[English]
EVIDENCE
[Recorded by Electronic Apparatus]
Thursday, February 22, 2001
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[English]
The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Ladies and gentlemen, I call this meeting to order.
Our order of the day, pursuant to Standing Order 108(3)(e), is consideration of the December 2000 report of the Auditor General of Canada.
Our witnesses today are Mr. L. Denis Desautels, the Auditor General of Canada; Ms. Sheila Fraser, the Deputy Auditor General, Audit Operations Branch; and Mr. Douglas Timmins, Assistant Auditor General.
Now we'll turn it over to you, Mr. Desautels, for your opening statement.
Mr. L. Denis Desautels (Auditor General of Canada): Thank you, Mr. Chairman. My colleagues and I are pleased to have this early opportunity to meet with the new committee to discuss the December 2000 report, which was tabled earlier this month.
Before moving on to the priority topics, Mr. Chairman, I would like to draw your attention to the chapter entitled “Matters of Special Importance”, which highlights issues that I consider to be especially significant. This year in this chapter I concentrate on how to improve the management of government spending.
This theme is central to our office and dear to my heart. Despite honest efforts and repeated commitments to improvement, expenditure management in the federal sector is still not as good as it should be or can become.
To this end I set out the following four basic principles that should underpin spending decisions and practices in a parliamentary system of government like our own: first, all government spending should have Parliament's sanction; second, government spending should be managed with probity and efficiency; third, the value of government spending should be measured by what it achieves; and fourth, government spending programs should remain current. The government needs to evaluate its programs regularly and assess whether they are still relevant, effective, and affordable.
These principles may appear self-evident. They are, nevertheless, too frequently breached, as evidenced by the number and nature of our audit observations.
[Translation]
In Chapter 18, we report on the governance of Crown corporations. We found that boards of directors lack some of the skills and capabilities that are essential to carrying out their responsibilities for the affairs of the corporation. Also, boards need to be more involved in selecting the corporation's chief executive officer. We found weaknesses in the audit committees of the boards and in the government's oversight of Crown corporations' strategic direction.
The governance of Crown corporations must be improved to maximize their performance, prevent financial losses and, most importantly, ensure that they achieve their corporate mandate. While the Privy Council Office has provided an overall response to our Report, your Committee may wish to request specific responses to the individual recommendations.
Chapter 19 examines the planning and reporting documents provided to Parliament. We noted some progress over five years, but overall, departmental reporting has improved only modestly.
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In Chapter 20, we found progress was limited in the
measurement and use of performance information in the management
of departments and agencies. The federal government has
demonstrated its commitment to managing for results, although the
concept continues to be a challenge and is not always understood.
Departments need stronger leadership from the Treasury Board Secretariat to move beyond just planning for results. I continue to believe that to hold the government to account, members of Parliament need good performance information on what Canadians are getting for their taxes, and this has to start with how individual organizations manage themselves.
In Chapter 21, we identified serious problems in the recruitment function of the federal public service. We noted that while the Public Service Commission of Canada is recruiting qualified candidates, it recruits too few of them given the significant number of executives, managers and professionals who will be eligible to retire in the near future.
The situation is serious and needs the immediate attention of Parliament.
In October of last year, your committee began reviewing Chapter 9 of our April 2000 Report. This chapter discusses the need to clarify roles and responsibilities in all areas of human resource management in the government. The committee may wish to combine its review of chapters 9 and 21, as there is a fairly clear link among the issues covered in these two chapters.
[English]
Chapters 24 to 28 have a common theme: the protection of health and safety through regulatory programs. The committee may wish to review the chapters as a series. These chapters cover areas such as food inspection, biologics, nuclear power reactors, and air traffic safety.
There are many regulatory challenges that require determined and coordinated action among federal departments, as well as cooperation among federal, provincial, and international jurisdictions.
Our main concern is that federal regulatory authorities may not have all the key scientific information and methodology they need to ensure that systems can identify risks quickly and accurately and thus avoid possible mishaps. We signal deficiencies in identifying and managing risk, enforcing regulations, and reporting on effectiveness. For example, the Canadian Food Inspection Agency is working to develop a more uniform, consistent, and risk-based approach to food inspection. However, it needs to take more action to complete its initiatives.
The government needs to ensure that regulatory authorities appropriately resource their programs based on risk. It needs to recruit enough scientists to deal with the rapid technological advances. Current staffing difficulties have an impact on the delivery of these services. The government also needs to better inform Canadians about levels of risk they face. In doing so it should explain the balance it seeks between the need to protect Canadians and the need to address economic and trade objectives.
Chapter 31 focuses on Fisheries and Oceans' fleet of vessels. The fleet plays a key role in providing services such as aids to navigation, ice breaking, search and rescue, and prevention of marine pollution. It also supports fisheries science and enforcement, hydrography, oceanography, and other marine sciences. In our opinion the department is not managing its fleet in a cost-effective manner. There are problems in a number of key areas, from planning and accountability for fleet activities to life cycle management and the management of human resources. Your committee may wish to review the department's progress on its plans to address these issues.
Finally, Mr. Chairman, one of our audit observations discusses how Human Resources Development Canada, HRDC, and the Canada Customs and Revenue Agency have not dealt adequately with suspected abuse and fraud in the employment insurance program in British Columbia. This matter involves some employers who issue false record of employment forms to employees or other individuals so they can obtain employment insurance benefits. The agency and HRDC have known about this problem for many years, and I urge them both to take the necessary action to resolve this matter. The committee may wish to monitor progress in this area to ensure sustained effort.
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Before concluding, Mr. Chairman, I would like to
remind the committee of some of the issues raised in
our October 2000 report, tabled just before the
dissolution of Parliament.
For instance, weaknesses in the Canadian International Development Agency's management of contribution agreements, together with the issues surrounding grants and contributions by HRDC, warrant particular mention here. As well, our audit of airport transfers highlights the importance of proper financial analysis for decision-making. We also noted a very troubling situation with first nations' health and the slow progress in response to our 1997 audit. Finally, we're concerned with how Downsview Park was created without Parliament's clear and explicit authority.
I thank you, Mr. Chairman, for your attention.
This completes our opening statement, and we would be pleased to answer the committee's questions.
The Chair: Thank you very much, Mr. Desautels.
I forgot in my opening remarks to acknowledge that this is the first regular meeting of the public accounts committee since the election, and I was going to welcome all our new members here. But when I look around the table, I only see one new member here, Mr. Peschisolido from the Canadian Alliance, and someone who is a new member of the committee, Mr. Bryden, but certainly not a new member of the House. So we also welcome you to the committee.
It's the same old chair, as well.
Mr. Mayfield, I will turn the table over to you for eight minutes.
Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance): Thank you very much, Mr. Chairman, and I'd like to thank the Auditor General for coming with his staff to discuss this report he has tabled in Parliament.
In discussing governance of crown corporations, it seems to me there is some similarity perhaps to his comments made in the section on recruitment in the federal public service, and I'm wondering if you see.... You mention leadership in here, but do you see a need for the Treasury Board to offer more leadership in this type of recruitment you're talking about for boards in one instance and perhaps more generally for the public service in the other section?
Mr. Denis Desautels: Mr. Chairman, I think the issues are different in a number of respects; there's a need for leadership in both instances, but I think the leadership has to come from different sources.
We're talking about the governance of crown corporations, about appointments to boards, and about the selection of chief operating officers of crown corporations. These, as you know, are Order in Council appointments, and the leading agency for that is the Privy Council. I think that in terms of reacting to our recommendations, which are to involve the boards more in identifying their needs and to work with the boards more closely in recruiting candidates, the Privy Council Office has reacted quite positively. They recognize the issue we're raising. So I think if our recommendations are to be implemented, the initiative has to come from that area.
When you were talking about our chapter on recruitment into the public service, I think you were talking about two other agencies that share responsibilities there, in particular the Public Service Commission, which has the leading role in that. But of course the Treasury Board also has an interest in that as well.
So on the recruitment side, as I said in my opening statement, there is a link between the problems we're identifying concerning recruitment and the issues we raised earlier on roles and responsibility. It's simply not satisfactory right now, and I think the main actors on the recruitment side really have to get together and resolve that. Right now the main responsibility lies with the Public Service Commission.
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Mr. Philip Mayfield: Sir, perhaps just to go on from where you stopped now, you might discuss briefly, if you would, what immediate steps could be taken to speed up the recruitment process in the public service.
Mr. Denis Desautels: If we are to be able to recruit into the public service some of the bright young people our universities are producing, the government has to be able to turn around and react a lot faster than it has reacted in the past. Right now it literally takes months before decisions can be made, and potential recruits who are not selected immediately are simply forgotten when there's a subsequent search for more people.
The whole approach has to be completely rethought so the government can compete with private sector corporations and other public entities for this talent. These are people who want answers quickly when they apply. They need to know where they stand, and if you don't respond to their applications, they're going to look somewhere else.
So I think the government really has to change completely, to make fundamental changes as to how it approaches the recruitment of post-secondary graduates.
Mr. Philip Mayfield: As to some of those changes, would they be changes that are made through the system that's now in place, or are you perhaps suggesting that there should be some systemic changes as well?
Mr. Denis Desautels: I don't think we should preclude significant systemic changes, and I think everything should be put on the table.
Mr. Philip Mayfield: Thank you very much, sir.
The Chair: Thank you, Mr. Mayfield.
[Translation]
Go ahead, Mr. Cardin.
Mr. Serge Cardin (Sherbrooke, BQ): Mr. Chairman, I was asked to sit in for my colleague at the last minute. Therefore, I don't have any prepared questions, but there is one question that comes to mind.
You stated that you identified weaknesses in the management of HRDC grants and contributions. Could you elaborate further on these weaknesses?
I will then have a secondary question for you.
Mr. Denis Desautels: Mr. Chairman, in our October report, we identified a series, in fact a whole range, of weaknesses in HRDC's contributions programs. In many cases, the application forms from the applicants were missing from the files. We also found that requests were not properly evaluated and that there was no follow-up after the funds had been disbursed. At times, disbursements exceeded approved funding levels.
We identified a slew of problems of this nature. We also found serious shortcomings in terms of assessing the effectiveness of certain programs and we called into question a number of effectiveness studies that had been done.
Mr. Serge Cardin: Can your audit bring to light, for instance, a situation like the one I'm about the describe to you? I have first-hand knowledge of this situation, although I won't name names. A grant application was submitted to a number of departments. Consider, for example, the Economic Development Agency of Canada. I would assume that you audit this agency's grants and contributions program as well. Let's suppose a grant application is refused on the grounds that profitability is questionable and investing would serve no purpose. I would imagine that files of this nature are not the focus of in-depth audits. However, if an application is rejected because feasibility is questionable, and the application then goes to Public Works which approves more or less the full amount requested, albeit in the form of advertising, is this a practice that your audit might bring to light and even condemn?
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Mr. Denis Desautels: Our audit didn't go quite that far because we focused on one department in particular, namely Human Resources Development. On other occasions, we have audited other grant programs, for instance, at Industry and at Heritage Canada. However, we haven't conducted audits within other departments such as Public Works and Government Services Canada to ascertain whether the same companies had looked elsewhere for funding. We didn't go that far.
Mr. Serge Cardin: Your audits do not, therefore, bring to light situations where grant applications are turned down by one department because they fail to meet the criteria, but then are approved more readily by another department. In your capacity of Auditor General, what does this suggest to you?
Mr. Denis Desautels: When, in the course of our audits of different departments, we find that unwarranted expenditures have been made, without going through the tender process, or that the supplier selected was not the best choice that could have been made, we certainly bring this to people's attention.
In fact, we have audited the contracting practices of various departments and in some instances, we have observed that contracts were not put out to tender as they should have been or that contract changes did not follow the usual procedure.
It's difficult for me to answer your questions without referring to a specific incident. However, if, during the course of our audits, we identify a situation where a contract was awarded to someone and in fact should not have been awarded, we respond accordingly.
Mr. Serge Cardin: Thank you.
The Chair: Thank you very much, Mr. Cardin. You have eight minutes, Ms. Jennings.
Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): I'd like to focus for a moment on chapter 18. Frankly, I was disturbed to hear you report that the boards of directors of Crown corporations lack the essential skills and capabilities to carry out their responsibilities effectively. Did you find this to be true of all Crown corporations or merely of those in your sample study?
Mr. Denis Desautels: Mr. Chairman, this is not true of all Crown corporations. However, our audit was fairly extensive and certainly, in some instances, we found that some boards ran more smoothly than others.
Ms. Marlene Jennings: I see. Did your audit enable you to identify the skills and capabilities that are required of each Crown corporation? Obviously, different boards of directors require different capabilities.
The reason I'm asking is that in our society, we have the expertise to go inside an organization, whether it be a Crown corporation or private company, and to carefully study that organization's mandate and mission and the skills and capabilities required, and to draw up a profile of the ideal candidate for the board of directors of that company or Crown corporation.
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A study of this nature has never apparently been conducted
by our government or commissioned by the Privy Council for our
Crown corporations. To your knowledge, has a study like this ever
been done before?
Mr. Denis Desautels: To my knowledge, Mr. Chairman, the government has never, acting either through the Privy Council or through the Treasury Board Secretariat, compiled a list of the skills and capabilities required by Crown corporations.
Ms. Marlene Jennings: Would you agree then that this is something the government, through the Privy Council, should consider doing?
Mr. Denis Desautels: I think the government could ask Crown corporations to supply it with the profile it would want members of boards of directors to have. Crown corporations are, for the most part, in a good position to identify the type of people they need and the skills they should have. This doesn't necessarily mean that the government would follow their recommendations exactly, but at least it would have some guidelines from the corporation and could act accordingly. That hasn't been done up until now.
Ms. Marlene Jennings: Fine. This brings me to my next question. Whether the Privy Council is called upon to hire consultants to make the rounds of Crown corporations and draw up a candidate profile for each board of directors, or whether each Crown corporations sets about doing this task, one thing is clear. Despite the fact that the government wants to meet certain stated objectives, for instance increased representation at the decision-making level and on boards of directors by women, ethnic and visible minorities and aboriginals, there may not be enough candidates out there to make any kind of real impact.
What do you think of the idea of establishing mentoring or other similar programs? This is becoming an increasingly popular practice in the private sector. It gives women, among others, the opportunity to network so that their name comes up when a search is launched to fill a board seat. Do you think this is something the government should be looking into?
Mr. Denis Desautels: When we conducted our audit, we realized right away that diversity was one of the government's objectives when seeking to fill seats on boards of directors.
Nevertheless, we concluded that this objective of achieving diversity was not incompatible with the objective of finding people with a diverse range of skills to serve on these boards. You must, however, weigh our words carefully. We are not calling into question the competence of present board members. Rather, we're saying that a balance of capabilities is lacking, i.e. one skill may be in abundant supply, while another may be lacking. This is an important distinction that must be made.
Now then, what should we do about this? There are several steps we could take. You mentioned a mentoring program. That's one possible solution. You also talked about networking as another solution. I think someone, somewhere, needs to keep an inventory of candidates who meet the criteria, both in terms of diversity and representation, and who could take on specific responsibilities on these boards of directors.
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Some boards are confronted with major technical challenges
in terms of financial instruments. The corporation needs to have
members who speak the language. There has to be a better way, a
way of drawing up an inventory of potential candidates, based on
geographical area and professional sector. This shouldn't be too
difficult a task.
Ms. Marlene Jennings: I have a question concerning HRDC and all of the problems, some ongoing, identified by the Office of the Auditor General and highlighted in countless reports over the past twenty years or so.
One of the problems identified by your Office in recent reports concerns the grants and contributions program. It seems that HDRC awarded grants without insisting on fully completed application forms or complete supporting documentation.
Were you able to determine with this audit whether organizations that were singled out for not having submitted complete forms or subsequently, after having their application approved, failed to report fully on how the funds were used, in fact had something in common?
The Chair: We're running short on time. Could you respond briefly to that question, Mr. Desautels?
Mr. Denis Desautels: Certainly, Mr. Chairman. I don't believe we identified any common denominators. We examined four different programs with little in common and found a range of problems with each one. Therefore, it would be virtually impossible to say that the problems identified were confined to a particular type of organization. That may be true to some extent, but it's very difficult to establish a clear connection.
Ms. Marlene Jennings: Thank you.
[English]
The Chair: Mr. Thompson, eight minutes, please.
Mr. Greg Thompson (New Brunswick Southwest, PC): Thank you, Mr. Chairman.
It's nice to have you and your officials here, sir.
I don't have the relevant section with me with regard to the EI surplus. I thought I picked it up courtesy of the chairman. Going from memory, from the literature you provided us, it appears you do have concerns about that surplus. I mention that because it's a huge surplus.
I want you to explain for the sake of the audience what the Government of Canada is obligated to do with that surplus. As we know, it goes into general revenues, but there is a notation made in the books. I believe a rate of interest has to be paid into the EI fund as a result of that surplus. Specifically, I want you to mention some of the concerns you have about the growing size of that surplus and to comment on what the government might do with it and how they can do it. Does it have to be through an Order in Council, or can it be done only through an act of Parliament in terms of wiping out that surplus? That would then eliminate the interest on that account, which in turn helps keep down EI rates.
Maybe you could reference all of this in terms of the bill before the House, Bill C-2, which takes away for two years the ability of the commission to set the rate. The rate is now going to be in the hands of the cabinet. Maybe we could start there and hear some of your observations in terms of the EI account.
Mr. Denis Desautels: Mr. Chairman, for Mr. Thompson's information, this was in chapter 34 of our report.
The Chair: What page was that?
Mr. Denis Desautels: It's page 34-18. I'll try to deal with those questions as clearly as I can.
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What can be done with the surplus in
the EI account is governed by the Employment Insurance
Act. The act determines what is charged to the account
and what can be credited to the account. There are
stipulations about interest rates paid on the account.
There are also sections within the act that talk about
the rate-setting process. The act governs what goes in
and out of that particular account and therefore would
govern what you can pay out of that account. There is
interest paid, and in our chapter we talk about whether
or not we should rethink how that is calculated. But
that's a bit of a side issue.
Mr. Thompson referred to Bill C-2. The link between Bill C-2 and the issues here is that in our chapter we say that whether the manner in which rates are set is in full observation of the Employment Insurance Act is not clear. You can't answer that question until you know exactly how the government goes about setting the rates at the present time. Bill C-2 basically allows the government to buy some time. The rates in the next two years, I believe, will be set by the government by Order in Council, which is different from the Employment Insurance Act. But in the meantime work will be done on how this should be done in the future. So I think the bill buys some time to come up with a better way of calculating the rates paid by the workers and their employers.
Mr. Greg Thompson: The EI actuary suggested that as of last year the rate could be as low as $1.46 provided we didn't have a slowdown in the economy. Even considering a slowdown in the economy, he suggested the rate could be as low as $1.75 and the fund still sustain itself. Now we're stuck at a $2.25 rate.
I'm just concerned about having that huge surplus in the fund and the ability the government has to get its hands on that fund. In a sense it's a tax by another name. These huge revenues are pouring into a so-called unemployment insurance fund and the government is using the money for other purposes, but yet because of the bookkeeping entries is forced to pay interest on it into the fund. I have a problem with that.
The other part of that question—which wasn't addressed, perhaps because there were too many questions in there—is, how does the government remove that notational change, that asterisk beside that account in its books, and move it over strictly to general revenue? In other words, when we see that it signals the fact that the surplus is generated in the fund, how do they remove that asterisk from that entry into the books? Can that be done by Order in Council, or does it have to be an act of Parliament? I am concerned about that. Obviously, money is paid into the fund today, and that surplus can in fact keep the rates low simply because of the interest on the fund. How can they remove that entry from the books? I'm not a CA and I'm not sure if I'm using the right terminology, but hopefully we'll get some kind of response from you.
Mr. Denis Desautels: Before I answer the last question, let me just go back quickly to the chief actuary's position. If we look at the situation from a slightly different angle, the chief actuary would still say, I think, that a surplus in the account of $10 billion to $15 billion would be enough to carry the account through a downturn in the economy or a full economic cycle.
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As of last March 31, the account was at about $28
billion. This was about a year ago, so if we project
that to March 31, 2001, we're looking at something in
the neighbourhood of $34 billion or $35 billion. So
you have to compare that amount with the $10 billion to
$15 billion that would be necessary as estimated by the
chief actuary.
Your second question addresses how the government goes about removing this notional account from its public accounts, from its own financial statements. Is an act of Parliament required or a simple Order in Council? The only way you can remove the disclosure of the results of the transactions going through the EI account is to do away with the EI account itself, and the only way to do away with the EI account itself is through a change in the EI Act. So it would require an act of Parliament, if that's what you had in mind, to make that notional account disappear.
As long as the EI Act is there, requiring an account to be kept and to keep track of the ins and outs of the employment insurance account, you have to disclose it somewhere. So I don't think there's much choice unless there's a change in legislation.
Mr. Greg Thompson: Thank you.
The Chair: Thank you very much, Mr. Thompson.
We'll move on to the second round. Members have four minutes each, starting with Mr. Peschisolido.
Mr. Joe Peschisolido (Richmond, Canadian Alliance): Mr. Chairman, thank you. I'd also like to thank Mr. Desautels for giving me the opportunity to ask questions on a variety of issues.
I'd like to begin with a question on the federal public service and how it relates to territorial diversity. Obviously you are right that something has to get done in order to recruit qualified people at all levels of the civil service. Are there particular programs or things that could be done to encourage Canadians from British Columbia, Alberta, or the west in general to have a higher profile within the Canadian civil service?
Mr. Denis Desautels: I think the Public Service Commission and all of government jointly, if you wish, have a responsibility to make access to the public service equal for people from all parts of the country. I believe the operations of the federal government are sufficiently decentralized that this should be doable. If all of the work was being done out of Ottawa and it was centralized in Ottawa, it would mean people from the west would have to move to Ottawa to enter the public service, but there are large operations out in the regions and some pretty high-level positions as well. There is quite a range of positions.
Mr. Joe Peschisolido: Just following up on what my colleague, Ms. Jennings, mentioned about mentoring programs, it seems as though the most important point in beginning a civil service career is to convince university students to come out and join the public service. I don't have the statistics and facts in front of me, and I apologize for that, but I would assume that the great majority of those students would be coming from universities in Ontario and Quebec.
Now, that isn't a bad thing in itself, but having said that, would it be possible to have a type of mentoring or outreach program to deal with universities from Alberta or British Columbia that could reach out and bring in those Canadians as well?
Mr. Denis Desautels: I'm sorry, Mr. Chairman, but to answer the member's question I think we're talking about a degree of detail I can't give in terms of how the Public Service Commission goes about approaching universities across the country. But in my view this particular chapter on recruiting into the public service is extremely important if we want to be properly equipped in the future. That's why I think it would be quite useful to have the Public Service Commission here to answer exactly that kind of question.
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Mr. Joe Peschisolido: The final point I would like to make is that I was a little bit surprised and saddened about a response by Madam Robillard to a question from the Conservative Party. What is her title?
The Chair: She's President of the Treasury Board.
Mr. Joe Peschisolido: There was a question dealing with territorial requirements for certain positions within the civil service. I believe it was the Minister of Industry who was asked why for certain positions within his department one had to live either in certain parts of Ontario or Quebec to even qualify for that position. Can you elaborate a bit on that? Is that policy or does it deal with specific things?
Mr. Denis Desautels: Mr. Chairman, I'm afraid I would have to get back to the member on that. I'm not familiar enough with whether or not there is such an approach to identifying who does and who doesn't qualify for certain positions. We could dig into that or ask the Public Service Commission to supply the information.
The Chair: Or we could ask for it too.
Mr. Bryden, four minutes, please.
Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Lib.): I just noticed that the CBC, the Canadian Race Relations Foundation, the National Arts Centre, and the International Development Research Centre are all exempt from the Financial Administration Act for purposes of accountability. Does that mean, in your opinion, that they are held to less rigorous legislative standards of accountability than those crown corporations that are answerable to the FAA?
Mr. Denis Desautels: Mr. Chairman, what it means is that yes, there can be a slightly less demanding level of accountability because they are exempt from certain sections of the FAA.
On the other hand, in terms of the CBC, although the CBC has been exempted from certain of these requirements, the CBC legislation itself did pick up essentially the same requirements. So they evened out the playing field through that mechanism.
Mr. John Bryden: But that's not the case with the International Development Research Centre, then, by implication.
Mr. Denis Desautels: That's correct.
Mr. John Bryden: Then I can assume they are held to less rigorous standards.
Mr. Denis Desautels: I'd like to give you an example. The International Development Research Centre, IDRC, is not required, for instance, to go through a special examination every five years, as the other regular crown corporations are. They can still do so, but it's on a voluntary basis.
Mr. John Bryden: You mention quite a bit about how the government doesn't seem to be able to assess the crown corporations' business plans and that which is reported to it. Is the problem there that the government has to rely solely on the information being provided to it by the crown corporations? In other words, how does the government know that the information being provided to it by the crown corporations is good information?
Mr. Denis Desautels: Mr. Chairman, I don't think the concern has been about the reliability of the information given but more about the completeness of the information given and the ability of the government to ask questions about that and to ask for further information on certain things in order to satisfy itself that the plans make sense and that eventually Treasury Board and Finance are comfortable with the plans put forward by the crown corporations.
Mr. John Bryden: Let me try it another way. Independent of your assessments, how do I as a member of Parliament know that a crown corporation is doing the job I expect of it, and indeed that you expect of it? How do I know, independent of your actual findings? How can I determine that?
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Mr. Denis Desautels: There are two main sources of information you can go to every year. First of all, you have the annual report from the crown corporation, which is supposed to report to you against its objectives and how it achieved the objectives for which it has been created. Certain crown corporations do that better than others, and that's something we have to worry about. So that's one source of information, and in some cases it's quite good.
The other source of information, of course, is the business plan, which is public and would be available. Of course, this precedes the annual report.
Mr. John Bryden: But—
The Chair: Very briefly, Mr. Bryden.
Mr. John Bryden: I'm aware of those things, but your very report criticizes the kind of information that goes into that type of report. Other than those sources that we know are flawed, how do I as an MP access the information, similar to your access to these crown corporations, to monitor what they are doing save for the times when you come by and check up for me?
Mr. Denis Desautels: At this point, Mr. Chairman, I think your only official sources are the ones I've just described.
The only way to get additional information would be through the parliamentary process or by getting the crown corporations to appear in front of a standing committee to provide that additional information, which is done in some cases.
The Chair: Thank you, Mr. Desautels and Mr. Bryden.
We're going to move on to Mr. Shepherd now for four minutes.
Mr. John Bryden: Four minutes is a very short time to develop an idea.
The Chair: I know four minutes is not very long. I'm fully aware of that. But I like to give everybody a chance to speak, and we want to wrap this up by five o'clock.
Mr. Shepherd, please.
Mr. Alex Shepherd (Durham, Lib.): Mr. Desautels, in chapter 19 on improved reporting to Parliament, one of your conclusions was that the government should give consideration—I don't know if that's a recommendation—to legislative proposals for an accountability act. I know you've also been engaged in some other discussions concerning reporting across departments and government, and there's the great discussion we're having about the horizontal nature of reporting, as opposed to the silos and so forth that currently exist, for instance, in line departments.
I'm just wondering how you view some of the recommendations you have in here. You're talking about improved reporting and evaluation methods of line departments. Is that relevant when we actually consider the larger issue that people want to see government flattened and some of the decisions made horizontally?
Mr. Denis Desautels: Mr. Chairman, in our recommendation in paragraph 19.147 we do say the government should give consideration to legislative proposals. We didn't go further and say government should do this. Of course, it's something for parliamentarians to debate whether or not they wish to do that.
The idea is that in certain jurisdictions this has been done with a certain degree of success. Alberta is one good example. Ontario, Quebec, and Nova Scotia have also moved in that general direction, and the U.S. and Australia have also legislated certain reporting standards or objectives.
Of course, in our recommendation we do open the door to reporting that way, not just for individual departments but for the government as a whole. So when you talk about horizontal issues, in our view, if you were to move in that direction and have some legislation that would govern reporting requirements, it should include reporting on government-wide or horizontal issues.
• 1630
Mr. Alex Shepherd: The issue would be how you draft legislation like that, and I'm personally familiar with the Alberta and possibly the Quebec examples. Obviously, the accounting that goes on in government today, the estimates and so forth, is all done line by line. So you're talking about legislation that would presumably have the flexibility to establish certain evaluation methodologies—benchmarks, if you will—that would go across all departments and yet would be flexible enough to carry us into the future. In other words, is it going to burden us with a piece of legislation that talks about line-by-line department reporting? That's what we're trying to move away from.
My question would be, how successful have these regimes been at improving reporting to Parliament, that being a useful tool not only for parliamentarians but for citizens generally?
Mr. Denis Desautels: Mr. Chairman, in terms of answering how successful these have been, I think the history there is relatively short. I think we have to take that into consideration, but it's worth it to look at what these other jurisdictions have done.
In terms of Mr. Shepherd's concern about legislating something that would freeze us into a departmental model, I think we have to worry about that. At the same time, I believe there is more and more acceptance now of the need to report across departments and also to report on a government-wide basis. Treasury Board, for instance, is working right now to develop different social indicators or measuring devices for government-wide performance. There is some movement in that direction. You would have to pick up on that if you are going to legislate certain reporting standards.
The Chair: Thank you very much.
Mr. Mayfield, you have four minutes, please.
Mr. Philip Mayfield: Thank you very much, Mr. Chairman. Mr. Desautels, perhaps if you would, I'd like to take a run at this question of public service recruitment from the opposite direction. I asked you previously what could be done to speed it up. Perhaps if we look at it from the other side, what are some of the obstacles that make it the problem it is now. I don't know whether they're obvious or not, but there are some questions in my mind about whether it's a matter of adequate compensation, of security, or of whether there are issues like employment equity that are not working properly. Without saying that these are the obstacles, because I'm not sure about that, I'd just like to ask you what some of the problems are that we really need to look at, since we're putting everything on the table.
Mr. Denis Desautels: Mr. Chairman, the issues we raised here and the shortcomings of the recruitment program of the federal government revolve more around the effectiveness of the recruiting program itself. The federal government isn't an absolutely perfect environment to work in. There are some frustrations, no doubt, but on the other hand, if you look at it positively, there are some very interesting jobs and there are some advantages to working for the federal government. The federal government has a lot to offer in terms of potential recruits. I think it's in selling these advantages, in responding quickly to departmental needs for new people, and in meeting the potential recruits' needs for quick answers that they're falling down.
The problem is really in the management of the recruitment program as opposed to obstacles within the public service itself. It's not perfect, but that's not where the main problem is.
Mr. Philip Mayfield: I'm one of those who thinks there are some limits to the whole question of image, but does the federal government have an image problem in its recruitment?
Mr. Denis Desautels: Mr. Chairman, in some areas it does. For instance, if young graduates apply to the public service and don't get an answer for months, the image right away in their minds is not very positive and it stays there for a long time.
• 1635
On the other hand, there are different government
organizations that over the years have had a good
reputation, and they have to make sure they maintain
that reputation. The Bank of Canada is well
respected on campus. Finance is seen as a good place for
economists to work. There are different departments
that have a pretty good image. But others are not
efficient enough in terms of dealing with people, and
that image sticks with recruits for a long time after
that, unfortunately.
Mr. Philip Mayfield: Thank you, sir.
The Chair: Thank you, Mr. Mayfield.
Ms. Torsney, please, four minutes.
Ms. Paddy Torsney (Burlington, Lib.): I'd like to talk about this whole issue of risk that you identified in your points 14 through 18, particularly your point 18 about Canadians being better informed about the level of risk they face. I'm not sure there needs to be a lot more work done on understanding risk in the general population. I would worry about how we communicate that if there isn't an understanding of risk. All you have to do is look on the highway and see a teenager driving to know they don't really get the risk thing. But I'd like to know if more work needs to be done and what specifically you think we should be communicating to people about risk, and how to manage the risk once they have that information.
Mr. Denis Desautels: I'll ask Mr. Timmins to answer that question.
Mr. Douglas Timmins (Assistant Auditor General, Office of the Auditor General of Canada): I think, Mr. Chairman, in terms of managing risk, it will depend on the individual programs. What we've identified, of course, in looking at a number of programs is that that's an area that warrants more attention.
One of the things we have suggested is more use of high-level scientific advisory committees to ensure knowledgeable people are in place and helping make sure the broader risks are there. I don't think it's so much a matter of not knowing what the risks are. I think the organizations can identify the risks. It's managing the risk in terms of allocating resources against that and making sure you're establishing your priorities on the basis of where the highest risk is.
Ms. Paddy Torsney: For instance, I recall—I wasn't around at the time—watching some footage about the risk of polio vaccination in Canada. At the time the polio vaccination was introduced, it turned out Americans were all getting sick from it. The minister at the time, Paul Martin, had to make a decision to take a risk about whether or not to immunize children. He made the right decision, as it turns out. But if in the course of communicating that risk people didn't understand how to access that information, we could still be dealing with polio on a big basis in Canada.
So it's not just what you communicate but also how people understand the information. I wonder if there needs to be more work done on both sides before we can really accept the information.
Mr. Douglas Timmins: Certainly, Mr. Chairman, we did point out the fact that more communication is required in relation to the balance the programs have chosen between the health and safety aspects of risks and other priorities of risk.
We also talked, for example, in the food inspection chapter about having a need for more information on food-borne illnesses and the prevalence of pathogens. That information would allow the management to change their priorities in terms of responding.
We also recognize within it that you can't eliminate all risks, and government shouldn't be setting up that expectation. That is part of educating the public in terms of what choices they have made and how they best have dealt with them.
It's not always going to be perfect, but I think the point is better information and better communication and being prepared for the evolution of risks. There are a number of health and safety risks. E-coli was not as prominently known until we had a number of outbreaks in the United States, etc.
Ms. Paddy Torsney: But you're satisfied that CFIA is working on developing more programs and is on the right track.
Mr. Douglas Timmins: Mr. Chairman, I think we are encouraging them to do much more. We feel they had identified a number of initiatives. Some of them they've made some progress on and others have faltered. We think more effort is required on their part to move forward.
• 1640
Ms. Paddy Torsney: Okay.
The Chair: Thank you, Ms. Torsney.
Mr. Thompson, four minutes, please.
Mr. Greg Thompson: Thank you, Mr. Chairman.
I'm back on the EI surplus, sir. Again, I thank the chairman for identifying the chapter and verse. I'm at 34.55 on page 19 of chapter 34.
You're talking about the EI surplus having a direct impact on the government's annual surplus, and you spell it out quite clearly here. You're saying that the government's annual surplus would have been $7.2 billion lower and its net debt $28 billion higher if it were not for the surplus. The question comes back to intellectual honesty, if you wish, in terms of that account, recognizing that employees and employers, through payroll taxes, have developed this fund and the government is using it for optics.
The second part of this equation refers back to some of the questions earlier in reference to the fund itself and how the government could only through an act of Parliament set up a separate fund for the EI account. As a bookkeeping measure, and maybe in terms of good governance and accounting procedures and some intellectual honesty, wouldn't it be of benefit to all of us if the government took that fund, acknowledged that it's an EI fund, and with that fund helped reduce those payroll taxes in a very transparent way? We could say, “Listen, the $34 billion is there because of you and I, so let's take that $34 billion and move it over.”
The fact is, I don't think there's any rocket science in setting the rate. The actuary has told us, and I don't think we're going to have to wait two years to determine.... It would give us quite a buffer zone in terms of an upswing or a downswing in the economy.
Maybe you could comment on that, sir.
Thank you, Mr. Chairman.
Mr. Denis Desautels: I guess there's a bit of history here. The EI account used to be in a deficit position. The government once upon a time did not recognize in its own accounts the deficit that would be accumulated in the EI account. Eventually the government was convinced that it should consolidate the results of the EI account with the rest of the public accounts. That was still at a time when the account was kind of breaking even, or even in a deficit situation. Nobody had any problems with it at that point.
In the second half of the 1990s, the situation turned around quite dramatically. The annual deficits turned around into substantial annual surpluses. That caused people to again question whether or not that fund still should be consolidated with the public accounts.
My view is that, yes, it should stay consolidated, because it is a government program. It's perhaps a dedicated tax but it's still a tax and it's fully administered by the federal government so it should be reflected in the results of the federal government.
The fact that it's running a surplus does not change the issue, as far as I'm concerned. The fact that it's running huge surpluses is something that Parliament and the government have to work out somehow. The essential intent, I believe, of the EI legislation was that over time this account should break even. You should collect enough to pay the benefits and administer the fund. You could have surpluses to provide for a rainy day, but the general principle is that this fund should basically break even. So if it breaks even, it makes no difference if it's consolidated or not.
In terms of what's to be done with the surplus, that's entirely a political question. You can change the rates, of course, or reduce payroll taxes. You can play with the benefits as well, and even it out that way. But I'm not going to venture in that direction. I believe that's strictly a political choice.
The Chair: Thank you, Mr. Desautels.
Ms. Leung, please, four minutes.
Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chairman.
• 1645
Mr. Auditor General, you expressed some concern in
chapter 34 regarding CCRA, HRDC, and the fact that
there are cases of fraud and EI abuse in B.C. I think
CCRA has already created a special policy for complex
cases and hired a technical review officer to try to
combat some of the problems you're concerned about.
Another initiative we have taken is to implement a joint HRDC-CCRA training program for officers in order to provide more adequate training and to improve the working relationship between the two departments. These matters were at the root of a lot of the problems with the two departments.
You also suggest the government should make a concerted effort to apply detection and prevention in cases of EI abuse. I wonder, do you have any other suggestions, aside from our two initiatives, for more concrete action, especially on the prevention side?
Mr. Denis Desautels: Mr. Chairman, what was troubling about this case is that it's been going on for quite a number of years—I think close to twenty years—and that both organizations knew about it and suspected a problem, yet between the two of them they weren't able to stop the abuse. When you look at it that way, it's quite troubling, and we're talking here, Mr. Chairman, of two industries we knew of in a particular part of the country. It could very well be that the same kind of problem is taking place elsewhere in the country. Just remember that we were focusing here on only a specific area and specific industries, and there could be more than that.
So the two organizations basically have had a lot of difficulty getting their roles in sync in order to stop this. Because of the division of roles between the two organizations, they weren't really able to do that effectively.
The main problem here lies more, in my view, at the CCRA end. I think HRDC was basically quite vigilant in identifying the problem, but when the response was transferred from HRDC to CCRA, CCRA either was ill-equipped or did not feel they had the right mandate to pursue that to its ultimate resolution.
So I note the response of the departments concerned, but I'm still concerned that this may not be enough. I think I'll withhold judgment on that for the time being, Mr. Chairman, and I think this warrants a follow-up.
The Chair: You may ask a very brief question, Ms. Leung.
Ms. Sophia Leung: I want to know if there are any other measures we can apply to CCRA. We have already taken the two initiatives. Perhaps it's too early to tell.
Mr. Denis Desautels: Mr. Chairman, I think CCRA has to do two things. First, it has to recognize its own responsibility in arriving at the ultimate resolution of the issue, which I don't think has been the case so far. Second, once it does that, it has to equip enough people in its organization to act. Right now we're talking about a special officer for the department, better communications, and some training, and while this is going in the right direction, it may not be quite enough. More of that is probably needed.
The Chair: Thank you.
Mr. Grose, please.
Mr. Ivan Grose (Oshawa, Lib.): Thank you, Mr. Chairman.
• 1650
Mr. Desautels, I was intrigued by your mention of
Downsview Park. I still have trouble viewing it as a
park. I was more used to using it as an airport
facility. You say it was created without Parliament's
clear and explicit authority. Does that not place in
jeopardy any land-lease, sharing, or land-sale
agreements made by whatever authority is running it now
if Parliament has not given its clear and explicit
authority?
Mr. Denis Desautels: Mr. Chairman, this is a very difficult legal issue. Let me try to answer it this way. I think from a strictly legal perspective, the corporation and the government could probably demonstrate that they have all the titles and all the authority to sell or lease properties. Indeed, the title hasn't changed through all of this; it has remained with the Government of Canada. Despite the problems we have identified, I think the land could be legally disposed of without any concerns about future invalidation.
We feel, though, that Parliament has not given this whole operation the right kind of approval. The proceeds of dispositions are not coming back into the consolidated revenue fund but are being appropriated for the development of the park. I think there are fundamental principles at stake. There are obviously counter-arguments to that, but we believe it would have been more proper to make sure the proceeds were credited to the CRF and appropriated out of that for other purposes.
Mr. Ivan Grose: In other words, we have in effect set up a paper corporation that could receive the proceeds of sales, leases, or whatever and direct them somewhere else other than the consolidated revenue fund.
Mr. Denis Desautels: There are some fundamental principles in terms of how proceeds of dispositions are to be handled and how funds are supposed to be appropriated by Parliament out of the CRF. I think what was done here short-circuited those principles.
Mr. Ivan Grose: Thank you. Thank you, Mr. Chairman.
The Chair: Mr. Finlay, please.
Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman.
It's good to see you again, Auditor General.
I'm looking at chapter 11. In the last two paragraphs in the letter you sent us, you wrote:
—and so on. You say in the next one:
—which is a good thing—
I want to ask you what you mean there, and I want to be fair and tell you why I'm so concerned. It's about HRDC grants and these programs, the transitional jobs fund and the programs you mention here. You looked at youth internship, social development partnerships, and sectoral partnerships, which were carried out in every riding across this country—in my own riding to the tune of $5 million or $6 million a year. They affected hundreds and thousands of people in the riding. They helped industries from our largest to our smallest. We had good results from it, in my view. I remember getting the whole list and checking it over and so on.
• 1655
Now I find, after the brouhaha and the nonsense of
boondoggles, etc., that the civil servants are unable
to act in a way that really moves things ahead. They
have been throttled now; they must check this and
they must check that. Even the manager of three towns
in my riding cannot right a wrong that is quite obvious
to him and me and the citizen. He can't do it because
the systemic change has been such that everybody is
covering their bottom and their top, and they don't
dare make a move that isn't written down. I think
it's a tragedy.
I'd like to know what you mean by systemic change. I've discussed this with other members and with many people in the department, some here in Ottawa, and this is general. Of course, it will spread to other departments too.
The Chair: Let's give the Auditor General a chance to respond, because you've used up quite a bit of your time, Mr. Finlay.
Mr. Desautels.
Mr. Denis Desautels: Mr. Chairman, I think this is an excellent question to debate, and I would like to have a chance to discuss this further. I think it's a very important issue.
We looked into HRDC very closely and tried to get the right judgment on what was done wrong and what was done right. We've also been keeping in touch with the department since we reported last October. So we have an idea too of how things seem to be going in HRDC.
The concern raised by Mr. Finlay is not unique. I've heard it from other sources as well. I'm quite conscious of it. We've had discussions with departmental people to determine to what extent that was in fact happening.
The department readily admits, I think, that they had gotten the balance out of kilter between providing fast service to recipients of grants and contributions and respecting certain basic duties they had under the Financial Administration Act and other procedures of government. We have to make sure that out of all that we don't overreact or cause the wrong things to happen. I'm equally concerned about that.
But I believe we can talk about it and find the right balance. I believe we have to make sure we don't eliminate intelligent risk management in the process of managing these grants and contributions. We should allow for intelligent risk management, and I'm all for that.
So, yes, we should worry about that, and I think it would be a good discussion to have. I believe the department as well would welcome such a discussion. It would enable us to move a little closer to finding the right balance. What do we expect to see as minimum paper work and minimum verification of certain things before a cheque goes out? I think we need to worry about that. I think what was done before was not right either. We have to make sure we set the right balance.
The Chair: Thank you, Mr. Desautels.
Mr. Bryden has implored me for one very brief question.
Mr. John Bryden: I have to say, Mr. Chairman, in response to Mr. Finlay's remarks, that in my riding I am delighted there is caution, because things occurred in my riding that I never would have countenanced, and I am very glad that HRDC has now developed cautions that perhaps it didn't have before.
The Chair: And your brief question is?
Mr. John Bryden: My brief question, following the theme of my remarks, is this. We established that as a member of Parliament trying to have oversight of crown corporations I have to rely on financial statements and annual reports these crown corporations put forward. On your very rare visits to crown corporations, you have determined they contain from time to time information that is seriously flawed. My question is, would crown corporations in terms of their management benefit from being under the legislated transparency of the Access to Information Act in terms of giving members of Parliament an opportunity to monitor their activities in the same way we can monitor those government departments that are subject to that act?
• 1700
Mr. Ivan Grose: John, that was a brief question.
The Chair: That was a brief question.
Mr. Desautels.
Mr. John Bryden: It was a good one, though.
The Chair: Maybe it was good, but it wasn't brief.
Mr. Denis Desautels: Mr. Chairman, I think this is a legitimate policy question. I think there is a way of making crown corporations more transparent, and I think we have to look into that. Certain crown corporations are, I believe, already covered by the Access to Information Act. For instance, I think that for BDC certain things can be obtained under the Access to Information Act. Whether or not that could be extended to more crown corporations is, I think, a legitimate question.
The Chair: I think, Mr. Desautels, we're going to cut it off there because we are past the time.
Mr. John Bryden: I'm very interested in his remarks.
The Chair: I'm sure the information—
Mr. John Bryden: It's only five o'clock, Mr. Chairman.
The Chair: I know. We have a steering committee meeting that is supposed to start at five o'clock.
Mr. John Bryden: Mr. Chairman, if I may put it to the other members of the committee, let him finish his remarks.
The Chair: If you're very brief, Mr. Desautels, you can finish your remarks.
Mr. Denis Desautels: Mr. Chairman, I have mixed views on that. I would like to see more transparency with crown corporations, but I'm not sure to what extent the Access to Information Act as is should apply to all crown corporations.
The Chair: That's something for debate.
I have one question from myself, Mr. Desautels, before we wrap this up. The chair of this committee always asks questions. Referring to your opening remarks, Mr. Desautels, you say that previously you observed shortcomings, although of a lesser magnitude, which suggests the problems you have identified now are of a greater magnitude. You talk about Canadians being justifiably upset by such disclosures, and you say you share their frustration. In the table you printed on page 10 of your opening remarks you talk about some fundamental rules, which I believe you actually reported back in 1992, including such things as do nothing illegal, act within your delegated authority, and don't waste public money. Have we really moved forward, Mr. Desautels, if we still have to say don't do anything illegal? Are we really going to get there? Do you have confidence we're going to get there and really ensure we provide value for taxpayers' money?
Mr. Denis Desautels: Mr. Chairman, I believe that despite some of the occasional setbacks, we've moved in the right direction on that front. I think it's always important to remember some of those very fundamental rules in case people ever get pressured or tempted.
The Chair: Thank you.
I'm going to bring the meeting to a close. There is a steering committee meeting following immediately afterwards. The committee members are three Liberals, Mr. Bryden, Mr. Harb, and Ms. Jennings; myself from the Canadian Alliance; Monsieur Desrochers from the Bloc; Mr. Nystrom; and Mr. Thompson. So if everyone else can remove themselves as quickly as possible, that would be appreciated.
This meeting stands adjourned to the call of the chair.
