Profession >
Feature
Public Performance
More emphasis on performance audits in local and provincial governments means new opportunities for accountants.
FROM:
MAY-JUN 2007 ISSUE | BY
LUIS MILLAN
When Alain Lalonde, CGA, was given the unique opportunity to establish the Office of the Auditor General for the City of Ottawa, he moved quickly to impart his authority as the independent watchdog of public accountability. Lalonde inherited a staff of 12 from the former internal auditor who reported directly to city management, a mandate at odds with the independent nature of the legislative auditor. “Attitudes over how they saw their roles had to be changed – and it was not easy,” he says. “In the past, we audited what we could; now we audit what we must.”
From the moment he became auditor general in September 2004, Lalonde began asserting his independence from government administrative controls, clearly conveying the message that he would be operating at arm’s-length from City Hall. “Every opportunity I had to reaffirm my position, I seized it,” says Lalonde, who has more than 20 years’ public administration experience, including an
18-month stint as auditor general for the City of Gatineau. In quick succession, Lalonde introduced new security measures that severely restricted access to his office, a revamped website to highlight the independent nature of his group’s oversight activities, new personnel policies, and a trimmed down workforce so he could afford the services of consultants. Further, Lalonde placed – and still places – far more emphasis on conducting performance audits than compliance and financial audits.
Great Expectations
Faced with high public expectations, public sector accountants have given priority to establishing systems that provide greater accountability, better management of tax dollars, and more efficient public services. Though the responsibilities of the Office of the Auditor General include attesting to proper financial bookkeeping, much of the staff’s energy and time is now spent on performance audits, which assess whether government programs are conducted with efficiency. “We look at the issues of the day; the issues that the legislature and citizens would like to hear about,” says Arn van Iersel, CGA, acting auditor general of B.C.
Unlike financial and compliance audits, performance audits do not rely on objective standards of accounting. Rather, performance-based auditing tends to employ comparisons with other well-performing organizations as well as standards used by auditors general in other jurisdictions. “Part of an auditor’s job when doing a performance audit is to determine a reasonable standard for performance,” explains van Iersel. “You could measure it against past performance or best practices in other jurisdictions. The other test is to determine if the program met its original objective. If so, how? If not, why not and how could it be improved?”
Carol Busch, CGA, treasurer and general manager of finance for the City of Thunder Bay, Ontario, also spends much of her time measuring performance to ensure operating efficiencies. “Long-term financial planning is part of our mandate, and it entails examining the challenges we face, the progress we have made, and the things we need to improve,” says Busch, who leads a team of 91.
Busch believes professional accountants who oversee local government finances must, above all, provide financial leadership. That entails developing a financial vision, forging a financial plan, and creating policies to achieve the plan. It also means being a strong team leader and developing good communication skills to be able to convey financial information in a clear and transparent manner. “It means being a realist and making tough decisions,” says Busch. “It means that if something doesn’t make sense, saying so. Whether or not decision-makers accept the recommendations, the onus is on you to say what you believe, even if it is not the popular thing.”
Meeting New Standards
All of these qualities are now being put to the test as local governments across the country inch their way toward meeting a new standard set by the Public Sector Accounting Board (PSAB). In a move designed to push local governments toward full accrual accounting, the PSAB, last summer, approved revisions to Section PS 3150, Tangible Capital Assets. This means local governments will account for and amortize all of their tangible capital assets in their financial statements from January 1, 2009. “Getting the capital assets on the balance sheet and recording the depreciation of the capital asset is probably the biggest thing that ever hit municipal governments,” says Busch.
The process requires identifying and locating assets such as equipment, lighting, infrastructure, and vehicles belonging to local government. But tracking down assets is such a huge undertaking that finance departments have had to partner with engineering and public works departments to get the required information. The City of Thunder Bay has even hired a couple of part-time people to locate and identify its assets. It has also given Busch the green light to hire a full-time capital asset accountant who will deal with the trickiest issues.
“Determining the useful life and age of assets is a huge issue,” says Busch. “If assets are maintained properly, from a management perspective they can last forever. From an accounting perspective, the estimated useful life is determined for depreciation purposes. Those two concepts need to be reconciled. And that is a huge challenge.”
It’s a conundrum all too familiar to Scott Stevens, CGA, P.E.I.’s comptroller general. The biggest challenge his office faces, aside from having sufficient time to research, review, and provide opinions on submissions and proposals, is grappling with PSAB’s new standards. “From a comptroller’s perspective, we find it most challenging to deal with the number of changes PSAB is making within a rapid timeframe,” says Stevens. “Many changes are put forward, and as governments move on to new ones, we don’t have compliance right across the board.”
Community Service
Over the past four months, Doug Chapman, CGA, director of finance for the seaside community of Sechelt, B.C., has been pouring over the figures of the municipal budget he will be handing to Council, and assessing the financial sustainability of the programs offered by the town of 9,000. With a tax base that is 93 per cent residential, he says it is becoming exceedingly difficult to offer the kinds of services residents expect without resorting to tax increases. The price of housing has skyrocketed, fuelling a dramatic rise in property assessments, which in turn means tax increases. “In the past we just raised taxes and did not give it much thought,” says Chapman. “That’s no longer acceptable because if we continue that course we are going to be taxing our residents out of their homes, so tax increases are a last resort.”
In a bid to achieve financial sustainability, Chapman recently made it compulsory for individuals seeking new municipal services or an enhancement of an existing service to submit a structured proposal that includes an analysis of the needs or problems, proposed alternative solutions, assumptions, constraints, and a
risk-adjusted cost-benefit analysis. And Chapman would like to introduce a comprehensive system for financial monitoring and reporting. Developed by the International City/County Management Association, the system, outlined in a book called
Evaluating Financial Condition, provides benchmarks and guidance for analyzing financial trends. It also recommends management practices and legislative policies to keep local government finances on an even keel through economic, political, and local growth cycles.
Chapman has a proven track record with the system, having used it with satisfying results when he was the director of finance for the town of Quesnel, B.C. “It took me almost two years to complete it in Quesnel, but once it’s done you just have to update the indicators,” he explains. “I used it as a precursor to the budget. If there is a trend that is troubling, the system gives you an opportunity to address it during the budget process.”
Having worked in municipal finance for 22 years, Chapman says he has no regrets about his career path and has, in fact, used it to seize the opportunities that have come with working in public sector finance. “Sometimes there is more to life than just money, for example, serving the community and trying to make it a better place.”
Ontario’s Busch is taking that message to career fairs, where she spends some of her time actively recruiting. She also develops intern programs for students who may not otherwise consider a career in public sector finance. “One of the challenges we face in municipal governments is succession planning,” notes Busch. “We have been working very hard to recruit and retain new talent and to make sure staff have access to good training and development,” she adds.
If you are looking for a new opportunity close to home, take note, as there are similar programs in place across the country.
[
TOP ]
Luis Millan
is a Montreal-based freelance journalist.