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.

This morning, I plan to describe my views on the provincial government’s progress towards:

• Providing all BC people with a full accounting of planned and actual financial results
• Developing robust results focused performance information, and
• Building sound risk management

My presentation is about 40 to 45 minutes. After, I will do my best to answer your questions and listen to your views or concerns.

As the Auditor General, I am an officer of the Legislature – I work for and report to the people of BC through their elected representatives.

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

I can be fired 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 deals with my reports in meetings open to the public and the media.

That committee – referred to as the Public Accounts Committee – is an all-party committee and is chaired by a member of the opposition. Both members of the opposition serve on this committee.

I believe a healthy and rigorous public scrutiny of the performance of government by this Committee is a key to ensuring the work of my Office leads to constructive and meaningful change – and it does – although rarely as quickly as I think required.

In general, the role of an Auditor General is to help all legislators and, thus, all BC people, hold the government accountable for its management of the considerable resources and responsibilities we entrust to government.

A meaningful and rigorous public scrutiny of the performance of government is a key ingredient to public confidence in our institutions of government.

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, and
• Management of risks is sound.

Through our work, we encourage 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 – a challenge.

In my Office, we allocate our resources and energies to three lines of business.

Firstly, we attest to the reliability of financial statements. We want people to know whether the government is providing them a complete accounting of financial results 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. We want people to know the extent to which the government uses and reports results-focused performance information.

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

I have an Office of about 85 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 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 read our reports on our website at www.bcauditor.com.

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

A new Auditor General Act now provides my office with new tools. For example, we can now examine whether money transferred to non provincial government organizations are used for the purpose intended.

Also, the new Auditor General Act provides 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.

These changes are ones my Office has requested for many years and were 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 was to cut our funding and, thus, weaken our capacity – and theirs – 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, the degree of public confidence in our institutions of government, and the current unusual representation within the legislature.

But, that’s the way it is – added responsibilities with less capacity – a familiar story.

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 someone who is in the auditing business – we certainly live in interesting times! - Enron, Worldcom, Parmalat, Nortel and now the federal sponsorship issue.

The public is becoming impatient and more demanding – They expect and should receive all of the information the require for a meaningful scrutiny of performance, and so that they can understand, assess and – yes - challenge decisions, decision making and decision makers.

In these times, having and using relevant and reliable cost and performance information is an essential for earning public trust and confidence.

With these thoughts in mind, I will describe the challenges and opportunities emerging in the context of the work I do within each 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 province to do this – other jurisdictions allow their governments to use weak rules that can be inconsistent from year to year, and, in my view, misleading.

Providing a full accounting within the government’s financial plan and annual financial statements is a particularly important step forward.

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

A complete accounting is 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 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 used and reported by government and the increasing 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 governance, 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 beginning to be used. Linking resources, strategies and results is the key challenge.

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 Community Charter supports sound performance management and reporting. But I also know that many of you have much experience linking cost and results information and debating alternatives in an intense public forum.

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 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, capacity building and program management.

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

First, several years ago 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 of elected officials only and most of those officials are also on the board of the GVRD which oversees TransLink.

This is a particularly complex governance structure.

Members of TransLink’s board have a particular difficult time sorting out whose interests they represent. So far, our advice has caused rethinking but no change yet. Our advice and recommendations are particularly relevant given the current RAV line controversy.

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 looks like.

Our advice has been well received and significant change is taking place to the relationship between the ministry of health and each health authorities.

Ensuring board continuity and moving ministry away from program delivery are two particularly important issues to monitor.

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 – since almost all of what we do is through people.

One key examination focused on the work environment. We wanted BC people 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 quality of 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 by large private sector organizations.

We can also identify the few variables that if managed well can lead to a significant improvement in the work environment.

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 and presenteeism. We are examining 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.

We are examining the extent to which the school system is prepared for such autonomy in terms of its own capacity to plan, manage and report.

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 to 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 months.

The third area that we examine relates to more specific 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.
• Several years ago, 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.
• In the autumn, we plan to report on what actions have been taken in response to the recommendations provided by Filmon and my Office.
• We examined risks related to managing contaminated sites on Crown land – we found that the government did not 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 to citizens on an 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 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 several 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, foreign currency and scope creep.

Each year, we plan to report on the status of the 2010 Olympics beginning this December.

We are also 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. We want BC people to know 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.

We should report our findings, conclusions and recommendations with respect to these two examinations in the next several months.

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.

As you can see, much is going on.

During this next year, I will be reporting to you and all BC people:

• on whether the government is providing a full accounting
• on the extent to which the government is using and reporting robust performance information, and
• on the extent to which it is managing several particularly important responsibilities in a sound manner.

Thank you for inviting me to speak at your meeting. I appreciate your interest and ask for your support.

Now, if you have questions, concerns or suggestions, I will try to answer them and I will listen.

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