The question posed to the panel today is “What is the role of assurance in advancing results-oriented government?” A daunting question, I thought. But then – and I hate to admit it – it’s a question I’ve been thinking about even before this panel posed the question! And so I hope I am able to shed some light on the link between assurance and results.
I’ll start first with the last half of that question, focusing on results-based management in BC. Then make the link to assurance and, in the process, define what I mean by the term. Talk about BC’s experience with assurance on annual reports. And, lastly, cover the challenges ahead or what I call the learning curve.
As everyone is aware transparency and accountability is a legislated requirement in BC. The Budget Transparency and Accountability Act requires regular public reporting about the planned and actual results of government’s programs.
But there’s more to it than reporting. The Act presupposes that organizations are managing for results – it calls on government to set out its goals, objectives and specific performance measures. And if organizations are not managing for results, public reporting is meant to give impetus to it. In other words, organizations will want to tell a good performance story. They will want to demonstrate that they are making good use of public funds and are achieving the things that matter.
What we’re seeing, though, is a disconnect between the service plans and annual reports that are produced. They’re not tied to the business of the organization; they’re not part of an organization’s performance management processes. The key reason, I believe, is that performance information is not being used, either internally or externally, to drive performance.
Yesterday, Dana Hayden outlined the internal management processes for managing for results. So today I’ll focus my remarks on the external use of performance information and discuss how its use can help drive better performance.
Let me start by saying that public scrutiny can be a powerful motivator for improved performance. If you know someone is critically examining what you do and what you say you’ve done, you’re going to want to do well – both in your performance and in your reporting on that performance.
Unfortunately, there is little public scrutiny in a systematic way of the annual reports of government. Only one select standing committee of the Assembly, the Crown Corporations Committee, for example, reviews the plans and reports in any depth in a public forum.
Why? There are several reasons. But as Michael Eastman of the CCAF alluded to yesterday: performance reports lack credibility.
So it becomes a chicken and egg problem: if reports aren’t credible, they won’t be used. If they’re not used, then those who produce them won’t want to do so anymore. This doesn’t mean that organizations won’t have to manage for results anymore, but it does mean there’s one less incentive for doing so.
Well, assurance can help. Assurance is defined as a process whereby credibility is added to reported information. It gives readers added confidence that what they are being told is relevant, reliable and fair. That’s why the Auditor General audits the financial statements of government, for example.
I should say that government’s themselves recognize the value that assurance can provide, not just to financial information but also to performance reporting.
So what we’ve been seeing in BC is a demand for assurance. For example, you may recall that in 2001, the government of BC, in its New Era Document, committed to producing service plans with “measurable performance standards and targets for all programs that are annually audited and published . . . .”
The following year, the Public Accounts Committee, an all-party committee of the Legislative Assembly, endorsed the principle of independent assurance. It said that assurance should be provided on the reliability of information contained in the annual reports of ministries, Crown agencies and government as a whole. It went a step further. It also suggested that assurance – the statement about the credibility of the report – be part of the annual reports themselves.
I have another example. The Public Guardian and Trustee Act includes a clause that requires the Auditor General to report on the extent to which the Public Guardian and Trustee has met the performance targets and other objectives in his service plan.
But it’s not just in BC where the demand for assurance has been growing. In Alberta, federally in Canada, in Europe and in the USA, both the public and private sectors are exploring how best to give clients, stakeholders and the public confidence in what is reported.
There is as yet, though, no
common approach, although there is a fair bit of experimentation. One
model, one way of thinking about assurance, has been put forward by the Canadian
Comprehensive Auditing Foundation. This model suggests that assurance is a
continuum:
§ from assumed (where you, the reader, make a judgment as to the credibility
of the report);
§ to affirmed (where management expresses ownership);
§ to described (where management not only takes ownership but explains to you,
the reader, why you should feel positively about what is reported).
At these stages, assurance is between you and the organization.
The final stage is 3rd party validation where someone qualified and independent of the organization makes a judgement on your behalf as to the credibility of the report.
While this model suggests there are different ways of providing assurance, as you can appreciate, there are different degrees of assurance as well.
So what is the BC experience with assurance?
Well, first, there’s lots of reporting: about 20 ministries and 30 Crown agencies report each year under the Budget Transparency and Accountability Act. But while there’s lots of report, there’s little assurance on these reports other than assumed; that is, you must decide for yourself whether you find it a credible report.
To some extent, it might be argued that the service plans and annual reports are at the affirmed stage. Each report includes a signed statement from the Minister that he or she is responsible for the basis on which the report was prepared.
And that’s it for assurance – apart from some limited 3rd party validation carried out by the Auditor General.
That’s unfortunate because assurance can have a positive impact: externally, in encouraging greater use of performance reports, but also internally where it can help drive better performance.
I mentioned the Public Guardian and Trustee. We’re in the 5th year assessing the performance report and providing readers with added confidence about what is reported. But the Public Guardian and Trustee tells us it is also having an impact on his organization:
“We had to blaze a trail, and we had to do so pretty quickly. We gathered information from other organizations in B.C. and elsewhere about performance management, and we embarked on an exercise of defining the goals, setting the objectives and identifying the performance measures that would help us determine whether those goals and objectives were being met”. (PAC meeting, October 2003)
And he goes on to say that it has had an impact on the culture of the organization, as well, helping them focus on performance.
Other organizations also want to demonstrate that they are well-performing. And so, increasingly, we’re finding that organizations themselves want the credibility that assurance can add.
For the last two years, for example, at its request we’ve provided an audit opinion on the quality of the performance report of WorkSafe BC –going beyond an audit of its financial statements to include its operational performance. This report is one of the leading edge performance reports you’ll see. And it includes an opinion from the Auditor General that the report fairly presents performance.
Right now we’re reviewing the performance report of the BC Assessment Authority – at their invitation – and expect to provide similar assurance.
A few other reports we’ve been
involved with:
§ Twice now we’ve audited the performance indicators in the Ministry of Health
Services report. The Nationally Comparable Performance Indicators,
reported in 2002 and again in 2004, is part of the First Ministers’ Accord on
Health Care Renewal. In fact, Auditors General in every province provided
assurance on the health indicators reported in their jurisdictions.
§ Two reports from Partnerships BC: the Value for Money Report on the Abbotsford Regional Hospital and the Project Report on the Sea to Sky Highway Improvement Project.
§ And a third report we provided assurance on was the Canada Line Final Project Report.
What is the value of all this assurance?
It’s all about informing the public – increasing their confidence in what is said – and in getting elected representatives to want to use performance information. That, in turn, will help drive better performance.
We’re gaining experience in providing assurance on the performance reports of government. But I should reiterate that it is a relatively new field. We’re all learning. And there are issues we need to wrestle with yet such as: how much assurance should be provided? Is it always necessary? Should all annual reports be assessed in this way? All or only the most significant parts of a report? What is “significant’? Should we focus on relevance, accuracy, or both at the same time? And how far do we dig? Just how in-depth should our review be?
The most challenging issue, though, is not a technical one. It’s a communication issue.
At the end of the day, we have to ask: “Do the users of a report understand what is being provided when that assurance is given?” We worry there may be a tendency to read more into what the Auditor General says than is there.
Philosophically, we say that it is management’s responsibility to report on performance, not the Auditor General’s. Our role is to help you – the client, stakeholder, member of the public, or elected representative – understand whether the information you’re given is relevant, reliable and fair so that you can then focus on the key issues and ask the hard questions.
If I could sum up: what we’re seeing is a growing demand for assurance and the value it adds, internally in helping drive performance and externally in ensuring good, credible performance reporting. We just need to be clear about what we’re communicating.
And, if you want to have a closer look at some of the reports I’ve mentioned, here are the reference sources:
Public Guardian and Trustee (trustee.bc.ca)
Annual Report 2004-2005
WorkSafe BC (worksafebc.com)
2004 Annual Report and 2005-2007 Service Plan
Ministry of Health Services (www.gov.bc.ca/health)
BC’s Report on Nationally Comparable Performance Indicators 2004
Partnerships BC (partnershipsbc.ca)
VFM Report: Abbotsford Regional Hospital and Cancer Centre Project, Feb
2005
Project Report: Achieving VFM – Sea to Sky Highway Improvement Project,
Dec 2005
Canada Line (canadaline.ca)
Canada Line Final Project Report, April 2006
Thank you for your attention.