Introduction

Thank you for those kind words of introduction. And, thank you for inviting me to join you this morning. I welcome this opportunity to report on and answer questions about how I am fulfilling my responsibilities—which of course is a fundamental component of accountability.

In my presentation, I plan to provide you with an update on public sector governance, management and accountability practices in the context of my office’s three lines of business—

• we attest to the reliability of government financial statements
• we assess the quality of government performance reports
• we examine how government manages its key risks

My presentation is about 30 to 40 minutes. After, I will do my best to answer your questions or, if I cannot, I welcome the opportunity to listen to your concerns.

As the Auditor General, I am an officer of the Legislature—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 four 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.

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

That committee is an all-party committee and is chaired by a member of the opposition. Both members of the opposition are on this committee referred to as the public accounts committee.

A healthy and rigorous public scrutiny of the performance of government by this Committee 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 hold the view that a key ingredient to public confidence in our institutions of government is that a meaningful and rigorous public scrutiny of performance takes place.

Signals that a meaningful scrutiny is taking place is when you know:

• Governance arrangements are clear
• Results of proposed and actual government decisions are known and transparent
• Management of risks is strong

Through our work, we provide assurances and advice to support a meaningful 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 reported publicly by government. I hold the view that an important sign of good management is when an organization reports fully on its performance.

Thirdly, we assess how well government manages the key risks it faces in achieving its planned results.

I have an Office of about 80 people with a wide range of professional credentials and experience—we are a small office when 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.

We have access to all parts of government, to all types of information, and we decide what to report and when. And, our reports are public documents. You can access all of our reports on our website at www.bcauditor.com.

Last year after about ten years of discussion and debate, legislators finally approved a stronger mandate for my office.

A new Auditor General Act now provides 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 means to determine the extent to which they receive independent assurances and advice about the performance of government from my office through funding decisions and through directing my office to carry out specific work.

This change is one my Office has argued for for many years and was made with the full support of the Minister of Finance—a significant step forward.

On the other hand, with its new authority, one of the first steps taken by the current group of legislators took was to cut funding to our office and, thus, weaken its capacity to carry out an independent public scrutiny of the performance of government.

Not a good first step particularly in the context of the significant change underway across the provincial public sector, low public confidence in our institutions of government, and the current unusual representation within the legislature.

For all of us, the force of technology continues—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 now plan to focus my comments 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 several key initiatives now underway within the provincial public sector that have significant long-run potential.

On the financial statement front, the government is now required by law to adopt generally accepted accounting principles—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, weak, and, in my view, misleading.

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

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, 2003, for example, the annual deficit is overstated by some $200 million. In addition, both liabilities and assets are both understated by several billions of dollars.

My office is now working with officials of government to ensure the move to rigorous accounting rules takes place.

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, complete and meaningful manner.

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

By the way, the government of the USA does not yet publish complete and reliable financial statements. Its auditor—the government accounting office—states that the financial statements of the USA cannot be relied upon. This is an enterprise projecting a $500 billion annual deficit! A particularly worrisome state of affairs!!

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

In fact, we know the waiting time information now referred to is not reliably measured.

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

• To publish its proposed overall financial plan each February
• To publish, on that same day, three year service 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, targets and costs

With this direction put into law, 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.

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.

The BC government and BC legislators have endorsed the principles for use in the provincial public sector. And, they are now being used.

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

Nationally, the CICA’s public sector accounting board is now beginning the arduous, long-term work of moving to more formal guidance and standards. One of my senior staff members is on the task force that is beginning to do this work.

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.

I also know that within your community the VanCity credit union has taken a significant leadership position in its externally verified account of how its is living up to its statement of values and commitments. I congratulate and thank VanCity for its leadership. We certainly refer to this accountability report when thinking through issues and thinking through what is possible.

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

This work is particularly important because of the significant change, restructuring, and down sizing now taking place across the provincial public sector. During such a period, the people of BC face considerable risk that programs and services will not be effectively delivered and that scarce public resources will not be well managed.

We devote about 40% of our resources to risk management examinations.

There are three general themes to our risk management work—governance issues, capacity building and program management.

On the governance side, I want to take this opportunity to bring to your attention two particularly important examinations.

First, we examined the governance structure put in place to guide TransLink. We concluded that the structure needs significant improvement. We provided advice on clarifying how GVRD holds TransLink accountable, and raised the issue of whether the board of TransLink should include non elected people with particular industry expertise.

Currently the board of TransLink consists primarily elected officials and most of those officials are on the board of the GVRD. This is a particularly complex governance structure. We observed that members have a particular difficult time sorting out whose interests they represent. So far, our advice has caused rethinking but no change yet.

We also examined the performance agreements put in place between the Minister of Health and the chairs of each of the six health authorities.

This was the first time performance agreements have been used to manage the accountability relationship between the Minister and the health authorities.

We commended the government for putting these in place but also identified much room for strengthening. The key issue is to define clearly who makes what decisions, and what success means. Our advice has been well received and significant change is taking place to the relationship between the ministry of health and each health authorities.

We also examine risks to the capacity of government to carry out its programs and services in an effective manner.

Several of these examinations focus on human capital—almost all of what we do is through people.

One key examination focused on the work environment. We wanted legislators to know the extent to which the work environment in the public service is healthy—a key ingredient to a well-performing government. We found that the environment is not healthy and identified several key factors to address. The most important factors related to a significant lack of confidence and respect for the leadership provided by senior government officials.

This work was done three years ago. Currently, we are redoing this examination to determine the extent to which there has been a change to the work environment. Our primary evidence gathering tool is a survey instrument we developed with the help of Hewitt and Associates. This instrument allows us to compare results to similar assessments done within large private sector organizations.

We are also now examining capacity building issues within the health system and within the K-12 system.

Everyone knows the work environment in the health system is not healthy. There is much absenteeism. What we are examining is the extent to which causes are known and being addressed by senior management.

In the K-12 system, significant change is taking place. School boards now have more autonomy and choice in how they use resources. No longer does the government define in detail how each dollar is to be spent.

What we are examining is the extent to which the school system is prepared for such autonomy in terms of its own capacity to plan and manage. We are finding that the system is not well prepared. In particular, it is struggling with the idea of collaboration. The tradition has been to consult with parents and teachers but not share decision making.

Our reports on the state of the work environment within the health system and the education system will be public in the next two or three months.

The third area that we examine relates to a wide variety of program management risks.

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
  • Initially, our advice was not promptly acted upon. More recently with last years dramatic events, and the more specific advice provided within the Filmon report, much action is now taking place.
• 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—the government is now addressing our concerns.
• We also examined the due diligence carried out in preparation of the province’s 2010 Olympic bid. As far as I know, our exam was the first time independent assurance was provided for such a 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 developing an ongoing work program related to the Olympics designed to ensure the people of BC know:

• The extent to which the current forecast is consistent with the original plan
• The extent to which key construction projects are on time and on budget
• The extent to which sound risk management practices are in place for such risks as sponsorship revenue, security, inflation, and foreign currency

We are now examining several other risk management issues pertaining to

• chronic disease management in the health system focusing on diabetes, this, as you know is a significant cost driver. Our objective is to assess the extent to which sound management practices are in place
• we are examining wild salmon management practices, this examination is being carried out jointly with the Auditors General of Canada and New Brunswick

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.

We also do follow-ups. About one year after our initial findings, conclusions and recommendations are considered by the Standing Committee on Public Accounts, we initiate a review to determine the extent to which action has taken place. These follow ups are also public and are addressed by the public accounts committee.

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,
• Our work on promoting the use by government of sound cost and performance information, 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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