John Himmelman
John Himmelman

The NWT Needs An Independent Auditor General

If the next legislative assembly wants to pay more than lip service to transparency and accountability, there's one big move they must make.
Without independent verification, what the GNWT has in place is essentially a system of self-reporting

In the run-up to the Territorial election, there’ll be lots of talk about attracting development, lowering the cost of living, saving the environment — and what campaign speech would be complete without the obligatory commitment to transparency and accountability? It may at times seem like a charade, but there is a genuine opportunity here to make MLAs earn your vote.

If Territorial candidates really do believe in transparency and accountability in government, they should all be in favour of an independent auditor general who reports directly to the legislative assembly. The first chapter in every introductory auditing text book points out the necessity of auditor objectivity.

All Canadian provinces began with the NWT’s current model: an internal audit function reporting to the finance department. As time went on, every province replaced this with an auditor general act — sometimes on the heels of a financial scandal.

These acts saw the auditor general report directly to the elected assemblies, independently of the organization they were supposed to be auditing. The NWT changed to have the internal audit bureau report to an Audit Committee, but it is composed of senior management. So essentially, they still report on themselves without auditor independence.

The key difference is power, and where it lies.

Say you think a fellow employee may not be following all the rules. If that employee is your boss, would you report them to themselves, or to their boss? Not likely. Say the employee is a co-worker and you both have the same boss. A lot less risk to you, since that employee is not your boss. This is why independence is key when assessing the strength of an internal control environment. Basically, no independence means weak internal control, and less reliability.

Does a strong internal control environment matter? Yup. External auditors like it. It means less risk of misstatements, so less work for them.

Picture two scenarios. In scenario A, an employee wants to be paid for a business trip. They submit claims and get paid. Done. In scenario B, with a strong internal control environment, an employee submits claims for a business trip. Now, the claim is examined. If it’s really business and not personal, then let’s see your documentation of what business contacts were made, how much business was done and why they would only do business with you in person. See the difference?

Is it expensive? I’d think redrawing existing reporting relationships, or finding boilerplate legislation from a provincial system would be cheap. They could also just change the existing audit committee membership to be MLAs. All the provinces found a way to justify the expense. It was also worth it to many large cities like Calgary and Edmonton.

Transparency and accountability — the foundation of good governance should be an election issue. Without independent verification, what we have in place is essentially a weaker system of self-reporting. Can you say Nutrition North?