HUMA Committee Meeting

STANDING COMMITTEE ON HUMAN RESOURCES DEVELOPMENT AND THE STATUS OF PERSONS WITH DISABILITIES

COMITÉ PERMANENT DU DÉVELOPPEMENT DES RESSOURCES HUMAINES ET DE LA CONDITION DES PERSONNES HANDICAPÉES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 21, 2000

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[English]

The Chair (Mr. Peter Adams (Peterborough, Lib.)): Colleagues, we're here pursuant to Standing Order 108(2) for a study of HRDC grants and contributions. I'd like to remind you that the way we began several weeks ago is the committee was to study grants and contributions by the Department of Human Resources Development and report to the House no later than June 1 of this year, providing that an interim report be tabled by April 15.

As I said the last time, because of the way things have unfolded in the House of Commons we are behind, through no fault of our own.

I am negotiating with the other witnesses on our list. At our next meeting it will be the Auditor General. It's a matter of getting them on dates on which they're available. So we're doing that, and I'm trying to move things forward as quickly as I can.

Before I introduce our witness, I thought I would clarify, as I've had to clarify for myself, the matter of committees dealing with public servants. This is not the same case as our dealing with ministers or past ministers. In the material I have received, it says that two related obstacles stand in the way of compelling a public servant to answer a question. One is the concept of crown privilege and the other is the concept of ministerial responsibility. We have discussed ministerial responsibility before. Crown privilege encompasses the confidential advice officials provide to their ministers.

The obligation of a witness to answer all questions put by the committee must be balanced against the role that public servants play in providing confidential advice to their Ministers. The role of the public servant has traditionally been viewed in relation to the implementation and administration of government policy, rather than the determination of what that policy should be.

And it goes on to say here that in the past, as a result of that, public servants have been excused from answering questions put by committees.

So I would mention that to you. There's been discussion in the media about a witness being in a position to answer questions on his previous role, as deputy minister of HRDC. He is able to answer questions on that matter, and I'd like that to be clear within the limitations of crown privilege and the confidentiality between a deputy minister and his minister.

I would now like to introduce to you our witness, who is Mel Cappe, Clerk of the Privy Council and Secretary to the Cabinet.

Mr. Cappe, we welcome you here. I know that you have an opening statement. We would be glad to hear it. You heard my opening remarks. If you don't understand that, nobody does.

Mel Cappe.

Mr. Mel Cappe (Clerk of the Privy Council and Secretary to the Cabinet): Thank you, Mr. Chairman.

I'm actually quite pleased to be here today to help the committee, to the extent I can, in its deliberations. I'll keep my opening remarks quite short because I know that honourable members have many questions they'd like to ask, and I want to be as helpful to the committee as I can be.

I'd like to begin by highlighting for the committee my responsibilities as Clerk of the Privy Council. I'll then touch on how that role differs from my former responsibilities as the Deputy Minister of Human Resources Development.

[Translation]

As Clerk of the Privy Council, I am the deputy minister for the Prime Minister's department, the Privy Council Office. What this means is that I support the Prime Minister in exercising his responsibilities. It also means that I am responsible for the administration of my department. As clerk, I am also the head of the public service. In this capacity I am responsible for providing leadership and direction to the public service of Canada. I do not administer individual departments, other than the Privy Council Office. This responsibility rests with the deputy minister of each department.

[English]

Mr. Chairman, for those of you who know me, you know the great pride I have in the Public Service of Canada and in the public servants who work for this organization. The organization is comprised of thousands of individuals devoted to doing the best each and every day.

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You may have also heard me say that the public service is a non-partisan, professional organization along the lines that the chairman described at the outset. What does this mean? It means we serve the government of the day by implementing the policies the government and Parliament have put in place. It means we do this without regard to political purpose or personal opinion.

Public servants do not express their opinions publicly on the programs they administer. However, how these programs are administered can be discussed. Therefore, permit me to take a moment to provide you with my views on the internal audit at HRDC and what this says about the public service.

As the Deputy Minister of Human Resources Development Canada, I was responsible for the administration of that department from July 1996 to January 1999. That responsibility included asking for this internal audit to be initiated.

As the members of this committee know, the internal audit examined the administration of the department's grants and contributions programs. You also know that the department's audit staff found inadequacies in the manner in which the department administered these programs.

Let me be clear, Mr. Chairman, that the administrative problems found by this audit are not acceptable. I've read in the media that some people believe the cause of these problems was program review and downsizing. Others have suggested that these problems are inevitable in an organization as large and complex as HRDC. Frankly, Mr. Chairman, neither of these are excuses for the administrative shortcomings that were found in the audit.

I know what the public service is capable of doing, even under difficult circumstances, and we can do better. I also believe that in this particular instance the process of continuing improvement actually worked and worked well.

[Translation]

How does this process work? Every day the public service looks for weaknesses in its administration and seeks ways to improve. That is what occurred here. Once those weaknesses are found, they are addressed. That also occurred. This is what continuous improvement is all about and that is what we strive for.

[English]

Mr. Chairman, like you, I wish we were perfect. If we were, there might be no need for audits. But as administrators we can't afford to be idealists; we must be realists. Therefore, we must take seriously the job of continually examining what we do to see if we can do it better. Audits are just one tool available to us to improve the quality of our administration.

We also rely on continually updating the administrative policies that guide our actions. We ensure that our staff receive the training they need. And perhaps most importantly, we work hard to recruit and retain the best people.

As I said, as Clerk of the Privy Council I wear a number of hats, and I do have a role to play in the matter before you today.

First, there is the question of the administration of grants and contributions throughout the Public Service of Canada. Whatever lessons can be learned from the HRDC internal audit must be applied throughout the public service. Whether this means improved training, tighter financial management, or simply better bookkeeping, we're obliged to look at how we administer these kinds of programs in all government departments.

It was for this reason that I asked the Comptroller General to work with the deputy ministers in departments administering these programs. We will continue these efforts until we are satisfied that our administration of these programs is at a level that we all expect.

In fact, this is a continuing process. We will then audit these programs again and the cycle will repeat itself, as it should, as we continually look for ways to improve the way we do business.

Mr. Chairman, I know that many of the committee members want to know how much I knew about this internal audit and what I did about it. As I've already said, I asked for the audit to be initiated, so I was certainly aware that this audit was underway long before I became clerk.

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When did I get a copy of the results? In January, just after the audit was released to the public. However, I was made aware of some of the audit's preliminary findings in November and discussed the audit with the deputy minister of HRD in December.

Should I have known more? No, I don't believe so. The minister and the deputy minister are responsible for running the department and addressing the results of the internal audit, and clearly they are doing this.

[Translation]

In conclusion, Mr. Chairman, I know the members of this committee serve their constituents with pride. Well, like you, public servants, myself included, serve Canada and their fellow Canadians with pride. Getting the job done right is not just an on-going commitment, but a way of doing business and the goal of each public servant.

However, we do not do this job alone. We consult Canadians who tell us how we can improve the way we do business. The efforts of committees such as yours, and, more generally, the views of parliamentarians, are also important in helping us achieve more. Even audits are part of that process. I believe that good management is about bringing these resources together and striving for excellence. With your help I know we can do even better.

Mr. Chairman, I will stop at this point as I know the members would like to ask questions and I am now in your hands.

The Chair: Thank you, Mr. Cappe.

[English]

Colleagues, I already have eleven people on my list. I would begin with Diane Ablonczy, then Bryon Wilfert, Paul Crête, Judy Sgro, Libby Davies, Rey Pagtakhan, and then others.

Diane Ablonczy.

Mrs. Diane Ablonczy (Calgary—Nose Hill, Ref.): Thank you, Mr. Chairman. I have a question for you. We have been asking for copies of the 1991 and 1994 audits. Do we have them yet?

The Chair: No, we don't. And you're right: we have, and I did, and the committee has. So I will ask again.

Mrs. Diane Ablonczy: I would like to put on the record that there are questions we would have liked to ask this witness about those documents. In the absence of those documents, I think we may have to recall this witness once we get those important documents, if we ever do. And I would ask you, Mr. Chairman, to be a little bit stronger in making it clear to the department that we want that information as a parliamentary committee.

The Chair: As you know, publicly and privately I've asked for them. And I agree with you, we should get them. Thank you.

Mrs. Diane Ablonczy: Mr. Chairman, I would first of all like to ask a question with respect to the department's standard of due diligence in handling Canadians' moneys and in managing affairs on behalf of Canadians.

I would like for Mr. Cappe, Mr. Chairman, to tell this committee what he understands about the problems at HRDC, what he understood at the time he was deputy minister, and what he understands now about those problems.

Mr. Mel Cappe: Mr. Chairman, what I understand about the problems at HRDC is frankly what I've read in the audit. And I will continue to make reference, I suspect, throughout the course of my response with honourable members, to the results of the audit, because I think it's very important that the audit be seen in the context in which it was done.

The honourable member posed the question of what I was aware of. Perhaps, Mr. Chairman, I could spend a minute on that.

In October 1997 the Auditor General had completed an audit of the TAGS program, and it was in this context that he found that the staff of the department were eagerly serving their clients. They were working very hard to get the unemployed back to work, but in the context of TAGS to help those people get income and get money from the TAGS program. And in there he had indicated that there were some inadequacies in the way the staff were dealing with their clients, in terms of adequate bookkeeping and the like. So it was in that context that we triggered this particular audit in the audit plan.

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The degree of due diligence the honourable member raises is very clearly enunciated in both the Financial Administration Act and in the guidelines from the Treasury Board on grants and contributions policy. There should be no doubt that this is what was expected of staff.

Mrs. Diane Ablonczy: Mr. Chairman, I agree with Mr. Cappe on that, and that's why it was so shocking that this audit recommended that HRDC management take appropriate action to ensure that staff were competent to perform their duties. The audit said that management should make sure that staff is competent to perform their duties. Yet one would have thought, Mr. Chairman, that this would have been what management was there for. It's rather amazing that an audit would say to management: make sure your staff knows what they're doing.

Why was there an absence of the most vital function of management in this department such that the internal audit had to chastize management for not making sure staff knew what they were about?

Mr. Mel Cappe: Mr. Chairman, I think it's important to put this in context. The audit found that indeed staff would benefit from better training on the administration and financial integrity they were responsible for.

I think it's very important to recognize that staff in HRDC—as in all departments to some extent, but in this department in particular—were very dedicated to serving their clients. And in finding the balance between serving the unemployed, the disabled, the youth, the people who were the beneficiaries of the programming, and in recognizing their duty, as the honourable member points to, of respecting the Financial Administration Act and the guidelines that come from Treasury Board and proper management, there is a tension there that has to be reconciled and that cannot be focused on quality service at the expense of a lack of attention to that financial management.

During my tenure in the department we had spent a lot of time on learning plans and on training for the department. Whenever I visited local offices I would meet with staff. I remember meeting with staff in Nanaimo and having a bear-pit session there with the local staff and asking the question about adequate training, and we would go through these kinds of conversations about whether staff had adequate training.

In retrospect, I think what the audit showed was that they had adequate training for doing some parts of their job. We have actually put together a $5 million internal reallocation to allow for the provision of more training to staff. In retrospect, that was along the lines of where the audit was leading us.

To sum up, Mr. Chairman, we were doing a lot in terms of increasing training for staff. We had a program of modern comptrollership, which was trying to inculcate in staff that respect for the taxpayer's dollar and the financial integrity required. And they were doing it, but they were not doing it enough.

Mrs. Diane Ablonczy: Then—

The Chair: No, Diane. I remind you both and all colleagues—and Mel, this includes you—if there's a ten-minute exchange between one of our members and the witness, in an 18-person committee that's three hours. And I would mention, Mel, to you, that the answer is included with the question in the time.

Diane Ablonczy.

Mrs. Diane Ablonczy: I appreciate that, Mr. Chairman.

In fact we know, Mr. Chairman, that all of these efforts fell far short of what Canadians could reasonably expect of the public service and of the people who handle their money.

We also know that the former deputy minister of the department sent around a videotape in 1996 to HRD offices telling them about a new and more flexible regime. We know from documents we have obtained from the department that this so-called new and more flexible regime was very much focused on what we might call “breaking the rules” and on, it appears, in fact violating sections of the Financial Administration Act with respect to payouts, to lapsing of funds, and also to flouting of Treasury Board guidelines.

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I'm wondering how Mr. Cappe can explain this shocking disregard of the basic fundamental guidelines under his tenure and how safeguards for handling public funds could have been so routinely flouted.

Mr. Mel Cappe: Mr. Chairman, I will not get into a dispute on how to characterize this, so I'll just note at the outset that I will not try to correct or change or dispute with honourable members on how they want to characterize this.

I've not seen the video the honourable member refers to, but I understand the direction it was going in. I think it's important to recognize that we were coming from a system of significant red tape, of trying to improve quality of service. It need not be a trade-off between improved service and lightening the red tape and respect for the rules. So I fully agree that there should have been a respect for those rules—and, indeed, most of the time there was. There was not, as the audit found, good documentation for a lot of that. Indeed, the audit points out that while there may have been monitoring being done, it was not being documented.

Just on the issue of breaking the rules, there was a process in the department that had been entitled “breaking the barriers”, and this was trying to find some of the impediments to efficiency that we had created ourselves. As I talked to staff about breaking the barriers, I made it very clear, time and again, that breaking the barriers did not mean breaking the rules.

So I think it's important to understand that there need not be a trade-off between good service and respect for the rules. I don't think it would be in anyone's interest, certainly not in the public's interest, to return to a system of highly bureaucratized red tape.

The Chair: Diane, a very short question here—and a very short answer.

Mrs. Diane Ablonczy: I'd simply point out, Mr. Chairman, that clearly it did happen and it was a cause for grave concern.

The question I have is, are there any sanctions that can or should be imposed on a department that is found to be in violation of the Financial Administration Act, of the Treasury Board regulations, of the ordinary safeguards that Parliament has put in place for the handling of public moneys?

The Chair: Mel, if you can, respond to that very briefly and then perhaps in writing later, if it is quite possible.

Mr. Mel Cappe: Very briefly, I think the notion of responsibility is to identify the problems and then fix them, and that's what we've been doing.

The Chair: Bryon Wilfert, Paul Crête, Judy Sgro, Libby Davies, Rey Pagtakhan, and Jean Dubé.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Mr. Chairman.

First of all, Mr. Chairman, I would echo my colleague's comment that I think it is extremely necessary not only that we receive the 1991 and 1994 recommendations, but we also want to know which of those recommendations were implemented—and not only that were implemented, but of the others that were not, why not?

Mr. Cappe, you mentioned the need to try to balance between a highly bureaucratized red tape system in terms of delivering what I believe in many cases are very worthwhile and needed programs to the disabled, to youth, etc., and, on the other hand, the suggestion being made with regard to a kinder or gentler type of regime. Obviously in some eyes—and certainly my own—that would lead one to wonder how we would wind up with 80% of the audited projects having no evidence of project supervision or 80% of them not having evidence of financial monitoring.

I would concur with you that we want to reduce red tape, but on the other hand we certainly don't want to have this type of horrific situation, so that leads me to my question on the issue of the implementation of a six-point plan.

First of all, if you would give us your candid assessment of the plan—what role you, as the Clerk of the Privy Council are playing in that, and what observations you might give us in terms of... You had made a comment in your presentation that the lessons from the situation at HRDC can and should be applied in other departments. How do you see that developing?

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Mr. Mel Cappe: Indeed, Mr. Chairman, I'll try to be more brief in my answers.

In terms of the assessment of the plan, the deputy and the minister... I've had no involvement in designing or critiquing the plan. However, I was encouraged when the Comptroller General endorsed the plan, the standards advisory board of CEOs from the private sector endorsed the plan to the Comptroller General, the Auditor General endorsed the plan, and Deloitte and Touche commented to the department on the plan. I've watched that, and I was comfortable that the six-point plan was indeed going to be successful.

In terms of the lessons applied elsewhere, as I mentioned, the Comptroller General, at my request, brought together the deputy ministers from those departments where there are significant grants and contributions programs. They have essentially gone back to review how the policy on grants and contributions is being applied in their departments and assuring themselves that indeed the rules are being met.

The Chair: Bryon Wilfert.

Mr. Bryon Wilfert: Do I have another question?

The Chair: You have a minute and a half.

Mr. Bryon Wilfert: Oh, excellent. You're being more generous today, Mr. Chairman.

The Chair: Well, you'd better be quick.

Mr. Mel Cappe: I'll take longer if you'd like.

The Chair: No, it's okay.

Mr. Bryon Wilfert: Mr. Cappe, one of the issues clearly is that by the end of April we will have a finalized version of the review of the programs, those that are currently outstanding. I'm wondering what checks and balances are in place currently that you see would be essential to make sure that while we are continuing through this process to the end of April, we get no more of these situations that we have seen—as I've quoted from some statistics earlier—that it not only be stopped, but that we also make sure we are making it very clear both to the recipients and to those who are serving those clients that the letter of the law must be in fact upheld.

Mr. Mel Cappe: Mr. Chairman, some of these questions may be better posed to the department, so I won't try to answer in detail the point about the review. But clearly the minister has asked for those quarterly reports, and what I take as comfort in the six-point plan is that no approvals will be made without the sequential review that's built into the first element of the plan.

In terms of the checks and balances, it strikes me that they are built into the plan by the tracking group they have established and the authorities of senior financial officers in the regions approving the projects before disbursement. I think they have that built in, but it may be better to pose the question to them.

Mr. Bryon Wilfert: With those ongoing audits—the audit that's going to be presented in June, the Auditor General's in October, and the one next January—do you feel it would be necessary to have a further outside body do an audit?

Mr. Mel Cappe: I guess I would... That's an interesting question, Mr. Chairman. My sense is that the Auditor General's review will hopefully pick up some of the changes that have taken place as a result of the six-point plan.

After seeing the Auditor General's review, it might at that point be worth while asking that question again. So I wouldn't prejudge that.

Mr. Bryon Wilfert: Thank you very much.

The Chair: That's the last time I will encourage a member to use up his time.

Paul Crête, Judy Sgro, Libby Davies, Rey Pagtakhan, Jean Dubé, and then Marlene Jennings.

[Translation]

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): I have two questions for you, Mr. Cappe. First, I would like you to tell us why there was a double standard in the department you used to head. On the one hand, the employment insurance system was tightly controlled; the department went so far as to impose quotas on public servants, otherwise they would lose their jobs. On the other hand, the grants programs were loosely managed. How do you explain this? Was there political pressure behind this obvious way of doing things?

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My second question is on the management of the Transitional Jobs Fund. Regarding the grants, to your knowledge, did the office of the Minister or that of the Prime Minister, or other political players, intervene, which would explain why 54% of the grants in Quebec under this program were given out during the 1997 electoral period, and why 63% of the grants were made to ridings represented by Bloc MPs? Can you tell us why this relationship exists? Did the Minister's office or other partisan political players intervene when these grants were made?

Mr. Mel Cappe: Mr. Chairman, I will begin by answering the second question by saying that neither I nor my officials were subjected to any type of pressure, no one communicated with us or intervened to get us to speed up the grant approval process, regardless of the program.

Mr. Paul Crête: Are you saying that at no time did anyone from the Minister's office or from another office pressure you into approving certain projects before your officials even made their recommendations? Are you saying that you never received any files which were sent directly from the Minister's office?

Mr. Mel Cappe: I would say, Mr. Chairman, that I was never subjected to that kind of pressure.

Mr. Paul Crête: So are you saying that no one, at any time ever intervened in the management of applications which you may have received from the office of the Minister responsible for Human Resources Development or from the office of another minister, including the Prime Minister, and that all the applications were acceptable to each department?

Mr. Mel Cappe: Mr. Chairman, when I was deputy minister of that department, I always insisted on the fact that it was in the government's and the minister's interest that officials be allowed to do their job, in other words, as I said earlier in my presentation, that they should do a professional job and make professional recommendations based on facts.

Mr. Paul Crête: In that case, Mr. Cappe, how can you explain the fact that it has not been possible to determine the true number of jobs created by the job-creation programs, either through an internal audit or by another means? The deputy minister and the internal audit director have told the committee that they did not know how many jobs were created. Is this a good way of managing things?

Mr. Mel Cappe: Yes, I would say it is good management, Mr. Chairman. If you allow me, I will answer and explain. When I started working in the public service, I started out as a program evaluator for Treasury Board. As Mr. Winberg said before the committee last week, there is a rigorous methodology which measures program outcomes. If you ask whether jobs were created or if you try to measure current job creation, that's hard to do. You can't count noses; you have to have a process allowing you to find out how many jobs were created. That is why Ekos was hired to produce the evaluation you have before you.

Mr. Paul Crête: Why was it easy for the internal audit to obtain clear figures in the case of Videotron—$222,000 and 44 jobs at $5,000 each—whereas for other cases which were not identified in the internal audit, such as Placeteco, it was absolutely impossible to get an answer from the government? This seems to contradict what you have just said about finding the information. Since the internal audit identified one case out of 37, how is it that we cannot do this for every other department program?

Mr. Mel Cappe: Mr. Chairman, as I said a little earlier, questions on specific cases are better left to departmental officials. I cannot answer precise questions on specific cases, but, as I said, there is a clear and rigorous methodology to measure the outcomes of these programs.

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Mr. Paul Crête: Therefore, without being specific, you seem to be content with the fact that job creation programs were created, but that it is ultimately impossible to determine whether or not they actually created jobs.

Mr. Mel Cappe: No, that is not acceptable. I agree with the honourable member, but we need to use general methodologies to measure the impact of the program.

For specific cases, we used a monitoring process, but unfortunately, as the audit pointed out, it was done poorly. I personally believe that it is possible to do that type of monitoring to identify indicators, but the evaluation has to be larger in scope.

Mr. Paul Crête: Mr. Chairman, the first question I asked dealt with the double standard in the way programs were managed. Was there political pressure to ferret out the unemployed under the Employment Insurance Program at the time you were deputy minister, in contrast to the loose way in which the grants programs were managed?

Mr. Mel Cappe: I apologize for having forgotten to answer the question.

No, I was never given any quotas, I was never put under pressure, and my way of managing the department was to tell people they had to do their job.

Mr. Paul Crête: Mr. Chairman, I myself made public a list of quotas which had been drawn up by each employment office. We received a letter from the Prince Edward Island employment office in which public servants were threatened with the loss of their jobs if they did not meet their quotas. Are you still saying that this did not happen?

Mr. Mel Cappe: No, that's right. I maintain that there never were any quotas. At the time, it was possible that cutbacks would happen because of...

Mr. Paul Crête: If you prefer, we can talk about cost recovery targets, but if you prefer the word “quota”...

Mr. Mel Cappe: No, wait. Yes, there were targets to convince Treasury Board that it was worth investing in cost recovery.

Mr. Paul Crête: Why then were there no job-creation targets, when there were cost-recovery targets in the employment insurance program?

Mr. Mel Cappe: Well, we were a little more, let's say...

[English]

We were trying to be opportunistic.

[Translation]

There had to be a link between jobs created by the private sector and finding people from the ranks of the unemployed able to fill those jobs. We had to strike a balance between supply and demand.

Mr. Paul Crête: I will repeat my question. Why did the department have cost-recovery targets under employment insurance on the one hand, and, on the other, why did it not have similar criteria to determine how many jobs would be created two or three years after the Transitional Jobs Fund was implemented? That is my question.

[English]

The Chair: A very short reply.

[Translation]

Mr. Mel Cappe: My answer was apparently not satisfactory. I said we had to strike a balance between the supply and demand when it came to job creation. It's one thing to look after the unemployed; it's another to try to find them a job.

[English]

The Chair: Judy Sgro, Libby Davies, Rey Pagtakhan, Jean Dubé, Marlene Jennings, Larry McCormick, and Judi Longfield.

Ms. Judy Sgro (York West, Lib.): Thank you, Mr. Chairman.

Thank you, Mr. Cappe. I'm actually beginning to think I'm getting a better understanding of what it is you were trying to achieve in making the changes.

One of the criticisms from the March of Dimes and a variety of organizations in my riding when they came to me for assistance in filling out these applications was how cumbersome and difficult they were to fill out and how they needed to get an accountant to do it. Was part of the intent when you initiated these new programs to reduce some of the federal government's red tape?

Mr. Mel Cappe: Yes, Mr. Chairman, the initiative we undertook was to try to be more service-oriented. Indeed, in the departmental business plans we talked back in those days about trying to improve the quality of service. These are the plans that were studied by this committee or its predecessor. And as we talked in one page about improving service quality, we then talked about building sound management.

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As I responded to Ms. Ablonczy earlier, I don't want to leave the impression that there was a choice here. We had to do both things. We had to do sound management as well as improve service quality, but we were definitely trying to improve service quality.

In the 1996-97 business plan, for instance, you have service delivery, quality service initiatives, systems, and then human resource considerations. The final one was managing fiscal restraint, which talked about the audit and evaluation process, how important that would be, and how the commitment to good management would be important for the future of the department.

Ms. Judy Sgro: Given the fact that a lot of these programs were to be done in conjunction with both municipal and provincial governments, what kinds of processes are there to monitor at the other level? Do we monitor them at our level, or are our management people expected to be monitoring both—when the provincial government and the municipalities said they wanted to be a partner—to ensure that these things are being carried out with proper management?

Mr. Mel Cappe: The honourable member raises a really important point. In terms of the thrust of the change in the administration of these programs, there was a great move towards increased partnership. Partnership leads to complex accountabilities, and this is a really important point.

What the department and I would argue is that there is not an excuse for not being accountable for the taxpayers' money. Having said that, it is complicated a bit more by the fact that we're using third parties to deliver. When we were running these out of our own offices and dealing with the unemployed or the disabled directly, the accountability regime was easier. When you're giving responsibility to a third party to run a community-based program, it's more complicated.

The Chair: Judy, very briefly.

Ms. Judy Sgro: Under the new six-point plan that is being mapped out, and so on, who's going to be monitoring that? As Clerk of the Privy Council, are you confident? You've indicated that you are, with the six-point plan. But the concern I have is that as we try to get a balance between an overabundance of red tape and not swinging too far to the other side, who's going to be monitoring the ongoing changes in these programs, in this area as well as other areas of our government?

Mr. Mel Cappe: Very briefly, remember that the audit made recommendations. The department had a management response, which took the recommendations and went further. Then the minister insisted on going further yet again by having these public quarterly reports. So remember, that transition and those public quarterly reports will be an important part of the accountability process.

The public and members of this committee undoubtedly will be reviewing those quarterly reports. So I'm quite confident you will have a role to play in finding that balance. Of course, within the government the Comptroller General, the Secretary of the Treasury Board, and I will be watching this as well.

The Chair: Libby Davies, Rey Pagtakhan, and Jean Dubé.

Ms. Libby Davies (Vancouver East, NDP): Thank you, Chairperson.

First of all, Mr. Cappe, thank you for coming today.

In your opening remarks you said “I wish we were perfect.” It reminded me of a program in East Vancouver called “Nobody's Perfect”, which is actually not funded by HRDC. It's a parenting program. So no one's expecting you to be perfect, but I know there are a lot of questions that need to be answered.

Also in your opening remarks, you talked about what you've read in the media and what people believe to be the cause of the big mess at HRDC. You mentioned a couple of things, but you didn't actually say what you yourself think is the cause. I would be fascinated to know what you think is the cause of the mess in HRDC, because you haven't actually told us yet.

Mr. Mel Cappe: “Nobody's Perfect”... I like the program. I should join.

I also said in my opening remarks that it would be inappropriate for public servants to comment on policy. Having said that, let me nevertheless try to address the honourable member's question.

I don't think there is a single reason. What I said in my remarks was that all those reasons may have been legitimate, but none of them are excuses for admitting or allowing this to happen.

• 1150

The department was going through the downsizing of 25% of its staff. We went from about 25,000 people to 20,000. We reduced the number of offices across the country from 700 to 300. We were going through the transfer to the provinces of about 2,000 people and the conjoint delivery with five other provinces of active labour market measures. There were a number of major policy initiatives going on in the department: the national child benefit; the implementation of EI. A lot of change was taking place in the department.

As I said, none of that is an excuse for allowing bad bookkeeping or bad record-keeping. But having said that, I would suggest the most important element relates to my response to Ms. Sgro's comment. I think the refocusing on partnership and on service delivery and trying to unburden the delivery of the programs has probably resulted in our need to rebalance. We should have found a better balance at the outset. That doesn't mean you want to move away from improved service delivery. You want to do it in a way that is respectful of the need for monitoring, for post-program surveillance, and for keeping the files complete.

Ms. Libby Davies: One of things that has really bothered me in this whole situation is how it becomes clearer and clearer that rules were applied differently in different situations, and this gets back to the cause. So you've said, well, this is what I think the causes are. But I think the very political nature of the grants and contributions and how decisions were made in terms of disbursements across the country still really hasn't been resolved. Can you respond to the issue that there were variations across the country?

For example, I've heard from a variety of people that in some situations it was basically a staff decision on the Transitional Jobs Fund, and staff in a local office would pretty well make a decision. The MP would provide a concurrence, but they really weren't involved. But in other situations, particularly in Ontario, it was very much politicized. Members of Parliament, and some in particular, such as the former parliamentary secretary, were highly involved in the disbursements, and this is where we get into all these sort of variations about disbursements and the creation of these pockets. I'd really appreciate you explaining to us how we have this huge variance in the decision-making process.

Mr. Mel Cappe: It's important to make a distinction among the 27 programs that were audited, because I think the honourable member has identified a couple of particular programs. We should make this distinction between the Transitional Jobs Fund, which was explicitly designed to allow for and indeed encourage members of Parliament to participate in the process to reflect the interests of their community, whereas in most of the other programs—as far as I know, all of them—there was not that kind of involvement.

I think the Transitional Jobs Fund, the $100 million program that expired and was replaced by the Canada Jobs Fund, was meant to be flexible, and it was designed in such a way to reflect local variation and local differences. So as I was responding earlier to Mr. Crête, it had to take account of the supply and demand in the local market. It had to take account of what would be appropriate for the local economic development plan, and in consulting with the community in this, it was felt that, by design, we should consult with local members of Parliament of all parties and all stripes.

So when I travelled across the country, I would meet with the local director of the local Human Resources Centre of Canada and ask them about the relationship with local MPs. I remember being in Abbotsford and asking what the relationship was, and it was actually very good. As I travelled, I always asked that. But there was always this involvement. When does involvement sort of cross the line? I always encouraged my staff to do their job.

The Chair: Very briefly.

Ms. Libby Davies: Do you agree, though, that there were huge differences in the nature of that involvement from province to province and region to region? In some cases it was pretty modest and pretty superficial, and in other situations I think it was very politicized and highly involved and it became a question of who was directing whom. Would you agree with that?

• 1155

Mr. Mel Cappe: No, I wouldn't, but I understand the sentiment that leads to the question. I think it was riding by riding. Indeed, many local HRDC directors told me they had no contact with the local MPs, and in many of those cases they were government members. That's why I'm trying to distinguish between it being politicized and there being political involvement of members of Parliament.

I think the honourable member has an important point, which was that it varied depending on the MP. Some MPs of opposition parties got very involved in local communities. Other MPs of the government chose not to, and vice versa.

The Chair: Rey Pagtakhan, Jean Dubé, Marlene Jennings, Larry McCormick, Maurice Vellacott.

Mr. Rey D. Pagtakhan (Winnipeg North—St. Paul, Lib.): Thank you, Mr. Chair, and thank you, Mr. Cappe.

Considering the wealth of experience you have, could you have predicted the problems found and prevented them, in retrospect?

Mr. Mel Cappe: I'd love to be able to say I was prescient, and yes, I should have been able to anticipate them. I think the answer is probably not.

However, I did have an inkling that we were probably having this general problem. I made reference earlier to the 1997 audit of TAGS by the Auditor General. The Auditor General criticized us for doing too good a job on service, and not a good enough job in terms of applying the rules. That's what gave me an inkling that maybe we should examine the discretionary programs, because the rules were fairly clear. So on that basis, I guess I should have been more concerned, in retrospect.

Mr. Rey Pagtakhan: As head of the public service, you indicated during your presentation that you are providing leadership and direction to the Public Service of Canada. For my clarification, do those two elements of leadership and direction to the public service mean management of all departments?

Mr. Mel Cappe: I make the distinction, frankly, because I will not be managing those line departments. But the leadership I provide I hope will give a direction to the deputy ministers, the executives, and the non-executive leaders in those departments, including front-line staff, many of whom are very good leaders, to be able to respect the balance between service to the public and respect for the taxpayer.

Mr. Rey Pagtakhan: Of course, simplicity of service to the public, in terms of filling out their forms, I would submit is equally part of good sound management. But as part of that directive and direction, would you consider, instead of guidelines, that it be a mandatory directive, insofar as handling of the grants and contributions are concerned, to ensure adequate administrative controls in the future directive, mandated by the Treasury Board? How is that as a potential development that we ought to consider very soon?

Mr. Mel Cappe: I would caution against that, although I would argue I've asked the Comptroller General to review the Treasury Board policy on grants and contributions, to determine if the policy is adequate. So I think it's legitimate for this committee to address that question.

I would caution against recognizing the necessary flexibility front-line staff departments need in order to take a generalized policy and apply it to a particular program. The issue in some of these cases relates to the terms and conditions of the programs themselves. The Treasury Board approves terms and conditions for a particular program, and perhaps those should be tighter, as opposed to the general policy being made more strict, if you know what I mean. You have to find a balance using all the instruments.

• 1200

The most powerful instrument—and I come back to the first question Madam Ablonczy asked—is the training of staff and the inculcation of values we give staff, in terms of the respect for those rules.

Mr. Rey Pagtakhan: I have a question.

The Chair: Okay, but no reply.

Mr. Rey Pagtakhan: Did the managers of the programs where the problems were found receive bonuses?

The Chair: Yes or no.

Mr. Mel Cappe: The program of performance pay that applied at the time identified specific commitments managers had made, and they received performance pay based on that. The policy applied across the government.

The Chair: Okay. Jean Dubé, Marlene Jennings, Larry McCormick, Maurice Vellacott, Judi Longfield.

[Translation]

Mr. Jean Dubé (Madawaska—Restigouche, PC): Thank you very much, Mr. Chairman. I have the pleasure of being here once again today to ask questions which are very important for many Canadians. What we are dealing with is the management of a department, of taxpayers' money and billions of dollars.

I was pleased to hear you say, Mr. Cappe, that you were not aware of the audit before January and that you only heard about it in November, although you did not know any of the details.

You also said that as Clerk of the Privy Council, your role was not to know what was going on, that the deputy minister should have known, as well as the Minister and officials who were responsible for managing the department. We all know that the Minister stated in the House that she also did not know, but that she should have.

[English]

I would like to know if Mr. Cappe was involved in preparing rules and regulations, because Mr. Cappe was the deputy minister at the time of TJF. Most of these programs that were reviewed were during the mandate of Pierre Pettigrew and Mr. Cappe at the department. I would like to know, when the Transitional Jobs Fund was brought in, if you were involved in structuring rules and regulations for this program.

Mr. Mel Cappe: I became deputy minister July 2, 1996. That was the actual day on which the program

[Translation]

came into effect. People started working on the program at the time when Mr. Young was Minister, and I believe that it was first announced under Mr. Axworthy's tenure.

[English]

When I arrived in the department, the terms and conditions had already been set by the Treasury Board, and the application in the regions happened on the same day I became the deputy minister. So in a sense I inherited the program. But as I said, I was responsible in that period.

Mr. Jean Dubé: If I go back to monitoring and rules and regulations, when we look at what has gone on with Human Resources Development Canada, as far as TJF goes, there are certainly some discrepancies there, as far as the monitoring and accountability of taxpayers' money.

A lot of money has also gone missing. We have projects that were approved, projects that were paid for, and projects that did not even go ahead during the time you were deputy minister, Mr. Cappe. I would like to highlight one of them, just to give you an example.

• 1205

In my very own riding, Atlantic Furniture Manufacturing was paid $280,000 and never even opened their doors. That's $280,000 of taxpayers' money. I'd like to get your response on that.

Mr. Mel Cappe: Mr. Chairman, let me answer on two points.

First, on the question of adequate monitoring, I would just note that the audit, on page 8, actually says:

Absence of monitoring notes or reports in the file does not necessarily mean that no monitoring was conducted. During field visits, some project officers stated that they were in fact monitoring projects but not documenting their monitoring activities.

That's not an excuse; it's merely to note that there was some monitoring going on. They should have been documented, and all of them should have been monitored.

In terms of the particulars of a project not going ahead, Mr. Chairman, I think it's important that we take into account the kinds of projects the Transitional Jobs Fund was dealing with. Remember, there were 27 programs, and this was one of them. The TJF was focusing on very high-risk projects. It is not a surprise to me that there were some projects that did not go ahead and that some projects failed.

I don't have any comment whatsoever on the particular project, Atlantic Furniture. The first I saw of it was actually on television. But I appreciate the nature of the question. I think we have to recognize that with these projects, the police are called in when someone engages in fraudulent activity. What we were doing in terms of the program is trying to create employment.

Mr. Jean Dubé: But the reason this happened was that there was a lack of monitoring and a lack of preparation for a program. That's the way I see it. If we're going to create a program and are going to invest taxpayers' money, and if we don't have the proper rules and regulations in place, it's going to happen again.

There's a six-point plan now. That's all we hear about, right? Bravo! But there wasn't a six-point plan before. Why is that?

Mr. Mel Cappe: Mr. Chairman, there are a couple of points here.

One is that, again, I think there is no excuse for the lack of monitoring that took place before. The change to the Canada Jobs Fund from TJF increased the amount of auditing of individual grants, so the terms and conditions did change in the creation of the Canada Jobs Fund.

On the six-point plan, I think the training that is being done in the six-point plan is indeed going to change the way the programs are administered. There will be much more monitoring, and not only monitoring by the project officer, whose job it was to build the partnership, but also by third-party monitors, who will be a better check on the system.

Mr. Jean Dubé: I think we're going to be part of that, as you stated. But you probably also got a question from our first member on the fact that it's very difficult to get some information from HRDC.

There were three audits, in 1991, 1994, and 1997. We have asked for copies of the 1991 and 1997 ones, and still today—

The Chair: I don't want to interrupt, Mel, Jean, but I don't think we should keep repeating this. The committee has asked for those. Mel, in your present capacity as Clerk of the Privy Council, perhaps you could help us. We're going to continue to press for those.

Mr. Mel Cappe: You have every right to do that, and there's no excuse for them not being available

[Translation]

in both official languages. I encourage the Minister to ensure that the documents be available in both official languages.

[English]

The Chair: Marlene Jennings, then Larry McCormick, Maurice Vellacott, Judi Longfield, John Godfrey, and Dale Johnston.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Cappe, for your presentation and the frankness of your answers.

I will begin with a brief comment. In my view, and, as far as I know, in the view of many Canadians across the country, our public institutions are among the cornerstones of our democratic system. Accountability, transparency and the governance of these public institutions, including the programs administered by them, are a concern for all Canadians.

• 1210

I am very interested in the role of the deputy minister, and I would like to speak to the subject in light of the creation of the Transitional Jobs Fund. The government realized that there was a very high unemployment rate in certain parts of the country and decided to create a program to stimulate job creation. Therefore, mechanisms had to be put in place under the program. Is it not up to the deputy minister to study the program and to say that the said mechanisms would either help or hinder the program's objectives?

The Chair: Marlene, I would like to remind you that the chairman is following closely and that we don't have time for long interventions.

Ms. Marlene Jennings: Should there not be a few days delay to think of new ways to reach the objectives? Don't the monitoring of measures and staff training fall under the mandates of a deputy- minister?

Mr. Mel Cappe: Mr. Chairman, it goes without saying that the role of a deputy minister is varied and complex. Deputy ministers advise and counsel ministers on issues related to policy. They advise on program design and on measures to promote efficient management. Therefore, the answer is yes.

Ms. Marlene Jennings: The government decided to create the Transitional Jobs Fund. You were not deputy minister when it was designed; you became deputy minister just as it was being implemented. Did you yourself study the control and monitoring measures which were implemented in order to make sure that the stated objectives would be reached?

The Chair: Please answer briefly.

Mr. Mel Cappe: When I arrived at the department, I was impressed by its 56-billion-dollar budget. I was concerned with issues related to statutory programs, such as

[English]

Canada Pension Plan, old age security, employment insurance, and income benefits.

[Translation]

I contacted the Auditor General in order to make sure that these programs, which involve not a hundred million dollars, but rather dozens of billions of dollars, had been well managed. The Auditor General told me that his audits had revealed they were.

[English]

I invited the Auditor General to sit on the audit and evaluation committee of the department in order to provide me with even more confidence, but I was more concerned with the statutory programs than I was with the discretionary ones, frankly.

The Chair: Larry McCormick, Maurice Vellacott, Judi Longfield, John Godfrey, and Dale Johnston.

[Translation]

Ms. Marlene Jennings: Mr. Chairman, I would like to put some further questions during the next round.

The Chair: Yes, if we have time during the second round, you will be able to do so.

[English]

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair.

Thank you for being here, Mr. Cappe. Certainly the eyes of Canadians are on this investigation, and it's good to have some of the facts put on the table here. It gets very political in our House and this building, but it's important, and you can shed a lot of light.

• 1215

I have a question. I believe the Auditor General is coming this week. I will perhaps ask him, but they've done many audits, just as you have done and as the departments have done. Of course they've found shortcomings in audits with Industry Canada, Heritage Canada, and with Treasury Board with the infrastructure program. Given that they found such serious situations, I'm just wondering why HRDC was not able to address some of these problems before this audit or during this time.

Mr. Mel Cappe: Mr. Chairman, it's not often that I like to cite the Auditor General, but in response to Mr. McCormick's question I would just point out that I've already talked about the Auditor General's report of October 1997 on TAGS, and that was chapter 16. Chapter 17 was actually an assessment entitled “Human Resources Development Canada - A Critical Transition towards Results-Based Management”. In Chapter 17 he talked about the department having moved toward management that was much more results-based. He said the progress was very rewarding and that there was a change from a traditional emphasis on process to one that focuses on results. He particularly assessed the decentralization and increased authority to the local level, and the fact that there was more flexibility in rules and regulations. Those are exactly the issues that have been raised by honourable members here today.

Mr. Larry McCormick: Mr. Cappe, I'm sure the chair would want to know the date of that document—out of his time and not mine.

Mr. Mel Cappe: October 1997, and it's chapter 17. And I could cite—

Mr. Larry McCormick: Thank you. The Auditor General is a great gentleman, but I have another question for you.

The Chair: Larry, I appreciate your interpretation of my my wishes, but my wishes are also that you be fairly brief.

Mr. Larry McCormick: Thank you, Mr. Chair. I'm timing you also.

Mr. Chair, the staff of HRDC is very devoted. I said here at one other meeting that many of them go the extra mile, and I was glad they've received a letter from the head of the union of 12,500 people, recognizing the work they do. I've heard even some of those people saying they would like to do more and do an even better job, but that there have been too many resources they don't have. In fact this government has cut back on people in almost every department, and I've just wondered about the extent to which these cutbacks could be a factor in this.

Mr. Mel Cappe: Well, you have to recognize that the cutbacks are one of the reasons why the government can now make choices about the kinds of programs and policies it wants to put in place. You have to look at both sides of the elements of program review.

The cutbacks were indeed an element in this—and I talked about this earlier in my first response to the first question. In the interest of trying to improve service to the public, we probably cut back on overhead too much. I should take responsibility for that, but I think the challenge here was being faced with the choice between cutting back on service and cutting back on overhead. We cut back on overhead. Overhead is very valuable. Overhead is helping us to meet the objectives of service.

Mr. Larry McCormick: Mr. Cappe, in that regard, as chair of the government rural caucus, my concern is about the delay of programs. I'm glad to see that it's a concern brought forward by every political party in the House. This is the fear that's out there. There's a real need for these excellent programs across the country, and I would ask to pass that on to you as a reminder.

Mr. Mel Cappe: Well, thank you.

Mr. Chairman, I would just say once again that it should not be a choice between good management and good service. We have to do both.

The Chair: Maurice Vellacott, Judi Longfield, John Godfrey, Dale Johnston, and Christiane Gagnon.

Mr. Maurice Vellacott (Wanuskewin, Ref.): Mr. Cappe, if the 1991 and 1994 audits show that certain problems were identified—and you would obviously be aware of what those audit results were—if it turns out that those very same problems from 1991 and 1994 were also turned up in this recent audit, will you take responsibility?

Mr. Mel Cappe: Well, Mr. Chairman, I should just begin by saying that I was never aware of the 1991 audit or the 1994 audit. I was never made aware of the results. I never found out about them until I saw the release of the 1997 audit.

I should add that the 1991 audit was of programs that don't exist any more. They were of the Canadian Jobs Strategy. However, having read the report—and I apologize that they are not available to the honourable members—the issues are the same, similar, or related.

Mr. Maurice Vellacott: If I understand you, why were you not in custody of them? Why did you not receive the 1991 and 1994 audit reports?

Mr. Mel Cappe: As I said, the 1991 audit was of a program that expired in 1993, I believe. Or maybe it was 1995. You should check the audit. But it was of a program that doesn't exist any more.

Mr. Maurice Vellacott: Okay. And what about the 1994 one?

Mr. Mel Cappe: It was assessing the implementation of the 1991 audit.

• 1220

Mr. Maurice Vellacott: So you're inferring that there's no relevance in terms of those audits as to any of the subsequent audit—

Mr. Mel Cappe: No. Mr. Chairman, I want to be very clear, and I said this in the first part of my response to the honourable member. I was saying that one of the reasons it wasn't brought to my attention, I think—I'm guessing, because I can't say why it wasn't brought to my attention, but it wasn't—would be that it was of the Canadian Jobs Strategy, the money of which had expired, and therefore the program was no longer being delivered. But the issues raised were the same, so I think Mr. Vellacott is raising an important point. I don't deny that it was relevant.

Mr. Maurice Vellacott: So there may be relevance there, but for whatever reason you're saying that this was kept from you or it was not brought to your attention.

Mr. Mel Cappe: It was not brought to my attention at all.

Mr. Maurice Vellacott: Okay. My second question has to do with this matter of authorizing the bonus payments to individuals, which I understand you to have done with regard to the 1998-99 year. If so, why did you authorize those payments to individuals who were apparently not doing their job properly or who were not—

Mr. Mel Cappe: I'm sorry, I didn't catch the question. Was it about performance pay?

Mr. Maurice Vellacott: In terms of authorizing salary bonuses for managers who were responsible for the delivery of programs in the 1998-99 year, why did you authorize payments to individuals who were not doing their jobs properly?

Mr. Mel Cappe: Mr. Chairman, if you'll allow me, I'll just give a very brief general outline of the way performance pay works.

People are given specific challenges, and when they meet them, they're assessed on that basis and given performance pay. About 30% of the executives would have received performance pay for some of the specific challenges they were given and the specific things that were done.

In the new regime—and again, this is a question that might be better put to the current deputy minister—my understanding is that in the current year there has been a change to the performance pay system, and there are two categories of objectives: one is ongoing commitments, and the other is key commitments. You can't qualify for performance pay without having met the ongoing commitments. You can qualify if you meet the ongoing and then do the key commitments. The implementation of this six-point action plan is part of those ongoing commitments. If you don't meet that, you don't even qualify for being considered.

Mr. Maurice Vellacott: So would it be fair to say that some of those categories for receiving bonuses kind of missed the mark, at least with regard to all these somewhat disastrous or troubling audit results? They were obviously not synchronized to give us the kinds of results we need in departments. They were missing the mark—

Mr. Mel Cappe: Mr. Chairman, if I had known then what I know now, we would have set different objectives for that year, yes.

The Chair: Maurice, briefly.

Mr. Maurice Vellacott: I have two quick questions here.

In respect of the matter of members of Parliament signing off the approval of projects and so on—and you know the particular areas, TJF and CJS in particular, and there are a few other initiatives I'm aware of that require signing up—do you feel that involvement of an MP jeopardizes in any way the integrity of the project approval process as established by HRDC and the Treasury Board?

Mr. Mel Cappe: Mr. Chairman, I really think the answer is no, that it doesn't in and of itself jeopardize the integrity of the program. I go back to an earlier answer I gave to Ms. Davies, I think is was, that the strength of the program was the partnership with the community. It's very difficult for me to explain to the public that we want community involvement but want to exclude the member of Parliament.

Mr. Maurice Vellacott: I want to move very quickly to my last question. As deputy minister of HRDC, were you aware of the fact that project officers were authorizing advance payments to projects well in excess of Treasury Board guidelines? Were you aware of that?

Mr. Mel Cappe: I was not aware of that.

Mr. Maurice Vellacott: If not, why—

The Chair: Next is Judi Longfield, followed by John Godfrey, Dale Johnston, and Christiane Gagnon.

We'll get back to the Reform Party, Maurice, in a few moments. Pass your question on.

Mrs. Judi Longfield (Whitby—Ajax, Lib.): Thank you, Mr. Chair, and thank you, Mr. Cappe.

I want to follow up on questions that were raised by my colleague Mr. McCormick and by the member opposite, Mr. Vellacott. It has to do with the results of previous audits, whether they be within HRDC or in other departments. Is there not a mechanism in government whereby shortcomings in one department, one program, are automatically flagged to other departments so that we're not sort of repeating our mistakes department after department or program after program?

Mr. Mel Cappe: Yes, there are, Mr. Chairman. As I mentioned earlier, I've asked the Comptroller General to improve that process, in effect, by working with other deputy ministers.

• 1225

In fact the policy calls for departments to take the summaries of the audits and post them on the Treasury Board website. There is a community of auditors, managers, and executives who all try to learn lessons from each other. So we do try to take best practices. As well, there's a program out of the Canadian Centre for Management Development of orientation for new executives, which strives to take best practices and to learn from other departments. So all of this is relevant, and we are trying not to reinvent the wheel.

Mrs. Judi Longfield: If that is happening, do you know of any changes in policy and administrative or implementation practices that have occurred in other departments as a direct result of what has happened in HRDC?

Mr. Mel Cappe: I can only give you an anecdotal answer. I was in Vancouver about two weeks ago meeting with the regional council of federal departments, and a number of those executives talked about having taken the time to go back and look at the way they're administering grants and contributions programs in order to try to learn some of the lessons from what we've seen as a result of this audit and the public controversy that has been raised.

Mrs. Judi Longfield: Do I have time for another question?

The Chair: Briefly.

Mrs. Judi Longfield: Are you concerned about the administrative practices of programs that are delivered under the full transfer labour market agreement? For the Government of Canada dollars going to a province to administer, do we have a responsibility to see that those dollars are spent appropriately, and what's the mechanism?

Mr. Mel Cappe: The answer is yes. The transfers that have taken place pursuant to part II of the Employment Insurance Act are indeed transfers of federal money through the employment insurance program. In the agreements that were negotiated with the provinces, there is an accountability regime built in, and each of the provinces has a commitment to meet certain target numbers of how many unemployed people they will get back to work and the like. The federal government is not in the position of going into the provinces to audit, but rather accepting what the provinces are telling us, and presumably their own internal audit regimes will apply. These are issues that were discussed with the Auditor General at the time of the transfers.

The Chair: Next is John Godfrey, and then it's Christiane Gagnon and the chair. Then, folks, we're starting a second round.

Mr. John Godfrey (Don Valley West, Lib.): My question relates to the general problem of risk management and assessment and the specific request you made to undertake this particular audit and what happened between July 1996, when you became the deputy, and November 1998, roughly that timeframe, when this particular audit was undertaken.

The question I'm asking goes like this. I can imagine that there are something like three different variables you could have looked at. There's the administrative one, which simply says better look at the big bucks first, the statutory transfers to individuals, because that's the bulk of the money. But I could also imagine an argument when you came in asking, “Where's the trouble? Where am I going to get into trouble on this one?” These would be the fiddly programs, which are grants and contributions. So that would just be of a general nature wherever you were, I would assume.

Secondly, I can imagine that you're not oblivious to political risk and that however big the bucks may be over here, the more problematic ones may be in the smaller bucks where things can go wrong, things can blow up, and that has to be a dimension of your consideration.

Finally, there's the whole issue of specific problems that start to percolate up as you become more familiar with the file.

So the question is this: Was the audit initiated when it was initiated because you couldn't get around to it earlier because you had all this other stuff going on, such as TAGS, the new child benefit, and all that sort of stuff, or were a critical number of these little beasts coming forward and beginning to bother you—or would you always be bothered by that file anyway? That's the nature of my question, the relationship between the general and the particular as to why you initiated the audit.

Mr. Mel Cappe: Mr. Chairman, I think it is important to recognize that in the 1997 audit of TAGS the Auditor General found that there was excessive attention being paid to service, as I said, and not enough to the necessary elements of the paperwork. It was in that context that I said that if there was this problem with TAGS, it was probably evident in other programs as well. That's when the issue of discretion came in.

• 1230

Therefore the discretionary grants and contributions programs, as opposed to the statutory grants and contributions programs, is where I felt we would be at some risk. On the other hand, I was not aware of any specific problems, to answer that part of your question.

Having said that, there were a number of elements that were under review at the time. I have the 1998-99 HRDC audit and evaluation plan, where the audits that were being undertaken reviewed the department's capacity to deliver services, the internal coordination of new initiatives, improving accountability within HRDC, and improving risk management in HRDC.

In the context of that audit, which we used KPMG to assist us with—it came to the national management board often, actually—we've done a survey of 11 or 14 offices across the country, local offices, to assess the kinds of risks we were running. I forget now exactly how many we surveyed. We came up with some actions we would take in terms of staff training and the like. So there was a fair bit of action on risk management exactly in that context.

Mr. John Godfrey: So it was only—

The Chair: Christiane Gagnon.

Mr. John Godfrey: —in the normal sequence of events—

[Translation]

The Chair: Christiane Gagnon.

Ms. Christiane Gagnon (Québec, BQ): I would like to come back to the issue of pockets of poverty because, in my view, many ridings lost out in the way they were applied. Did the Department issue specific official directives regarding this criterion? Despite the fact that the Minister answered yes in a document, the document dealt with the way the criteria was applied. In many areas, including mine, the Quebec City region, the poverty rate was above 12%. But I had told my constituency that they were not eligible. However, it seems that some other criterion was quietly been applied by some members, whereas others did not even know it existed.

Mr. Mel Cappe: As I said a little earlier, the criterion was the unemployment rate, and not the rate of poverty as such. However, it was obvious that we had to be flexible in how we applied these criteria. According to the brochures put out by the department, the program's flexibility was an important point. There were no explicit criteria. First, we considered the region's unemployment rate, that is, the employment insurance zone, and then we applied the criteria in a flexible manner by approving grants based on need.

Ms. Christiane Gagnon: How is it that most members in the House, especially opposition members, were unaware that flexibility meant pockets of poverty? Why wasn't it indicated in the official document published by the government that this flexibility meant pockets of poverty? As I discovered when I travelled through Quebec on the issue of poverty, we all have pockets of poverty in our ridings, whether it be in Trois-Rivières, Quebec, Chicoutimi or Jonquière. Many communities could have benefited from this program. We know that the Minister was aware of that criterion, but we were not made aware of that when the data was made public.

Mr. Mel Cappe: Mr. Chairman, as I told Mr. Dubé earlier, members of Parliament got involved on their own initiative. The department consulted members, and many of them got involved in their communities and through their riding offices. I can't explain why some members of Parliament were unaware that such flexibility existed. We explained to the managers of these offices that this flexibility was possible.

Ms. Christiane Gagnon: You say that members of Parliament were informed. Were all members of Parliament made aware of this issue, or just some members on the government side?

Mr. Mel Cappe: As I said earlier on, I consulted when I travelled to the regions. I went to the Quebec offices. I always asked the people in charge if they had a good relationship with the local member of Parliament. In almost all cases—I clearly remember visiting the office in your region at the start of my mandate with the department—I was told that a good relationship existed. I cannot explain why some members of Parliament were unaware that this flexibility was possible.

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Ms. Christiane Gagnon: I know the public servants well and we have a very good relationship. I am very surprised that my office was not made aware of this flexibility. We have pockets of poverty in Limoilou, Saint-Sauveur and Saint-Roch. I told my communities that they were not eligible for this program. I subsequently learned that the Minister was entitled to it and that people were aware that there was some flexibility, flexibility that was equated with pockets of poverty. I do not think that the directive was understood very well, and it was not intended to be well understood.

Mr. Paul Crête: We never even saw it.

Ms. Christiane Gagnon: We never ever even saw that directive.

Mr. Mel Cappe: Mr. Chairman, as I said, I don't know what directives the member is talking about. To reiterate, people had to submit a project and the department had to respond after having applied the criteria.

[English]

The Chair: Colleagues, I will take some time for the chair. Then, although there are one and a half members who have not spoken yet, we'll go to the second round and I'll bring the other members in.

Mel, first of all I want to speak to you in your capacity as clerk. When I became chair of this committee last fall, it was common knowledge on all sides that this department, which you've described as very large and actually very diverse, had not been very responsive to this committee. I suppose that's not its own fault.

We know, by the way, that departments have other things to do than respond to committees, but I would like to say that to you as the clerk, as we have said it here on a number of occasions. We don't want the department to spend all its time thinking about this committee, but in my view it has not spent sufficient time and I hope that as clerk you will remember that. That's one.

Two, in earlier responses you mentioned performance reports and the change in reporting and so on. Again, as someone new to this area—we have colleagues who have been on this committee since they were elected and I'm not one of them—I know we all welcome the changes in performance reports. But the response from HRDC and the measures they have given us... One example is the number of phone calls instead of the number of jobs created. I hope that as clerk you will continue to look at performance reports so that the House of Commons can get some sense of what the various federal departments are doing.

If I can return to the matter at hand, you mentioned the initiation and the operation of the audit we're discussing and of other audits. I would like to know what is the role, specifically of the chair, of the department's internal audit and evaluation committee. We do understand the difference between audit and evaluation. What is its role in initiating audits of this type and in following them through? Who was the chair of that committee? To the best of your knowledge, if you can tell us this, who were the members of the committee at the time you were there?

Mr. Mel Cappe: Mr. Chairman, if you'll just allow me as Clerk of the Privy Council to offer two comments on your first two points.

It is the responsibility of the department, in terms of its accountability, to be responsive to the committee. I will take your comments seriously.

In terms of performance reports, we are moving from measuring inputs to measuring outputs, with the objective of trying to measure outcomes. That is under way. We're not there yet and that's unfortunate.

The Chair: You'll have to keep your responses short, for obvious reasons.

Mr. Mel Cappe: I will.

When I was in the department, the chair of the audit and evaluation committee had traditionally been the associate deputy minister. I believe this is still the case, although I can't speak for sure.

I met as deputy minister with the director general of audit, Mr. Martin, on several occasions to underscore for him the dotted line relationship that I always felt I had with the director general of audit. When I was in the Department of the Environment, I did the same thing with the director general of audit in Environment Canada to say that as deputy minister, he had an open door to my office if he was ever aware of anything that required my attention. I forget who was on the audit and evaluation committee.

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The Chair: But you mentioned earlier the Auditor General was on it. Sorry, is that what you said?

Mr. Mel Cappe: I specifically talked about Mr. Martin, our DG, but I had invited, I had sent a letter to... The Auditor General had approached us and asked if we would accept them. And I said no, we will actually invite you, because I thought it would be useful to have them participate, and Mr. Rattray and Ms. Chan, from time to time, one or the other, would always sit on the committee.

The Chair: We would be interested in those names. We'll ask the department for those names rather than you.

Mr. Mel Cappe: And the Auditor General.

The Chair: It's Diane Ablonczy, on a second turn, and then Bonnie Brown on a first turn, then Angela Vautour on a first turn.

Mrs. Diane Ablonczy: Our witness is the top civil servant. I would like to ask him how it is that the civil service of a democracy like Canada can omit, neglect, delay, refuse to produce documents that are requested by a parliamentary committee?

Mr. Mel Cappe: Mr. Chairman, my understanding is that they haven't refused but that the documents were not available in both languages, as they should have been. My understanding was that they were in the process of producing them. I know they have produced them under the access to information process, so I'm sure they're available.

Mrs. Diane Ablonczy: I would simply point out, Mr. Chairman, that we don't have the documents in spite of repeated requests. Quite frankly, I'm getting a little testy about this.

Mr. Mel Cappe: Mr. Chairman, I can only sympathize with the committee, because I think they should be available to the committee.

Mrs. Diane Ablonczy: I would suggest, Mr. Chairman, that the witness could do a lot more than sympathize if he in fact is in charge of the civil service.

I have a short question. We know that an audit was done of the HRDC department's activities in 1991, another one was done in 1994 but never finished, and then after that long delay another audit was finally done in 1999. I would ask whether the 1999 audit was finally requested because the department knew that the Auditor General was doing an overview of the department, that he was going to blow the whistle on the activities of the department, so they figured they'd beat him to the punch.

Mr. Mel Cappe: Mr. Chairman, as I said earlier, as far as the 1991 and 1994 audits go, they were programs that were disappearing. If you recall, at the time, in 1994-95, the department was undertaking a social security review in the revision of all its programs.

In terms of 1999, the audit was undertaken. As it's described in the audit and evaluation plan, dated April 1998, it was being undertaken and “will assist HRDC's senior management, providing assurance that present financial operational systemic controls... are effective and efficient”. And I already answered to this committee that I asked for the audit after the October 1997 Auditor General's audit of TAGS.

Mrs. Diane Ablonczy: My last question—

Mr. Mel Cappe: So I asked for it immediately after, Mr. Chairman.

The Chair: Quickly, Diane.

Mrs. Diane Ablonczy: My last question has to do with the responsibilities of the Clerk of the Privy Council. I understand that the Clerk of the Privy Council is responsible for the management control system throughout the federal government; in other words, causing to happen what should happen and causing not to happen what should not happen. Is that correct?

Mr. Mel Cappe: Mr. Chairman, I would make a precision, if I could. The 1992-93 amendments to the Public Service Employment Act created the clerk as the head of the public service, but it just has that title in the Public Service Employment Act. The Financial Administration Act is actually under the Treasury Board. I want to distinguish the role of the Secretary of the Treasury Board and in fact the President of the Treasury Board as the general manager of the government, if you will.

Mrs. Diane Ablonczy: So the Clerk of the Privy Council has no real responsibility at all?

Mr. Mel Cappe: No, I'm telling you, as I said in my opening remarks, that the Clerk of the Privy Council is an adviser to the Prime Minister, and is responsible as the deputy head under the Financial Administration Act for the Privy Council Office.

The Chair: Bonnie Brown, then Angela Vautour, then Paul Crête.

Ms. Bonnie Brown (Oakville, Lib.): I have three questions, Mr. Chair, and I'll try to be as quick as possible.

I'm interested in the subject raised by my colleague from Whitby when she talked about the transfer of money to the provinces and you responded that we get statements from the provinces based upon their assessment as to whether they have reached targets, etc. Might it be possible to get copies of the audits they are responsible to do? That's one question.

The second thing you said was you focus on the statutory programs like old age security because of the dollars involved, and I have to say I agree with that. Certainly we want people paying more attention to the programs that cost the most money. But I'm wondering whether in a small local office an employee who has a multitude of tasks might also get caught in that thinking that they have to serve all these customers for old age security, employment insurance, etc., and the grants and contributions is such a small fraction of the general budget of the department that they really do not set aside that much time for it.

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The third point is that it has been the era of partnerships, but it seems to me whenever we get into partnerships we get into trouble because we lose control and I never know who's in charge. For example, if a businessman puts in three quarters of the investment and we put in one quarter, and then he decides to move, how could we possibly stop him when three quarters of the money is his?

The Chair: Mel Cappe.

Ms. Bonnie Brown: Just a second, Mr. Chair.

The Chair: You'll get very short replies, Bonnie.

Ms. Bonnie Brown: This is my question. Considering that the main job of our employees at HRDC is to help people in need or in trouble, is it wise or realistic to tell them that for a couple of hours every week they're supposed to assess the viability of business plans submitted by people whose main motive is profit?

Mr. Mel Cappe: Mr. Chairman, I'm not aware of the status of the reports, and the question on the provinces would be better posed to the department. I don't know the answer to that.

On the statutory programs and the time of front-line staff, I think the simple answer is, first of all, that there are certain staff who deal, as project officers, with some of the discretionary programming like the Transitional Jobs Fund, who are different from those who are involved in the delivery of old age security or Canada Pension Plan, in every office, I'm pretty sure. I think they are different staff. It doesn't mean that there isn't the issue of management time and supervisory time that's being spread thinly.

On the issue of partnership, and I'm trying to be brief, Mr. Prime Minister—Mr. Chairman, rather.

The Chair: Prime Minister is fine.

Mr. Mel Cappe: There are many complexities to the accountability process, and the partnership the honourable member refers to adds to that complexity. But that is not a call to go back to the simple federal delivery of programs, because I think we are potentially much more powerful and effective when we work in partnership.

The Chair: It's Angela Vautour and then we're going to go to Paul Crête and we're going to keep moving—Rey Pagtakhan, Judy Sgro, Marlene Jennings, Maurice Vellacott, Larry McCormick, and others.

Very quickly, Angela.

Ms. Angela Vautour (Beauséjour—Petitcodiac, PC): Thank you.

I want to thank Mr. Cappe for being here. He probably remembers the first time we tried to meet when I was an activist and he had agreed to meet with me to discuss UI cutbacks for the people in New Brunswick, but because I had advised the media he refused to meet with me at the door. So he left me with his advisers. So today being a member of Parliament, representing the same people, I think he is forced to answer some of my questions today. He cannot leave me at the door.

I was not here, being on duty, at the start. I have one short question. When you left, did you know the mess HRDC was in regarding the Transitional Jobs Fund and Canada Jobs Fund?

Mr. Mel Cappe: Mr. Chairman, again I don't want to dispute the characterization of this, but I was not aware of the results of the audit when I left HRDC.

Ms. Angela Vautour: But you could have been aware of the difficulties they were in.

Mr. Mel Cappe: I was not aware of those difficulties, except, as I say, having had the results of the TAGS audit I was aware of what the Auditor General found, which was that we were too client-oriented and not enough taxpayer-oriented.

Ms. Angela Vautour: Would you agree today that the Transitional Jobs Fund and Canada Jobs Fund was put in place because this government had cut too deep in the EI program and needed to find a way to try to make up, and at the end what we actually ended up with is a lot of people with no income right now and at the same time we have millions or even a billion dollars that we can't really seem to trace or has been mismanaged? So really both ends have lost through this process.

Mr. Mel Cappe: Mr. Chairman, I don't have a particular citation, but if you go back to the announcement of the Transitional Jobs Fund, it was expressly designed at the time of the introduction of employment insurance to be for those people who were not eligible for employment insurance. You had part two, active benefits and measures, which were for people who were on unemployment insurance, and this was meant to be a complementary program. So I think I agree with you.

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Ms. Angela Vautour: Which didn't work.

I believe that during your time with HRDC you would have had quotas put upon CEIC offices to try to go out and seek money from the unemployed, but you didn't find it important enough to have a system in place to monitor this Transitional Jobs Fund and Canada Jobs Fund. Why was it found that having a program in place for quotas was more important than a system in place to monitor this program?

Mr. Mel Cappe: Mr. Chairman, as I answered Mr. Crête earlier, the department did not have quotas. It did have targets of recoveries, and that was done because of the resources made available. But we did not have quotas for that. It is appropriate to do post-grant and post-contribution monitoring, assessment, and recovery when you find people who have received money who are ineligible.

The Chair: Angela, I know you're on duty, and before you came your party had a considerable amount of time.

It's Paul Crête and then Rey Pagtakhan, Judy Sgro, Marlene Jennings, Maurice Vellacott, Larry McCormick, and Bryon Wilfert. We're going to go very quickly.

[Translation]

Mr. Paul Crête: We can see that people at the department are not providing the information requested, with respect to the investigation, for example. Ten days ago, we were told that a letter had been sent to all members of Parliament regarding the Transitional Job Fund. The letter was supposedly written in June 1998 and we have not yet received it. Moreover, we are facing a situation where the departmental authorities, you and the Prime Minister are in a conflict of interest. Given these facts, are you prepared to recommend that the Prime Minister direct the government to vote this evening in favour of the motion that is calling for an independent public inquiry into this matter?

Mr. Mel Cappe: There are two things, Mr. Chairman. First of all, I never give the Prime Minister advice. I hope you understand that it is not appropriate for me to do so. Secondly, that is a political question that I will not answer.

Mr. Paul Crête: If you were still the deputy minister of this department, would you not be of the opinion that there are enough facts on the table to state that the scandal at Human Resources Development could not be resolved within one day, that we are in a situation that is worsening by the day and that, basically, this is hurting the job creation programs because people are throwing out the baby with the bath water? We had programs that could be justified, but since they were poorly managed, people are asking us to do away with the programs when in fact it is the poor management that we should be eliminating. As the former deputy minister, do you not feel that there are enough problems to warrant a public and independent inquiry, so that there will be justice and an appearance of justice?

Mr. Mel Cappe: Mr. Chairman, as I was saying, I do not dispute the characterizations of this audit or these programs, but quite frankly, we have to go back to the audit per se.

[English]

The audit found that there was bad paperwork, incomplete files, and inadequate monitoring. The audit recommended some actions that should be taken. In fact, it said “The Management Response included in the report comprehensively addresses these issues”. That's a quote and citation from page one of the audit.

[Translation]

Mr. Paul Crête: Mr. Chairman...

[English]

Mr. Mel Cappe: The department went further than the recommendations in the audit, and then the minister asked for further action still. As Clerk of the Privy Council, I'm satisfied that there will be good management taking place as a result of this audit.

The Chair: Short commentary.

[Translation]

Mr. Paul Crête: Mr. Cappe, you know that the internal auditor for the department, Mr. Martin, told us that there had never been any legal proceedings in any of the audits he had conducted in the past and that there are now 19 inquiries under way with respect to the Human Resources Development Canada file. Does this not constitute additional information that we should consider in the decision, instead of closing our eyes and restricting ourselves to the 37 cases? Shouldn't we view this as an indicator of what is wrong in the department, which came out even more clearly in the results of the investigations?

[English]

Mr. Mel Cappe: No. I think there have always been those concerns. That's the purpose of monitoring. That's why we find these things out.

The Chair: Rey Pagtakhan—and keep it short.

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Mr. Rey Pagtakhan: Mr. Cappe, I would like to come back to the issue of directive versus guideline. I would like to have from you sort of a belief in principle. Do you believe that clarity of direction is best achieved for a path to effective administrative control, as a general principle?

Mr. Mel Cappe: I'd really like, Mr. Chairman, to be able to agree with the honourable member, but I'm afraid I really think that a generalized statement like that can get us in trouble. I'd like to be able to say that clarity of direction will be helpful, but sometimes it will not be because it will not be responsive to local circumstances; it will not allow us to innovate.

If you follow the rules there will be no creation and creativity. So I really think it has to be balanced with principles and values. If you have good values and good principles that underlie them, then you can rely on the front-line staff to make good decisions.

The Chair: Rey, I'd like to move on, if I could, to Judy Sgro.

Colleagues, just for your own interest, it's close to one o'clock now, and I think we should move them. I'm quite glad to get everyone on. The only other way is to cut a number off. So it's Judy Sgro first, then Marlene Jennings, then Maurice Vellacott.

Ms. Judy Sgro: Mr. Cappe, we talked about performance pay, and I'd like to know what the opposite is in dealing with a variety of issues.

Secondly, one of the things I find frustrating this morning is deputies seem to go in and deputies go out, ministers go in and ministers go out, Treasury Board sets the rules, somebody else sets something else, someone else has the guidelines, and at the end of the day—as an elected official and new to the federal government process—who's responsible? Are we the responsible people as elected officials? Who runs the ship at the end of the day, and who's responsible?

Mr. Mel Cappe: Mr. Chairman, on the performance pay question, as I said, if people don't do their job, if they don't meet their objectives, they don't get it. But you should go back to 1981, I think it was, when the system was first put in place: basically, the money was taken out of the base of the salary. So it is re-earnable; it is pay at risk that is being re-earned.

On the question of who's responsible, I think there's a long tradition of parliamentary democracy and ministerial accountability. Remember that the audit found things not done. There's no public servant who has had any allegation made against them for having done the wrong thing. What we have seen is that some of the people who have been given money pursuant to this have not done what they were expected to do.

The Chair: Marlene Jennings and then Maurice Vellacott.

[Translation]

Ms. Marlene Jennings: I would like to ask two brief questions.

First of all, I have noted that some departments take a dim view of the work done by the Office of the Auditor General instead of using his reports as an effective tool to improve things. Have you made the same observation?

Secondly, do you believe that the new financial information management system will be able to provide a better tool to our deputy ministers, to our executives, to our officials to help them manage programs properly and to analyze these programs to ensure that measures and controls are implemented?

Mr. Mel Cappe: To answer your second question, I feel that this is a valid tool. We are still using it.

[English]

To answer the first question, it's easier for me to talk about a gotcha audit

[Translation]

that find problems without recommending anything whatsoever in order to improve the situation and an audit that assists management. Most internal audits are tools to improve management. A lot of audits conducted by the Auditor General are also tools, but not always. But most of the time...

[English]

The Chair: Maurice Vellacott.

Mr. Maurice Vellacott: I have two quick questions.

Following up on my last question, Mr. Cappe, this matter of project officers authorizing advance payments well in excess of Treasury Board guidelines, you said you did not know about that. Why did you not know? And in hindsight, how did you lose control of your department in respect of that? That's my first question.

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My second question gets to the matter of the bonus performances. How could you be so wide of the mark and irrelevant to getting effective results? I'm assured that in future you're going to be measuring what the output at HRDC will be. In the past it was more input—what do we get in, what moneys, and that kind of thing. So what were the criteria? Was it for shining shoes, combing hair, putting makeup on, and tie straightening, that kind of thing?

Mr. Mel Cappe: Mr. Chairman, the eagerness of the staff to try to get the unemployed back to work, the disabled into the workforce, and youth making the transition from school to work is what I said I thought was the problem. In regard to why I was not aware of this, we ultimately did become aware of it. I asked for the audit to be done, we did an audit, and we found what the problems were. I go back to my opening remarks: we're looking for continuous improvement.

In terms of the performance pay, I would merely go back to the changes that were underway in the department, the kinds of activities that were on, and the objectives that were given to each of those people related to those kinds of outputs we were focusing on. So if one of the regional heads was involved in negotiating a transfer to the province, that would have been one of the particular requirements we would have identified, for instance.

The Chair: Okay. It's Larry McCormick, Libby Davies, Bryon Wilfert, and then we'll conclude.

Mr. Larry McCormick: Well, Mr. Chair, I don't want to get political, but following the comments around here today, you know we've heard... And I want to point out that HRDC has done a good job of helping Canadians help themselves. I think, Mr. Chair, this is proven when we see that following question period every day in the House, members from each political party sitting at this table, which includes the five, turn around behind the cameras and lobby our minister and HRDC officials to process these good programs. I just want to get it on the record that there is support for this from all sides of the House. Thank you, Mr. Chair.

The Chair: Okay.

Libby Davies.

Ms. Libby Davies: Thank you.

I just came back from the House, where we're debating a motion calling for an independent public inquiry, and the government's not going to support that. I guess the tragedy of this whole mess is really how it's shaken the public confidence in the expenditure of public funds.

Mr. Mel Cappe: I agree with that.

Ms. Libby Davies: As Canada's top civil servant, I'm sure you have some interest in that. I mean, what does the public think about this? Frankly, the six-point program is not going to do it. So I guess the last question to you is, in the position you're in, what should be done to restore that confidence? What would you have done differently to ensure that this mess wasn't created in the first place?

Mr. Mel Cappe: Well, Mr. Chairman, I would go back to the facts. I would go back to what the audit found. I would go back to the fact that there are other investigations that have been done over the years. If you go back to what the audit actually found and what the plan to ameliorate this will do, I think we can rebuild public confidence.

I think the point about public confidence is a very, very important one. I hope the committee itself will be able to address that question. I think, frankly, you should go back to the audit and look at what it said. I think there is a plan to deal with this. I hope the committee will make some suggestions about how to improve the way we do financial management. But quite frankly, I think the shaking of public confidence is something we all have to look in our hearts on.

The Chair: I'd just comment that the Auditor General, as I recall, did say that he or his predecessors had found these problems over 21 years.

Bryon Wilfert.

Ms. Libby Davies: It doesn't make it any better. It makes it worse.

Mr. Bryon Wilfert: I have two quick questions. The first one is that I continually hear that a billion dollars have gone missing. To your knowledge, your understanding, are a billion dollars missing?

Mr. Mel Cappe: Mr. Chairman, I have no knowledge or evidence of any money going missing. I am aware of a number of monitoring initiatives that have led to some of the recoveries of funds. No money went missing, and you can ask the recipients who are across this country, groups and individual young people. No money went missing.

Mr. Bryon Wilfert: I would hope... I won't use the question I was going to ask on section 33 of the Financial Administration Act, but in response to a comment made by Ms. Davies with regard to the six-point plan not doing it, my comment would simply be how do we know, because we've spent less than 30 seconds talking about it?

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The Chair: Again, we're not here... We have a witness before us.

Colleagues, on your behalf I would like to thank the Clerk of the Privy Council and Secretary to the Cabinet, Mel Cappe, for being here.

We appreciate your contributions, Mel. Thank you very much.

Colleagues, we are going to adjourn until Thursday, same time, probably the same place. Our witness will be the Auditor General of Canada.