Finance

New auditor general’s past in Finance Department raises concern about potential for bias

New Brunswick’s new auditor general says he will take a hands-off approach to files he handled as a senior Treasury official, in order to avoid any perceptions of a conflict of interest.

Paul Martin says the challenge of jumping from bureaucracy to the role of an independent observer is nothing new, and he will tackle it the way his predecessors did.

“The office has successfully dealt with this transition in the past and there have been no independence issues,” he said Wednesday as he packed his desk in Chancery Place. “The same process will apply in my case as well.

“You just have to use your professional judgment and know when that turns into a real or perceived conflict and when it’s a good time to step back.”

Martin is leaving the comptroller position at the Department of Finance, which means that as auditor general he will be responsible for independent audits of some of the programs he worked on or reviewed as a civil servant.

Brent White has worked for Auditors General for two decades and now teaches at Mount Allison University. He says he feels strongly that the Auditor General should not be a former Treasury official. (Provided by Mount Allison University)

He is the third auditor general in a row to achieve a leap from the position of auditor who works as an internal auditor for government departments. Five of the eight general auditors in the history of the province were auditors first.

To avoid any realization issues, Martin said he would have no role in auditing the county’s financial statements in his first year as auditor general.

He will handle individual software performance audits case by case, stepping down if the office addresses anything in which he played a major role.

Martin was responding to a former auditor who worked in the Office of the Auditor General and urging Prime Minister Blaine Higgs to step back.

Brent White, now a professor at Mount Allison University, said taking someone out of finance to become an auditor violates basic principles of the accounting profession’s code of conduct.

kim adair macpherson auditor general
Kim Adair-MacPherson left her position as auditor general of New Brunswick in the spring of last year. She was also the county comptroller before taking office, but she is best known for being a strong and independent comptroller. (Catherine Harrop/CBC news file photo)

Self-review and familiarity with the key players are two of the five “threats” to independence that accountants protect under their professional standards.

“I feel very strongly about this, and I think there are likely to be other accountants who are feeling very strongly,” said White, who has been an auditor in the Office of the Auditor General for two decades.

“The only person who can do something about this is Blaine Higgs.”

In fact, Martin formally took office on January 1, and it will now take a two-thirds vote of the legislature to remove him.

The legislature approved Martin’s appointment on December 8. Liberal opposition leader Roger Melanson supported the appointment proposal, although he supported White’s call for a more independent job selection process.

Melanson said in December that Martin, with whom the Liberal leader worked when he was a cabinet minister, was “clearly independent” and highly qualified for the job.

premier blaine higgs dec 9 2021
Prime Minister Blaine Higgs said he asked a similar question about Martin when he was being considered for the job, but it was confirmed that Martin would not be asked to review his work. (Ed Hunter/CBC)

That’s not enough, White said.

“I think the political class has come to define independence as a kind of equivalent of ‘He’s a nice guy’ or ‘He’s a good guy,’ rather than saying, ‘Does he meet the standards of the accounting profession in terms of independence in fact and appearance?’ “

Martin was nominated by a selection committee made up of Executive Board Clerk, Legislative Clerk, Judge and Vice Chancellor.

Higgs said on the day he announced the date that he raised the question himself when the committee recommended Martin but that the files he handled as Controller would be “treated independently … so you’re not reviewing your work.”

White first raised his concerns last year when he distributed his PhD thesis on the topic.

Besides the frequent selection of bureaucratic insiders for the job, White said the hiring process itself must change to remove the executive board clerk, the county’s top civil servant, from the selection committee.

White’s conclusions were endorsed by former Progressive Conservative Treasury Secretary Norm Bates, who sent the letter to the leaders of the four political parties in the legislature.

auditor general michael ferguson
Michael Ferguson was one of five public auditors in New Brunswick who previously worked in financial management. Ferguson went on to become the auditor general of Ottawa. (Adrian Wild/The Canadian Press)

All three opposition leaders said they shared his concerns, and Liberals in Melanson put forward a motion calling for the boycott to establish a “revised selection process that would be independent of the Executive Board.” This proposal has not yet come to a vote.

Last March, New Brunswick’s certified professional accountants made a public offer to help the province come up with a more “rigorous” selection process.

“You cannot be an auditor for a company that either you own or has significant influence over, or your spouse is its president or CEO,” John Clark, the organization’s chairman, said Wednesday.

This contradicts independence and objectivity.”

Clarke said the choice of a Treasury official as auditor general “doesn’t appear to be the best”. “In an ideal world, there would be someone who was appointed to this position and who had no prior role in any of those positions.”

Clark said that having “lightened controls,” such as Martin’s promise to step down from some audits, was acceptable. However, appointing a public auditor from outside the civil service would avoid the need for that.

Clark said that former auditors who became public auditors, including Kim Adair Macpherson and Mike Ferguson, were “beyond censure in terms of their ethics, but that is the situation as it relates to optics.”

Higgs’ office on Wednesday did not respond to a request for comment on White’s call for him to rescind Martin’s appointment.

Instead, company spokesperson Jan Bertin clarified the selection process and noted that the Auditor General Act gives Martin the authority to delegate certain responsibilities to avoid potential conflicts.

“Through the selection process, New Brunswick has been very successful in appointing the auditors general who previously held the role of controller,” he said. They have won the confidence of both the Legislative Council and the public.”

best of the web (1)

Related posts
Finance

Improving financial literacy must be a priority for Europe

This article is the latest part of the Financial Times Financial Literacy and Inclusion Campaign The…
Read more
Finance

2022 Alexander S. Melvin Award for Inspirational & Ethical Leadership in Financial Services Call for Nominations

Toronto, January 17, 2022–(BUSINESS WIRE)– The Alexander S. Prize Committee is seeking.
Read more
Finance

CRC Recommends Elimination Of Finance Board

After evaluating the recommendation that the BOF become a designated advisory board, the Newtown…
Read more
Newsletter
Become a Trendsetter
Sign up for Davenport’s Daily Digest and get the best of Davenport, tailored for you.

Leave a Reply

Your email address will not be published. Required fields are marked *