PACC Committee Report

INTRODUCTION
OBSERVATIONS AND RECOMMENDATIONS
CONCLUSION

Pursuant to Standing order 108(3)(e), the Standing Committee on Public Accounts has the honour to present its

The Standing Committee on Public Accounts has considered Chapter 24 of the December 1998 Report of the Auditor General of Canada (Revenue Canada – International Tax Directorate: Human Resource Management) and the Committee has agreed to report the following:

Established in November 1991, the International Tax Directorate was created to enhance Canadian businesses’ competitiveness and to protect the Canadian tax base by ensuring compliance with Canadian legislation applying to non-residents and to international transactions.

International tax is a growing field with a significant potential for tax revenues for Canada (24.19). At the same time, given the complexity of the concepts and issues involved in the international tax field, there is also a serious possibility of loss of revenues if risk to the tax base is improperly managed. In this complicated, knowledge-intensive area, the International Tax Directorate requires a stable work force of highly skilled professionals to properly manage the risk to the tax base (24.22).

The audit focused on the human resource management of Revenue Canada’s International Tax Directorate and how well it attracts, motivates and retains well-qualified and trained staff who can perform effectively and to a high standard.

With these issues in mind, the Standing Committee on Public Accounts decided to consider the findings of Chapter 24 of the December 1998 Report of the Auditor General of Canada.(Revenue Canada – International Tax Directorate: Human Resource Management ). The Committee met on March 23, 1999 with Mr. Denis Desautels, FCA (Auditor General of Canada), Mr. Shahid Minto (Assistant Auditor General) and Mr. Barry Elkin (Principal, Audit Operations Branch). Representing Revenue Canada were Mr. Barry Lacombe (Assistant Deputy Minister, Verification, Enforcement and Compliance Research Branch) and Mr. David Brown (Director General, Human Resources Agency Team).

In his opening remarks, the Auditor General stated that human resource issues in the International Tax Directorate (the Directorate) needed much attention. "Weaknesses in human resources management in the Directorate, coupled with the often cumbersome human resource management rules in the Public Service, have resulted in long delays in the staffing process." (1540). The audit noted that the Directorate’s staffing process was slow, and that it took an unusually long time to mark examinations and establish eligibility lists. Good candidates may lose interest if they have to wait for long periods of time. At the time of the audit, the Directorate was still developing a comprehensive plan and human resource strategies linked to its business plan, even though it recognised as far back as 1994 the urgent need for a human resource plan. (24.41)

The Directorate will need to have a robust human resource strategy to ensure that, as senior level personnel retire or transfer, their positions are filled with competent, experienced people. To support the implementation of this strategy, a reliable human resource information system will be needed. Revenue Canada has acknowledged the need throughout its organisation for a reliable human resource information systems and databases. (24.38)

The audit noted the Directorate’s high rate of staff turnover, low average levels of experience, and many key positions being filled using secondments, redeployments and acting assignments. The Auditor General stated that " this approach to staffing has resulted in a lack of stability and continuity and may pose a risk to the quality of work. (1540)

Given that the Directorate’s staff is expected to interact with highly experienced and skilled senior people in the largest corporations and with tax professionals in the private sector and other governments, they are expected to exercise good judgement when interpreting complex transactions and complex tax laws. Attracting and maintaining the necessary workforce can be achieved through developing the current workforce, hiring new people with the right skills and providing a suitable environment that enables personal growth and career progression.

The Auditor General closed by observing that the solutions to the problems rest solely with the Department. Revenue Canada must develop a plan to hire, retain and train key employees. (1545) The move to the proposed Canada Customs and Revenue Agency should not be considered as a panacea for outstanding human resource management issues.

In his opening statements to the Committee, the Assistant Deputy Minister for Revenue Canada, Mr. Barry Lacombe, indicated that the Auditor General’s observations and recommendations supported and reinforced the Directorate’s own comprehensive action plan to address human resources problems. Mr. Lacombe discussed the Directorate’s progress in staffing management positions and also described a set of initiatives to ensure that it has a qualified and well-trained work force. For example, the Directorate established an accelerated development program for its auditors to be piloted this year. It also plans to introduce a self-directed career development program to ensure the internal development of management expertise. The Assistant Deputy Minister also indicated progress in the development of a human resource management plan together with updated information systems to support this plan.

In contrast to the Auditor General’s position, the Department feels that the move towards Agency status, while not a universal cure-all, will allow for greater flexibility to tailor the Department’s human resources strategies to meet the business requirements of the International Tax Directorate. The Department maintains that the effort it has put into upgrading its planning and accountability systems addresses in a global sense the issues raised in the audit. Upgraded human resource management systems will be incorporated into the new agency. The witness stated that: the creation of the Canada Customs and Revenue Agency will strengthen the link between human resource plans and business plans. That linkage, we believe, will be an integral feature of the overall departmental planning process. This will allow the agency to better predict its human resource requirements, so that it can take the necessary actions on a proactive basis. (1555)

The Committee then asked for the Auditor General’s opinion on the ability of the Directorate’s action plan to correct the human resource problems. Mr. Shahid Minto, Assistant Auditor General, answered that the audit team was very comfortable with the action plan’s objectives and intentions. The real question was whether these were matched by effective actions. Mr. Minto added that the implementation of the action plan performance would be monitored.

Some Committee Members wondered about the potential impact on human resource planning if Revenue Canada became an Agency. The Auditor General acknowledged that management of human resources at Revenue Canada was a very challenging activity, particularly in the hiring of new staff. The move towards agency status would undoubtedly provide greater flexibility in managing human resources, but the Department could considerably improve its management by speeding up its own internal hiring process. (1630)

When questioned about the causes underlying the long delays in filling positions in the Directorate, Mr. Lacombe stated that it was partly due to the slowness in the Department’s own internal staffing procedures and to the external appeals process. (1640)

The Director General of the Human Resources Agency Team, Mr. David Brown, indicated that it took an average of 166 days to complete a closed competition. An average of 90 days would be added if the staffing decision was appealed.(1650) Mr. Lacombe mentioned some cases where the appeal process had lasted over two and a half to three years.(1645)

While agreeing with the Auditor General’s position that the Department could speed up its own internal staffing process, Mr. Lacombe felt that the move towards agency status would bring additional flexibility to human resource management.

In his participation in the Canada Customs and Revenue Agency project, Mr. Lacombe mentioned that he had had discussions with organisations that had similar problems with their appeals process. He stated that some of these organisations addressed this issue by adopting a less formalised process that, in some cases, shortened the duration of appeals down to thirty days (1645).

After listening to the testimony concerning the Directorate’s management of human resources, the Committee urges the Directorate to immediately address all the internal issues before the eventual move towards the Customs and Revenue Agency status and therefore recommends:

Recommendation No. 1

That Revenue Canada’s International Tax Directorate complete the implementation of its comprehensive action plan that links its human resource management plan to its business plan.

Recommendation No. 2

That Revenue Canada’s International Tax Directorate include in its annual Performance Report to Parliament, starting 31 October 1999, an implementation report of its comprehensive action plan, containing a detailed list of planned initiatives together with their implementation timetables.

Recommendation No. 3

That Revenue Canada’s International Tax Directorate complete the implementation of its Corporate Administration System (CAS) project, consisting of upgrading and updating the human resource information systems and databases to support the human resource management plan, and inform Parliament of the progress of this project through the Department’s annual Performance Reports.

The Committee believes the human resource management at Revenue Canada’s International Tax Directorate is an important issue that needs to be addressed given the potential tax recoveries for Canada. While the Committee recognises that part of the problem is external, this should not prevent the International Tax Directorate to immediately undertake improvements to its internal staffing procedures. The Committee feels that human resource management issues need to be addressed regardless of Revenue Canada’s decision concerning the planned Canada Customs and Revenue Agency.

Pursuant to Standing Order 109, the Committee requests that the Government table a comprehensive response to this Report.

A copy of the relevant Minutes of Proceedings (Meetings Nos. 58 and 61) is tabled.

Respectfully submitted,

JOHN WILLIAMS