Treasury Board Secretariat is “committed to seeing that Canadians receive good value and positive results from public expenditures ¹⁴ and has identified “stewardship” or “sound management of federal resources” as one of the strategic outcomes around which it organizes its work. Accordingly, the Secretariat supports the Treasury Board’s role in the allocation of resources and the “monitoring and analysis of the management of resources on a program, departmental, and sectoral basis,” and the “establishment of policies and standards to improve management practices” in departments and agencies ¹⁵. Total planned spending by the Secretariat on stewardship for 2003-2004 amounts to $816 million.

The Secretariat also has responsibility for traditional comptrollership functions such as financial and contract management, accounting, review, and internal audit. It is expected to provide leadership in financial management and contract management.

The audit found that under the former Commissioner there was a breakdown of basic financial management and control at the OPC. According to the Auditor General:

In short, it did not have the financial controls that would have enabled it to meet even the basic requirements for financial management as stipulated in the Financial Administration Act, Treasury Board guidelines, and Receiver General directives. (Paragraph 76)

In the absence of proper financial management and control at the OPC, Treasury Board policies regarding expenditures on travel and hospitality were “consistently ignored.” Spending limits were exceeded, claims were not documented properly and unnecessary travel advances were given to the former Commissioner. Absent or weak financial controls meant that travel and hospitality expenditures were not reviewed properly.

Treasury Board policy on contracting is clear; contracts valued over $25,000 must be open to competitive tender. Exceptions can only occur under narrowly defined circumstances and must be documented. Departments and agencies submit reports on annual contracting activities to Treasury Board Secretariat, which has, in practice, made them public.

The audit found that contract management at the Office of the Privacy Commissioner was “weak and that the controls over contracting activities were either ineffective or non-existent.” (Paragraph 171)

Treasury Board Secretariat has agreed to the three recommendations made by the Auditor General following her audit. The Secretariat has also announced that it will undertake a number of additional steps, including:

• The identification of all positions not classified in accordance with Treasury Board classification policies, provision of classification advice to OPC and ensuring that the OPC takes timely corrective action for positions found to be misclassified.
  
  
• The review of improper hospitality expenditures, improper cash-outs of vacation leave, and ineligible travel expenditures with the interim Privacy Commissioner and ensure that all corrective actions are taken.

The Secretariat has completed a management review of the OPC and provided a report to the Interim Commissioner as the basis for comprehensive change of management practices for the future. It has frozen an amount in the office’s budget for the current fiscal year equivalent to the $234,000 over-expenditure for 2002-2003. The Secretariat is working with the Interim Commissioner to establish the current and prospective financial requirements for the office. It is also working with the OPC to select a new senior financial officer and ensure the appropriate training and development are given to this individual. The Secretariat has indicated that as per the Auditor General’s recommendation, it would produce a joint report with the interim Privacy Commissioner on the outcome of these efforts that would be tabled in Parliament by the end of October 2003.

These actions are appropriate but they are specific to the Office of the Privacy Commissioner thus do not address how the Secretariat intends to prevent similar breakdowns in other departments and agencies in the future.

Mr. Judd explained that the Secretariat had failed to take timely corrective actions in the case of the Office of the Privacy Commissioner because it is “one of dozens of small agencies,” and because

Agents of Parliament are treated somewhat differently than the rest of the public sector by central agencies of government for reasons having to do with, principally, not wishing to give the appearance that the government is, is some fashion or other impeding their independence.

The Committee is not convinced by this explanation. There is no provision in the Financial Administration Act that exempts officers of Parliament and most of small agencies from Treasury Board policies. It is therefore the will of Parliament that these policies apply and it is consequently the responsibility of Treasury Board Secretariat to ensure that they do apply. Furthermore, the Committee is not persuaded that adherence to these policies — and therefore their enforcement — would in any way constitute an infringement upon the ability of officers of Parliament or other small agencies to perform their responsibilities. If this were the case, then it is incumbent upon Treasury Board Secretariat to say so and arrange for formal exemption. The Committee therefore recommends:

RECOMMENDATION 7

That Treasury Board Secretariat monitor compliance, by all entities listed in Schedule I.1 (sections 2 and 3) of the Financial Administration Act, with all applicable Treasury Board policies.

RECOMMENDATION 8

That Parliament be informed of any exemption from Treasury Board policies extended to entities listed in Schedule I.1 (sections 2 and 3) of the Financial Administration Act, and the reasons for such exemption.

RECOMMENDATION 9

That Treasury Board Secretariat intervene in a timely manner when instances of non-compliance with Treasury Board policies by all those to whom they apply come to its attention and take all necessary corrective action.

RECOMMENDATION 10

That Treasury Board Secretariat report all instances in which it has had to intervene to ensure compliance with Treasury Board policies, naming the entity involved, the nature of the non-compliance, and the corrective measures taken, in its departmental performance report, beginning with the report for the period ending 31 March 2004.

The Committee recognizes that small agencies such as the Office of the Privacy Commissioner pose a relatively smaller risk than departments with numerous programs, many employees, and massive budgets. However, a central lesson learned as a result of this audit is that even small agencies consume significant public resources and that when aggregated the amounts involved are substantial. The Auditor General has recognized this and has created a unit dedicated to these agencies. The Committee has recommended that the Public Service Commission take similar steps and wishes to see Treasury Board Secretariat do the same. The Committee therefore recommends:

RECOMMENDATION 11

That the Treasury Board Secretariat develop a detailed action plan to focus more attention on compliance with Treasury Board policies in smaller departments and agencies, and table that plan with the Committee no later than 31 July 2004.

The Committee is profoundly concerned with the manner in which performance bonuses for senior public servants have been administered. The available information shows that the overwhelming majority of senior executives receive these bonuses, even in agencies such as the Office of the Privacy Commissioner or the Public Service Commission where there is clear evidence of poor performance. In the case of the Public Service Commission, as noted above, these bonuses were paid out for purposes unrelated to actual performance. These examples represent an abuse of the system.

The Committee was informed that Treasury Board Secretariat is reviewing the performance bonus regime and intended to issue new directives in November 2003. The Committee recommends:

RECOMMENDATION 12

That Treasury Board Secretariat submit a copy of the new performance bonus directives to the Public Accounts Committee upon their completion.

The Committee is also concerned about the absence of transparency surrounding the award of performance bonuses and consequently recommends:

RECOMMENDATION 13

That all departments and agencies be required to include in their departmental performance reports the criteria used to determine the eligibility of executive-level employees for receipt of performance pay, the total number of executives employed, the total number and percentage of those in receipt of performance pay, and the total amount of the bonuses awarded, beginning with the reports for the period ending 31 March 2004.

For several years the Committee has expressed strong reservations about Treasury Board Secretariat’s tendency to release policies and then leave the task of monitoring and enforcing them to others. In particular, this is a responsibility that has been left to deputy heads of departments and agencies. This would have meant, with regard to the Office of the Privacy Commissioner, that the former Commissioner was in charge of making sure that Treasury Board policies were obeyed. The flaw in that approach and the undesirable consequences it can produce have now been starkly illustrated.

A case in point is the Treasury Board Secretariat’s handling of the government contracting policy. On several occasions, the Auditor General has brought instances of non-compliance with, and abuse of, this policy to the attention of Parliament ¹⁶. The Committee has examined these audits, and found that the contracting policy is good but poorly monitored and enforced. In particular, the Committee has noted that Section 5.1 of the Policy defining the role of Treasury Board Secretariat is not fully applied. That Section states that:

Two mechanisms will be used to monitor government contracting activity: departmental audits and an annual report on contracting. Departments will be evaluated on their compliance with contracting policies and the level of competitive contracting.

All departments and agencies awarding contracts and/or amendments, are required to submit an annual report to the Treasury Board Secretariat on all contracting activities.

The Treasury Board Secretariat also conducts periodic reviews of contracts for the services of individuals, including those for less than $5,000. In addition, departmental auditors need information about contract situations. Contracting authorities are to ensure that contract files include substantiation of the appropriateness of the fees paid and of the need to contract instead of using the staffing process.

In its reports back to the House, the Committee has repeatedly recommended that Treasury Board Secretariat perform the full role that the Policy requires ¹⁷. The Committee made this recommendation again in its Tenth Report to the House of Commons ¹⁸. The Secretariat responded that there is now a “more robust and broad-based system” of monitoring in place composed, in part, of “ongoing dialogue with departments,” monitoring of departmental audit plans, training for contracting specialists, and review of cases at the Canadian International Trade Tribunal. This “more robust” approach appears not to have worked at the Office of the Privacy Commissioner.

At the Office of the Privacy Commissioner, the Auditor General discovered that contract management was “weak and that the controls over contracting activities were either ineffective or non-existent.” (Paragraph 171) The OPC could not provide the Auditor General with a list of all contracts it had awarded over the last three years. Among the files that Mrs. Fraser was able to examine, she found contracts with a total value of about $2 million that had been awarded without competition. Many of these were subsequently amended for amounts well over $25,000 — the maximum amount allowed for a sole-source contract — particularly contracts for personal services. (Paragraph 168)

The audit also found several instances of sole-source contracting and splitting of contracts that resulted in the avoidance of competition. Specifically, the audit team found that the OPC had awarded virtually all professional services contracts on a sole-source basis, with 50% issued for $25,000. At the OPC:

The contracting officer, who also had other administrative responsibilities, did not receive copies of all contracts and amendments. This made it impossible for the OPC to provide the Treasury Board Secretariat with the accurate number, type, and value of contracts and amendments issued — yearly reporting required of all departments and agencies for accountability purposes. (Paragraph 176)

In conformity with the Contracting Policy, Treasury Board Secretariat compiled annual purchasing activity reports that included data from the Office of the Privacy Commissioner. It is clear that the Secretariat did not challenge the information provided to it by the OPC — information that has now been shown to be unreliable — or conduct any audits of its own, otherwise the shortcomings found by the Auditor General would have been detected sooner. With these matters in mind, the Committee recommends:

RECOMMENDATION 14

That the Treasury Board Secretariat fulfil all of its responsibilities in the area of contracting as set forth under Section 5.1 of the Contracting Policy, heeding in particular to communicate the results to Parliament in its annual contracting activity report.

The Contracting Policy states that the Treasury Board Secretariat will rely on departmental audits as a means of ensuring that the Policy is being complied with. But the Secretariat was aware that a large number of small departments and agencies — including the Office of the Privacy Commissioner — have no internal audit capacity ¹⁹. A study conducted for the Secretariat’s Centre for Excellence for Internal Audit by Deloitte and Touche recommended that small departments and agencies have access to central internal audit resources ²⁰. The Committee believes that had there been an internal audit function at the Office of the Privacy Commissioner, many of the problems revealed by the Auditor General — not just in the area of contracting — would have been identified and corrected much earlier. The Committee therefore recommends:

RECOMMENDATION 15

That Treasury Board Secretariat create a pool of resources to make central internal audit services available to small departments and agencies, including the Office of the Privacy Commissioner of Canada.

If there is a weakness in the current internal audit regime, it is that internal audit is placed under the aegis of deputy heads and its initial reporting stages occur within departments and agencies. While final audit results are made public, this happens only after internal departmental review has taken place. This process may work well in the vast majority of government entities; it is questionable whether or not it would have under the former Privacy Commissioner. It is therefore incumbent upon Treasury Board Secretariat to not only collect annual contracting activity data from departments and agencies, but to monitor this activity and challenge it when appropriate. The Committee therefore recommends:

RECOMMENDATION 16

That in its action plan to focus more attention on compliance with Treasury Board policies in smaller departments and agencies, Treasury Board Secretariat include measures to improve the monitoring of contracting activities.

Perhaps the most disturbing finding arising from the Auditor General’s audit has to do with the abuses that OPC employees were subjected to and the resulting impact on their morale. Public Service employees are provided with the means to raise their concerns about workplace irregularities. Problems with recruiting and hiring practices can be brought to the Public Service Commission. This was done regarding the OPC; nothing of substance resulted.

Concerns involving other forms of wrongdoing are accommodated by the Treasury Board’s Policy on the Internal Disclosure of Information Concerning Wrongdoing in the Workplace. Under this policy, a public servant may report problems to either a senior officer designated by a deputy head to receive disclosures, or to the Public Service Integrity Officer.

It is reasonable to ask why these mechanisms were not used. To answer this question, Treasury Board Secretariat commissioned a study in July 2003. The study surveyed employees at the OPC and found that over half of the respondents (56%) were unaware of the existence of the policy. Of those that were, lack of confidence in OPC senior management and fear of reprisal were major factors in dissuading them from reporting wrongdoing. Similar concerns were identified by the Auditor General in her report. (Paragraph 187)

Lastly, the Committee notes that Treasury Board Secretariat had advance warning that OPC employees harboured concerns regarding their ability to report workplace wrongdoing. As part of 2002 the annual public service employee survey conducted by the Secretariat, OPC staff was asked whether they agree that they could “initiate a formal redress process (grievance, right of appeal, health and safety, etc.) without fear of reprisal ²¹. Sixty-nine percent of respondents disagreed, 40% of them strongly. It is to be hoped that the Secretariat act quickly to investigate such warning signals in the future.