans required under the amended act will be published in February next year, and the first annual reports against those plans will be published in the summer of 2003.

This legislation is a very significant step forward, but for the reasons I've already outlined, we believe that consistent and persistent leadership and lots of hard work and patience will be required in the years to come to bring this initiative to a successful state.

J. Nuraney: It seems that a few of your recommendations were met in the BTAA that was enacted and then revised again this year.

J. Nuraney: You say there are still more steps to be taken. Could you just give us some examples of what is missing?

E. Price: The steps to be taken are not so much regarding the legislation. I think that the framework as provided by the Budget Transparency and Accountability Act is good. The point I'm making — and I think it's a point that is borne out by experience in the other jurisdictions I referred to earlier on — is that legislation alone will not enable all this to happen, at least not in a meaningful way.

It does represent shifting from focusing on managing inputs to managing for results. As I say, it sounds simple, but it is difficult, and it does require training. It requires guidance. It requires organizations to buy in to the concepts. The point is that it is not simple. The legislation provides a good framework, but now it requires a lot of consistent leadership to bring this to fruition.

I said that progress was slow. Work was continuing in various parts of government. I think there's a good base to move forward on, but getting to grips with identifying and measuring and managing for outcomes is difficult. It may well be that we'll never get it totally right, but the point is to move in a steady, measured way toward that end.

W. Strelioff: One of the steps that this committee can help put in place to help the move forward is to ask questions. When Crown corporations come in, ask questions about their achievement of planned and actual results. Why are they selecting particular targets and indicators? How does that relate to their overall objectives? What risk management practices are being put in place? Your questions will help the infrastructure of management to take ownership with the change and move forward, all with the view of making the best use of public resources.

K. Stewart (Chair): The one issue that did come up in this presentation was the three-year plans and reviewing the annual reports against the plans. That will be an ongoing role of this committee with regard to the Crown corporations and, I would suspect, one of the major functions of this committee. The core reviews will be done. The organizations, the Crowns, will come before us and present their three-year plans. It'll be incumbent on us to first look at those plans, scrutinize them, and then, as time moves on, to come back with that same corporation and say: "Okay; now what have you done? You told us what you're going to do." It's going to be incumbent on us to ensure that we have some method of gauging that what they say they've done, they've actually done, so that'll be a big part of this committee.

It does need a long-term commitment from the Legislature for this committee to have the time to continue. That's the long-term goal. Certainly, the intention given to me as Chair was that this committee would be a long-lasting committee that would go on beyond this session of parliament, even. It's incumbent on this committee to do a good job, and then that good work will continue for a long future. That is the intention.

J. Nuraney: If I may, Mr. Chairman, just to follow that up, my understanding is that legislation in itself is not enough to change that culture. Are there any steps taken to change that mindset to a more accountable process?

E. Price: I think the steps are really, to a great extent, around the use of the information. I've said that one of the pitfalls — one of the ways in which information can be misused, if you like — is to be ignored. If that happens, if organizations were striving to produce better information around their performance but that information wasn't being used in a public way, then that would be a disincentive.

Again, echoing what Wayne has said on a number of occasions this morning, the work of this and other committees to bring those reports to life and to actually be seen to be actively using the information is a very significant step in leading that culture change.

W. Strelioff: One of the other factors that I am particularly looking forward to is the articulation of a governmentwide strategic and business plan that sets out the priorities, goals and objectives of the government as a whole, including the key benchmarks and indicators that government as a whole is setting out to gauge its progress over the next few years. When that's set out, then the individual organizations of government, including Crown corporations, will have a better framework for assessing how they can contribute to those overall government goals and objectives. That will be a key part of encouraging change, and that means leadership by the government as a whole, perseverance and just a lot of hard work.

K. Stewart (Chair): Before we move on, again it just indicates the importance of the template and that we ensure that we can elicit measurable indicators from these organizations that come before us. Those will be tasks that we will have to do: first, design those templates so that we can elicit those responses, and then secondly, in the long term, gauge the success of what they've put forward to us.

E. Price: Moving on to the third part, I'll now start to focus on the work that we've actually done and the criteria that we've developed. I think it's clear from comments that have been made by myself and my colleagues this morning that the office of the auditor general strongly supports this initiative, so we want to do what we can to make sure it's successful.

We believe that as performance measurement improves and public performance reporting evolves, our primary role — one way we can really add value — will be to add our independent assurance that the information reported in our annual reports fairly presents performance. We're not there yet. We do, how-

ever, hope to start doing this work in 2003, when the annual reports start to come through.

In the meantime we thought it would be useful to review the performance plans and reports that were published earlier this year. We recognized that those plans and reports did not any longer represent the plans and directions set by the new government, but nonetheless we thought that our review would provide a good assessment of how organizations were doing in their reporting and where improvements could be made in the future.

We did two things. First of all, we established a set of criteria for what a good service plan and a good service report would look like. Then we selected 20 ministries and Crown corporations and assessed the extent to which they met those criteria. We did this to establish a baseline for future years and to get a sense of where improvements were needed. I want to stress that we didn't set out to be judgmental of whether organizations had done as well as they should in their reporting. As a result, you'll see when our report comes out that we do not comment on individual organizations unless it is to highlight good examples of reporting.

I'd like to spend just a few minutes talking about our criteria. We think this is an important area in which we recommend that legislators at this committee take an active role. After I've explained the criteria, I'll then try and give you some sense of what our report will say when it's published around the end of this month.

In approaching this, we didn't want to be prescriptive and set out a detailed framework for what should be included in a service plan or report. Each organization will find its own way of telling its performance story, and, indeed, we encourage innovation in reporting. Rather, we developed a set of statements or, I guess, a set of questions that describe what a good plan or report should tell the user of the material. I've included in the packages that you've got two documents that set out our criteria, both for plans and for reports. They're just one page each. The documents are headed "Summary of Key Questions and Criteria."

You'll see that the criteria are gathered under four key questions about the plans and reports. First, is it clear from the reports what public purpose the organization serves and how it carries out its role? Second, is it clear what the intended results are and the extent to which the intended results are being achieved? Third, is the organization being transparent and credible in explaining its plans and performance? Finally, is it clear whether the organization has the capacity to maintain or improve results in the future?

I'll just give you a bit more detail about each of those four questions. We think that the plans and reports should enable an understanding of the public purpose of the organization, of its key programs and how it delivers them, of the way in which it conducts its business with reference to its values and to governing legislation and of its governing structures and reporting relationships.

With respect to results, we think that the reader of the plans and reports should understand the organization's goals, objectives and intended outcomes; its main strategies for achieving its intended results; and how its goals, objectives and intended outcomes are aligned with government's strategic direction. We think that goals and results should be linked to resources required. In other words, there should be an integration of financial and non-financial information. Subsequently, it should be clear what the organization actually achieved, compared with its plan; what it cost; how the operating environment impacted its performance; and what it plans to do differently as a result.

We think the plans and reports should be easily accessible, easy to read and understand, fair and balanced. We think it would be helpful to the reader if organizations explained the degree to which the performance data are reliable.

We believe that organizations should report on the state of their capacity and describe how they will maintain or improve their capacity in the future. The concept is built upon the notion that to deliver an appropriate level of service in the future, organizations need to have or have access to the appropriate combination of resources, systems and structures. Mr. Bennett raised a question earlier about the risks around major restructuring. I think the information around organizational capacity would be of particular importance over the next few years as this significant change takes place.

Elements of an organization's capacity would include such things as the skills, knowledge and abilities of its workforce; whether it has the necessary tools, such as equipment and information systems, to do the job; appropriate leadership and direction within the organization; its financial condition; and its risk-management and contingency planning.

Now, the criteria that we used were developed from several sources, including the BTAA, the budget process review panel's final report, the general accounting office in the U.S.A. that's done a lot of work in this regard, the accountability reporting framework set out in the auditor general and deputy minister's council report that I referred to earlier and material developed by CCAF-FCIV Inc., which is a national, non-profit, research foundation.

You may wish to review and discuss our criteria in due course, and we would welcome that, actually. I want to stress that right now there are no authoritative criteria for either building or assessing performance plans and reports. The art or the discipline is evolving, I could say, at a very different stage from that of financial accounting, for example. There we have national, even international, generally accepted accounting principles that have been developed and well established over many years. The rules are well known.

There is work in progress on the national scene, however, to develop a set of principles to guide governments in reporting publicly on their performance. This work is being led by CCAF. It is conducting a multi-year research program in public performance reporting. The program is addressing several key issues — among them, what is reasonable to expect in

terms of public performance reporting. What are the human factors that influence its nature and its use, the leadership necessary to make progress and the basis and means for developing shared understanding and consensus around an agenda for action?

An important element of this program does focus on public performance reporting principles. This work is really being carried out in three parts, focusing on the key players in the accountability relationship between governments and their respective parliaments. The legislative auditing community developed a discussion paper on the subject of principles for building a public performance report. Also, a task force drawn from the governments of Alberta, Canada and Ontario was invited to provide a management perspective on public performance reporting.

The two sets of proposed principles were, thankfully, quite similar. I've included copies of both of those papers in the package that's been distributed to you. CCAF is now in the process of merging these two sets of principles and is starting to consult with elected officials across the country. We think this committee might wish to have an involvement in this process of developing a set of principles for public performance reporting, because it is in fact these principles that will guide the nature of the information that you and others will receive in the future.

The CCAF's entree into these discussions in most jurisdictions, I believe, has been through the Public Accounts Committee. My understanding is that they're inviting the Chair and the vice-Chair of the various Public Accounts Committees across the country to nominate legislators from across the spectrum that they think would have an interest in participating in these discussions. That's one sort of avenue that might involve members of this committee.

Beyond that, if the committee would sort of like to pursue this as a discussion item, we could certainly arrange for J.-P. Boisclair, who is the executive director of CCAF, to attend a future meeting of the committee. That's the end of the third part.

D. Jarvis: I'm just wondering, with the principles and the human factors, how you are going to get around direction and political philosophy from the government. Would the principles or the intended or actual results not be somewhat changed when you have a political government which wants to put forward a philosophy that is contrary to some of this?

W. Strelioff: Just as a first cut, the policy directions that change as one government moves in should be evident in good performance plans and reports. That's the usefulness, the importance of those kinds of documents: to set out how the plans and priorities are changing and then how they're actually being achieved.

E. Price: I'm not sure I understand your question. Are you referring to perhaps a change of administration that would not believe this was the right thing to do?

E. Price: I would answer that in two ways. One, I would say that legislation, which, of course, can be changed, is a strong statement of support for this initiative. I think, in a general sense, it's fair to say that in some of the other jurisdictions I mentioned that the initiative, once it's taken root, has really received bipartisan support. Whilst each administration will, perhaps, want to put its own stamp on the thrust of the fundamental initiative, the fundamental concept of accounting for, managing for and reporting on results, I believe, has not been seen as a partisan issue.

W. Strelioff: In the future a key step that we've been advocating is to put in your expectations that you want to know whether the information is reliable. You want to know that from the auditor that works for the Legislature. That's why we're advocating changes to some legislation, including the Auditor General Act.

P. Gregory: The other thing we see, I think, is that really this step is something that ultimately is being driven by the public. It is the public who are demanding open and accountable government. I mean, if you thought about an analogy, it would be like a new government coming in and saying: "We don't believe in financial statements or financial reporting. We're not going to tell you where your money came from or where it went." It's inconceivable that would happen and that the institution of the government would retain the confidence of the public.

I think that's where this is going over time. It will become just fundamental information that people expect from governments of any stripe. Having that reliable, open, accountable government is something that is a public expectation.

K. Stewart (Chair): Just following on that, good government is good government, and hopefully, if we do a good job and provide good government, we don't have to worry about a change of administration for the near future — or the long future, hopefully.

J. Nuraney: If I understand this rightly, I think we are moving from simply accounting to accountability in what you're trying to propose. Who do you see playing the overseeing role?

W. Strelioff: The Legislative Assembly is the elected representatives of the public. You have that role and responsibility.

K. Stewart (Chair): Certainly, as a committee, given the mandate we have, we have a responsibility for a cut of that, and that is the Crown corporations. So it's up to us, John.

J. Nuraney: I was wondering, because, practically, perhaps it is not feasible to do that. Would you anticipate your office playing that role — not simply doing the auditing but also the accountability of the goals and expectations?

K. Stewart (Chair): I think it's pretty clear where that falls. Again, we just have to look in the mirror and know where that one's going to fall. We're responsible.

Any further questions before we move on to the last section of this part? Okay. Thank you.

E. Price: Now I'm going to summarize the results of our review of the performance plans and reports. Our review was based on the four questions and the criteria that we've just been looking at. I mentioned, I think, that our report will be coming out around the end of this month.

Now, the relative strengths and weaknesses of the plans and reports we reviewed were actually pretty similar. There wasn't much, really, to distinguish the reporting of ministries from Crown corporations, either. So generally we grouped the results of our review together, unless there was a particular matter that stood out.

It was obvious that a number of organizations had put a lot of effort into their plans and reports. Most of the documents, we thought, were very well presented, but none of the plans or reports met all of our criteria. The fact that there was room for improvement in all cases isn't a significant concern, at least for now. As I think we discussed earlier, organizations are at very different points on the spectrum for measuring and managing performance, and this inevitably will be reflected in their public reporting. We do expect the quality of reporting to improve with experience, with the sharing of information and with greater familiarity regarding the expectations.

Our first set of criteria looked at the public purpose of organizations. Descriptions of purpose and program delivery proved to be the strongest element of the plans and reports that we reviewed. In virtually all cases organizations provided informative and useful descriptions of why they exist and the needs they fulfil.

In general, descriptions of governance and operational structure were adequately presented. However, most organizations had not described the values that guide them in the conduct of their business. While most organizations did list the opportunities and threats posed by their external environment, many failed to describe their strategies for meeting those challenges.

Our second set of criteria around assessing intended and actual results was divided into three categories. The first looked at how organizations described their goals and objectives. While most plans described what organizations intended to do, only about half actually linked their intentions with strategies for achieving them. While all plans purported to be for three years, in some cases it was difficult to tell just what period of time was actually being planned for.

Overall, organizations reported how well they had done in relation to the objectives set out in their plans, although in some cases major goals seemed to disappear without explanation between the plans and the subsequent reports.

Where changes to strategic priorities occur after a plan has been issued, which may happen quite often, the subsequent report should identify them so the reader isn't left hanging. For many organizations there was no discussion about how the organization's goals and objectives related to governmentwide strategic direction as set out in the governmentwide strategic plan.

We assessed how organizations reported on their performance or their performance measurement. As expected, this area of performance measurement proved to be the most problematic. Many tended to focus on inputs and processes rather than measuring outputs and outcomes. Others provided measures that had no obvious association with the organization's goals.

Baseline and historical-trend information can give readers some context in which to understand targets that have been set. In other words, are the targets ambitious, too easy or fair? We found that few organizations had actually provided any targets for their performance, and those that did usually didn't have enough trend or baseline information to support the targets chosen. Now, to be fair, given that results measurement is a new activity for many organizations, perhaps there were no trends or baseline information to report. Obviously, this situation should improve over time.

We looked at the way financial information was presented in plans and reports. We found that almost all plans included a current year budget and that many reports didn't compare actual financial performance against that budget. Like performance measurement, associating goals with resources is something that's quite new to many organizations. It's quite different from traditional financial reporting. While most organizations didn't do this, it was interesting that some had developed ways to associate their major goals, programs or initiatives with the resources expended to achieve them.

Our third question asked if plans and reports were transparent and credible. Our review suggested that most organizations had made good efforts to ensure that their plans and reports were readily available. We also found most documents to be reader-friendly, using minimal jargon and acronyms. In general, most organizations could have done a better job describing the quality, sources and reliability of data so that readers could have some sense of the reports' reliability.

Our last question assessed the extent to which plans and reports assessed organizational capacity. Indeed, we found that few of the plans and reports we reviewed addressed organizations' current capacity or outlined strategies for ensuring continued operations in the long term.

Organizations have approached performance management and reporting from many different starting points, and some have come a long way in a short time. The criteria that we developed represent a framework that we believe organizations should work towards. In our report we will be recommending that government organizations draw on the positive examples that we will be citing and that they use our criteria as a self-assessment tool to help them identify the strengths and weaknesses of their plans and reports. We're pleased that at least two organizations have already taken this step.

We will be recommending that central agencies — and I guess we're talking there about Treasury Board staff and the Crown agencies secretariat — incorporate our criteria into their guidelines for preparing service plans and annual service plan reports.

Our report will recommend that government help organizations enhance their performance management and measurement capacity. We will be formally recommending that legislators in B.C. participate in the development of public performance reporting principles.

Finally, as I think was discussed earlier, we will be recommending that the Legislative Assembly further strengthen the BTAA by requiring the auditor general, as its independent auditor, to comment on the fairness and reliability of publicly reported performance information.

W. Strelioff: Thank you, Errol. By the way, also with Errol is Mr. Michael Macdonell. He participated in this audit of the service plans and reports of government and Crown agencies, as well as Susan Jennings.

J. Wilson: One of the best incentives that I know for compliance and reporting is a scorecard on any audits you do. Something that would certainly help this committee in their assessment and their work is to be able to look at something and know who they should be reviewing and who they shouldn't immediately, based on the criteria they've set down. Have you considered this?

E. Price: I think that as we move towards providing audit assurance around the performance reports, then that indeed would be the result of that work. At least it would identify for the committee and for other users where information was either not reliable or, indeed, was missing.

The review we carried out right now was not an audit. In other words, we did not examine the reliability or the credibility of the detailed information. It was a fairly high-level review to see to what extent the information met the criteria that we'd set out. In terms of the scorecard, I guess the criteria would represent the scorecard. As I mentioned earlier, I think that because there is as yet no authoritative criteria around performance reports, there is an opportunity for committees such as this to shape what those reports will look like in the future, to some extent.

W. Strelioff: Also, don't lose track of the purpose of our work. We're trying to make sure that you have the best possible information for assessing performance so that you can then decide whether you agree with the performance direction that has been taken by a particular organization or whether you want to call them in and find out why planned performance didn't measure up to actual performance. The information we're trying to encourage is to support your inquiry into the performance, which leads to the questions of policy direction. That's where the essence of holding somebody accountable focuses. What we're trying to do is make sure, to the extent that we can, that you have the information that supports that discussion.

J. Wilson: That sort of backs up the need for something to point out the areas we need to review. It's fine to let us know that there's a gap here, that this Crown did not do this and this and this or that they haven't met their goals. I guess a report card is a simple way of putting it, to identify those things and just hand it to us so that we can look at it and say: "Yes, we should." Time is critical when we're dealing with these. We can go on forever reviewing stuff. You want to get your priorities straight and deal with the important things in order. That's where I feel it would be helpful to the committee. Now, that is simply my opinion here.

W. Strelioff: The work of your subcommittee, I think, will be very important in terms of setting the priorities for this committee and which organizations you want to look at, in which order.

I think Mr. Bennett discussed the template or framework of the questions that we want answered by all organizations and then by each organization in a particular way, in relationship to their performance. That will be one key mechanism you use to set your priorities and identify the questions about performance that you wish to explore.

We heard earlier that one of your colleagues wants to explore the risk-management practices of ICBC as it pertains to its investment portfolio. Well, there's a particular issue that, no doubt, will surface in the subcommittee's decisions and work.

J. Wilson: Well, I guess that's an answer. But when it goes to a subcommittee, their work is going to be pretty lengthy if they have to sit down and review all of the Crown corporations and make these types of decisions. A little input like a scorecard would certainly speed the process up and cut the workload down.

W. Strelioff: I think what you may be asking for is sort of a historical report that indicates where we may

want to look with a particular organization and how they've done in the past through audit.

J. Wilson: Yes, that's basically it. As a committee we can set the boundary as to where we want to take this or what we want to do with it, but it's nice to have a starting point.

K. Stewart (Chair): I would trust that prior to a particular group or Crown coming before us, we would try and get as much information consolidated ahead of time as possible. We would certainly rely on your office to assist with what you had in the past with that particular organization so that we would be able to prioritize who we really wanted to see first. Again, as we move through the work of the subcommittee…. Not that we have a committee formed yet, but it appears that whoever is going to be on that committee, Mr. Bennett, will be awfully busy. You're up next.

B. Bennett (Deputy Chair): I wanted to get feedback from you, or perhaps confirmation, that I'm on the right track here in terms of the conceptual differences between what the auditor general's office does and what our committee will be doing respecting Crown corporations. As I see it right now, anyway, I think there will be some duplication, if you want to call it that. But that's not necessarily a bad thing, in my view.

One of the distinctions I see — and this is where I'm looking for the feedback — is that your office seems to evaluate how well a public organization is organizing itself and making a determination of what its objectives are. Then you also seem to evaluate whether or not their processes are designed to lead to those objectives. That's where the performance reporting comes in.

It seems to me that this committee could, in addition to that kind of approach or investigation, also challenge the Crown corporation on the actual objectives they have set for themselves. Whereas I don't believe you would do that.

W. Strelioff: I thought that was a good explanation. We don't challenge the policy objectives of particular organizations. It's the role of legislators to do so.

B. Bennett (Deputy Chair): Let me carry on just for a second, Mr. Chair, in terms of trying to focus our efforts on this committee. This is following up on where I think Ida was going. I don't want to do a bunch of duplication that the Public Accounts Committee is already involved in and so forth. Maybe we need to think about looking at the core objectives of a Crown corporation, in addition to looking at efficiencies, performance and things like that.

K. Stewart (Chair): Just before I turn it over, one of the key roles that we have is to report back to the Legislature as to how that Crown corporation fits within the mandate. The audit is certainly one part of validating the quality of their performance. Certainly there has to be their raison d'être — the reason they're there — and it has to make sense to government. That's part of our role as I perceive it. As we look at these organizations, we have to look at not only how fiscally responsible they are and how well they're performing, but how they as an organization fit within the mandate of the government. That's a role that isn't for the auditor general's department, but it's certainly a role for this committee.

E. Price: I just want to comment on that if I may. I think maybe it's an overly simplistic way of looking at this, but to my mind where we can add value is with respect to what information is provided. Over time, our goal is to ensure that you receive completely the information that you need.

I believe that the role of this and other committees has really to do with the why questions. Why is the performance as it is? Why are the objectives as they are? Now, the basis for those lines of inquiry will hopefully be the information that you have in front of you, but I just see it as being a split between the what and the why. Because there is not yet full consensus around the what, I think that potentially there is a role for this committee to have some input into what the what should be, but over time the focus should be on the why — if that makes sense.

I. Chong: Thank you, Mr. Chair, and I apologize for having left the meeting for a short while. I'm missing part of the presentation, but I noticed the conclusion of your presentation where you talk about opportunities for improvement.

What struck me here was the bullet that you have: "Amend the BTAA to require auditor general to comment on fairness and reliability." That's the first time I've seen that reference to the BTAA from your office. I'm wondering if you could clarify for my benefit — and if it's been asked, then I apologize. Are you suggesting, then, by amending the Budget Transparency and Accountability Act, that your office would now — in looking at the performance plans, service plans and those things — comment on the fairness and reliability in the same context as you would when you're auditing a financial statement? Is that what it's about?

I think the words "fairness" and "reliability" sound like easy terms for the layperson, but in accounting terminologies the word fairness and the word reliability have a different connotation. For the benefit of us here, if we're to support you in this amendment, perhaps it would be beneficial if you clarified what components of fairness and reliability you would want amended for us to support.

E. Price: The thrust of this recommendation is, I think, consistent with one of the provisions in our proposed act. I guess it is to enshrine in legislation the

right of or the need for the auditor general to provide assurance around fairness and reliability.

With financial statements we say, in essence, that financial information is fairly presented in accordance with generally accepted accounting principles. I've described steps in place to develop principles for public performance reporting. The ultimate objective would be for us to provide assurance around the fair presentation of performance information, which would encompass such things as completeness, relevance and reliability. It's an audit function that is being contemplated. Now, there is a question with respect to the timing of that work, because the ability to carry out audits depends upon having a certain quality of information.

I. Chong: My supplementary, Mr. Chairman, would be: is it practical? In financial auditing it's possible, it's practical, and it's necessary. But if your function is part of providing that criteria to performance plans, I'm just wondering whether it is practical, because it's very subjective. People will look at the word fairness and think: "Well, the auditor general says it's fair to have that in the service plan." As I say, it gets confusing. I just want to understand, because it's a new area that we're venturing into, that whatever assurance you provide is in fact something that we as committee members can rely heavily on.

P. Gregory: There are some preconditions, as you point out. A precondition is that there are generally accepted principles for performance reporting — there have to be certain standards of performance — and that the state of the art is such that the plans are being prepared in accordance with those principles. I think it's important to note that the assurance would be limited to that: the information provided has been prepared in accordance with the principles. It is analogous to the financial statement situation, where there are generally accepted accounting principles and the reports are prepared on that basis — and that means presents fairly.

It doesn't mean that the corporation, say, that's being audited has made all the right choices about management or its finances or that it wouldn't be better had it chosen different courses. All it means is that the report that's being presented has been prepared in accordance with those principles, and on that basis it presents fairly. We see a situation where this information is going to be important for people evaluating, reviewing and scrutinizing. Therefore, people are going to need to know that, yes, the information that we've been provided is fair and reliable. It doesn't say that the performance is good, but it says that the information is good.

I. Chong: Finally, would you have the opportunity, then, to have a reservation? If, in fact, you've provided the assurance of fairness and reliability, would you somewhere provide us with reservations that you have? You can say: "However, this is what we're concerned about." That would highlight it for us as committee members to pursue that avenue of questioning with those Crown corporations.

W. Strelioff: Yes, with the general principles in place, that does give us a basis for saying, "Well, yes, the information is consistent with those general principles, except that" — and then for explaining that to you.

P. Gregory: We also, I think, see that this evolution will take some time, as the principles are developed and as the capacity to report against them occurs. Initially, at any rate, there would likely be long-form reports. There would be an explanation rather than just a short-form report.

If I could maybe just look to your group — I'm not sure what you have left to present — to see if you do have more information to present. We do have about five minutes of business to conduct at the end, so we've got approximately 20 minutes left that we could spend with you. Do those two presentations pretty much cover what you wanted to bring forward for us today?

W. Strelioff: Yes, they do, other than to wish you all the best in your responsibilities. I do want to emphasize that an effective public scrutiny of government's performance is very important, and this committee has that responsibility for the Crown corporation community. I wish you all the best in carrying out that scrutiny. Thank you.

K. Stewart (Chair): Again, just giving you one more opportunity. Based on the types of questions you heard from the committee today, do you have any further thoughts, other than good will, that you could pass on to us at this time?

I trust that when the subcommittee's formed, which is some business we have to clean up before the end of the meeting, they will be in contact with your office. We certainly look for some further clarification or direction. Also, when we get past the core reviews and the agendas are starting to be made with the specific Crowns, we will be coming to you to look for some of the past work that you've done with those organizations and suggestions you may have with regards to those.

Just in closing, do you have any comments specifically to Crown corporations that may be of assistance to us?

W. Strelioff: Advice to Crown corporations or advice to your committee. I think you have the framework. One of the things that I mentioned in the past

hour or two was to consider asking Crown corporations to do their own self-assessments of the information that you provide. Our aim is to encourage Crown corporations to provide the best information possible so that you can have a focused debate on issues that you find, as individual legislators and as legislators as a whole, that interest and concern you. The information is to facilitate the scrutiny and debate. That's your responsibility.

K. Stewart (Chair): Again, we do appreciate your input today. I'm sure that there's a liaison that will continue beyond today as we continue through the mandate of this committee. Thank you very much for taking the time today to give us such a thorough presentation. We certainly do appreciate that.

We do have a couple of bits of business to complete today. I understand that we have a motion out there.

J. Nuraney: Yes. If I may, Mr. Chairman, I would like to move that the Chair, the Deputy Chair and up to two other members constitute a subcommittee to get the agenda and the procedure for the purpose of proposing a workplan and a timetable for the committee to consider.

K. Stewart (Chair): With that order of business done, I have a couple of other points. We do have a group from China coming tomorrow that wants to talk about Crown corporations, so if anyone would like to attend that with me, it's a half an hour, from 2:30 p.m. to 3 p.m. If anyone has an interest in attending that, just let me know.

The next business up would be with regards to our next meeting. Again, what we're going to try and do with all the meetings is schedule them around events that are happening here, to make the best use of our time. Our timetable is still somewhat conducive to what happens with the core reviews. My anticipation is that we may not need another meeting in the near future, but we'll debate that. Also, part of what Bill comes back with may indicate otherwise.

Craig, do you have any other issues with regards to it? Any other members? Yes, Ida.

I. Chong: I'm mindful of the time frame and what's occurring in terms of government processes, core review, etc., but I'm wondering — for your consideration — if it wouldn't be appropriate to perhaps have a meeting in December. I'm not trying to push extra work onto the Deputy Chair to have a workplan done, but if we wait until after Christmas in January and then the House is convened in February, I think it limits the opportunity for this committee to actually start getting engaged in some reviews of Crown corporations.

I'm anxious to see what we can accomplish and what we can do. Because it is a new committee, I think there is greater opportunity. I would just ask for your consideration to see if in fact the Deputy Chair, with his subcommittee, can possibly move that along and see if we couldn't convene very quickly in December for a short meeting to give us an idea so that we have our minds set around it right after the new year begins. It's just a suggestion.

K. Stewart (Chair): Certainly. I notice — just before I go to Bill — that the auditor general would like to speak.

W. Strelioff: Just to remind you that we did offer to make available to you the CEO of the Canadian Comprehensive Auditing Foundation, or CCAF, who could provide you with a perspective on governance and accountability practices across Canada. That might be a useful perspective that would help you build your own capacity.

K. Stewart (Chair): Again, we're in a process where we do have the luxury of some time. But, as Ida pointed out, it quickly gets eaten up. The more knowledge and preparatory work we can do prior to having the Crowns come before us, the more effective those meetings will be.

B. Bennett (Deputy Chair): It would be useful to me to just have a short discussion on what your expectations are with respect to the motion that we just passed. When we talk about workplan, I know that something that will be useful for us will be this template that I've alluded to and that the Chair and I discussed this morning. I've got a lot of notes and some ideas that I'll formulate and put together and, I guess, e-mail to you…

B. Bennett (Deputy Chair): … at some point to get your feedback and so forth. But in terms of the workplan, are you thinking that it would include a list of those Crown corporations that we'll talk to for the first six months or something?

K. Stewart (Chair): My thought on the agenda, as far as the scheduling of Crown corporations, is that there will be two factors. One, of course, is the intention of priorities from this particular committee but also taking some of the lead from the secretariat with regard to who's prepared and who's ready. They're responsible for that core review now, and that's a fairly big process for some of these organizations. Some of them are well on their way into it; others may not be so far along. Those, I would suspect, would be the two factors that would go into it.

I also would suspect, listening to some of the earlier comments of this committee, that there are some key ones that have more of a public interest than others. We'll have to weigh that into our agendas also.

P. Bell: I'd just like to support Ida's comments there. I think it would be appropriate for us to move ahead. Months roll on very quickly. It's been about three months, give or take — two and a half — since we were sitting, and the next session will be upon us quickly, as will the business plans and strategies for the Crown corporations. So I think it would be very appropriate for us to meet perhaps even in the end of November or early December to work with Bill's plans and move forward.

I also think, given the core review that's taken place, that it probably is appropriate for us to augment and support that particular committee by identifying a few Crown corps where the boards remain and where there's some history of those boards. Perhaps we can work with those individuals to support the overall core process at the same time. That might be a thought, Bill, when you're looking at what Crown corps we want to talk to in the near future — ones where there is some history behind the boards and ones where we could support the core review process.

K. Stewart (Chair): Certainly, I'll look to Craig to help facilitate that, as far as the meeting. Again, it does work out well when we can tie it into a reason why we're all here in Victoria anyway. It makes it much more convenient for all of us, I know.

B. Bennett (Deputy Chair): Ken, I want to try and make sure that I understand what the expectations are. I see that what I've been asked to do with the subcommittee is an exercise in determining what this committee's role is, basically. We don't have a whole lot of formal direction, and I've spoken to the Chair about what came from his meeting with the Premier, so I know that. But from the motion that was passed by the Legislature, we don't really have a lot of specific direction.

I think it's important that we know specifically what we're trying to accomplish. Then we can formulate our actions over the next three and a half years to reach the objectives that we want to reach. I see it more as a conceptual exercise that I will be going through. In

terms of what Crown corporations we review, I see that as an exercise in democracy — whatever this committee decides.

The information I am going to be providing to you will be more about who we are as a committee, what our purpose is and, perhaps, some ideas for this template that we would provide to each of the Crown corporations that will come before us so that we get the information we need to reach our objectives.

K. Stewart (Chair): We've done some work on this already. I just want to add the fact that the Chair is always on the subcommittee, so whatever assistance I can give you, I will.

At this point in time, if there are no other questions, I'd like to turn it over to Craig. He has a few comments and thoughts.

C. James: Just for the information of members, now that we're discussing the issue of the direction of the committee and the role the committee may wish to perform over the course of the next little while, Erskine May is very clear about the terms of reference for parliamentary committees in this case. It's a matter for the committee to interpret its own terms of reference and to establish its own framework around which it is to pursue in its inquiry.

Secondly, in terms of the subcommittee, traditionally subcommittees, generally speaking, do not have Hansard present. They are primarily planning sessions. We meet in here. They're minuted, and of course, as with all other select standing and special committees of the House, we expedite all the subcommittee business, as well, including minuting and any other administrative and procedural matters. We'll work very closely with the Chair of the subcommittee in terms of accommodating that as well.

REPORT OF PROCEEDINGS (Hansard)

SELECT STANDING COMMITTEE ON CROWN CORPORATIONS

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE
ON CROWN CORPORATIONS