PACC Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Wednesday, February 12, 2003

¹

1535

The Chair (Mr. John Williams (St. Albert, Canadian Alliance))

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance)

The Chair

Mr. Steve Mahoney (Mississauga West, Lib.)

The Chair

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General )

The Chair

Ms. Sheila Fraser

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1540

¹

1545

The Chair

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)

The Chair

Mr. Odina Desrochers

The Chair

Ms. Sheila Fraser

The Chair

Mr. Richard Neville (Deputy Comptroller General, Comptrollership Branch, Treasury Board of Canada Secretariat)

The Chair

Mr. Richard Neville

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1550

¹

1555

The Chair

Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance)

º

1600

The Chair

Mr. Richard Neville

Mr. Gérald Cossette (Director, Management Strategies, Expenditure and Management Strategies Sector, Treasury Board of Canada Secretariat)

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

º

1605

The Chair

Mr. Philip Mayfield

The Chair

Mr. Philip Mayfield

Mr. Richard Neville

The Chair

Mr. Odina Desrochers

Mr. Richard Neville

º

1610

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

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1615

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

The Chair

Ms. Beth Phinney (Hamilton Mountain, Lib.)

Ms. Sheila Fraser

Ms. Beth Phinney

Mr. Richard Neville

The Chair

Mr. Richard Neville

Ms. Beth Phinney

Mr. Richard Neville

Ms. Beth Phinney

The Chair

Ms. Sheila Fraser

Ms. Beth Phinney

Mr. Richard Neville

º

1620

Ms. Beth Phinney

Mr. Richard Neville

Ms. Beth Phinney

Mr. Richard Neville

Ms. Beth Phinney

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

Ms. Beth Phinney

Ms. Sheila Fraser

The Chair

Ms. Beth Phinney

Ms. Sheila Fraser

Ms. Beth Phinney

Ms. Sheila Fraser

º

1625

The Chair

Mr. Gerald Keddy (South Shore, PC)

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

Mr. Richard Neville

Mr. Gerald Keddy

Mr. Richard Neville

Mr. Gerald Keddy

º

1630

Ms. Sheila Fraser

The Chair

Mr. Richard Neville

Mr. Gerald Keddy

The Chair

Mr. Richard Neville

Mr. Gerald Keddy

The Chair

Ms. Val Meredith

Mr. Richard Neville

º

1635

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

The Chair

Mr. Richard Neville

Ms. Val Meredith

The Chair

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

The Chair

º

1640

Mr. Richard Neville

The Chair

Mr. Roger Gaudet (Berthier—Montcalm, BQ)

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

Mr. Roger Gaudet

Mr. Richard Neville

The Chair

Mr. Steve Mahoney

º

1645

The Chair

Mr. Richard Neville

Mr. Steve Mahoney

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

Mr. Steve Mahoney

Ms. Sheila Fraser

Mr. Steve Mahoney

º

1650

The Chair

Ms. Sheila Fraser

Mr. Richard Neville

The Chair

Mr. Steve Mahoney

The Chair

Mr. Tony Tirabassi (Niagara Centre, Lib.)

Ms. Sheila Fraser

Mr. Tony Tirabassi

Ms. Sheila Fraser

º

1655

Mr. Tony Tirabassi

Ms. Sheila Fraser

Mr. Tony Tirabassi

The Chair

Mr. Gerald Keddy

Mr. Philip Mayfield

The Chair

Mr. Philip Mayfield

The Chair

Mr. Gerald Keddy

Mr. Philip Mayfield

The Chair

Mr. Philip Mayfield

Mr. Richard Neville

»

1700

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

The Chair

Mr. Richard Neville

The Chair

Mr. John Finlay (Oxford, Lib.)

The Chair

Mr. John Finlay

The Chair

Mr. John Finlay

The Chair

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

»

1705

The Chair

Mr. Richard Neville

The Chair

Mr. Odina Desrochers

Mr. Gerald Keddy

Ms. Sheila Fraser

The Chair

Mr. Richard Neville

Mr. Gerald Keddy

»

1710

Mr. Richard Neville

The Chair

Mr. Odina Desrochers

Mr. Richard Neville

The Chair

Ms. Beth Phinney

»

1715

Mr. Richard Neville

Ms. Beth Phinney

Mr. Richard Neville

Ms. Beth Phinney

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

Ms. Beth Phinney

Mr. Richard Neville

Ms. Beth Phinney

Ms. Sheila Fraser

Ms. Beth Phinney

Mr. Richard Neville

The Chair

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

Mr. Peter DeVries (Director, Fiscal Policy Division, Economic and Fiscal Policy Division, Department of Finance)

»

1720

Ms. Val Meredith

The Chair

Mr. Richard Neville

The Chair

Mr. Peter DeVries

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Ms. Val Meredith

Mr. Richard Neville

Ms. Val Meredith

Mr. Richard Neville

The Chair

Mr. Richard Neville

Ms. Val Meredith

The Chair

»

1725

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Ms. Val Meredith

The Chair

Ms. Sheila Fraser

The Chair

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CANADA

Standing Committee on Public Accounts

---

NUMBER 013

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Wednesday, February 12, 2003

[Recorded by Electronic Apparatus]

¹  (1535)  

[English]

    The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, everybody.

    The first order of the day is consideration of a notice of motion from Ms. Meredith on the GST fraud. Hopefully, we'll get that done in a few minutes.

    The second, pursuant to Standing Order 108(3)(e), is consideration of chapter 1, “Placing the Public's Money Beyond Parliament's Reach”, of the April 2002 Report of the Auditor General of Canada. When we get to that, I will introduce the witnesses.

    We will start off with Ms. Meredith's motion, which I presume has been circulated to everybody in both official languages. It says:

I, Val Meredith, Member of Parliament for South Surrey--White Rock--Langley, give notice of the following motion: That the Minister of National Revenue be called before the Standing Committee on Public Accounts on the issue of GST Fraud (Goods and Services Tax).

    Ms. Meredith.

    Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Mr. Chair, it's self-explanatory. I am placing this on the table because I think it's important that the minister appear before this committee to answer questions as to the accusations of the level of GST fraud that are out there.

    The Chair: Does anybody else have a comment?

    (Motion agreed to)

    Mr. Steve Mahoney (Mississauga West, Lib.): You had one at the last meeting, too, Val. So that's two.

    The Chair: Since we are all in such good humour, we will just continue into the hearing for today.

    I love this unanimity thing. It's the way public accounts should work.

    Do you have a comment on that, Ms. Fraser?

    Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General ): Ms. Sheila Fraser (Auditor General of Canada, , Office of the Auditor General )No, I don't.

    An hon. member: You don't want to audit the committee?

    Some hon. members: Oh, oh!

    The Chair: Our witnesses for today are, from the Office of the Auditor General, Ms. Sheila Fraser, the Auditor General of Canada, and Ms. Maria Barrados, Assistant Auditor General; from the Treasury Board of Canada Secretariat, Mr. Richard Neville, Deputy Comptroller General, and Mr. Gérald Cossette, Director, Management Strategies, Expenditure and Management Strategies Sector; and from the Department of Finance, Mr. Peter DeVries, Director, Fiscal Policy Division, Economic and Fiscal Policy Division.

    We'll start with the opening statement by the Auditor General.

    Ms. Fraser, please.

    Ms. Sheila Fraser: Thank you, Mr. Chair.

    We thank you for the opportunity to meet with the committee today to discuss our April 2002 chapter entitled “Placing the Public's Money Beyond Parliament's Reach”. As you mentioned, I'm accompanied by Maria Barrados, Assistant Auditor General, who is responsible for this work.

    The federal government has delegated program responsibilities to certain foundations without making them appropriately accountable. Since 1996-97 it has transferred more than $7.4 billion to 10 foundations, money provided well in advance of program needs. Prominent examples are the Canada Foundation for Innovation, with $3.15 billion in federal funds; the Canada Millennium Scholarship Fund, with $2.5 billion; and Canada Health Infoway Inc., with $500 million. At March 31, 2002, almost the entire amount that had been provided to the foundations was still in their bank accounts and investments. It will be years before the ultimate intended recipients--that is, students, health care providers, and others--receive the money.

    The government's accounting policy recognizes such transfers as expenditures when the money is transferred to the foundations. We question whether this accounting treatment properly reflects the economic substance of these transfers. Would it not be better represented in the government's financial statements if expenditures were recorded in the years when the foundations make grant payments to the ultimate intended recipients or use the money themselves for the government's ultimate intended purposes?

    The public sector accounting board of the Canadian Institute of Chartered Accountants has two projects currently underway that could affect how these transactions are recorded. First, PSAB has issued draft revised standards for determining whether organizations such as the foundations should be included in the government reporting entity, and this focuses on whether the government controls the entity. Second, PSAB is developing revised standards on when transfers should be recorded as expenditures.

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[Translation]

    In 2001-02, the government announced its intention to create two new foundations. Later, it found that it could meet the same objectives through normal departmental programs and appropriations and subject to the usual accountability to Parliament. As a result, transfers to foundations declined from $2 billion in 2000-01 to $235 million in 2001-02.

    The arrangements with the existing foundations do not meet the essential requirements for accountability to Parliament, namely credible reporting of results, effective ministerial oversight, and adequate external audit. In addition, they are weak in key aspects of an adequate governing framework, notably transparency and protection of public sector values and ethics. Sponsoring government departments need to ensure that taxpayer-funded foundations spend the public's money with fairness, propriety and good stewardship.

    In our view, sponsoring ministers must have effective means to strategically monitor foundation spending and make adjustments, should things go wrong or government priorities change. Ministers now have almost no power to intervene, short of taking legal action if the funding agreement is breached.

    Each of the foundations we examined has provisions for financial statements and a financial audit by an external auditor appointed by the foundation's board. However, none of the foundations has independent, broad-scope audits that go beyond auditing the financial statements. None is required to undergo audits that cover propriety compliance with authorities, or value for money in the use of federal funds. This is the assurance and information that Parliament traditionally seeks through broad-scope audits conducted by its Auditor General. Mr. Chairman, in my view, Parliament's auditor should be appointed in most cases as external auditor of the foundations.

    Reporting to Parliament and the public on these foundations needs to improve. The foundations publish annual reports, but few of them make provision for tabling these reports in Parliament. Nor does Parliament receive multi-year plans or evaluation findings. While Parliament does receive some useful information in the Estimates documents of the sponsoring departments or in the foundations' annual reports, the performance information they provide could be better.

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[English]

    In April 2002, the Treasury Board adopted a policy on alternative service delivery that we see as a promising step. It means that sponsoring departments can be required to provide information on the governance and accountability of proposed new arrangements such as foundations as part of the approval process. If the policy is to be effective, however, departments will need better guidance on key governance issues than they were getting at the time of our audit, and the Treasury Board Secretariat will need the appropriate resources and skills to effectively monitor departmental compliance with the policy.

    In conclusion, it is our view that the government should re-examine the accountability and governance of foundations and other delegated arrangements. Concrete improvements are urgently needed. For example, recent budgets gave some foundations additional funding. The government could use such occasions to strengthen the provisions for governance and accountability in the funding agreements. Until the many gaps in the foundations' governing frameworks are tightened, their accountability to Parliament will continue to be unnecessarily at risk, and public money that they receive will remain beyond Parliament's reach.

    That concludes our opening statement. We would be pleased to answer the committee's questions.

    The Chair: Thank you, Ms. Fraser.

    I have one question before I turn it over to the floor. The $7.4 billion that you talk about in your first paragraph means that the surpluses of the Government of Canada have been understated by $7.4 billion, and the debt of the Government of Canada is now overstated, or could have been reduced by $7.4 billion? Am I correct in saying that?

    Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): There's no translation.

    The Chair: There's no translation? Is the French side coming through now?

    Mr. Odina Desrochers: It's back.

    The Chair: It's back. Let me ask my question again, Ms. Fraser. In your paragraph two, you mention $7.4 billion that's been put into foundations and still has not largely been spent. This means that the surpluses of the Government of Canada have been understated by that amount of money and the debt of the Government of Canada could have been reduced by that amount of money. Am I right?

    Ms. Sheila Fraser: You are correct, Mr. Chair, that the $7.4 billion of transfers has been recorded as an expenditure and has been reduced from the surpluses each year as the transfers were made.

    The Chair: And I apologize. I'm a little rusty at this. We've been so long since we've had a hearing I just about forgot to ask Mr. Neville for his opening statement.

    Mr. Richard Neville (Deputy Comptroller General, Comptrollership Branch, Treasury Board of Canada Secretariat): Thanks, John.

    The Chair: I can see he wasn't going to let me away with it, though.

    Mr. Richard Neville: But I also think there's a thank you to the clerk that should be noted, so thank you.

[Translation]

    First off, Mr. Chairman, I want to thank you and the member of the Standing Committee on Public Accounts for the opportunity to appear today before you on the topic of the government's use of foundations.

    I am pleased to have with me today Mr. Gérald Cossette, Director of Management Strategies, Expenditure and Management Strategies Sector, within the Treasury Board Secretariat; and Mr. Peter DeVries, Director of the Fiscal Policy Division, Economic and Fiscal Policy Branch within the Department of Finance.

    On November 26 last, I appeared before this committee on the subject of the Public Accounts Report for 2002. At that time, I addressed the Observations of the Auditor General on the subject of foundations which had been included in the Public Accounts. These Observations, and my remarks before this Committee, provided the members with a more complete overview of the Government's use of foundations.

    At this time, I would like to reiterate some of the principles relating to the government's use of foundations including those related to governance, accountability and the government's accounting treatment.

    The government supports innovation in service delivery to Canadians. One of the means is by actively promoting and facilitating optimum organizational performance through innovative organizational arrangements. A test of their validity is where they make sense and when they serve the public interest.

    In determining how the government organizes and structures the delivery of programs and services to Canadians, there are key policy considerations that must be addressed to determine whether any particular organizational innovation is in the public interest.

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[English]

    When the government transfers funds to non-government organizations, it makes a very conscious and considered decision that an organization at arm's length is in the best position to deliver on the public interest. As you know, the government provides transfer payments to many hundreds of not-for-profit and volunteer organizations. It is the government's position that decisions to provide transfers to foundations are based on the merit of these delivery vehicles.

    The government also recognizes that innovative organizational arrangements for service delivery to Canadians must be balanced with Parliament's, the government's, and citizens' needs for openness, transparency, visibility, and accountability for the expenditure of public money and the achievement and reporting of results.

    Foundations are not-for-profit organizations at arm's length from the government that receive conditional grant funding from the federal government. The main difference between foundations and the funding of other not-for-profit organizations is that the funding is up front. There may also be minority federal representation on the board of directors, but this would not be entirely unique. They generally operate in areas of strategic importance to Canada, such as innovation, research, environment, health, and education. In a number of cases, the foundations must lever additional resources of funding to supplement the federal funding provided. It is through the use of foundations that such leverage is sometimes made possible. Funding up front to these foundations also adds financial stability to the entity being funded.

    It is very important to note that three foundations, which account for approximately 80% of the funding identified by the Auditor General in the public accounts 2002, were created directly by Parliament through legislation. They are the Canada Foundation for Innovation, the Canada Millennium Scholarship Foundation, and the Canada Foundation for Sustainable Development Technology. Parliament specifically reviewed and debated the accountability and governance arrangements for these foundations as part of the legislation for them. This included requirements for auditing, evaluation, and reporting to Parliament through the responsible minister. The funding agreements for other foundations were modelled after the arrangements for the legislatively created foundations.

    Arrangements entered into subsequent to the December 2001 budget have been further strengthened in response to the recommendations of the Auditor General. These include, for example, provisions for independent compliance audits and evaluations, the submission of plans, default provisions, and the possible return of unused funds.

    The Secretary of State for International Financial Institutions, in his appearance before the Standing Senate Committee on National Finance on June 12, 2002, outlined five principles under which the government would consider using a foundation to deliver public policy. Those principles are:

    (1) The foundations should focus on a specific area of opportunity in which policy direction is provided generally through legislation and/or a funding agreement.

    (2) The foundations should harness the insight and decision-making ability of independent boards of directors directly experienced and knowledgeable about the issues at stake.

    (3) Decisions by foundations should be made by expert peer review.

    (4) Foundations should be provided with guaranteed funding that goes beyond the annual parliamentary appropriations to give the foundations the financial stability needed for comprehensive medium and long-term planning that is essential in their specific area of opportunity.

    (5) Foundations should have the opportunity and hence the ability to lever additional funds from other levels of government and the private sector.

[Translation]

    All funding agreements with foundations require Treasury Board approval and these have been strengthened considerably over the last couple of years. The revised Policy on Transfer Payments and the new Policy on Alternative Service Delivery, issued in April 2002, provide additional means to improve the use of these arrangements.

    While the federal government does not control such organizations, the agreements ensure that they are held accountable.

    There is a balance between control and accountability. This balance ensures these entities can operate independently from the government but at the same time be held accountable for the use of the funds provided and the results achieved.

    It is a Treasury Board policy that the results achieved by foundations be incorporated within departments' Reports on Plans and Priorities and Performance Reports which are also tabled in Parliament.

    This approach reinforces the Minister's responsibility and accountability to manage the funding agreements. Ministers are directly accountable to Parliament for this spending and the results achieved. In addition, it is worth noting that representatives of foundations can be, and have been, called before committee.

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[English]

    Regarding the government's accounting treatment, it is important to emphasize that professional judgment is always used in applying objective accounting standards. While the Auditor General does not agree with the government's accounting treatment, she has not been able to conclude that it is inappropriate, given existing professional accounting standards.

    The public sector accounting board of the Canadian Institute of Chartered Accountants is currently studying a number of accounting standards that might have an impact on the government's accounting treatment of foundations. Of critical importance is the definition of control as it relates to other organizations. However, until this work is completed, it would be premature to presume the outcome of professional due process. These standards are of interest to all public sector jurisdictions in Canada, and the federal government is actively supporting the reviews.

    I trust this overview on foundations has been useful to the committee members.

    Mr. Chairman, I would be pleased to answer any questions you or the members of this committee might have. Thank you very much.

    The Chair: Thank you very much, Mr. Neville. I'm sure we do have some questions.

    Do you have any questions, Mr. Mayfield? You have eight minutes.

    Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance): I do have a question or two, Mr. Chairman.

    I'd like to thank you for this opportunity, and particularly thank Ms. Fraser and Dr. Barrados, and Mr. Neville and the staff of Treasury Board, for being with us this afternoon to discuss this.

    This, in general, is an issue that we have discussed a number of times here--that is, transparency, oversight, and accountability.

    I'd like to address the alternative service delivery, or ADS, policy described, as I've seen it, in the Treasury Board website, and its relation to the problems of current arrangements with existing foundations.

    Regarding the ADS policy, the Auditor General, in her statement, says “sponsoring departments can be required to provide information on the governance and accountability of proposed new arrangements such as foundations as part of the approval process”.

    I want to refer to two or three points in the Treasury Board policy on alternative service delivery.

    At the bottom of paragraph 2.0 it says:

In leading innovation, the government must ensure that appropriate links and relationships, including those concerned with accountability and governance, are established among the entities involved, whether they be within the Government of Canada, with other levels of government or with other organizations.

    Then, jumping on to paragraph 3.0, policy objectives, “The purpose of the policy is to ensure that”, and there are a number of bullets. I'd like to draw your attention to two of them. One says “there are appropriate arrangements for ministerial accountability and reporting to Parliament”. The other bullet I draw to your attention says “the outcomes of innovative service-delivery arrangements are measured and assessed against stated objectives and reported in an open and transparent manner”.

    Then, jumping ahead to paragraph 5.0, application, in part it says “More specifically, this policy applies to the following types of initiatives in the provision...as well as the transformation of existing programs and services”.

    Under the bullets, I read: “the creation of new organizations...; Crown corporations;... Shared governance corporations;...and the contracting-out of federal programs and services to the private and not-for-profit sectors”.

    It concludes in this paragraph: “The policy also applies to existing alternative service delivery arrangements...”.

    ADS has recently gone into the rescue of the Canadian firearm registration system, with a contract approval of about $35 million last year, and sinking its previous database after the department spent hundreds of millions of dollars, all this without the benefit of a complete audit. I refer to the Hession report.

    Other than the annual reports that these foundations submit to Parliament, how can the ADS program operate and assess risk in a foundation without ever having to undergo a realistic audit by the government?

    Mr. Neville, I would like you to comment on that, if you would, please. I'd also like Ms. Fraser to add a comment, if she would.

    Thank you, Mr. Chair.

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    The Chair: Okay, Mr. Neville.

    Mr. Richard Neville: Mr. Chairman, regarding the first part, dealing with ASD and the references made, I'd ask Mr. Cossette to share with us his views with respect to the comments made.

    I'll probably add some comments subsequently.

    Mr. Gérald Cossette (Director, Management Strategies, Expenditure and Management Strategies Sector, Treasury Board of Canada Secretariat): How it should work is that before departments decide on the kind of structure they want to implement, whether it be inside or outside the public service, a foundation being an organization that is outside the public service, they have to submit a case analysis to justify why this mechanism would be better than proceeding with a regular type of structure or organization. At that stage Treasury Board and departmental officials would exchange views as to why this structure instead of another one, what kind of accountability and governance structure should be put in place to ensure that in fact ministers have control, and so on and so forth. It could be at the stage when the issue is being discussed that those issues are addressed. Or if the organization itself has already been announced--such as the government will proceed with a foundation--as the creation of the foundation unfolds, then Treasury Board would have the occasion to discuss with departments all these arrangements that would take place.

    We like to work as much as possible right at the outset of the thinking process that leads to the creation of an organization. So far we've worked the other way around. We've been involved too often after the decision was taken. But we still have the occasion at that stage, before going to Treasury Board ministers, to influence how the structure will be organized, what kind of accountability there will be, and so on and so forth.

    Mr. Richard Neville: Building on Mr. Cossette's comments, I'd like to add that once a decision has been taken, we work with the department and the entity. We have a checklist, which has 25 or so questions that have to be checked off in terms of their having been met before we proceed. We end up with what's called a funding agreement. Each and every foundation we work with has a funding agreement, which is quite detailed, and within the funding agreement there are the components that one would normally expect in terms of ensuring accountability.

    That being said, you asked a question about audits. There are certainly provisions for audits, evaluations, and special reviews. There are a number of components. We could spend some time on that. I'm sure we probably will this afternoon.

    Each funding agreement is quite complete. It does go to Treasury Board ministers before we proceed with the actual payments.

    The Chair: Ms. Fraser.

    Ms. Sheila Fraser: There are a couple of items I'd like to add. First of all, on Mr. Mayfield's question, there was a bit of a presumption that all of these foundations give their reports to Parliament, which is not the case. Some are required to and some do it on a voluntary basis, but there is not a standard requirement across the board that these reports be tabled in Parliament.

    Even if they all were, there are two questions that come from that: how do you know if the information in the reports is good and accurate? Also, you have to go beyond just getting the information. What are the mechanisms in place to be able to deal with issues, be it non-conformity with the policy direction or inadequate performance? How would Parliament be able to influence these foundations in any way? Even if we say that they should come to committee hearings, the committee can make a recommendation, but they are under no obligation to accept that. So there's a loop, if you will, in the whole accountability process.

    On the last question, on audits, even though there may be provisions for financial and some other kinds of audits, my presumption--and I think it's the case for all of them--is that those audits, which would be reported to the boards of directors, are not reported to Parliament. So again, how would Parliament know what the issues would be coming out of those audits?

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    The Chair: Mr. Mayfield, you have run out of time.

    Mr. Philip Mayfield: May I ask a short supplementary question?

    The Chair: A very short supplementary with a very short answer, because we're all in such a good mood today.

    Mr. Philip Mayfield: Thank you very much.

    Ms. Fraser didn't raise the issue first. Mr. Desautels talked about the same issue. In your report, Mr. Neville, you mentioned that the Auditor General has not been able to conclude that anything is inappropriate. But I believe that Mr. Desautels, perhaps not on this issue but on a similar one, did not give a clean report one time. So there is some evidence on that.

    My difficulty is when the money has already been spent, the funds are already in the foundation bank account or investments, there are no means by which Parliament can see how that money has been used, and there's no accountability for it. Do you understand the question, sir? How can you say that it's appropriate when so much has been given with so little accountability?

    Mr. Richard Neville: On the first question, with respect to Mr. Desautels, there were some anomalies in how we actually worked through having foundations. We have since changed our approach. Hence, that takes care of the first part.

    On the second part of your comments, dealing with accountability, I would certainly like to show you this afternoon, time permitting, how robust our funding agreements are that now allow us to have that accountability.

    The Chair: That's accountability.

    Monsieur Desrochers, “s'il vous plaît, huit minutes”.

[Translation]

    Mr. Odina Desrochers: Once again, I would like to welcome Mr. Neville and Ms. Fraser, as well as the other witnesses who are here this afternoon to speak to us about these famous foundations.

    I'm speaking as a parliamentarian who has voted on budgets democratically tabled in the House of Commons and who has seen $7.4 billion poured into various foundations. If a constituent were to ask me what happened to these $7.4 billion, I don't think I'd be able to answer that question.

    I have a question for Mr. Neville. Relying on all of the organizational tools that you have put in place, would you be able, in the short term, to give us an indication of what proportion of the $2.5 billion allocated to the Canadian Millennium Scholarship Foundation has been spent and what the plans, if any, are for spending the remaining funds? That's what we would like to know.

    I have a problem with you're saying that you want to turn this responsibility over to sponsoring departments, because they did not assume this responsibility. They delegated it to the foundations. I think the Parliament of Canada should put a stop to this kind of thing because as a parliamentarian, I see this as $7.4 billion in funds over which parliamentarians have no oversight.

    My question then is as follows: To rectify some mistakes that have been made, would you be able, in the short term, to give us a clear indication of the funds that have been spent, what your plans for the future are and whether you will be submitting reports to the House of Commons so that we can track the spending of these foundations over a certain period of time?

    Mr. Richard Neville: Thank you, Mr. Chairman.

    That's a very good question. As I mentioned initially, close to 80 per cent of this $7.4 billion in funding was approved through government bills. Pursuant to an agreement, a plan must be drawn up each year and an annual report outlining spending must be tabled, first to the minister, and then of course in the House.

º  (1610)  

    Mr. Odina Desrochers: Has this been done?

    Mr. Richard Neville: I'm assuming it has, because it's a requirement.

    Mr. Odina Desrochers: When the government is under an obligation to do something, well, as you know, sometimes...

    Mr. Richard Neville: They are required to submit an annual plan along with an annual report which includes financial statements audited by an auditor general. As far as I know, they comply.

    As for the other foundations, those set up since the December 2001 budget are required to submit documentation to the responsible minister each year. That information is subsequently made public. Again, the process is transparent.

    In the case of foundations established prior to December 2001, we are working closely with these organizations to amend their funding agreements to ensure greater equity.

    Mr. Odina Desrochers: Ms. Fraser, do you feel confident about the approach advocated as a means of ensuring that parliamentarians are accountable for up to $7.4 billion in funding approved through a democratic process?

    Ms. Sheila Fraser: As I noted in my opening statement, I believe the Treasury Board Secretariat's new policy is a step forward and that improvements are being made. Requests for reports have increased and more reports are in fact being tabled in Parliament. However, as I mentioned earlier, it's not just a question of receiving information, but a question of being able to act on that information. When it comes to accountability, we must follow through to the end, which means we need to have mechanisms in place that guarantee the information received is accurate and comprehensive. Furthermore, we must be able to react when we note a failure to comply with the policy in place or when performance falls short of our expectations.

    Mr. Odina Desrochers: Then, we've reached the half-way point, Ms. Fraser.

    Ms. Sheila Fraser: Yes. Some progress has been made, but there is still room for improvement.

    Mr. Odina Desrochers: Much remains to be done.

    Mr. Neville, as for my request, you stated that annual reports are tabled and that ministers should, as a rule, table these reports in the House of Commons. Given that all of this money has passed through the hands of the Treasury Board Secretariat, can you tell us at this time how much money has been spent on each of the foundations?

    Mr. Richard Neville: Mr. Chairman, I can't say exactly how much money these foundations have spent on their clients. We provide transfers pursuant to the funding agreements in place. Subsequently, it's the foundation's responsibility, as a third party, to meet its own requirements. We have already taken steps to ensure that the funds are well spent. Audits may be conducted and financial statements are verified by an external to ensure that a particular foundation is not experiencing financial problems.

    Mr. Odina Desrochers: Since Treasury Board delegated you to meet with the committee today, can you tell us if a process exists for conveying information between the sponsoring departments, which receive the annual report, and Treasury Board?

    Mr. Richard Neville: One mustn't forget that the British parliamentary system operates in Canada and as such, responsibility always rests with the minister. The minister is therefore responsible for ensuring compliance with the mechanisms in place and for seeing that reports are submitted as per the agreements.

    Mr. Odina Desrochers: However, I'm asking you whether ministers designated as foundation sponsors share with you information concerning these foundations?

    Mr. Richard Neville: No, not directly, in that they do not submit documentation. However, at year's end, each of the 85 departments and agencies submits a performance report. We audit these performance reports which include an obligation on the part of ministers and departments to ensure that if substantial sums of money and departmental policies are involved, a summary description of the foundation's achievements is provided as well.

º  (1615)  

    Mr. Odina Desrochers: Are you satisfied with the reports or with the information you receive from the departments, or from the ministers?

    Mr. Richard Neville: I have no information that would lead me to believe otherwise.

    Mr. Odina Desrochers: Thank you very much.

[English]

    The Chair: “Merci beaucoup, Monsieur Desrochers”.

    Ms. Phinney, please. You have eight minutes.

    Ms. Beth Phinney (Hamilton Mountain, Lib.): Thank you very much, Mr. Chairman.

    The Auditor General in her comments said that ministers now have almost no power to intervene, short of taking legal action. Could you just explain? If the minister thinks there's an overspending of a million dollars, or a billion dollars or whatever it is, are you saying that in order to find that out they'd have to go to the public courts to find the answer to that if the organization didn't feel like giving them the answer?

    Ms. Sheila Fraser: Mr. Chair, in many of the funding agreements these organizations are treated as strictly independent organizations with little mechanism for a minister or the department to intervene in the affairs of the organization, so the only legal mechanism is if there's believed to be a breach of the funding agreement. You would have to have a proof that the funding agreement had not been respected and then obviously go on from there.

    In some cases, and we've noted in our report a few, they can be subject to audit by the department, but that is not the majority of the cases.

    Ms. Beth Phinney: Mr. Neville, you put in yours, I suppose, pretty well the same thing. The federal government does not control such organizations.

    Mr. Richard Neville: Correct. If we controlled them, Mr. Chair, we would have to include them as part of the entity.

    The Chair: You mean financially be in the government?

    Mr. Richard Neville: Yes, we'd have to consolidate it in our books.

    Ms. Beth Phinney: So you pretty well agree that they have no control over such organizations, but at the same time the federal government is held accountable.

    Mr. Richard Neville: Yes.

    Ms. Beth Phinney: How can you be--

    Mr. Richard Neville: I'll make a point of clarification. Obviously they are third party. We treat them as third party. We have to give them the rights that go with any entity that's a third party that has been incorporated into the Canada Corporations Act. But with respect to when there are issues that come to the fore that are so critical, as mentioned a moment ago, there are two situations where ministers have the right to intervene. And those are set out in the funding agreements, specifically the ones that have been created since the budget of December 2001.

    The first of those provisions applies when there are deviations from the terms of the funding agreement. So if there are deviations, the minister can intervene. If it isn't serious, we could have dispute resolution mechanisms in place. But if it is serious, the minister can intervene.

    Secondly, for extreme deviations, agreements allow the responsible minister the remedy of rescinding the agreement and recovering unspent funds.

    Ms. Beth Phinney: How does the minister know?

    The Chair: Ms. Fraser wants to make a comment.

    Ms. Beth Phinney: Yes, I know you wanted in.

    Ms. Sheila Fraser: I want to make a point of clarification. These provisions are for the more recent ones. The initial ones, I think Mr. Neville will agree, do not contain those clauses, and the minister has very little means of intervening. And I was just going to make the point that I think Ms. Phinney is going to make, which is how do you know if there has been breach?

    Ms. Beth Phinney: Who decides if it's a deviation or an extreme deviation? Would you have to go to court? Between the minister's saying “I think you've made an extreme deviation” and the organization saying “No, no, it was only a deviation”, who's going to mediate that?

    Mr. Richard Neville: It comes back to judgment. I think it's always required in these situations. But if you have indications that there are some problems, then you would take the necessary steps. And how do you know that you have a problem? There are a number of options you can have, as mentioned earlier. You can have minister's request for specific audits. There's obviously information coming from the clients. The clients are well aware of what's transpiring and may very well lead the minister to understand that there may be a problem, in which case then you look into it.

    So I think there are a number of mechanisms a minister would have to keep in check what's happening within that particular foundation. But again, we still want to maintain the third party association, so we don't expect the minister to be there every day, obviously, because you're not into that third party scenario.

º  (1620)  

    Ms. Beth Phinney: I'm still not clear about who the arbitrator is on these decisions between the ministers and these organizations.

    I'd like to go on with something else. On page 2 of your comments, you talked about some comments from the Secretary of State for International Financial Institutions outlining five principles under which government can consider using a foundation. Number four is that the foundation should be provided with guaranteed funding that goes beyond the annual parliamentary appropriations to give the foundations financial stability. So do you mean it goes beyond what normally would be provided by a ministry and therefore we give them so much money they feel it should go into a special place over there? I'm not quite sure what that means.

    Mr. Richard Neville: Maybe I could shed some light on that. Traditionally most appropriations that are in the main estimates for a department or an agency are for one year only. There are exceptions, but the majority are for one year only. So we normally talk of appropriations for one year.

    In this particular case, when you're talking about foundations, in order to allow them to have the fiscal stability that goes with multi-year funding we work with that kind of an arrangement where the funding is up front.

    Secondly, we also would like, and sometimes require, that the foundation use the funding that they've received from the federal government up front as leverage for obtaining additional funding. And that's been the case in many foundations. So because they have x dollars from the federal government, they can go out and get from the private sector, or from other governments, an equal, or larger, or smaller amount of money, depending on the foundation. But by having that amount up front, it gives them the power and leverage to go and get the additional funding.

    So in that case, when we are giving money to a foundation we would be giving them the total amount up front, as opposed to giving them x millions of dollars per year.

    Ms. Beth Phinney: I think it says in here somewhere that some of the foundations haven't used the money. Is that correct? I read it today.

    Mr. Richard Neville: That could be.

    Ms. Beth Phinney: Is there any limit on them? Can they keep $10 million in a kitty and never use it, or is there some kind of control over that?

    Mr. Richard Neville: It comes back to the legislation they have for the three largest foundations, where it's quite specific as to what their mandate is, how they make the payments, and how they carry that out. So it could be in the bank accounts for some time until they meet their mandate. Conversely, there could be a much shorter timeline because the funding agreement states it must be spent over x number of years, as opposed to x plus y number of years.

    The Chair: Ms. Fraser.

    Ms. Sheila Fraser: Thanks, Mr. Chair.

    At the end of March 2002 we noted that in the public accounts, $7.4 billion of the total had been transferred to these foundations and $7.1 billion was still in the bank accounts. In fact, for some of the foundations that had been created more recently, the amount in the bank account was actually higher than the amount transferred because obviously they were earning interest on it. So they hadn't begun to spend it on the program objectives for which the money was transferred.

    Ms. Beth Phinney: Can they keep that money in there indefinitely? Is there a time limit of say 10 years, 20 years, or 50 years?

    Ms. Sheila Fraser: To my knowledge, there's no specific time limit on any of these. In the funding agreements there can be details as to how much they are supposed to flow, but there is no time limit on the foundations that says they have to complete their programs within 10 years or whatever. So they could in theory keep it for a very long time.

    The Chair: I'm being very generous today. You may have one final question, Ms. Phinney.

    Ms. Beth Phinney: Did you have any problem getting the information from the foundations? Were you allowed to contact them? Were you allowed to see them? Were you allowed to look at their books?

    Ms. Sheila Fraser: I have absolutely no mandate vis-à-vis foundations. We took the information we published from their annual reports, which are largely on their websites.

    Ms. Beth Phinney: Do you think audits should be allowed?

    Ms. Sheila Fraser: Very much so. I came out and said the Parliament's auditor should have the right to audit these, at a minimum should have access to these foundations, should see what is going on, what is the conformity, and what is the value for money, and be able to report to Parliament. Under the current audit regimes in these organizations, their auditors report to their boards of directors, not to Parliament.

º  (1625)  

    The Chair: Thank you very much, Ms. Phinney.

    Mr. Keddy is next, please, for eight minutes.

    Mr. Gerald Keddy (South Shore, PC): Thank you, Mr. Chair.

    Welcome once again to the committee, Ms. Fraser, Mr. Neville, and your colleagues.

    Listening to some of my government colleagues discussing the foundations, I was surprised at the lack of knowledge about some individual ones. So I'm going to test your knowledge on some individual ones.

    The Foundation for Sustainable Development Technology was actually a natural resources foundation, and I'm the natural resources critic for the Conservative Party. We tried with everything in our power to make it more accountable to Parliament and to the public.

    I was absolutely shocked there was no sunset clause in that particular foundation, and there's none in the other foundations that I'm aware of. Also, there's nothing in there preventing the government from shutting it down at any time, that I'm aware of. So it could go for two years, three years, or ten years, and they could suddenly say they were going to wrap it up.

    The way the Foundation for Sustainable Development Technology legislation is written, if there's a billion dollars left in the foundation on the day it is wrapped up it gets divided equally among any of the players that actually have projects ongoing.

    So if you haven't closed your books and you're McGill University, or you're a small-business person and you've developed some type of equipment that's going to reduce greenhouse gases and maybe it's a $50,000 project, you'll get your portion of the $100 million. If there's $10 million left, you'll get 10% of it. This was the legal opinion from the government's own legal experts. If there's $20 million left, you'll get one-twentieth of it.

    Mr. Neville, you said this was a professional accounting standard. What part of a professional accounting standard would include that type of legislation?

    Mr. Richard Neville: Mr. Chairman, on a point of clarification, all funding agreements arising from the 2001 budget have in place a provision that allows the responsible minister, at his or her discretion, to recover unspent funds in the event of winding up or termination.

    I'm just saying that every foundation since December 2001--i.e., the budget of 2001--has had that condition in it.

    The Chair: Prior to that?

    Mr. Richard Neville: Prior to that it depended on the funding agreement that was negotiated at that time.

    The Chair: Ms. Fraser.

    Ms. Sheila Fraser: This particular combination that Mr. Keddy mentioned was created out of the 2000 budget. He is correct that the government does not recover the funds if the foundation is wound up.

    Mr. Richard Neville: To further clarify, Mr. Chairman, if we were to continue with that foundation and top it up, there would be a requirement for them to come back and have their funding agreement reviewed, because it is an additional amount of money. Our commitment at this point is to have that clause included in that particular funding agreement.

    Mr. Gerald Keddy: Are we going to have to go back to rewrite the legislation then? Because it's certainly not included in the original legislation. We brought that amendment to committee. We brought it again to Parliament. We were not successful in getting it put in place. We were successful in having them report to Parliament on some type of semi-annual basis. I don't have it all in my head at this time.

    Mr. Richard Neville: Just to reassure you, if I could, Mr. Chairman, we are working actively with all of the foundations to try to get that particular clause included therein. We have had some success. I believe it's common knowledge that the Canadian Foundation for Innovation has agreed to come back to negotiate their funding agreement and have that particular clause included therein.

    Mr. Gerald Keddy: I'm going to ask one more question here. I think I still have some time.

    Ms. Fraser, in paragraph 1.4 you stated that “weak oversight of such arrangements is limiting ministers' answerability to Parliament,” which is a statement I quite agree with.

    I'm not trying to be too hard on you here, but is there some deliberate attempt to enable ministers to duck responsibility for these foundations and their spending habits entirely, or is it simple incompetence that has allowed these foundations to be set up with no parliamentary oversight?

    I think the majority of my colleagues, of whatever political persuasion, would have to agree that as guardians of the public purse, there has to be accountability and transparency in all government actions. Quite frankly, there's no accountability nor transparency, and there's no way to find that out.

    Why should we leave any minister in any government, past, present, or future, off the hook for the accountability of their department? Can you comment?

º  (1630)  

    Ms. Sheila Fraser: I'm not sure I can respond to that, Mr. Chair. I think the government would probably be better able to respond than I.

    My impression is that these foundations were set up and great care was taken to ensure that they would be viewed as independent and not part of government, which brought with it a certain number of conditions.

    Perhaps there was some over-zealousness in respecting some of those conditions. I think Mr. Neville has indicated that the government recognizes that some of the clauses may not have been totally appropriate and that they are trying to fix them where they can.

    So I do take some comfort in that--that there has been recognition that maybe things went a little too far. As to why, I think that would be better asked of government.

    The Chair: Mr. Neville.

    Mr. Richard Neville: Mr. Chairman, I'm surprised with the comments. I thought I had already made the point that we have certainly taken a lot of time to try to improve the funding agreements. Again, for those going forward, we would go to Parliament and get legislation if they are significant, either from a policy or a financial perspective.

    We have provisions in there for accountability of Parliament. There are a number of components in terms of corporate plans, annual performance reports, and audited financial statements. Again, still on the accountability of Parliament, there are evaluation reports that are required. So I think we're doing a lot more than a lot of people realize.

    Secondly, with respect to the ministerial oversight, we've taken some positive steps, undertaken compliance audits and evaluations in terms of the transfer payment policy. We've allowed ministers to intervene in exceptional circumstances. On wind-up, we've put the provision in that ministers will have the right to reclaim the funds.

    I think, Mr. Chairman, we've put a lot more into these funding agreements recently than we have in the past. We're moving forward in that sense.

    Mr. Gerald Keddy: I very much appreciate your comments, Mr. Neville, and I have one more short question.

    One of the greatest tools that any parliamentarian has in their tool box is the ability to access information through the access to information process. In this process when these foundations were set up, they weren't subject to access to information requests, according to my information.

    You say you're trying to have accountability and get this on the public record, so to speak, and answerable to government. Has that changed? Is there now a provision that allows for access to information requests from parliamentarians? We simply can't get access to information without going through that process.

    The Chair: Mr. Neville.

    Mr. Richard Neville: I don't have the answer to that.

    Mr. Gerald Keddy: I think the answer is no.

    The Chair: I think you're right, Mr. Keddy, because I've tried to get information too, and I haven't been successful.

    Ms. Meredith is next, for four minutes, second round.

    Ms. Val Meredith: That's interesting. My question is probably a bit of a follow-up to Gerald's. I think he's right that access to information does not apply to these foundations. But are the funding agreements available to parliamentarians? If we want to see the funding agreements the government has struck with these various foundations, are we able to get copies of them?

    Mr. Richard Neville: That's a very good question. As is the case with a number of contracts, when there is a third party involved, to protect their interests you must ask if they're willing to allow that funding agreement to be released.

    So to answer your question, if they say yes, you can; if they say no to protect their interests, we wouldn't be able to do so.

º  (1635)  

    Ms. Val Meredith: What interests would a foundation have that could not be made public? If the taxpayers' dollars have been given to a foundation for a valid reason--to give it some independence from government....

    This comes down to the whole basis of the problem. In essence, we're giving a bunch of people billions of dollars and then washing our hands of it. We don't have any control over what the agreement says, what they do with the money, or whether they're spending it in the way it is supposed to be spent. There is no ability for Parliament--and I'm not even talking about the Auditor General at this point, I'm talking about Parliament, which is responsible for spending taxpayers' dollars--and members of Parliament to be included in the process.

    Mr. Richard Neville: Going back to that first part of your statement about access to information, I don't disagree. I don't see why there wouldn't be. But there is still a legal requirement to ask them. I'm not saying they would say no, and at first blush I'm not sure why they would want to say no. But all that being said, you have to go back.

    On your second comment, on accountability, the reports for the three foundations that have legislation are tabled in the House, therefore you get the information you're looking for. With the others, depending on the funding agreement, in most cases--definitely since December 2001--there is a requirement that information be provided to the minister and be made public. So transparency is there.

    Ms. Val Meredith: But it's only there in that the information is delivered, and it's the information that is given by the foundation. There's no sanction if the information they deliver isn't accurate, if it's giving a picture that isn't accurate, or if they're putting it in nice fuzzy words. Quite frankly, a lot of the government documentation comes in nice fuzzy words that don't adequately reflect what's actually happening. So there's no real ability of parliamentarians, of Parliament, to go after them to clean up their act.

    Ms. Fraser has already said there's no meat on the bones. There are no sanctions we can impose upon them because they're independent third parties out there with the money. Even the ministers probably have a hard time getting involved because they're third parties removed, so there isn't the government influence and interference.

    The Chair: Mr. Neville.

    Mr. Richard Neville: You can't have it both ways. You can't have accountability to the extreme you're talking about, because it really comes down to control. If you have accountability and control under the current accounting standards, then you don't have it outside the entity; it's inside the entity.

    Ms. Val Meredith: Just to repeat, maybe the problem is that Canadians aren't prepared to just give up $7.4 billion to third parties without their tax dollars being watch-dogged by the Auditor General or by Parliament.

    The Chair: We're going to have a wrap-up here. Mr. Neville wants to make a point.

    Mr. Richard Neville: I have a point of clarification on the access to information. The little note I have here says it can be released under ATIP as long as the agreement does not prevent it. So unless there's a specific clause, they allow it to be released.

    The Chair: We certainly hope that clause isn't there, Mr. Neville.

    Ms. Fraser.

    Ms. Sheila Fraser: Well, I may have some bad news for you, because I got a note saying that some of the funding agreements are confidential.

    I would just like to make the point that I found it interesting in Mr. Neville's comments that the accounting treatment appears to be driving this. If we're arguing we can't have better accountability because it would drive an accounting treatment that would make those payments not an expense, I'd just like to make sure the committee is aware that is being given as the rationale for that.

    The Chair: Since we have somewhat of a conflicting situation here, can you write a letter to the committee, Mr. Neville, telling us which agreements have confidentiality statements in them and which ones can be accessed? Is that possible?

º  (1640)  

    Mr. Richard Neville: I don't see any reason why that couldn't be done.

[Translation]

    The Chair: “Merci beaucoup.”

    You have four minutes, Mr. Gaudet.

    Mr. Roger Gaudet (Berthier—Montcalm, BQ): Since I have only four minutes, I won't preface my question with a lengthy comment. Has Treasury Board received any reports from the foundations?

    Mr. Richard Neville: As I already said, the reports are not submitted directly to us. They are tabled to the departments. We are responsible for setting policy and for managing the process. We look at each funding agreement individually and recommend to Treasury Board and the minister that it either be approved or not approved--it all depends--and once Treasury Board and the ministers have reached a decision, it is forwarded to the department.

    Mr. Roger Gaudet: I have a bit of a problem with the process. If Treasury Board and the Minister of Finance are not in the information loop, then how can they allocate funds to these foundations?

    Mr. Richard Neville: Those individuals directly involved at the Finance Department...

    Mr. Roger Gaudet: I thought you were from the Finance Department.

    Mr. Richard Neville: No, but there is someone with me from the department... I'm not with the Finance Department, I'm with Treasury Board. Maybe that explains why...

    Mr. Roger Gaudet: No, that doesn't really make any difference. As a rule, the money comes from Treasury Board, not from Finance. Treasury Board acts through the Finance Department...

    Mr. Richard Neville: However, before the money flows from Treasury Board, obviously there is some form of cooperation with Finance to ensure that both parties are on the same page as far as the funding arrangements are concerned.

    Mr. Roger Gaudet: What concerns me--and correct me if I'm wrong--is that as long as there are no problems, everything will go smoothly. However, if some funds cannot be accounted for, as was the case with Groupaction when three successive ministers were responsible for this matter, that's when things start to get dicey because the process is not the least bit transparent. We're kept in the dark. There's no way of knowing who benefits from these foundations. Is it the friends of the party? What about former party members? I don't have answers to these questions.

    Mr. Richard Neville: Getting back to the annual report tabled by this foundation, obviously...

    Mr. Roger Gaudet: Yes, but what about transparency, Mr. Neville?

    Mr. Richard Neville: The parties who are supposed to receive the funding receive it. In the case of the Canadian Millennium Scholarship Foundation, the beneficiaries are the students. Some 1,000 students receive x number of dollars each year. Clearly, the funds are going to the right people.

    Mr. Roger Gaudet: In that case, the process should be transparent. If 2,000 students each receive $2,000 per year, then the calculations are straightforward. If, out of a total of $2 billion, the foundation received $200 million for certain issues, then it should be easy to figure out the rest.

    Mr. Richard Neville: I did say that an external audit was conducted at year's end. The foundation as such is accountable for the way in which it manages the funds it receives.

    Mr. Roger Gaudet: Personally, I think we would have been better off if this money had gone into health care, education or even debt reduction. I'm astounded by the answers I'm getting. The sum of $7.4 billion has been mentioned and there's no report to show for that spending. I'm sure my colleagues share my sentiments. We haven't seen any kind of report. It's not just a matter of complaining about a lack of information. But, since I haven't laid eyes on a report, I feel inclined to complain.

    Mr. Richard Neville: Why do you say that there are no reports?

    Mr. Roger Gaudet: I've yet to see one. And neither have you.

    Mr. Richard Neville: That's not so. You asked if Treasury Board receives any reports. We don't receive them in the course of our day-to-day operations. Reports are tabled to the departments.

    Mr. Roger Gaudet: Which departments?

    Mr. Richard Neville: The departments responsible for...

    Mr. Roger Gaudet: Take, for example, Finance, Treasury Board and the Office of the Auditor General. The AG doesn't receive the reports. What about Treasury Board?

    Mr. Richard Neville: Yes, but that's one department out of a total of 104 federal departments and agencies.

    Mr. Roger Gaudet: And you don't communicate with one another.

    Mr. Richard Neville: I wouldn't say that, Mr. Gaudet.

[English]

    The Chair: “Merci beaucoup”, Monsieur Gaudet.

    Mr. Mahoney, please, for four minutes.

    Mr. Steve Mahoney: Mr. Chairman, I'd like to go to the auditor's report, page 35--new delegated arrangements audited--and page 36, delegated arrangements followed up. The new ones would have been created, I believe, since 2000. The ones followed up date back to 1997, 1998. Then there are even collaborative arrangements followed up, which, interestingly enough, date all the way back to 1992, before we became the government. There are a number of these issues. Perhaps Mr. Keddy didn't have all that in his head as he referred to my colleague's remarks.

    In any event, I wonder if both Mr. Neville and Ms. Fraser could just verify this. What I think I'm hearing is that the agreements in the new arrangements call for that change in the funding agreement to ensure the government has access to any balance.

    Okay, I don't need the body language. I'd just like some answers.

    A voice: We'll get the answers.

    Mr. Steve Mahoney: I've been watching a lot of the body language, both here and in the audience, and I'm a little disturbed by it.

    Let me place my questions, and I would appreciate each one of the professionals here giving an answer.

    If they do not have that funding agreement changed, is there a process in place to make that change, so that we ensure that if the foundation is wound up that money will indeed come back to the government?

    I have the same question in relation to the delegated arrangements earlier, where I'm assuming those changes are not in place and there may be a need for us to aggressively go after those changes to make sure that money is accountable to Parliament.

    The third question would be on the collaborative arrangements. For example, Canada's model forest program was established in 1992, so it's been funded for quite some time. What I'm trying to get at here is are we arguing about accounting procedures, or should we be somehow aggressively going after making the changes I've heard referred to? I'd like to know specifically where they are and where they aren't, and what we're going to do to fix it.

º  (1645)  

    The Chair: Mr. Neville, you can start off.

    Mr. Richard Neville: Generally speaking, we are actively working with the foundations to modify the agreements where they are not the way we'd like to see them. We've had some success to date. Obviously, there is still a lot of work to be done, but we're certainly going down that road.

    The short answer, Mr. Chairman, is yes, we are taking steps to try to remedy the situation.

    Mr. Steve Mahoney: Can you provide us--then I'll go to the Auditor General--with a written analysis on each one of these so we have some understanding of where we stand? I think there are seven in the first group and a dozen or so in the others.

    Mr. Richard Neville: In the first group we have an analysis that shows specifically all the components--the name of the foundation, the date it was created, the amount, the responsible minister, whether it's required to get audited financial statements, which is yes, of course, in each case. We have a number of columns that set out what the criteria are vis-à-vis that particular foundation. We can do that for you. That adds up to $7.4 billion--

    The Chair: Thank you. I'd appreciate that. You'll send that to the committee and we'll pass it on. Perfect.

    Ms. Fraser.

    Ms. Sheila Fraser: Mr. Chair, our concerns were largely with the delegated arrangements, in particular the foundations that received large sums of money, transfers of money up front, if you will.

    Mr. Steve Mahoney: Sorry, are these new delegated arrangements or--

    Ms. Sheila Fraser: Both. Both of the delegated arrangements. In those cases where they receive large sums of money there could be some where they receive funding each year under a contribution agreement, and those would be managed in the normal course of other contribution agreements. And the same thing would be in the collaborative arrangements; in I think all of those cases none of them receive funding in advance of need. So it's, in particular, in the foundations where there are very large transfers of funds.

    And I would note that the new conditions have come in subsequent to these. And, as Mr. Neville noted, when any of these foundations have come back for renewal, or for additional funding, there has been an attempt to try to improve the accountability.

    Mr. Steve Mahoney: I have one follow-up for the Auditor General, and it's on your statement. It's something that Mr. Neville has not answered. It's in section 2 of your statement, and let's deal particularly with the Canada Millennium Scholarship Fund, which was established in 1998. The transfer of federal funding was $2.5 billion. And they're to give scholarships on an ongoing annual basis.

    Ms. Fraser, you're stating here that this money is still in the bank account. That's pretty disturbing. I'd like to know why, as I'm sure all members of all parties would. I can't believe, if that money is still in the bank accounts, that the students in my riding who have received those scholarships haven't been calling me, saying they haven't got their money. These kids have been going to school for two or three years, waiting for their scholarships. So I need some explanation on that from either of you.

    And, Mr. Chairman, might I apologize for running out. I have an airplane to catch.

º  (1650)  

    The Chair: You're excused. But we'll just have a quick response from the Auditor General and Mr. Neville.

    Ms. Sheila Fraser: Mr. Chair, Mr. Mahoney is correct that in 1998 there was a transfer of $2.5 billion to the Canada Millennium Scholarship Foundation. And at March 31, 2002, which was the most recent public accounts, the cash and investments of that foundation were $2.364 billion. So somewhere in the order of $150 million of the $2.5 billion had been spent. Now, obviously there have been contributions and interest that have been earned.

    Mr. Richard Neville: That's exactly it, Mr. Chairman. What you have to take into consideration is that $2.5 billion generates interest and therefore it's significant, and then you take away the payments. So I would venture to say, Mr. Chairman, that the payments are more than the $154 million that would appear here. It's significantly more, but it's offset by the interest that's been earned in the meantime.

    The Chair: And you're absolutely right, Mr. Neville. The point is that you don't know, and we don't know, and we can't find the answer because we don't have access to the foundation.

    Mr. Steve Mahoney: We're not getting the calls from students saying they haven't been getting their money, as I'm sure we would be.

    The Chair: Mr. Tirabassi, please.

    Mr. Tony Tirabassi (Niagara Centre, Lib.): Thank you, Mr. Chair.

    I want to try to understand the difference between foundations who, as you state in page one of your submission today...“foundations, money provided well in advance of program needs”. In my riding, at the university, they take advantage of the CFI, which provides research chairs. And my understanding is that it's for those studies where it may not be clear today the road you're going to have to go down to find a sliver of results that you're going to use to better, let's say, the health of people sometime down the road, but you're going to need a commitment up front to attract other financial and intellectual properties to get involved in this project. So it's to my understanding that's why the money is paid up front, to show that your program is not going to be hanging on an annual commitment, which might not attract all these other investments and intellectual properties.

    Do you agree with that approach? And I'm asking the question of Ms. Fraser.

    Ms. Sheila Fraser: That, Mr. Chair, is really a question of policy, and it is question of policy as to whether the government wishes to establish these foundations and fund them up front. What we would like to ensure is that with the large sums of money that have been funded this way there is appropriate accountability to Parliament as to what has occurred with those funds, that corrective action can be taken if needed, and, as well, that there be an evaluation as to whether that is actually occurring. I can understand that, yes, maybe funding in advance, and committed funding over a long period of time, can be beneficial. But to my knowledge, no evaluation has been done to actually see if this funding in advance is generating those kinds of results and is beneficial to the various communities the money is meant to serve.

    Mr. Tony Tirabassi: Along with that, so far we've talked about the foundations. I want to touch on for a moment the other independent, not-for-profit entities that are out there. I understand that there are thousands. I'll give you one example, the FCM, the Federation of Canadian Municipalities, which administers a couple of the funds. They have their own directors, who are elected. Do you see a need to go in and be the auditor for all those entities as well? I know we're concentrating on foundations because the numbers jump out at you, but what about the other independent entities?

    Ms. Sheila Fraser: I don't think it would be appropriate for the Auditor General to be auditor of all foundations or non-profit organizations that receive federal funding. That would be clearly inappropriate. I think the Auditor General should be the auditor of record for very large foundations and foundations that have received significant sums of public money. At a minimum, the Auditor General should have access and should be able to conduct an audit, should there be some indication that this would be appropriate, and to report to Parliament.

º  (1655)  

    Mr. Tony Tirabassi: So the involvement of your office would really depend on the sum of money that's involved, even though the structures may be similar.

    Ms. Sheila Fraser: It could be the sum of money. It could also be public policy consequences or impact. For instance, is the foundation working with government in the same direction? I can see various scenarios where if we were looking at a program in its entirety, you would want to involve an audit of a foundation in looking at a horizontal issue, in this instance innovation. If we were to audit innovation programs across government, it would seem to me appropriate that the Canadian Foundation for Innovation would form part of that audit, because it does play a very large public policy role as well, over and above the monetary aspect.

    Mr. Tony Tirabassi: Thank you.

    The Chair: Thank you very much, Mr. Tirabassi.

    Mr. Keddy, please, and then we'll go to Mr. Mayfield.

    Mr. Gerald Keddy: I'll try to wrap up here.

    Mr. Philip Mayfield: Why am I not being kept in the order?

    Mr. Gerald Keddy: It is in order.

    The Chair: We come back to Mr. Keddy, who's with the fourth party. He won't be speaking again today. We still have room for about six more speakers. There aren't six more people, so I expect that you'll get two more shots, Mr. Mayfield.

    Mr. Philip Mayfield: But I have to leave soon.

    The Chair: Oh, I'm sorry. Can I put Mr. Mayfield on first, Mr. Keddy? Are you in a rush? If he has to leave--

    Mr. Gerald Keddy: I'll allow Mr. Mayfield to have my place, and I would hope that he would remember this for another day.

    Mr. Philip Mayfield: I think this is my place I'm taking.

    The Chair: Mr. Mayfield.

    Mr. Philip Mayfield: Mr. Chairman, with regard to the question I asked before, I heard an explanation of how the alternative service delivery system works, but I don't think I heard the answer to my question.

    As I read the Auditor General's report, paragraphs 1.6 and 1.7, I see that “the Treasury Board adopted the Policy on Alternative Service Delivery, which addressed elements of governance and accountability, as we and the Public Accounts Committee had recommended in 1999.” Then we jump to the next paragraph, 1.7, where the Auditor General writes: “More needs to be done to ensure that the arrangements institute and maintain public sector values and ethics.”

    I still come back to the question: other than the annual reports that these foundations submit, how can public sector values and ethics be assured? How can value for money be assured if there are not audits or some means of holding these foundations accountable by public scrutiny?

    The question that really comes out of that, sir, is what is the rationale behind the decision of excluding foundations from the oversight of the Office of the Auditor General? I don't understand why there has been so much effort in preventing the Auditor General from having an eye into the business of these foundations.

    Mr. Richard Neville: There are two questions there. First of all, dealing with values and ethics, if we were to impose public sector values, I think one could say that you'd start to think about crossing over the line into a non-arm's-length relationship.

    However, arrangements with the foundations require that the foundations have, or establish, a conflict of interest code and conduct guidelines internal to their own entity. So there is a requirement that they do establish a conflict of interest code and conduct guidelines, which I think deals with that question that you are asking. But we can't impose on them public sector values, because then you're starting to move into the zone of control, as opposed to third party.

»  (1700)  

    Mr. Philip Mayfield: But, sir, this is public money.

    Mr. Richard Neville: And we are, as I said, putting in the agreements that they are required to establish the conflict of interest and code of conduct guidelines.

    Mr. Philip Mayfield: But I think when we talk about putting into the agreement, we're talking about the failure of the agreement to have those foundations be held publicly accountable.

    Mr. Richard Neville: We are. By putting into the agreement that there's a requirement for the guidelines to be developed internal to the organization, I think we're respecting the third party entity as being third party and yet we're still requiring that there be values and ethics in the organization that has been created.

    Mr. Philip Mayfield: What is the rationale for not having the Auditor General be included in this? What is the rationale for not having everything in the open? Why are there agreements whose secrecy is being maintained? Why are there questions about whether this money can be recovered if it's not being spent in the way that was intended, or not being spent at all?

    The Chair: We're going to get Mr. Neville's answer and then we're going to go to Mr. Finlay.

    Mr. Richard Neville: Yes, I would like to not lose sight of the fact, Mr. Chair, that these organizations are independent, they're third party. We don't own them, we don't control them, they are not federal agencies. Therefore, we cannot have the Auditor General named automatically as the auditor of record of that foundation. They're a third party entity. They're created under the Canada Business Corporations Act. There are rules within that act that say the shareholders determine who the external auditor is.

    The Chair: Mr. Mayfield, do you have a comment?

    Mr. Philip Mayfield: Not really, Mr. Chair.

    The Chair: Mr. Finlay, please. Thank you, Mr. Mayfield.

    Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chair. I want to apologize to our witnesses for not being here at the start. However, I couldn't find my coat, to be frank, Mr. Chair; it disappeared.

    The Chair: In this weather, Mr. Finlay, it's important that you get your coat.

    Mr. John Finlay: It is important indeed. I found my rubbers but no coat. I found the coat.

    An hon. member: Too much information.

    Mr. John Finlay: Suffice it to say, I found the coat.

    I was the executor of my father's estate, a modest estate. The chief beneficiary of that estate, outside of the children in the family a little bit, was the Community Foundation of Ottawa-Carleton.

    There are hundred or thousands of foundations. We have foundations all over the place. I think the public donates to many of them, as my estate did. What assurance do I have that the money's going to be spent in the way the foundation says it's going to be spent? And why should it be so different with respect to these foundations? There are two questions.

    The third question is what is the value of a foundation? We have so many of them, they must have some value or we wouldn't have them and people would not contribute to them.

    The Chair: Are you talking private contributions, not government contributions?

    Mr. John Finlay: Yes.

    I have no objection with the fact that I think we should know what's going on with government foundations, but my point is there's going to be some wash here. With foundations we have to be careful. They come under this act and nobody can look into them, etc., because they're third party and because they're private.

    The Chair: Mr. Neville.

    Mr. Richard Neville: That question, Mr. Chair, was directed to the Auditor General.

    The Chair: Okay. You're passing the question.

    Ms. Fraser.

    Ms. Sheila Fraser: Thank you, Mr. Chair.

    Foundations of the type Mr. Finlay mentioned are charitable foundations and are subject to many rules. For instance, under the Income Tax Act I think 80% of the donations they receive in a year have to go to charitable causes. They have to do quite extensive reporting within their own communities. People do their own due diligence before giving money to these organizations, to ensure they're reputable and doing what they're supposed to be doing.

    We can all probably think of cases where a foundation or charity has lost its reputation or credibility, and it has been very disastrous to it. So I guess there is a bit of a check and a balance in those cases.

    What we're talking about here, of course, is the government giving very large sums of money. We're not questioning foundations per se. What we are questioning is the accountability back to Parliament on what that money has been used for, what the performance has been, and what mechanisms are in place to ensure that Parliament is aware of what has happened with these significant sums of public money.

»  (1705)  

    The Chair: Mr. Neville wants to say something.

    Mr. Richard Neville: I agree with what the Auditor General has said and I appreciate the way in which she has said it. But I would add that on a lot of the boards of the foundations we've been talking about this afternoon there are some federal appointees. There are never more than 50%, obviously, because then you'd be into a control mode, but we have our own federal representatives on a number of boards. They keep a close watch on what's happening and are in a position to sound an alarm if there is a problem.

    That gets back to a question that was raised earlier about wrongdoing and how to find out if there has been any wrongdoing. I think that should be added to the minutes as another way of finding out if you have a problem with that particular foundation.

    The Chair: Thank you very much, Mr. Finlay.

    Monsieur Desrochers.

[Translation]

    Mr. Odina Desrochers: I'd like Mr. Keddy to go first.

    Mr. Gerald Keddy: Thank you very much, sir.

[English]

    In your report you refer to the government relying on the expertise of the directors of any of the foundations, and say that's kind of stepping away from the accounting practices a little bit. I recall that was an issue with the sustainable technology foundation that really garnered a lot of debate. As I remember, there were absolutely no criteria for the board of directors. They could come from academia or the business world, they could be inventors, but basically they were appointed by the chair, who was appointed by the minister.

    I just feel that without some criteria you're setting yourself up for potential abuse of the system. I'm not trying to be political here; I think that is generally recognized. Whatever political party happens to be in power probably tends to abuse that system.

    I'd like a comment, because that goes back to the transparency and the accountability of the boards.

    Ms. Sheila Fraser: I believe one of the criteria Mr. Neville mentioned and one of the aspects that guided the creation of these foundations was to have experts in the field concerned. We view it as being positive that experts, people who are knowledgeable, should decide on the funding. But you don't need a foundation to do that, quite frankly. That exists in the National Research Council or other peer review processes, and it is a very good process to have.

    There is one issue I would like to bring up, though. Mr. Keddy mentioned the question of boards of directors, and we note in our report that the federal appointees to the board are not clear about their roles and responsibilities. Are they there as representatives of the federal government or not? What happens if something goes wrong? What are their duties? So we believe there needs to be more clarity around their roles and responsibilities and how they should be conducting themselves, and just general education as members of boards.

    The Chair: Mr. Neville

    Mr. Richard Neville: To build on that, I mentioned in my opening comments, and I think it's worthy of reiterating, that the Secretary of State for Financial Institutions, in his appearance before the Standing Committee on National Finance on June 12, 2002, outlined five principles to consider in selecting a foundation. One principle was that foundations should harness the insight and decision-making ability of independent boards of directors directly experienced and knowledgeable about the issues at stake. So that's one principle we want to follow. The second was that decisions by foundations should be made by expert peer review. So we're working from the premise that the people who are named to those boards are very qualified.

    Mr. Gerald Keddy: I would have appreciated your answer in 2002, because the Foundation for Sustainable Development Technology became legislation in 2000, prior to the 2001 date you used earlier. I don't have the bill in front of me, but I seem to recall that during the debate in committee there was not even a process in place in that foundation to allow for normal carry-over for your board members. For instance, there was no guarantee that you would have corporate memory; that you would rotate two or three board members a year. I would just like to be assured that is in place now.

»  (1710)  

    Mr. Richard Neville: I don't know how familiar the member is with the Canada Business Corporations Act, but there is a subsection in there that is pretty specific about naming directors to the board. There is a requirement on how to have good governance. I trust that's being followed.

    The Chair: I hope so too, Mr. Neville, because I remember the Auditor General's chapter a little while ago on the quality of directors, especially those on the audit committee who had no financial experience at all. She was quite critical--or it might have been her predecessor, I can't remember--about the lack of competence on the board of directors.

[Translation]

    You have four minutes, Mr. Desrochers.

    Mr. Odina Desrochers: Mr. Chairman, I believe the April 2002 chapter of the Auditor General of Canada's report was entitled “Placing the Public's Money Beyond Parliament's Reach”. Today, we have seen proof that this is indeed happening. Sadder still, we don't know for certain if this practice will end, how much money is involved or what the status of the foundations is.

    Mr. Neville gave very diplomatic answers, based on his knowledge of the situation. To whom then should we be directing our requests for information?

    In a parliamentary system such as ours, the danger lies in parliamentarians not being able to justify to their constituents billions in spending. If we were to put the question to Mrs. Lucienne Robillard or to Finance Minister John Manley, would we get more information?

    Mr. Neville, as you can see, the members here want some assurance that this situation won't happen again. Furthermore, we fear that again, this reporting mechanism has some flaws. Consequently, are you prepared to say that you will put some pressure on the sponsoring ministers, in the hope that the situation will improve?

    When I leave this forum, Mr. Neville, people ask me direct questions about parliamentary oversight of public funds. We've been discussing this subject since 3:30 p.m. and I have yet to get an answer or to hear a solution that I might be able to pass along to my constituents.

    Are there any plans afoot to enforce stricter provisions and will Treasury Board be calling on the sponsoring ministers to do their job? You cannot even tell us whether the reports have been tabled. Ultimately, wouldn't it be preferable if these reports were tabled in the House of Commons? Then, if we had any questions, we could either call in officials representing the foundations or the responsible sponsoring ministers.

    We need some information, Mr. Neville.

    Mr. Richard Neville: Mr. Chairman, I'm surprised the question was even asked and that, given the context of this discussion, the expectation is that Treasury Board can provide at this very moment in time an accurate accounting of the ten foundations' finances and of the $7.4 billion in question.

    I thought that if specific questions were raised about a foundation, the inquiries would be made of the department concerned or the performance reports submitted each year to Parliament would be perused for the answers. I was confident the information would be contained in the annual reports tabled by these foundations.

[English]

    The Chair: Merci, Monsieur Desrochers.

    Ms. Phinney, please.

    Ms. Beth Phinney: It's good to hear that an effort is being made to make these groups more accountable. I'm glad to hear that's happening. The Auditor General mentioned that. You are working on it. It may be something this committee is going to have to follow very regularly, not just let it die after this report. I think we're going to have to keep an eye on it.

    I have a question about the Auditor General being able to look at the associations or groups that receive up-front funding. I don't understand. We can make any rules we want to. We can change any rules we want to. We can change any regulations we want to. It's easy to say we can't do that because this rule says we can't do that; third party rules say you can't do that. So you change the third party rules then, if that's the case, or allow the Auditor General to look at those foundations.

    Why can't we have a third party independent auditor? You'll tell me that they're not allowed to come back and account to the government. Well then, change the rules so they can.

»  (1715)  

    Mr. Richard Neville: Well, Mr. Chairman, the option is there today for a minister to ask the Auditor General to carry out compliance audits, to do evaluations. That option is there. Obviously, if we did that, though, I believe the minister would have to go through an order in council and then use section 11 of the AG's act to carry it out. But the option is there, if the minister wishes to have the Auditor General carry out that particular kind of review.

    Ms. Beth Phinney: That's making it an option only from the minister's point of view.

    Mr. Richard Neville: Correct.

    Ms. Beth Phinney: If we're going to keep this totally open, it should be an option that comes from other sources also. It shouldn't be only if the minister asks for it. It should be mandatory. Why can't we just put it in there? Change whatever rules that are stopping it and allow the Auditor General to look at these up-front funded groups, or allow the third party independent auditors to report back to the government.

    Mr. Richard Neville: That's right, but we can't force a third party to make that kind of decision.

    Ms. Beth Phinney: I've heard this many times--“we can't do it”. Change the rules.

    The Chair: I think Ms. Phinney's point is that you created this third party, you wrote the rules for the third party, and now you're hiding behind the rules saying you can't touch them. I think that's Ms. Phinney's point.

    Mr. Richard Neville: Well, I don't think we're in a position to change them that way, Mr. Chairman.

    The Chair: But don't you acknowledge that Ms. Phinney's question is right, that you wrote the rules, you created the organization, you gave it the mandate, you did everything for it, and now you're hiding behind it?

    Mr. Richard Neville: No, Mr. Chairman. It's more like we created the rules and we set them in terms of other entities, such as the Canada Corporations Act, and now we have to respect the rules under which other acts have been enacted.

    Ms. Beth Phinney: You can make an exemption.

    Mr. Richard Neville: You have to go back to Parliament, Mr. Chairman, to make that kind of exemption.

    Ms. Beth Phinney: Well, fine, go back to Parliament then. Maybe that's something we have to put in our report.

    Ms. Sheila Fraser: Mr. Chair, I don't think it's as complicated as having to change the legislation, quite frankly. I think with funding agreements, when we're--I don't know if I can be so blunt--handing over cash, we can often attach conditions to it. I think in the funding agreements there could be a provision that the Auditor General would have access to the foundations.

    Ms. Beth Phinney: It seems logical when you can change other things and correct things to make these groups more accountable, we should be able to do this, too.

    Mr. Richard Neville: Mr. Chairman, we have already taken a number of steps to make these foundations more accountable.

    The Chair: I'm going to Ms. Meredith for a couple of minutes, and Mr. Desrochers for one minute, and then I have a couple of questions of my own.

    Ms. Meredith.

    Ms. Val Meredith: Well, my question is going to be very specific, because I think we're getting confused with these major government programs that are functioning under a foundation as opposed to an agency.

    With agencies, we can have them appear before an audit, but the intent of the structure is basically the same as under an agency, is it not?

    Mr. Richard Neville: Yes. We have had discussions about what constitutes a foundation in the context that we are speaking of today, as opposed to the other entities.

    Ms. Val Meredith: So basically it's the same concept as an agency, and the agency can report to Parliament and have the function of the Auditor General.

    But my specific question is, not to confuse these foundations with other foundations, do they get any public funding, or do they simply get a massive amount of money from the federal government that then is invested and creates an income that they use for the project? Does the innovation fund really get private sector money?

    Mr. Richard Neville: My understanding is the CFI has levered the money that we have provided them to obtain money from other sources, provincial as well as private sector bodies.

    I'm going to ask my colleague, Mr. DeVries, to comment on that.

    Mr. Peter DeVries (Director, Fiscal Policy Division, Economic and Fiscal Policy Division, Department of Finance): Thanks, Mr. Neville.

    The CFI has made commitments to date of over $1.8 billion and has leveraged another $2.4 billion. So with regard to the CFI, they have their own money, or the money that was given to them by the federal government, plus private money as well as money given to them by provincial bodies, totalling $4.2 billion.

»  (1720)  

    Ms. Val Meredith: When you say leverage, what you're talking about is this foundation is going to give somebody $2 million and some third party private sector is going to put in $1 million. That's not giving the money to the foundation, it's giving the money to another project that the foundation is supporting. That's quite different from the foundation receiving $1 million from corporate Canada for the general good of the foundation.

    I'm not talking about project spending from the third party. I'm talking about whether General Motors of Canada throws $2 billion into the innovation fund to be used for whatever.

    The Chair: Everybody is trying to answer these questions here.

    Mr. Richard Neville: I'll give you an example, Mr. Chair. We've given $125 million to the Trudeau Foundation. There are numerous other entities that provide--

    The Chair: Yes, but that's a specific and special example. She was talking about the big ones.

    Let's just get Mr. DeVries to tell us, does this leveraging money go into the foundation so it now is a bigger pot, or does it just get some matching funds going to a project?

    Mr. Peter DeVries: In most of the cases, the CFI would put up roughly 40% of the money for a specific project. Then the other partners of that project would have to come with the other 60%, be it the individual university or the university with the provincial government.

    The Chair: That's very good. So what we have is matching money; we don't have money going into the foundation.

    Ms. Fraser, can we have your views?

    Oh, am I wrong?

    Mr. Richard Neville: I shared with you the fact that one of the foundations--

    The Chair: The Trudeau Foundation.

    Mr. Richard Neville: Specifically that one foundation, Mr. Chair. There were significant amounts of moneys that were coming from private individuals. So we have a mix.

    The Chair: I know, that's only a $150 million foundation.

    Ms. Fraser.

    Ms. Sheila Fraser: I think your point has been made, Mr. Chair. I just wanted to say that for all of the foundations created before 2001, which would exclude the Trudeau Foundation, the moneys do not flow into the foundation. They are used on a project-specific basis.

[Translation]

    The Chair: You may ask a question, Mr. Desrochers.

    Mr. Odina Desrochers: My question is of a technical nature, Mr. Chairman.

    In light of the testimony heard today, will you begin drafting a report, or perhaps ask to hear from other witnesses on the subject of information?

[English]

    The Chair: We normally have just one meeting. I don't think there's any reason to have a second meeting. Therefore, once the researchers have the transcripts and so on, they'll start writing a report that will come back to this committee in due course. Okay?

[Translation]

    Mr. Odina Desrochers: Is there no chance of hearing from additional witnesses? Will the subject automatically be closed at 5:30 p.m.?

[English]

    The Chair: Not unless the steering committee decides that we'd have another meeting on the issue. There are no plans at this point to have another meeting.

[Translation]

    Mr. Odina Desrochers: Then I can submit a request to the steering committee?

    The Chair:Yes.

    Mr. Odina Desrochers:Thank you very much.

[English]

    The Chair: Ms. Meredith.

    Ms. Val Meredith: I want to ask, because you brought up the Trudeau Foundation, is this going to be a new pattern of how the government hands out money--to create foundations to remove any reporting aspect? Why was that set up as a foundation?

    Mr. Richard Neville: Mr. Chair, we didn't set up the Trudeau Foundation. It was already set up. We contributed to it.

    Ms. Val Meredith: Okay, but then that is different from a government setting up a foundation. That is a private foundation that the government is putting money into, as they would with the Cancer Foundation or some other. That's quite different from one the government establishes by legislation, with a humungous amount of money for distribution.

    Mr. Richard Neville: But it's still--

    The Chair: I know, Mr. Neville. We can split hairs on this one, but Ms. Meredith's point is very valid.

    Mr. Richard Neville: It's on the list of foundations, as--

    Ms. Val Meredith: So are the Cancer Foundation and the Heart Foundation.

    The Chair: A new parliamentary committee, the government operations and estimates committee, has been created, as you're likely aware. You talked about this legal wall, which nobody can get through to these organizations. The Standing Orders of the Parliament of Canada give the government operations and estimates committee a specific mandate to look at private foundations primarily funded by the Government of Canada. Does that mean that they can go right through that legal wall and demand accountability?

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    Mr. Richard Neville: I'm not a lawyer, Mr. Chairman; I don't know the answer to that.

    The Chair: You work for the Government of Canada.

    Mr. Richard Neville: But I don't know the answer to that question, Mr. Chairman.

    The Chair: It would be interesting to find out. This legal wall that has been created may have again blocked the Parliament of Canada. I hope it hasn't. We'll have to find that out.

    Ms. Meredith.

    Ms. Val Meredith: I have a point of order. Why don't you have the Treasury Board get an answer to that question from the lawyer who works for the Treasury Board through the justice department?

    The Chair: I think we'll have to go through the estimates committee and let them ask the question. I don't think it's appropriate to ask Mr. Neville to define the Standing Orders of the Parliament of Canada. So we'll pass on that one. You're off the hook there, Mr. Neville.

    I'm concerned about it, and the Auditor General is quite concerned about it. Did they take the money off the surplus and not off the debt and put it into bank accounts we can't even access in order to know what is going on? It seems to me that the government in their haste wrote many agreements that they recognize in hindsight need to be changed. There are all kinds of serious problems, which you yourself acknowledge, Mr. Neville, which you can only change with the goodwill of these foundations. I certainly hope that you are able to do that. If you have accomplished some of that already, I would hope that you would advise the committee.

    Closing remarks, Ms. Fraser.

    Ms. Sheila Fraser: I think this is an issue of importance to all of us. We noted that other parliamentary committees and this committee have shown concern about the issue. We will continue to follow it closely. I know Mr. Neville has indicated that the government has made efforts to improve the accountability provisions, and we will be following that closely.

    The Chair: Thank you very much.

    This meeting stands adjourned.