Wayne Strelioff, CA
Auditor General of British Columbia

Thank you for those kind words of introduction. And, thank you for inviting me to talk to you today, answer your questions and listen.

In my presentation today, I plan to focus on:

• what we do and for what purpose
  
  

• the importance of government adopting more rigorous and complete accounting rules
  
  

• the growing demand for results focused performance information
  
  

• our recent work on the risk management practices of government

My presentation is about 45 minutes. After, I will do my best to answer your questions or, if I cannot, I welcome the opportunity to listen to your views and concerns.

After 11 years as an auditor general in two provinces, I continue to learn in so many circumstances that providing independent and evidence-based information and assurances on public sector performance is so fundamental to public confidence in our institutions of government.

As the Auditor General, I am an officer of the Legislative Assembly.

I am 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 two and one half 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. Public scrutiny is a key to the success of and public confidence in our institutions of government.

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.

As you know, we entrust much to our institutions of government.

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 and Saskatchewan – so we must ensure we are diligent in deciding what to do and rigorous in ensuring we do our work well.

We 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.

The goal of our Office is to encourage government to provide legislators and BC citizens with the best information possible for assessing the performance of government.

We want to make a difference by contributing to accountable and well-performing government. Valued for making a difference is our vision.

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 lines of business for which we allocate our resources and energies.

• Firstly, we examine financial statements to ensure they present 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.
  
  

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

Our recent work on risk management includes:

• The extent to which we are prepared for earthquakes, provide children a safe learning environment and safeguard our drinking water sources
  
  

• The degree to which governments in BC are prepared for wild fires spreading to communities
  
  

• Governance and financing issues related to public transit in the lower mainland –TransLink
  
  

• The work environment of the public service and the extent to which those elements associated with quality service actually exist
  
  

• The quality of information provided to legislators by the government in its performance plans and reports,
  
  

• The information used by government when allocating resources to regional health authorities,
  
  

• And, the information technology management practices of one large ministry using a portfolio management model.

In addition in July, we signed off on the government’s financial statements for the year ended March 31, 2002

Our current work on the risk management practices of government pertains to:

• Governance and accountability for the new public sector pension arrangements
  
  
• The management of contaminated sites
  
  
• The performance agreements being put in place within each health authority
  
  
• Quality of the overall performance reporting by government

• The contracting and monitoring practices for payments to practitioners not on a fee for service basis
  
  
• How well the BC health care system has adopted best practices for managing diabetes. That one is the first in a planned series of audits of chronic disease management
  
  
• Health and wellness in the workplace

Our findings, conclusions and recommendations do make a difference. Most of recommendations have been supported by legislators and implemented by government particularly so in the last three years.

For all of us, the force of technological change 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 indeed live in interesting times!

Our stakeholders are more demanding and impatient. They expect our help in ensuring a more meaningful opportunity to scrutinize and challenge decisions, decision making and decision makers. And, of course, they expect better quality services at less cost from all of us.

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

My second topic pertains to adopting a sound financial information framework so that the government’s financial story is told in a complete and clear manner. The government is required by law to adopt generally accepted accounting principles no later than April 2004.

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.

By law, such an accounting is to be put in place no later than April 2004.

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.

The government agrees with my assessment.

As it moves to a full accounting, a significant opportunity emerges for government to strengthen the management discussion and analysis it provides in its annual financial report called the public accounts.

Currently, the analysis is incomplete and in my view very difficult to understand. The focus is on explaining transfers amongst government organisations and complex accounting adjustments. Many of these explanations are needed because a complete accounting is not provided in the first place.

As a result – unfortunately – less attention is given to explaining the government’s overall financial results in terms of trends and comparisons.

And, anyone trying to assess trends in education and health costs or in debt and deficits will find that task particularly difficult because the accounting information is so complex.

In our recent report titled ‘monitoring the government’s finances’, we set out a framework of financial information we think would enable a more informative discussion and analysis.

In the framework, we use the information provided in the government’s financial statements. However, we organise that information in a more complete and what we think is a more reader-friendly manner.

In our framework, we include a full accounting of health and education financial results.

In the pamphlet provided to you today, we include three exhibits from our recent report that I find particularly useful.

In the first exhibit, we show overall trends in financial results for the past six years. We could not go back further because reliable and comparable information is just not available.

For those like me who look for more specific information, we do provide a more detailed display of this information in our report.

In the second exhibit, we show the province’s per capita gross domestic product and compare it with three other provinces and with Canada as a whole. Six years ago, our per capita GDP was right on the Canadian average, now it is well below the Canadian average.

In the third exhibit, we show the ratio of a government’s net liabilities and its gross domestic product. Net liabilities is a key measure of financial position and is about the only financial statement measure that can now be used to make comparisons with other Canadian jurisdictions in a reliable manner.

When combined with gross domestic product as we do in that exhibit, we can begin to assess the accumulated financial demand placed on the BC economy by government and compare that demand to other points in time and to other jurisdictions.

As you know, financial statements are complex and getting more so as standard setters, regulators, investors and other groups demand better and more disclosure.

As a result, large organisations including governments are using the management discussion and analysis part of their annual financial reports to tell their financial stories in a more clear, concise and reader-friendly way.

It is with this need and trend in mind that we recommend government consider using this framework of financial information. In our report on monitoring the finances, we use this framework of information to show the types of trends and comparisons the government could provide in its annual financial report.

Earlier this month, members of a legislative committee called the standing committee on public accounts supported my recommendation.

My third topic today pertains to the growing demand for results-focused performance information.

On this front again, 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 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 accountability and performance.

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 progress is taking place 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. The proposal consists of nine principles that I think provide a firm foundation on which to build on in a sustainable manner. These are listed in your handout.

In following the principles, an organization would:

• focus on the few, critical aspects of performance
  
  
• be forward-looking as well as retrospective
  
  
• identify key strategic risks
  
  
• disclose and discuss key considerations affecting capacity
  
  
• disclose and discuss other critical factors
  
  
• integrate financial and non-financial information
  
  
• provide comparative information
  
  
• base reporting on credible quantitative and qualitative information fairly interpreted and presented
  
  
• disclose the basis on which reporting has been prepared
  

A working draft is circulating amongst those leading public sector performance reporting in each jurisdiction of Canada.

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 to develop consensus as to how to apply the CCAF’s principles as part of the performance management and accountability expectations across the BC public sector.

We plan to discuss this development with legislators later this year in the context of our assessment of the quality of the most recent annual performance reports of government.

I also want you to know that providing assurance on the quality of performance information is a priority of all Canadian auditors general.

During the past year, we have been working on a simultaneous examination of a health indicator report required to be prepared by each province and the federal government.

The reports, which were published on September 30^th, include fourteen groups of 67 health indicators covering a wide range of significant issues such as survival rates for breast and prostrate cancer, waiting times for cardiac surgery, and patient satisfaction levels.

Each of these health indicator reports includes a statement from the Auditor General of the related jurisdiction advising Canadians and their elected representatives on the consistency and accuracy of the health indicator information reported by their governments.

This is the first time that the Canadian legislative audit community has carried out simultaneous examinations.

This development and other planned work will make it more likely that our governments use sound performance information when making decisions and when reporting on the performance of our health system.

Our work on the accounting front I discussed earlier is a companion effort intended to ensure rigorous program cost information is maintained and is then linked to results achieved. Much work is required on both of these fronts.

As I noted, the proposed principles for performance reporting include explaining key risks, the levels of risk accepted and the impact on decisions. While practice develops on how best to report on risk management in the public sector, our Office continues to examine directly risk management practices of government.

I want to bring to your attention work that we have completed in the past year that I think might be particularly relevant to you. The work focused on how government manages risks related to:

• The state of the work environment in the public service, and
  
  
• Resource allocation within the health system

Also, I plan to review our current work on the government’s underwriting of an Olympic bid.

Building a strong work environment is a particularly difficult but significant issue.

In an earlier examination of the role of training and development in the BC public service, we found that the work environment was impeding the performance of the public service.

Also, we obtained research that indicated that BC citizens expect better government services, that good performance and customer satisfaction are linked to a strong work environment, and that the federal government found a linkage between customer satisfaction and public confidence in government.

The focus of our examination was on the key factors that affect the ability of government to deliver quality services to BC citizens – we found out what members of the public service were thinking in early 2001.

We focused on four factors:

• the extent to which there was a citizen-centred culture, getting at the service to clients issue
  
  
• the extent to which employees are engaged, are enthused, take ownership
  
  
• the extent to which there is strong leadership that provides clear direction and support
  
  
• the extent to which there was a system of performance management in which the work environment and customer satisfaction are monitored

Overall, we found that an unhealthy work environment in the public service is putting the delivery of quality service and the achievement of organizational objectives at risk.

Our examination includes an important survey instrument that can now be used to compare change over time and to compare to other organizations. We have asked the chair of the public service commission to use this instrument – our request is supported by members of the standing committee on public accounts.

A second piece of work I want to bring to your attention is our examination of the information used by the ministry of health when making resource allocation decisions pertaining to our regional health care system. Our examination focused on the fiscal years of 1999-2000, 2000-2001 and the planning for 2001-2002.

We started with the premise that all governments want to know and be able to demonstrate that our publicly funded health programs and services are meeting the health needs of people in the most cost effective way possible

What we focused on was the extent to which the government was using sound cost and performance information when deciding how best to fund the regional health system

We found that the government made its funding decisions based on historical spending practices rather than on sound program cost and performance information

Key findings – there was

• No cohesive framework of performance expectations that would set out how health needs are to be met
  
  
• Funding decisions are not supported by sound cost and performance information or by rigorous analysis
  
  
• We found that a population needs-based funding model is being put in place – but that a complete picture of the performance of the regional health system is not provided
  
  
• We also found that cost and performance information that was being gathered was not used or linked to performance monitoring or funding decisions

In our report, we also note signs of progress

• The ministry is adopting a funding model that is based on population health needs
  
  
• Putting in place public service plans that are more results focused and that include more cost and performance information and expectations
  
  
• Are making current cost and performance information more accessible to health authorities
  
  
• Putting in place agreements with regional health authorities to define cost and performance expectations more clearly
  
  
• Have a three year funding framework
  
  
• Have provided regional health authorities with funding information in a more timely manner

In our report, the government set out its response that was very specific in what it plans to do.

At the meeting of the standing committee on public accounts in which the deputy minister of health was questioned, members supported our work plan and what the government plans to do in response.

The last matter I wish to bring to your attention is our work on the Olympic bid.

Next July, the IOC decides on the winning bid for the 2010 Winter Olympic Games.

At the invitation of the Bid Corporation and with the support of government, we decided to step forward in our role as the auditor of public money.

We do not intend to judge the merits of the bid to host the Olympics, but we do want to seek assurance that the major financial obligations being agreed to – and to be borne by taxpayers – are fully disclosed.

Hosting these Games would be a significant financial undertaking for our province. To date, the provincial government has committed to:

• funding 50% of the sports venue infrastructure and related legacy costs
  
  
• providing provincial services such as security, highway maintenance, and emergency planning
  
  
• making significant infrastructure investments, and
  
  
• underwriting the operations of the Games

Some of these costs will be borne in partnership with the federal government.

The work we are doing right now has two general themes.

First, we are examining the reasonableness of the Bid Corporation’s estimate to stage the Games.

Second, we are examining the reasonableness of the provincial government’s estimate of its overall financial undertaking.

This work leads us to more specific issues, such as:

• the adequacy of the due diligence,
  
  
• the assumptions underlying key costs and revenues, and
  
  
• the associated risks related to such straightforward issues like foreign currency fluctuations, and more complex issues such as security and weather

We plan to release our findings in a public report this Spring.

Taking on this examination moves us closer to real time examinations.

Currently, we are doing our work and bringing issues to the attention of officials of the Bid Corporation and of government so that those issues are addressed in real time. Our hope is that all significant issues will be addressed in the preparation of the Bid and in determining the overall provincial financial undertaking.

We are using a strong group of people within our office and have hired outside expertise to help us assess such issues as the projected economic benefits associated with hosting the Games.

In addition, we are making good use of the work done by our Australian colleagues in the Office of the Auditor General of New South Wales. That Office has done much good work on the Sydney Olympics and is providing us with their perspective on what to do and what to look out for.

I think the key contribution we will make relates to the due diligence carried out and the adequacy of public disclosure by government of the total financial undertaking.

It would be great if we could report publicly earlier but we need a final Bid before we can complete our work. And, the final Bid is not in place until early January.

We live in interesting times!!

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

• a more user-friendly framework of financial information now possible with the move by government to implement a more rigorous and complete accounting,
  
  
• the growing demand for more useful cost and performance information and the development of guiding principles for performance reporting, and
  
  
• our work on various risk management issues including the Olympic Bid.

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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