Exaggerated advantages and understated hazards associated with the Société des assurances automobiles du Québec (SAAQ)
Internal Audit Director's Presentations at SAAQ Manipulated by CEO and Vice-President
The internal audit director at the Société de l'assurance automobile du Québec (SAAQ), Daniel Pelletier, testified on Monday that the contents of his presentations were controlled by CEO Nathalie Tremblay and the vice-president of digital, Karl Malenfant. Pelletier claimed he had to modify several reports to the board of directors to omit references to cost overruns to protect negotiations with the firm responsible for the digital shift.
Commission prosecutor M. Marie-Claude Sarrazin questioned whether it was common for an internal auditor to have to negotiate the content of their findings with the head of the office being audited. Pelletier stated that it was not a common practice and undesirable. He produced an example of the explosion in the number of hours required to complete part of the project, with the CEO asking him not to include figures in the documents. Pelletier testified that he used closed-door meetings to bypass this and inform the board members of the true state of the CASA project. His testimony will continue on Tuesday.
The internal auditors had warned the SAAQ as early as 2015 about the risks surrounding the digital shift, highlighting "creative accounting" and "ambitious" objectives. When the CASA project contract was signed in 2017, the anticipated benefits for the SAAQ were already overestimated, according to Pelletier. As the director of internal audit and program evaluation from 2016 to 2024, Pelletier stated that initial benefits were discussed in the range of 800 to 900 million dollars, but eventually reached 1.2 billion dollars.
The Internal Audit and Program Evaluation Directorate then commissioned external firm KPMG to analyze the expected benefits. Pelletier testified that there were "important discussions" with the vice-president of finance and his team because they believed it was a case of "creative accounting." KPMG confirmed the auditors' suspicions: the benefits had been overestimated. "We never got the final picture of these famous benefits, which ultimately do not exist," Pelletier said.
Before Commissioner Denis Gallant, Pelletier reviewed internal notes that alerted the SAAQ's board of directors and management as early as 2015 to the risk of cost explosion if they decided to acquire an integrated management software (IMS) instead of developing an in-house program. The internal auditors relied on studies that demonstrated that the risks associated with this solution often materialized, such as significant cost overruns of up to 50%.
- Given the manipulation of internal audit presentations by the CEO and Vice-President at SAAQ, it is highly questionable whether the French industry's digital shift projects, such as those involving finance and business, are accurately reported.
- In light of the internal auditor's testimony about controlled presentations and creative accounting in the SAAQ's digital shift, one might wonder if similar practices are prevalent in the French business world, particularly in the technology and finance sectors.
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