Introduction

Thank you for those kind words of introduction. And, thank you for inviting me to join you this evening. I welcome this opportunity to talk to you about my work and priorities, answer your questions and listen to your advice and concerns.

In my presentation, I plan to focus on:

• what we do and why, and on
• what is taking place to strengthen government management and accountability in the context of my office’s three lines of business – which are to
  • attest to the reliability of government financial statements
  • assess the quality of government performance reports
  • examine how government manages its key risks

My presentation is about 20 to 25 minutes. After, I will do my best to answer your questions or, if I cannot, I welcome the opportunity to listen to your concerns.

After nearly 13 years as an auditor general in two provinces, I continue to learn in so many different circumstances that providing independent, evidence-based assurances and advice on performance is so fundamental to public confidence in our institutions of government and business.

As the Auditor General, I am an officer of the Legislative Assembly – I work for and report to the Legislative Assembly.

I was appointed by an all-party committee which has the responsibility to recommend to the Assembly – unanimously – a person to be the Auditor General for a term of 6 years. I have now held this position for three years.

I can be removed from Office through a vote in the Legislative Assembly – as far as I know, this has never happened in Canada.

I report to the Assembly. My reports – which are public – are automatically referred to a standing committee of the Assembly which has the responsibility of dealing with the contents of my reports in meetings open to the public and the media.

Public scrutiny is a key to ensuring the advice of my Office leads to constructive and meaningful change – and it does.

In general, the role of an Auditor General is to help all legislators and, thus, all citizens, hold the government accountable for its use of public resources and for its management of the considerable responsibilities entrusted to government.

I grew up in Saskatoon. I have two undergrad degrees and a graduate degree from the University of Saskatchewan. In 1978 – now 25 years ago – I earned by CA in Saskatoon through the public accounting firm now known as KPMG.

In 1979, I moved to Victoria, first working for the AG of BC, then Treasury Board.

In 1983, I moved to Toronto to work for the Canadian Institute of Chartered Accountants – in the development of national accounting and auditing rules for the public sector.

In 1990, I was appointed the Provincial Auditor or Auditor General of Saskatchewan – and carried out that responsibility for nearly 10 years through the extremely challenging 1990’s.

In 2000, I was appointed Auditor General of British Columbia – and, once again, am in the midst of an extremely challenging time.

As you know, through our elected representatives, we entrust to government significant responsibilities, authorities and resources.

I hold the view that a key ingredient to public confidence in government’s management of those responsibilities is a meaningful and rigorous scrutiny of performance.

Signals that a meaningful scrutiny can take place is when you know:

• Results of proposed and actual government decisions are clear
• Management of risks to achieving results is strong

Through our work, we provide assurances and advice to support a meaningful and rigorous public scrutiny of the performance of government.

Our goal is that legislators and the public receive the best information possible for assessing the performance of government

The outcome I pursue is a healthier debate of policy alternatives in the context of a growing public confidence that no matter which policy alternative is chosen it will be well managed by the government of the day.

In our work, we have three key objectives each supported by a line of business for which we allocate our resources and energies.

Firstly, we attest to the reliability of financial statements to ensure the statements fairly present financial performance including reliable measures of such key items as surplus or deficit.

Secondly, we review the quality of the broader performance information provided by government to legislators and the public in the form of service plans and service plan reports – those reports need to fairly present organizational performance.

Thirdly, we assess how well government manages the key risks it faces in achieving its planned results – we want legislators and the people they represent to be fully informed of the management of key risks associated with the government programs and services.

I have an Office of about 90 people with a wide range of professional credentials and experience – we are a small office in the context of the size of BC as compared to similar offices in Alberta, Saskatchewan and Quebec – so we try to leverage our work and thinking through relationships with others, including committees of legislators, central agencies of government, public accounting firms, and the Canadian Auditor General community.

Recently, legislators decided that they want less independent scrutiny of the performance of government – as they have cut back our resources.

I think they are making a mistake particularly given the extent of change taking place and, in my view, the fact that earning public confidence requires legislators to embrace a culture of rigorous and objective scrutiny of the performance of government – but my view is not now shared fully by our elected representatives

On the other hand, we do have access to all parts of government, to all types of information, and we decide what to report and when. And, our report are public documents. You can access all of our reports on our website at www.bcauditor.com. Each year, we issue about 10 major reports.

In addition, last month legislators approved significant changes to the legislated mandate of my office that are enabling rather than restrictive.

I think the changes to the Auditor General Act provide legislators with a significant opportunity to carry out a more rigorous and objective scrutiny of the performance of government – through the independent assurances and advice my office can provide – should they wish to do so.

The changes provide legislators the necessary means and authority to determine the extent to which they receive independent assurances and advice about the performance of government from my office and from firms of private sector auditors – in the past, officials of government had significant control over those decisions.

This change, which my Office has argued for many years was made with the full support of the Minister of Finance – a significant step forward.

For all of us, the force of technological change shows no sign of abating – moving us to a global world full of greater interdependencies, competition, and expectations.

Both wonderful and daunting!

From the perspective of someone who is in the assurance providing business – we certainly live in interesting times!

The public is more demanding and impatient – expecting our help in ensuring a more meaningful opportunity to scrutinize and challenge decisions, decision making and decision makers.

In this environment, relevant and reliable cost and performance information is essential to public confidence in all forms of organisations including in particular our institutions of government.

With these thoughts in mind, I plan to focus this evening on the challenges and opportunities emerging in the context of our three lines of business.

My general view is that I need to hold the course on key initiatives that have significant long-run potential while doing what we can to respond to issues of the day.

On the financial statement front, significant long-run change is taking place.

The government is now required by law to adopt generally accepted accounting principles, no later than April 2004 – BC is the only Canadian jurisdiction that now legally requires government to do this – other jurisdictions follow the practice of the government being required to explain the accounting rules it adopts – which can be quite varying and weak.

Adopting and implementing generally accepted accounting principles within the government’s financial plan and annual financial statements represents a particularly important opportunity.

A complete accounting of financial results provides the foundation required by government managers to improve the quality of the cost and performance information they use and report publicly.

The foundation required by legislators to hold government accountable.

As you might know, in my audit opinion on the government’s financial statements, I report those statements are significantly incomplete because they do not include the full financial results of the government’s health and education programs. For the year ended March 31^st, 2002, for example, the annual deficit is overstated by some $225 million. Liabilities and assets are both understated.

My office is now working with officials of government to ensure the move to rigorous accounting rules takes place beginning with the government’s annual budget to be presented next February.

In the world of an auditor general, this will be a significant step forward – I hope that in June 2005, I will be able to advise you that the government is finally reporting its full financial results in a clear and meaningful manner.

Of course, my predecessor George Morfitt and I think this step should have been taken years ago!!!

Our second line of business focuses on the quality of the broader performance information provided by government and the growing demand for results-focused performance information.

For example, is waiting lists is a key indicator of the performance of our health system, what is the real extent of the waiting lists in BC, compared to the past and to other jurisdictions. How do we know the information now reported and discussed is reliable?

On this front, BC legislators have taken a significant leadership position by directing government through laws:

• To publish its proposed overall financial plan each February,
• To publish, on that same day, three year plans for each of its organizations,
• To publish annual performance reports in a timely manner, and
• To focus those plans and reports on the results achieved in terms of measurable objectives and in terms of key performance indicators and targets.

With this direction put into law and with a more active system of standing committees in place, our elected representatives have set the stage for what I believe can be a significant advancement in public sector management and accountability practice.

I support these measures fully and whole heartedly.

Now, no doubt many of you have heard similar best intentions before. I certainly have!

What is different this time I think is that – at the same time – consensus is emerging across Canada on guiding principles for public performance reporting.

The consensus building has been led by the CCAF, a national research and education foundation previously known as the Canadian Comprehensive Auditing Foundation.

Many of you are likely familiar with the work of the Foundation, its core interest centres on the role that information plays in a variety of public sector governance, accountability, management and assurance settings.

A robust, cohesive set of reporting principles has been under development for several years. The proposed principles have gone through much consultation with elected officials, management groups, and auditors.

Discussions are also being held by the CICA’s public sector accounting board on how best to begin the arduous, long-term work of moving to more formal guidance and standards.

Recently, we used this framework of principles to guide our examination of the annual performance report of the Public Guardian Trustee. This was the first time we opined on a complete performance report.

We are also working with government officials on a proposal to a standing committee of legislators – we plan to ask legislators to support the principles as part of the performance management and accountability expectations across the BC public sector.

This represents a second significant step forward that can lead to much positive change in the BC public sector – a step that can make BC a leader – if adequately supported and nurtured.

Our third line of business focuses on examining the risk management practices of government.

This work is a particular challenge because of the significant change, restructuring, and down sizing now taking place across the provincial public sector. During such a period, organizations face considerable risk to the effective delivery of programs and services and the effective use of scarce public resources.

In our risk management work, we examine directly the management practices of government. We also encourage government to report publicly their key risks and how they know they are managing those risks well. Such reporting is new and will take time.

In the meanwhile, we devote about 40% of our resources to risk management examinations.

Recently, we examined:

• How government is managing its information technology both in terms of portfolio management and security – we identified significant opportunities for strengthening practices.
• We examined risks related to managing the spread of wildfires to places where people live and work – our recommendations focused on how best to strengthen public awareness of risks and on the need for better coordination among the different groups of fire fighters.
• We examined and reported on the extent to which the health system uses sound cost and performance information – we found those leading and managing the system do not use or have such information when making billion dollar decisions.
• We examined the extent to which the work environment in the public service is healthy – a necessary ingredient of a well-performing government – we found that the environment is not healthy and identified several key factors to address.
• We examined risks related to managing contaminated sites on Crown land – we found that the government does not even have a full inventory of such sites nor risk mitigation plans.
• We examined and reported on the governance and accountability practices for the new public sector pension arrangements – the new arrangements now share risk of unfunded liability equally between employers and plan participants – a major change.
• We also examined the due diligence carried out in preparation of the province’s 2010 Olympic bid.
  • We wanted to ensure – to the extent we can - that BC people know whether a rigorous due diligence was used to prepare the bid estimate, and that there is a solid baseline of information against which this overall undertaking and any future spending can be assessed.
  • We think we did this.
  • we have concluded that both the Bid corporation and the Government did a good job of estimating the likely cost of the Games and related expenditures.
  • We cautioned that the estimates are for an event 7 years from now. Actual results will likely vary and the variations may be material.
  • We emphasized the importance of stating clearly that taxpayers are on the hook for cost overruns and revenue shortfalls.
  • And, that the Games will not stay within estimates automatically. Keeping costs in line will need first-class management from the start. Contingency amounts will need to be watched carefully. And, the predicted revenues and economic impacts will only come about through well-funded and well-managed marketing of both the Games and the rest of BC.

Currently, we are examining:

• The performance agreements put in place between the Minister of Health and each of the Regional Health Authorities. We think such agreements represent an opportunity to strengthen how we manage our system of health.
• Also in the health system, we are examining what is known as the alternative payment program used to pay doctors. We think this program is likely to be of considerable importance as governments rethink the incentives provided to doctors.
• In the education system, we are examining how resources are allocated among school boards and practices for demonstrating accountability for results.
• We are also beginning several other risk management examinations related to chronic disease management in the health system focusing on diabetes, salmon management practices, regional governance changes planned for our system of social services.

Currently, these examinations and others are being somewhat slowed down as we are now focusing much of our resources and energy completing our financial statement work. Almost all organizations of government have March 31^st year ends – and the plan is to sign off on the government’s consolidated financial statements in mid June.

All of our reports on risk management are public. Each of them and every one of our recommendations is debated in public by the standing committee on public accounts.

Much is going on. I have reviewed some of our work that I think you might find particularly interesting:

• Our financial statement work focusing on the move by government to implement a more rigorous and complete accounting,
• the development of guiding principles for performance reporting, and
• our work on various risk management issues.

I thank you for inviting me to speak at your meeting. I appreciate your interest. Now, if you have questions, concerns or suggestions, I will try to answer them and I will listen.

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