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37th PARLIAMENT, 3rd SESSION

Standing Committee on National Defence and Veterans Affairs

EVIDENCE

CONTENTS

Thursday, March 25, 2004

1535

The Chair (Mr. Pat O'Brien (London—Fanshawe, Lib.))

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

Ms. Jocelyne Therrien (Director, Office of the Auditor General of Canada)

Mrs. Wendy Loschiuk (Principal, Office of the Auditor General of Canada)

1540

Ms. Sheila Fraser

The Chair

1545

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, CPC)

Ms. Sheila Fraser

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

Ms. Sheila Fraser

1550

Mrs. Cheryl Gallant

Ms. Sheila Fraser

The Chair

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

1555

Ms. Sheila Fraser

The Chair

Mr. Claude Bachand (Saint-Jean, BQ)

Ms. Sheila Fraser

Mrs. Wendy Loschiuk

1600

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

1605

Ms. Sheila Fraser

Mr. Claude Bachand

Ms. Sheila Fraser

The Chair

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP)

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

1610

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

1615

Ms. Sheila Fraser

Mr. Peter Stoffer

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.)

1620

Ms. Sheila Fraser

The Chair

Mrs. Wendy Loschiuk

Mr. John O'Reilly

Ms. Sheila Fraser

Mr. John O'Reilly

1625

Ms. Sheila Fraser

Mr. John O'Reilly

Ms. Sheila Fraser

Mr. John O'Reilly

Ms. Sheila Fraser

Mr. John O'Reilly

Ms. Sheila Fraser

Mr. John O'Reilly

The Chair

Mrs. Cheryl Gallant

1630

Ms. Sheila Fraser

Mrs. Wendy Loschiuk

Mrs. Cheryl Gallant

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

Mrs. Cheryl Gallant

The Chair

Mrs. Cheryl Gallant

Ms. Sheila Fraser

1635

The Chair

Mr. Janko Peric (Cambridge, Lib.)

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Ms. Sheila Fraser

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

Mrs. Wendy Loschiuk

Mr. Janko Peric

1640

Mrs. Wendy Loschiuk

Mr. Janko Peric

The Chair

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

Ms. Sheila Fraser

1645

The Chair

Mr. Lawrence O'Brien (Labrador, Lib.)

Ms. Sheila Fraser

1650

Mr. Lawrence O'Brien

Ms. Sheila Fraser

Mr. Lawrence O'Brien

The Chair

Ms. Sheila Fraser

The Chair

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

1655

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

The Chair

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

Ms. Sheila Fraser

Mrs. Cheryl Gallant

1700

Ms. Sheila Fraser

The Chair

Mr. Lawrence O'Brien

The Chair

Mrs. Cheryl Gallant

Ms. Sheila Fraser

The Chair

Mr. Janko Peric

1705

Mrs. Wendy Loschiuk

Mr. Janko Peric

Ms. Sheila Fraser

Mr. Janko Peric

The Chair

Mr. Claude Bachand

Ms. Sheila Fraser

Ms. Jocelyne Therrien

1710

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

Ms. Sheila Fraser

Mr. Claude Bachand

The Chair

Mr. Lawrence O'Brien

Ms. Sheila Fraser

Mr. Lawrence O'Brien

1715

Ms. Sheila Fraser

The Chair

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

Ms. Sheila Fraser

1720

Mr. Peter Stoffer

Ms. Sheila Fraser

Mr. Peter Stoffer

The Chair

Ms. Sheila Fraser

1725

Mrs. Wendy Loschiuk

The Chair

Ms. Sheila Fraser

The Chair

Mrs. Cheryl Gallant

Ms. Sheila Fraser

The Chair

1730

Ms. Sheila Fraser

The Chair

CANADA

Standing Committee on National Defence and Veterans Affairs

NUMBER 005

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, March 25, 2004

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. Pat O'Brien (London—Fanshawe, Lib.)): I'd like to call to order the fifth meeting of the Standing Committee on National Defence and Veterans Affairs.

I would like to indicate to the members that next Wednesday at 1 p.m. we will have a steering committee meeting to look at the future business of the committee, over the period that we can project with any certainty that we'll be here, which is not that long. The meeting will be in our regular committee room in the East Block.

We have several witnesses who have requested to appear on national missile defence, but the committee will have to decide whether it wants to continue those discussions or not. If so, we can schedule those witnesses accordingly.

With those procedural announcements taken care of, I'll go now to our witnesses. I'm very pleased to welcome the Auditor General of Canada, Ms. Sheila Fraser.

Welcome, Ms. Fraser. Would you like to introduce your colleagues?

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada): Yes, I will.

Thank you, Mr. Chair. It is a pleasure for us to be here today to discuss two audit observations from our chapter 10 of the November 2003 report, which was tabled this past February.

For your reference, the first audit observation, “Independent reviews of security and intelligence agencies”, begins at paragraph 10.120 of the chapter, and the second, “Government purchase of two Challenger aircraft”, starts at paragraph 10.49.

[Translation]

With me today are Ms. Jocelyne Therrien, the director of the audit work for the security intelligence observations; and Ms. Wendy Loschiuk, the principal responsible for the audit work on the Challenger purchase. With your permission, Mr. Chairman, I would like to ask each in turn to present a very brief statement, after which we would be pleased to answer any questions you may have.

Ms. Therrien.

[English]

Ms. Jocelyne Therrien (Director, Office of the Auditor General of Canada): Mr. Chairman, thank you for this opportunity to discuss our audit of independent reviews of security and intelligence agencies.

While conducting work for an upcoming report on the public security and anti-terrorism initiative, we noted a variety of models of independent review of agencies involved in the gathering of intelligence on Canadians.

[Translation]

Our objective for this audit observation, therefore, was to survey the situation, describe the roles of various security and intelligence organizations, and assess the extent to which the activities of each undergo review by an independent external agency. We expected that similar levels of intrusion by the various organizations would be subject to similar levels of review.

The Canadian Security Intelligence Service is reviewed by two external bodies: the Security Intelligence Review Committee and the Inspector General, CSIS. Both bodies have legislated access to all information held by this service except for advice to, and certain discussions between, ministers. This type of access allows the inspector general and the Security Intelligence Review Committee, for example, to review warrants and determine whether the service has adhered to the principle of limiting the information it collects to strictly what is necessary.

In comparison, the Commission for Public Complaints against the RCMP, based on the ombudsman model, cannot undertake broad reviews to determine systemic compliance with the law the way an agency with audit powers would. In fact, the legislation does not provide for random access to RCMP files or to assessments that would enable the commission to give Parliament assurance about general compliance with the law, especially where appropriate use of intrusive powers is concerned.

[English]

The Communications Security Establishment commissioner, another review body, has a broad mandate, but his public reports focus primarily on the lawfulness of that organization's actions and make few observations on management issues.

There are still other intelligence-gathering agencies that are not subject to any independent review. These agencies are involved, to varying degrees, in the actual collection of security intelligence. There is a distinction to be made between their respective powers to collect and the powers they actually use. For example, customs intelligence officers can use intrusive means, but this is usually in the context of alleged smuggling activity. National Defence focuses on threats to its installations and personnel. Its covert investigations are usually limited to employees of the department. The Financial Transactions and Reports Analysis Centre of Canada receives information and analyses it, but it does not actively collect security intelligence.

Now, Mr. Chairman, Ms. Wendy Loschiuk will brief you on the second audit observation.

Mrs. Wendy Loschiuk (Principal, Office of the Auditor General of Canada): Thank you. The second topic for discussion today is our audit observation on the purchase of two Challenger planes by National Defence to replace two older aircraft in its administrative flight services fleet. These new aircraft are used for VIP travel. The government could not demonstrate that it exercised due diligence in awarding this contract or that it achieved best value.

We found that the decision was made to buy these planes before the responsible departments had time to analyze the need and the cost and to explore other options. The decision to purchase the jets by the end of fiscal year was made in mid-March, bypassing the steps established to achieve best value.

We noted that neither National Defence nor Transport Canada had been concerned about the deficiencies in the fleet. Reliability and availability were close to 100%. The older VIP aircraft had experienced some mechanical problems, but they were not considered to be unsafe. Indeed, National Defence is still using them.

We recognize that new aircraft may offer improvements in performance, but without a clear assessment showing what improvements were needed, one could only guess whether buying these particular planes was the best option.

In any case, the government has not demonstrated a clear case for awarding this contract on a sole-source basis. The government's contracts regulations define four exceptions under which sole-source contracts are permitted. This contract was based on two: urgency and compatibility with the existing fleet. The government did not show that an unforeseen urgency existed, nor could we find any evidence of a disadvantage had the government not bought these aircraft before March 30, 2002, the deadline imposed by the contractor.

¹ (1540)

[Translation]

The government argued that only Challenger 604 aircraft would be compatible with the existing fleet. However, factors against which compatibility could be measured were never defined.

Furthermore, government officials had warned that using compatibility as a justification for awarding a sole source contract in this case was a high risk strategy, that is, if challenged it would be difficult to defend the position that the Challenger 604 was the only compatible option.

If, as the government said, improved performance was needed, it could be argued that other planes could have offered increased flying range, shorter runway access, or better operating costs. No analysis was done to demonstrate that these improvements could be met only by the chosen aircraft.

Mr. Chairman, the purchase of these aircraft for the VIP fleet is another example of government's failure to follow its own rules, in this case, its procurement policies and procedures. The decision to spend close to $100 million was made in the space of nine days. This did not give the responsible departments a chance to look at their requirements or review how best to improve the capabilities of the fleet.

We don't believe the government demonstrated due diligence or due regard to economy in making this purchase. It's difficult to see how good procurement practices could have been followed in the rush to complete the purchase before the end of the fiscal year.

[English]

Mr. Chair, this concludes my comments. The Auditor General will now conclude.

Ms. Sheila Fraser: Mr. Chair, there are a few points arising from these two audit observations that I would like to address.

First, even though there were no specific recommendations regarding the Challenger, the government disagreed with the conclusion that policies and practices were bypassed. It considered that the purchase was managed appropriately. We are concerned about this position because it leaves the door open for the same thing to happen again.

Second, in the case of our observation on the security and intelligence agencies, after our work was completed, the government announced the creation of a mechanism for an independent review of the RCMP's national security activities. Parliament might want to extend the analysis to others to ensure that all agencies collecting security intelligence are subject to appropriate levels of external review and disclosure.

Mr. Chair, that concludes our opening remarks. We'd be pleased to answer any questions the committee might have.

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

Ms. Therrien and Ms. Loschiuk, thank you very much for your comments.

First of all, before I go to questions from committee members, I think I can speak for all members on both sides of the table here when I thank you very much for the excellent work that you, Madam Auditor General, and your staff have been doing, not just as it relates to the defence portion of the budget, but to the total government operations. We think it's very important work, and I want to thank you very much for it.

I'm sure colleagues on both sides of the table will be anxious to pursue some of your comments and ask some questions.

Just by way of refresher to my colleagues, as per the committee's previous agreement, we will have a 10-minute round--for ministers or such witnesses as the Auditor General--from each opposition party, and then we'll have a 10-minute round from the government side. We will then alternate opposition and government sides.

So we'll start out with the official opposition, Mrs. Gallant.

¹ (1545)

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, CPC): Thank you, Mr. Chairman, and through you to the witness.

Now, there's no doubt in the minds of Canadians that the government's decision to take $101 million out of the defence budget to make the purchase of these jets was wrong. Has anything changed that you know of to prevent this from happening again tomorrow?

Ms. Sheila Fraser: Mr. Chair, as we noted, there is a whole series of regulations, policies, and procedures in place to ensure that purchases are managed transparently and openly and with a competitive nature to ensure that government gets the best value.

In this case, we are of the opinion that the policies, procedures, and regulations--I think it's clear--were not followed. Government disagrees with that. That disagreement does concern us, because if they think that things were done correctly here, we think they could justify doing it again in the future.

Mrs. Cheryl Gallant: The budget document this week talks about reviving the office of the comptroller general. What recommendations could you give to this office that would restore some of the fiscal accountability to government procurement policy?

Ms. Sheila Fraser: We have made several recommendations over the years as to how to improve financial information. In fact, next week I have another report coming, and in it there will be a chapter on financial information. I would point out that currently the position of comptroller general does exist, but it is combined with the position of the Secretary of the Treasury Board. It previously did exist; it was the combined function occupied by one person. Now they've been separated. I would certainly hope that whoever is the comptroller general will take our recommendations into account. I'm sure we will have a very active relationship with that person, because that person is generally responsible for the public accounts and the preparation, and we do a lot of work with the comptroller general throughout the year.

Mrs. Cheryl Gallant: Canadians feared that the standards applied to the Challenger jet purchase are now going to be applied to the contract to replace the 40-year-old Sea King helicopters. Unfortunately, your office is called only after a problem has occurred and it's of the scandal degree.

What can we as parliamentarians do about this to prevent it from happening?

Ms. Sheila Fraser: I would suggest, Mr. Chair, that you might want to discuss the processes being used with the department concerned and perhaps have a briefing from them on how they are conducting that purchase in respect of the regulations, policies, and practices that are in place.

Mrs. Cheryl Gallant: Now, the Western Star trucks, the Iltis jeeps, the Sea King helicopters, the leaky British subs, the wrong colour uniforms, Challenger jets--it seems every major DND purchase is controversial or filled with mistakes. Why is it that the Department of National Defence is so plagued with this kind of problem? Are other departments that you've looked at making these big purchases in a trouble-plagued fashion as well?

Ms. Sheila Fraser: Mr. Chair, I would prefer perhaps that those kinds of questions be put to the department. I wouldn't want to have the qualifications around the purchases...we certainly have never indicated that all the purchases in National Defence are.... I can't remember what the exact words were. I think we all have to recognize that this is a department that does have very significant purchases. The purchases are challenging ones. We have raised many issues about many purchases in government, but I think the kind of question the member is asking would be more appropriately directed to the department.

¹ (1550)

Mrs. Cheryl Gallant: The decision to purchase the Challenger jets, I think it's fair to say, was made for political reasons as opposed to operational reasons. Would it have been more acceptable for the government to drop all pretences regarding this purchase and just say they were buying the jets to help out a Canadian company? We know the purchase wasn't justified operationally, and that's why we're going through all this right now--because we didn't go through the proper procurement process, and as a result, we're looking at it today.

Would it have been more acceptable just to call it as it was?

Ms. Sheila Fraser: Mr. Chair, again, I can't ascribe other motives to it than what the government has told us in our report. They have indicated certain reasons, and we indicated that the documentation was not there to demonstrate the reasons they have given us for the purchase. We felt there was not sufficient analysis done for a purchase of this size.

We'd look, of course, to government regulations, policies, and procedures to see if they were followed. Government always has an option to indicate for a purchase that those regulations do not need to be followed, which would take an order in council. But in this case that was not the case, so we looked to see whether the regulations, policies, and procedures were followed.

The Chair: If I might cut in for a minute, Mrs. Gallant, and all colleagues, I'm going to allow some latitude on questions, but I think in fairness to the Auditor General, we have to respect her office and the reason she's here. She's here to speak to the business procedure or practices of the government and any shortcomings she's observed in same. I think if we can focus on that.... I think we've all been in politics long enough not to load up a pretty political question and give it to a witness. And she's indicating she doesn't want to respond to such. There are some serious questions, and Mrs. Gallant is asking them. Others on both sides want to ask them. But I think if we can bear in mind just what her purview and mandate are, it would be helpful.

Ms. Gallant.

Mrs. Cheryl Gallant: I'm just trying to piece everything together to find out who knew what and how we can prevent this in the future.

In paragraph 10.52 it is mentioned that the Privy Council Office convened senior officials from the Department of Justice, the Department of Finance, the Treasury Board Secretariat, Public Works and Government Services Canada, and National Defence to review the feasibility of the Challenger purchase. We know that at that time our current Prime Minister was the Minister of Finance. Given that the senior officials from the departments were to convene regarding this purchase, does this mean that the finance minister at the time was aware of this nine-day decision to purchase this set of jets?

Ms. Sheila Fraser: Mr. Chair, I hope Ms. Gallant will appreciate that I cannot and do not know what the former finance minister may or may not have known. That is a question you would have to put to him.

Mrs. Cheryl Gallant: So the finance minister's office as well as Treasury Board did know about this purchase, according to your notes?

Ms. Sheila Fraser: We indicate that there were senior officials from the Department of Finance who attended this meeting. Beyond that, you would have to ask the Department of Finance. I can really speak only to the facts and what is in this report. I would not want to get into supposition or conjecture about what may or may not have been known.

Mrs. Cheryl Gallant: The $101 million was indeed taken from the defence department budget. Is that correct?

Ms. Sheila Fraser: It was initially taken from the budget of the Department of National Defence but then was subsequently replaced by the Treasury Board.

Mrs. Cheryl Gallant: So that has been replaced.

Later on in your report there is reference to a $25 million advance to Bombardier and to the fact that there were interest payments required to be paid to the government on that amount up until a certain point in time. Now, according to the audit you did, was the balance of the $25 million used up?

¹ (1555)

Ms. Sheila Fraser: No. One of the difficulties we noted in this was that there was an advance payment made and there should have been a calculation.

Actually, I'll go back a step. One of the problems with the lack of the complete analysis was that it was very difficult to estimate with any kind of precision how much all of the fit-up would cost, so there was an estimate made, an advance payment was made, and there was to be an accounting of all of this when the contract was closed. At the time of our audit, even though the aircraft had been delivered, the contract was not technically closed, so under the terms of the contract there was not an obligation to do that final accounting.

We went through the estimates National Defence had made. There were several calculations done, the amount that should be reimbursed to the government was determined to be $3.2 million, and during the course of our audit that amount was received.

The Chair: Thank you, Ms. Gallant. I'll come back to you in the second round.

[Translation]

Mr. Bachand, you now have the floor. You have ten minutes.

Mr. Claude Bachand (Saint-Jean, BQ): Thank you, Mr. Chairman.

I would like to add my voice to those who congratulated you on having done such good work. I think that taxpayers are very satisfied because they feel it is very important that their money be well invested. I would also note that as the Auditor General, you seem to have much more clout than the Bloc Québécois. Despite our having asked 400 questions, nothing much was done, and now, within a few days, you have put the government in an uncomfortable position and there has been a major change in how taxpayers intend to vote.

I read with great interest the part of your report dealing with Challenger jets. I'm staggered by the numbers in it. The main point, in my opinion, is that there are six Challenger jets, four of which are reserved for VIP travel. Two of the jets have to be ready at all times and a third must be ready 90 per cent of the time.

According to the numbers I have before me, the reliability rate is 99.1 per cent. Furthermore, for the two Challenger jets available at all times and the other which is available 90 per cent of the time, the availability rate, on the tarmac, is 99.4 per cent. I would conclude from this that there is no urgency in purchasing additional Challenger jets.

Furthermore, according to what I've read, the Privy Council claims that a purchase such as this reduces operating costs. Do you think that the argument that purchasing two additional Challenger would reduce operating costs, probably because two older Challenger jets would be disposed of and expenses would eventually be recovered, is a sound one?

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

As we stated, the Privy Council and the government pointed out several times that these were issues of security, availability and so on. As we indicated in paragraph 10.56, the Defence Department's studies, as well as the Transport Department's studies, did not back up the government's arguments for purchasing these jets.

I will now ask Ms. Loschiuk to answer your question regarding the reduction in costs.

[English]

Mrs. Wendy Loschiuk: The two new Challengers were received and National Defence has removed two very old Challengers from its fleet, so it has maintained a balance of six Challengers. There are still four for VIP travel, and two from VIP travel have been replaced and now are going into utility transport.

Whether or not this represents a change in operating costs was something where it was just too early at the time of our audit for us to have enough data on, so we were not able to conclude on that.

º (1600)

[Translation]

Mr. Claude Bachand: Mr. Chairman, I would like to know if the Auditor General can conclude this study in another fiscal year. Perhaps next year we would know whether any savings have been made, it being perhaps too early in this case to come to that conclusion this year. Does your mandate allow you to verify, over the next few years, for example, whether or not the Privy Council's argument was sound?

Ms. Sheila Fraser: Mr. Chairman, it was not our intention to come back to this specific issue and follow up on it. However, if the committee so desires, it can ask the department to submit an analysis and a demonstration of its arguments.

Mr. Claude Bachand: Very well. I would now like to move on to sole source contract awarding. Something rather peculiar happened in this case. If I have understood correctly, the Privy Council justified its actions on the grounds of urgency. It seems to me that the statistics I just quoted prove that there was no urgency. Furthermore, they also argued their case on the grounds of compatibility with the rest of the fleet.

It seems to me that the fleet was made up of Challenger 600 and Challenger 601 jets. Those two jets are compatible; however, a Challenger 604 jet was purchased and this is a model that is more or less compatible. Many of its parts are not necessarily compatible with the rest of the fleet. I think that the report also mentions that pilots need special training. Could one say then that the grounds of urgency and compatibility with the rest of the fleet were false pretences?

Ms. Sheila Fraser: As we stated in our report, Mr. Chairman, we found no documents or analyses that would justify the exceptions used by the government.

Mr. Bachand is right in saying that additional training is necessary for the pilots and that these jets are not as compatible with the fleet as the former jets were. One could also ask why a bigger jet, coming perhaps from the same supplier, was a better choice. However, for such a significant purchase, one would expect a much more detailed analysis that would explain why two jets were purchased instead of three, why that type of jet would be purchased instead of a bigger one. One would expect, in short, some justification.

As I already mentioned, the government is always free to say that a process or certain regulations do not apply to a specific purchase. It could have chosen that route and passed an order in council, but it did not do so. The government chose the regular procurement process. It claims that it followed normal procurement policies and processes.

Mr. Claude Bachand: If I'm not mistaken, you were not reassured by the Privy Council's and Public Works' responses. From what I can see, these responses give no indication of regret over what happened. If we could give the Auditor General Act more teeth, you wouldn't object to sinking your teeth into the Privy Council and Public Works.

Ms. Sheila Fraser: I wouldn't want the mandate to bite anyone, Mr. Chairman. I think that our duty is to inform the committee when we are not satisfied with the responses to our audits. It is then up to the committee to decide whether the Privy Council should be questioned on its approach and its responses to our audit.

Mr. Claude Bachand: Fine. This is my last question. The Canadian International Trade Tribunal upholds certain regulations. One of the government's arguments is that there were no complaints from suppliers. How do you explain that, for a 100-million-dollar contract, there were no suppliers who said that the rules were not being followed or who lodged a complaint with the Canadian International Trade Tribunal? How do you explain that Treasury Board can get off so easily simply by saying that because none of the suppliers complained, it acted correctly?

º (1605)

Ms. Sheila Fraser: Obviously, I can't know why the suppliers did not complain, but I would draw an analogy with speed limits. Does the fact that one has never been stopped and never been given a ticket mean that one has never exceeded the speed limit?

Just because there have been no complaints doesn't mean that the process has been followed correctly.

Mr. Claude Bachand: I will conclude by saying that you still maintain that if the Privy Council Office and Public Works Canada have not expressed any particular regrets in their responses to your report, then this type of behaviour could happen again at any time, with no consequences.

Ms. Sheila Fraser: I would point out that the report was to be tabled in November. We probably received the response last October. Since then, there have been some rather significant changes within the department and within the Prime Minister's Office, however we have received no indication from the current government that they are not in agreement with the response provided last October.

[English]

The Chair: Thank you, Mr. Bachand.

I would just recall for colleagues that in the first week of April we'll have the Minister of National Defence at this committee to speak on his estimates. As Ms. Fraser has said, that will be an ideal opportunity to question that minister on estimates and departmental policy. As colleagues well know, as the committee continues its deliberations, we have all the authority we need to call the Treasury Board minister, the Minister of Public Works, or anybody else to come before the committee and speak to this purchase or about other government procedures around procurement.

So just with that reminder about where we're headed in the next few meetings, let me now go to Mr. Stoffer, please, for 10 minutes.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Thank you, Mr. Chairman.

It's good to be back on this committee, although for a short while.

Madam Fraser, on behalf of our party and taxpayers in the country, thank you very much for the work you do--and your staff as well. We know that behind every good woman is a good man, and I know that Mr. Thompson was ill. If you could, please say hello to him for us on behalf of our fisheries committee. We hope he has a speedy recovery because he does a great job as well.

Thank you for that.

I'm going to start off by being nice to the Liberal Party, to the government, at first.

Some hon. members: Oh, oh!

Mr. Peter Stoffer: This report was done in November, and as we know, we've had a change of prime minister and in some of the cabinet. Now, I'll just read into the record again where, in your chapter 21, your last sentence says you are concerned about this position “because it leaves the door open for the same thing to happen again”. You were discussing the concerns of the two Challenger jets.

Have you had an opportunity since this report to either meet the new cabinet or the new Treasury Board president, Mr. Alcock, to discuss this issue, and has he addressed some of your observations or concerns?

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

I have met with him. In fact, immediately before tabling, I offer to brief ministers on the findings of audits that are to be tabled in the House. I met with both the Minister of National Defence and the President of the Treasury Board. I've also had discussions with the Clerk of the Privy Council.

I have indicated to them my concern with the response from government to our audit and their position that all of the policies and practices and regulations were followed. I did not receive any indication from the current government that they wish to change in any way the response. That may be something the committee would want to discuss with government officials.

Mr. Peter Stoffer: So it's fair to say you asked the same question and got relatively the same answer.

Ms. Sheila Fraser: I raised our concern about the response with government officials and sought to know if there was any clarification or change in position the new government would want to take, and I received no such indication.

º (1610)

Mr. Peter Stoffer: In the second part of your statement you indicated, regarding the collecting of security intelligence.... Have you or has your office had an opportunity to review again this report with the new officials or the new people in those positions?

Ms. Sheila Fraser: Yes, we did, and again I would mention that between the time of the completion of the audit and the completion of our report and the tabling, the government did announce a review of the oversight of the RCMP, which was one of the major issues.

The oversight activities were a small piece that came out of a larger audit that we're doing on the national security initiative, which we will be tabling, in fact, next week. So it was more of an information piece to parliamentarians and to government officials about the inconsistencies in oversight and that Parliament might want to ensure that any differences are justified and warranted. So we were really trying to signal that the issue of the RCMP has obviously been addressed or is being addressed by government.

Mr. Peter Stoffer: My colleague from the Conservative Party indicated that when there's a problem, you're called in to have a look at it. Was that a correct statement?

I guess I'm trying to put into the record, how does your department determine which department of government you're going to audit? Is it because someone has called you in, or is it because you had concerns externally that you wish to review, be it Defence, Fisheries, or whatever?

Ms. Sheila Fraser: In fact, we go through quite an elaborate process to determine which areas we are going to audit. For all the major departments, we go through an analysis of risks and risks to the department meeting its objectives. We don't focus on areas where we think there might be something wrong. We try to pick important systems and practices that we believe are important and that, in a way, are of importance to the department as well, and we look to see if we can suggest improvements to their practices.

In many cases, we cite good practice in government systems, and I would say the vast majority of our audits we decide. On occasion we will get requests from parliamentary committees, or, in very rare circumstances, a minister, and we will obviously consider those one by one. When committees ask us to do work, we will generally try to put those, of course, into our schedule, but the vast majority of our work is self-initiated. It's not initiated by others.

Mr. Peter Stoffer: The reason I ask that question is--and correct me if I'm wrong, Mr. Chairman--when the so-called sponsorship concern hit the airwaves, was your department called in to look at that, or were you doing that as an initiative already?

Ms. Sheila Fraser: No, that in fact was initiated by a request from the Minister of Public Works at the time, to look at three contracts. Then, after completing that audit, we were concerned about our findings and decided to do the broader-scope audit.

Mr. Peter Stoffer: The concluding part of that request is, with the recent media announcements regarding x number of dollars concerned with a private company and that the military is very concerned about a contract they have, would you be or have you been asked to look at that as well? They're doing their review right now on that.

Ms. Sheila Fraser: We are aware of that issue and that file. That again is being handled by the internal audit department of National Defence. We see no reason to intervene.

We are monitoring the situation and feel it is appropriate, and I think it's actually a very good sign, that internal audit identified this problem, is following it through, and has done the investigation, and I think it's appropriate that they continue to handle it.

We would not intervene in this case unless there was some sort of exceptional event that would happen, but it is totally appropriate for government to manage that file and for us not to intervene in that.

Mr. Peter Stoffer: Also, on page 38 of your audit book, paragraph 10.147, one of the concerns I have on this is that, as we know, there's an inquiry going to take place regarding Maher Arar and what the government did know or didn't know. I think it's a welcome inquiry into that. The concern I have here is that you've addressed some concerns that the chair of the commissioner for public complaints against the RCMP may not have all the authority she requires in order to look into the RCMP or a particular department. Is it possible to indicate what their response was to that when you mentioned those concerns to the department?

The reason I say that is because throughout the country now we hear, regarding regional police officers, civic police, the RCMP--and unfortunately the media seems to make it all look bad--that policemen around the country are doing things rather nefariously. I don't think that's the case. I believe those are isolated cases. But in order to give the taxpayer public all the confidence in the world that the police themselves are doing everything according to the law...correct me if I'm wrong, but this here gives the perception that maybe they could do something and we wouldn't have a way of looking into that action. Am I correct on that?

º (1615)

Ms. Sheila Fraser: We were simply trying to be, Mr. Chair, factual in what the roles, responsibilities, and authorities of the commissioner are currently. I think she has made several comments and reports about the limits that she feels are on her. I really wouldn't want to comment on it. I think it would be more appropriate if she was asked about that.

What I would say, though, is the government has indicated that it does want to review this area. As part of that inquiry, I believe Justice as well has authority to look into the oversight mechanisms. I think we'll have to let that inquiry continue on and see what the results of that are.

Mr. Peter Stoffer: Thank you, Mr. Chairman.

The Chair: For clarity, before we go on, Madam Auditor General, you indicated that there had been no indication from the new government of a change of position. Did you actually have a response or only no positive response?

Ms. Sheila Fraser: We didn't have a written response per se. This report reflects.... There is, of course, a written response in order for us to publish the response of the government in the report.

It was in discussions that we asked if government was still of the same position or not. We had no indication that it had changed its position. Now, maybe in a hearing...I mean, there's still a possibility that it would change position. Up until now, we have received no indication that it would.

The Chair: Thank you for that.

I suspect that question will be asked of the minister when he comes before us in the near future.

The second point of clarification is around the question of Mr. Stoffer, for the committee's sake, on this latest problem with missing funds in a defence situation over the years. You indicated that you're pleased that the internal audit has caught a major problem there.

Would you foresee becoming involved in that, if you were so requested by the government to play a role in that? Would it be within your mandate, do you feel, to do so?

Ms. Sheila Fraser: We can, obviously, go into various files if a committee or the government would ask us to. We are, of course, being briefed on a regular basis by the department, and in particular the internal audit group, as to what is happening in this.

We will, of course, ensure that the audit is carried out effectively. I think we will also try to ensure that the department does a proper “lessons learned” from this to find out what went wrong and what needs to be changed in systems or practices, if necessary, to ensure that these things don't happen again.

The Chair: I thank you for that. I think, as you said, it's important to remember that it was an internal audit around the sponsorship problem that identified some concerns and referred the issue to you. Then you did the very good work that you and your staff have done.

Thank you very much for those points of clarification.

To recall for colleagues, it's ten minutes per party and then we'll go to alternating rounds of five minutes per party. It's per party.

Now we go to the government side, and three Liberal members have indicated they'd like to speak. They are, in this order, Mr. O'Reilly, Mr. Peric, and Mr. O'Brien.

We're starting with Mr. O'Reilly, please.

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.): Thank you very much, Mr. Chairman.

Thank you to the Auditor General and her staff for coming before this committee and bringing some of her concerns.

I'm always interested, as you know, in the Auditor General's findings. I like to play with numbers myself, but I am also very concerned with privacy and the rights of individual members of Parliament—as was demonstrated today in the House when the privilege was granted by the Speaker for all members, which I had moved on. It won't make me very popular with the press, but then again, you stand up for what you believe. Those are the breaks of the game.

I was co-chair, and I have a couple of questions.

First of all, I guess I should go with the Challenger jets. I'm glad, first of all, that we didn't buy from Embraer or someone in Brazil. I think we bought a good Canadian aircraft. According to the pilots I know anyway, they say the avionics are similar to and compatible with the upgrade of the CF-18s. They will eventually retrofit all the other Challengers so that they're compatible with our NATO partners.

We've refit the CF-18s. We have new jets, new trucks, Bisons, Buffalos, 97 Griffons, new Cormorant search and rescue helicopters, and new submarines. How many of those did you audit that you found problems with?

º (1620)

Ms. Sheila Fraser: I will ask Ms. Loschiuk to answer that question.

The audit I'm most familiar with, of course, is the one we did in 2002 on readiness, where there were problems in many of the forces. But Ms. Loschiuk might have more information than I do.

The Chair: Ms. Loschiuk, so that you're clear on this, I think the member wants to know how many contracts the Auditor General's office has audited that you found significant problems with.

Mrs. Wendy Loschiuk: In the work we've done, Mr. Chair, in the past, for example, we looked at the platforms themselves, in many cases, not so much the contracts, so our interest has mainly been: How is the equipment performing? Did we get what we wanted? Did it fill our capabilities? Does it fill our needs?

From that perspective, we've looked at several pieces. We've looked at the Griffon; we've looked at some upgrades to even the Leopard tank; we've looked at the LAV; and we are in the process of doing, and will be reporting on, some work on the CF-18. So we have done quite a bit of work in that area. However, in regard to the particular contract and whether we would be seeing similar types of questions, we have not done a lot in that area. We have looked at the contract, but I can tell you we would have raised issues had we seen anything of this nature.

Mr. John O'Reilly: Yes. My point is, I wondered if it's a systemic problem in the military in the way they purchase. The thrust of my question is, if this is a problem, then it behooves us, as members of Parliament, to deal with it, as members of this committee.

I didn't particularly like the way the Challengers were purchased with such rapidity. I thought it could have been done over a period of time. They fly longer, they use less fuel, they're more efficient and all that stuff, and I assume that somewhere down the line someone must have done an analysis that this was going to be of benefit. I haven't seen it and yet, and I don't see it anywhere in here that this has been looked at.

Ms. Sheila Fraser: That's the issue we're raising, Mr. Chair, that the analysis wasn't done that one would expect for a purchase of this size.

I think it's fair to say that this was not a purchase initiated by National Defence. I would suspect for the other purchases they would have been initiated by National Defence and gone through, what I think is fair to say, a fairly rigorous contracting process in National Defence.

Mr. John O'Reilly: When I was parliamentary secretary to the Minister of National Defence, I looked at a lot of the contracts and felt that all the National Defence contracts, to my humble eye, were pretty well done. I didn't see that there were any problems with them--major ones. There are always minor problems because, let's face it, the military budget at $13 billion, I believe, is the largest budget in Ottawa, so it's obviously the one you have to deal with the most and that you find the most problems in.

My observation wasn't that there was some type of an underlying systemic problem with the purchasing. But this one, obviously, twigged everyone's thoughts because it was done so quickly and it wasn't done by National Defence.

So was this some way to use up end-of-year budget? Or were these planes only available at this time and somebody moved on them? Do you have any answer to that?

º (1625)

Ms. Sheila Fraser: I would suggest the committee might want to discuss this with the Privy Council Office.

Some hon. members: Oh, oh!

Mr. John O'Reilly: I just thought I'd try.

Ms. Sheila Fraser: We were informed that the Privy Council Office was directed to complete the purchase.

Mr. John O'Reilly: Let me then go to the area of privacy. I was co-chair of the committee dealing with Bill C-17, the anti-terrorist bill, along with Bob Kilger. It was a legislative committee, different from a committee of the House. We examined a large number of witnesses from all areas of Canada, from all groups. Now that I have gone back over some of my notes and some of the observations I made, I'm very concerned with the quality and the truthfulness of the witnesses. I don't mean your department, because there is nothing there, so don't start sweating. For instance, George Radwanski gave testimony to that committee, and legislation passed maybe with the help of that particular piece of committee business.

Since 9/11, Bill C-17 came in and it was passed very quickly. It was rushed through. It affected some 24 or 27 pieces of legislation and many departments. It has to be, in my mind, a very onerous piece of legislation that is going to create layers of bureaucracy that you are not going to be able to break through. That affects my rights to privacy and many other people's rights to privacy if you go to the.... You're talking about your broader powers for the community, the security establishment, and interception and authorization is based on a number of conditions supposedly to protect my privacy. But what they have actually done is opened all of our books up to everyone. We've actually lost our privacy because of Bill C-17.

So I would hope that in future audits, when you're looking at the departments this affects, you come forward with the recommendations that I worry about as a person who co-chaired that committee, that I think the anti-terrorism act, Bill C-17, still has some very serious flaws.

Just from the quality of the witnesses, the ones I re-examined after everything happened, I was quite worried that this would restrict the way in which you could actually audit, because they've created some layers in there of secrecy and so forth.

Ms. Sheila Fraser: Mr. Chair, I have a couple of elements of response.

First of all, on our ability to audit, we have not had any difficulties, or I certainly would have been before a parliamentary committee to indicate that we were having difficulties. In fact, next week we have an audit coming on the national security initiative. We did work in CSIS and CSE and many of the agencies, which require a very high level, and we had to go through some of the new procedures and requirements of the anti-terrorism legislation in order to have access, but we were able to and had no difficulty in being able to do our work. I don't think there will be any difficulty in us doing the audit. It's in how we report the findings where there may be complexities around issues of national security. But up until now that has not caused a problem.

On the issue of privacy, we will make some mention of it next week. I would encourage Mr. O'Reilly to look for that report.

Mr. John O'Reilly: I will.

Ms. Sheila Fraser: I would hope perhaps that the committee might also ask the commissioner, Ms. Stoddart, to discuss some of the issues. I'm sure she's far more qualified than I to be discussing privacy issues. She would certainly, I'm sure, have some opinions to give on this.

Mr. John O'Reilly: Mr. Chair, if we have any time, Mr. Peric was looking for---

The Chair: I'm afraid we'll have to catch Mr. Peric on the second round, because, Mr. O'Reilly, you've used the ten-minute slot with some interesting points.

Now we'll start a second five-minute round. In this case we'll start with an opposition member. Then we come to a government member and so on, back and forth. There will be more opportunity for the government members to now join in this important discussion.

We start again with the official opposition for five minutes. Mrs. Gallant.

Mrs. Cheryl Gallant: Thank you, Mr. Chairman, and through you to the Auditor General.

In your report you make mention of $93 million in funding being authorized for the fiscal year 2001-02 for the purchase of the Challenger jets and then another $8 million for the following fiscal year for their purchase. This is in paragraph 10.62. So it appears that in addition to the $25 million advance payment, the balance of the payment for the Challenger jets was broken into two pieces.

I'm just a little bit curious about this. Is there something magical about the number $100 million? Is a contract below that amount not subject to approval by perhaps a minister?

º (1630)

Ms. Sheila Fraser: I'll ask Ms. Loschiuk to respond to the questions about the funding.

Mrs. Wendy Loschiuk: In this case, the contract was for $101 million, and that is considered to be a very large contract. A contract of that size must go through Treasury Board for approval, and it did.

The contract funding was allotted in this way to simply allow, I suppose, for the end of the fiscal year. Treasury Board approved so much from the current-year funds and then the remainder would come forward in the next year. That's how they chose to authorize the payments, but the contract itself remained at that fixed amount.

Mrs. Cheryl Gallant: The former parliamentary secretary of defence mentioned the rapid nature of this purchase. He alluded to perhaps end of budget or fiscal year funds. But I would like to know whether or not there is a mechanism in place so that if the highest authority, aside from the Prime Minister--the finance minister--sees this and determines there's something wrong.... Does he have a mechanism or the power to stop the purchase before it goes through?

Ms. Sheila Fraser: It is my understanding that purchases of this size, as Ms. Loschiuk mentioned, have to be approved by the Treasury Board. The Treasury Board did approve this purchase.

The Chair: Do you mean Treasury Board as opposed to the finance minister?

Ms. Sheila Fraser: That's right. The board of ministers has to approve a purchase of this magnitude, and this purchase was approved.

Mrs. Cheryl Gallant: Thank you.

The Chair: I think the Auditor General has clarified that Treasury Board is a board of cabinet, and it includes a number of ministers. As the Auditor General has indicated in response to Mrs. Gallant, that board would have to give approval to a contract of this size. I think it's important that we're clear on that.

Mrs. Gallant.

Mrs. Cheryl Gallant: The finance minister is the vice-chair of that board.

Does the sole-source nature of this contract put Canada in violation of any free trade agreements, or does Canada have the ability to practise protectionism when it comes to military procurement, as the Americans are allowed to do? Have we done anything amiss that could eventually hurt us down the road?

Ms. Sheila Fraser: I believe Ms. Loschiuk will elaborate if I'm not correct, but there is a provision that if it is in the public interest or the national interest to transact only with a Canadian supplier, for instance, the government can opt to do that. The government did not use that provision for this particular purchase.

In normal purchasing there are other exceptions: if it's a matter of urgency, a national emergency, or security, different issues like that. As we mentioned earlier, they invoked urgency, and we're saying there was no analysis and we cannot find the justification for that.

On the compatibility, again there was no analysis for that. They could have said it was in the national interest to use a given supplier. That was not invoked in this case.

º (1635)

The Chair: Thank you. That's your five-minute round.

Now we go to Mr. Peric, please, for five minutes.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Mr. Chair.

Madam Fraser, ladies, I thank you for coming out, and I congratulate you on your excellent work.

I agree with your statements here that government did not follow the rules by purchasing the two Challengers, but I need some more clarification.

Madam Loschiuk, what happened to the two older ones? Were they sold?

Mrs. Wendy Loschiuk: The two oldest Challengers?

Mr. Janko Peric: Yes.

Mrs. Wendy Loschiuk: Mr. Chair, the fleet, as I mentioned in the report, consisted of six aircraft. The two oldest were utility aircraft being used by National Defence. Those will be sold off, two aircraft from the VIP fleet will replace them, and the 604s will come in.

So we'll now have a VIP fleet of one 600 aircraft, one 601 aircraft, and two 604 aircraft.

Mr. Janko Peric: Is there any evidence of how much it cost to maintain the two older ones?

Mrs. Wendy Loschiuk: We did not get any information on the cost to maintain the older aircraft. In the course of this work, we're simply looking at the contract itself to buy the two new ones.

Mr. Janko Peric: So on the cost of maintenance there's no evidence at all.

Mrs. Wendy Loschiuk: We did not look at the cost of maintaining the oldest, no.

Mr. Janko Peric: But it's possible to find out?

Mrs. Wendy Loschiuk: I think the department could provide that information, yes.

Mr. Janko Peric: In your statement, right at the beginning, you mentioned that the government did not get “best value” for the money. Could you expand a little bit on that?

Mrs. Wendy Loschiuk: Mr. Chair, our concern is that the government cannot demonstrate that it got best value. In a case like this, there are certain mechanisms that demonstrate that the government is analyzing its needs and picking the options that would best fill those needs in the most economical way. Unfortunately, in this particular case, the documentation was not there for us to be able to conclude that in fact they had done that.

So it may be that they could provide other information if they were to do this a different way, but in this particular case, because of the route they chose, they did not provide any of that information.

Mr. Janko Peric: What tools would you use to conclude that this is not the best? Would you compare the Challenger 604 to other aircraft?

Mrs. Wendy Loschiuk: We would look at the department's own analysis, as it is their responsibility, in any contract, to analyze their needs, to review their options, and to assess how well those options fill the requirements and what the costs would be, including life cycle costs over the life of the purchase. Then they would put forward those options and a decision would be made. It then would be for us, as part of the audit, to go and look at that, and then to be able to conclude.

Ms. Sheila Fraser: Perhaps I could just add, Mr. Chair, that this analysis is part of their normal contracting procedure. Generally when National Defence does purchases, they do those kinds of analyses.

Mr. Janko Peric: Does the price tag of $100 million plus include the training or upgrading of pilots, and then how many pilots?

Mrs. Wendy Loschiuk: What is included in the contract, Mr. Chair, is the aircraft, the interior refurbishment, some spare parts, some maintenance manuals, and I believe there is some conversion for pilots, although I'm not sure. It was not clear, from the audit work we did, exactly how much of that conversion there is.

Mr. Janko Peric: What about the training of pilots?

Mrs. Wendy Loschiuk: Well, that conversion...that's the training, yes. There are some training manuals and publications for the pilots.

Mr. Janko Peric: Manuals are only papers. I used to hold a commercial pilot's licence, so I know what the manual is, and I know how long it takes to upgrade endorsement on different aircraft. I'm just wondering if the $101 million was for upgrading or endorsement on those two new Challengers. Was that included in the price, or was that on top of the 20 hours or 25 hours or whatever it is they need to upgrade?

º (1640)

Mrs. Wendy Loschiuk: I would have to go back into our analysis and see exactly how much was allotted for pilot conversion. I could get back to you on that.

Mr. Janko Peric: I would appreciate that very much.

Thank you, Mr. Chair.

The Chair: Thank you, Mr. Peric.

Yes, we would appreciate that information when you have an opportunity.

Monsieur Bachand, cinq minutes, s'il vous plaît.

[Translation]

Mr. Claude Bachand: Thank you, Mr. Chairman.

I would like to use all my time on the issue of intelligence agencies.

First, if I'm not mistaken, you mentioned earlier that the government could ask you to carry out specific mandates for it. But I believe that you can decide to go into any department to see whether taxpayers' money is being used appropriately or if the services being offered are efficient. In terms of the intelligence agencies, am I correct in saying that you decided to go and see how Canadians' privacy was being protected?

Ms. Sheila Fraser: No, that is not exactly the case, Mr. Chairman.

We completed an audit of the national security initiative, which is included in the report that will be tabled next Tuesday in the House of Commons. While we were carrying out that audit, we noted that there were differences in the levels of surveillance between intelligence agencies. We felt it would be useful to do a short audit observation to describe the situation.

The Privacy Commissioner is responsible for privacy issues and is in a much better position than I am to discuss these issues with the committee.

Mr. Claude Bachand: That was my other question.

If there is a Privacy Commissioner whose main purpose it is to monitor the rights and freedoms of citizens, why are you doing work that would be part of the Commissioner's mandate?

Ms. Sheila Fraser: Perhaps I didn't express myself properly earlier. We did not undertake an audit as such on privacy issues. However, during our national security audit, privacy issues were raised. Given that there is currently a debate on this issue, we simply noted this. We referred to it, but we did not undertake an audit of these issues. We concentrated on our own areas. However, sometimes during the course of our work, there are important issues such as privacy issues that come to our attention and we feel obligated to mention them to Parliament.

Mr. Claude Bachand: The material that we have before us today dates back to October, as you said, and you will agree with me that since then there have been many changes in the area of public security. In fact, a new department has been created.

I see that many of the groups that you audited have been transferred to the new department. CSIS, the RCMP, the Financial Transactions and Reports Analysis Centre of Canada, Emergency Preparedness and Critical Infrastructure Protection are now part of the new department.

Do you not feel that it will become more and more difficult for you to verify whether or not laws and ministerial decisions are being complied with? With a super department just like Tom Ridge's Homeland Security in the United States, are we not making it more difficult for citizens who want to be sure that their privacy is being protected by this super department and that they are not the victims of abuse by that system? Is it not your impression that this has become so big that it will now be very difficult for people like you to make sure that the public is being protected?

Ms. Sheila Fraser: As I mentioned, Mr. Chairman, it is not really our role to look into specific privacy issues. I said in reply to an earlier question that an audit report covering the activities of several departments and agencies would be tabled next week.

I think that when one is discussing security issues, it is inevitable that privacy issues will arise. We therefore refer to this in the report that will be tabled next week. I encourage Mr. Bachand to read this report. Obviously, the bulk of the work was completed before the changes that took place on December 12, but we do refer to this reorganization.

I do not want to give you the results of this audit before next week, but I would encourage the committee, if it is interested, to invite us back in order to discuss this new department and the challenges that it may face.

º (1645)

[English]

The Chair: Monsieur Bachand, merci.

Madam Auditor General, if you ever feel you want to come to this committee, please understand that you have a unanimous invitation to indicate that. We will certainly invite you back when we would like to do so as well.

Thank you.

There are two Mr. O'Briens on this committee. I am now going to Mr. O'Brien, the member from Labrador, for five minutes of questions.

Mr. Lawrence O'Brien (Labrador, Lib.): Mr. Chairman, thank you very much. This is my 45th cousin from somewhere across the land.

Madam Fraser and guests, it's indeed a pleasure to be here to partake in some of the fine work you do. This is the first opportunity I've had to compliment you on your work. You've certainly demonstrated tremendous capability in getting your job done, and I want to thank you.

As it relates to the Challengers, I have just a couple of points. I'm certainly not in the mode to defend the contract or anything along that line, in terms of policy and procedures. But I just want you to relay in some simpler...your views are simple enough, in terms of the report, but just in this public session if you wish....

I've been on the Challenger. I've travelled with the Prime Minister, and whatever. I look at the fleet. I've been on the older Challengers; I haven't been on the newest ones. While there are some concerns about policy surrounding the purchase of the Challengers, they are Canadian made and Canadian owned by Bombardier. That's consistent with a lot of the fleets we have in the Department of National Defence--the F-18s, the pilots who fly them, and so on. They do the long-distance runs here, there, and everywhere to get the Prime Minister to the far corners of the earth. The list goes on.

So these points are being made. It was approved by Treasury Board, and so on. Is it the main focus that caught your attention? Was it the 15-day period? Was it where they had to give this kind of public announcement? Was it the fast track, as I read it here, to get to year-end?

I used to be a bureaucrat too, prior to my political job, and I know a lot about fast tracking to get to year-end. I wasn't a federal bureaucrat; I was a provincial one, but there's no difference. I had some major budgets. We had to make major expenditures, and I know how to cut corners. I've been there. This is not new for me, but it's just the way the system generally works.

Without carrying on and making other points I could make, how much of this could you put in a simple two-minute analysis for me?

Ms. Sheila Fraser: Our major concern is that for a purchase of $100 million we would expect to see an analysis of why that equipment was needed--what justified that expenditure. I think we're all realistic enough to know that with a purchase of this size for these kinds of aircraft, the government would want to encourage a Canadian manufacturer. I have no quarrel with that per se. I'm certainly not in any position or capacity to talk about the benefits or disadvantages of that particular aircraft.

But at the end of the day, I say, why did the government buy two of those instead of three? Why not two of the bigger aircraft? Why not one? Why did the government decide to buy two of those aircraft? We just don't have the justification we feel is appropriate for a purchase of that size. When we are spending public funds, it is my duty to raise those kinds of concerns to Parliament.

º (1650)

Mr. Lawrence O'Brien: Are you simply saying in the future to comply with the regulations that were not complied with and that would serve the need? On some of Mr. Stoffer's points about the cost benefits, trying to find them, weighing it against other aircraft, and all these kinds of points, are you saying a lot of that work wasn't done?

Ms. Sheila Fraser: In fact, none of that work was done, or none that we can find. I think we do note in the report that the national defence department actually does have a fairly rigorous process to do the analysis to make sure the equipment they are purchasing is appropriate and meets their needs. All we're saying is just follow the process that should have been there. I think in many ways I'm starting to sound like a broken record. We don't need more rules and procedures. Just follow the ones you already have.

Mr. Lawrence O'Brien: Thank you very much.

The Chair: Thank you, Mr. O'Brien.

Just for clarity, Madam Auditor General, you've indicated that there is a process that Defence would normally follow, and you're indicating that it wasn't followed in this case.

Ms. Sheila Fraser: That's correct.

The Chair: Mr. Stoffer, for five minutes, please.

Mr. Peter Stoffer: Thank you very much, Mr. Chairman.

Ms. Fraser, are you sometimes called into a particular department by a minister or someone in that department?

Ms. Sheila Fraser: We have been. It has been quite rare. We were called in by the Minister of Public Works on the Groupaction contracts, and we were also called in by order in council and asked to do an audit on the process used to give answers in question period, more specifically the CSL question. Those are two that have come from government. We've also had requests from parliamentary committees.

Mr. Peter Stoffer: Excuse my ignorance in asking this question. Would a regular member of Parliament, such as myself in opposition, put in a request because of a suspicion--let's say we received an envelope--and ask your department to look into it? Would you accept that request or would you say no, it has to go through other channels?

Ms. Sheila Fraser: Mr. Chair, we take great care to be rigorous in how we select the audits we do. We obviously give great consideration to any correspondence we receive from members of Parliament, but we would not automatically agree to do work if a member of Parliament wrote to us. I'm sure Mr. Stoffer can appreciate that if we did that, we might end up being viewed as somewhat less independent than might be desirable. The information we receive will go to the team, and the audit team would take it very seriously. But we would not commit ourselves necessarily to do an audit.

Mr. Peter Stoffer: So if I asked you to audit my insurance company on my rising rates, you wouldn't be able to do that. I'm just kidding.

After the recent media attention your department has garnered--and I know you probably didn't do this on purpose; it was just the way it happened--in my opinion, and in my riding, you now have this cult status. I'm hoping you never go into politics because if you came to my riding, I would never have a chance of defeating you, no matter which party you were with.

Some hon. members: Oh, oh!

º (1655)

Mr. Peter Stoffer: The previous auditor general always stated that when they went into a department, all information was provided. There were no concerns whatsoever. When I worked in a private company, we always got nervous when the auditors came in. I think it's because people don't like someone looking over their shoulder. After what has happened in terms of yourself and your department and all the media attention, when you go into a department now or when you talk to government or the Privy Council, has there been a change in the way you're approached, or is it the same as it has always been?

Ms. Sheila Fraser: First of all, I will reassure all members that we certainly were not expecting or looking for the attention we have received.

I can also make a firm commitment that I will never go into politics.

Some hon. members: Oh, oh!

Mr. Peter Stoffer: So I'm all right. If you do, I'll sign you up. We have a membership card for you.

Ms. Sheila Fraser: No, I'm fine. I have more than enough to do right now, thank you very much. I still have seven years left in my term, at which time I think I will go off into a happy retirement.

I think there is always a bit of reluctance on the part of people vis-à-vis auditors, even though we say we're there to help and to bring improvements. I'm not sure we're always viewed that way.

We have not noted any particular change. I think departments understand our role. If we had difficulty getting access to information, we would certainly raise it in our reports to Parliament and make it very clear to Parliament. I suspect that some departments are spending more time looking at our reports and at what we're saying and how it will be perceived by the public than they may have in the past. But I think that is part of our ongoing relationship with departments.

Mr. Peter Stoffer: Mr. Chair, just to change tack a bit, on page 40 of her report, paragraph 10.161, the last sentence there, says, “We believe a comprehensive review of this situation would be beneficial.” I'd ask the Auditor General, what do you specifically mean by that in terms of the oversight of the agencies you're discussing in your chapter?

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

As we mentioned in the opening statement, there is a review going on of oversight of the RCMP, but there are also other agencies and departments that do conduct intelligence activities. Parliament might wish to consider looking at the oversight of those other activities and to ensure that the variety or the differences are warranted and are justified. It may be very appropriate that there be no oversight of certain...but at least that Parliament have the assurance that this is the case.

The Chair: Thank you very much. Are there any other questions from colleagues on this side?

Then we'll go to Mrs. Gallant for five minutes.

Mrs. Cheryl Gallant: I found it very comforting that perhaps one of the reasons this Challenger purchase happened was so that it could be interoperable in theatre. That was a suggestion made by the former parliamentary secretary of defence.

I have one last question on the Challenger for now. It refers to the last question I asked on sole sourcing. Is Canada exposed to any liability or international repercussions because it sole sourced it the way it did, or is that all taken care of?

Ms. Sheila Fraser: It is my understanding that a challenge would have had to have been launched,and as the government indicated, there had not been any. I do not believe there could be a challenge launched now. It has to happen within a certain prescribed time.

Mrs. Cheryl Gallant: There has been another contract problem in the news recently with the Department of National Defence. Have you been asked to investigate the false contracts involved with the $160 million that went missing with regard to the Hewlett-Packard incident?

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

As we mentioned earlier, we are aware of that situation. We have been briefed by the department and in particular their internal audit group. They have been informing us as to what is happening and the actions they are taking. We see no need to intervene. Management and the internal audit group are handling this in a way that seems appropriate to us. We will continue to follow that and, importantly, to try to make sure that the department tries to find out what actually happened, what went wrong in this particular case, and what actions are they taking to correct that in the future.

Mrs. Cheryl Gallant: Now I'd like to go to the security and intelligence agencies. With respect to the RCMP, we had the pepper spray scandal, the pillaging of the former president of the BDC--his home and cottage were ransacked by the RCMP after he refused to give Mr. Chrétien's friends a loan. That same person who was involved in having the former president's home and cottage raided was also involved in the pepper spray incident. And we had the raid of a journalist's home after an article about the RCMP communicating with the United States.

There was even a peculiar incident here on the Hill back in the first week that Parliament resumed in September where a cattle liner used to demonstrate the plight of the farmers across the country who had been affected by the border closures on BSE...even though there were three permits for it, the RCMP tried three different times to stop it from going on the Hill. They said this empty cattle liner might be harbouring terrorists.

So it appears that the Prime Minister's Office has been interfering with the RCMP.

I'd like to know, in your opinion, based on the analysis done so far, whether or not you feel there are sufficient controls in place to ensure that the actions taken by the security agencies are based on direct threats to the public good as opposed to being politically motivated.

» (1700)

Ms. Sheila Fraser: Mr. Chair, I think Ms. Gallant can appreciate that what she has asked is a very political question and it would be totally inappropriate of me to respond.

The Chair: I preferred to let you point that out. But I want to give Ms. Gallant her time. She has a minute and a half to finish her time.

A point of order.

Mr. Lawrence O'Brien: A point of order. I think this is completely out of context for Ms. Gallant to be getting on with this. She's playing to the cameras across this country. She's using the time of the committee to make political points that she should be doing with her House leader in the House of Commons. I suggest that from here on in, sir, you should make clear that anything that's dealt with is directed to the Auditor General appropriately.

The Chair: Thank you, Mr. O'Brien, for that point of order.

I've indicated that I will allow a slight bit of latitude. We all know the politics that can occur on Parliament Hill. I think the Auditor General has been very astute and quick to point out when she doesn't want to answer questions that perhaps really are not properly directed to her. We haven't had much of it. We've had a little bit. Maybe I've been slightly lenient. So I would ask members to keep their questions relevant to the work of the Auditor General.

Ms. Gallant, I won't take this time from you, so you have about a minute and a half for relevant questions.

Mrs. Cheryl Gallant: I'm asking about safeguards, and the question regards safeguards in controls with respect to the RCMP. In paragraph 10.131 you mentioned that passage of the anti-terrorist act permits the interception of private communications. Again, I would like to know, from the work you've done so far and to the best of your knowledge, are there appropriate safeguards in place to prevent information that is unintentionally intercepted from being used for other than security purposes?

Ms. Sheila Fraser: What I would like to do is perhaps just explain what this audit note is and is not. As I mentioned earlier, we are conducting a much broader audit of the national security initiative, which we will be tabling next week. In doing that work, we came across the question of oversight.

What we have done in this piece is simply describe the facts as to what are the various agencies and departments involved in intelligence activities and what is the level of oversight for each one of those. The point we are noting here is that there is a wide variety of oversight amongst these agencies. We can see, I guess, no overall rationale as to why some have certain types of oversight, others don't, and some have none. We thought we should bring that to Parliament's attention. Parliament might want to review this whole area and ensure that any discrepancies that exist are appropriate.

We did not conduct an audit into the actual intelligence activities and oversight activities per se.

The Chair: Thank you very much.

Now we go to Mr. Peric for five minutes.

Mr. Janko Peric: Thank you, Mr. Chair. I won't need five minutes.

Madam Loschiuk, something is bothering me here. It's $50 million per aircraft. I understand it's new aircraft and the range is much longer than the old one. You probably have better access to that information than any one of us. For our information, so that we can be better prepared for the meeting with the minister, could you provide us with a breakdown of the price of the aircraft and how much it costs to upgrade the equipment? How much was the training? Then we can compare and ask the minister when he comes to the committee. If it's possible, I would appreciate it very much.

» (1705)

Mrs. Wendy Loschiuk: Certainly. Mr. Chair, I can give you some indication of that now, but I would only be able to provide the information as was allotted in the contract. The contract at the time of the work was not closed, so we don't know what the final figures were. The final accounting was not done, so we really don't know what those were.

The planned expenditures, as laid out in the contract, were about $33 million per aircraft. That adds up to $66 million. There was going to be almost a little over $11 million for interior options, and then there were further interior options for another almost $8 million, the total there being about $20 million. They were anticipating about $7.5 million to $8 million in spare parts. Then there was a final cost of about $8 million to cover all ground support equipment, secure communications options, which they had not yet decided upon, and then some other training for maintenance, training for pilots. All of that was lumped into one classification. I don't know how much those were individually. That is how the contract itself anticipated expenses.

Mr. Janko Peric: Let me be clear, Mr. Chair. I will always support the government in purchasing for Canadian pilots, but not at any price.

Something is telling me that something is not clear here, because of the price for one aircraft, especially if they lump together the training or endorsement for the pilots. How many pilots? Were all pilots retrained? If they were, how often do they fly on those aircraft? It would be useless to train the pilots on those two aircraft if they fly only once every six months. Their endorsement would probably expire.

Those are my concerns, and I believe Canadian taxpayers have a right to know.

Ms. Sheila Fraser: Mr. Chair, I would only remind the members that we looked at the contract. I would remind the members that this whole process was done in nine days.

It would have been highly unlikely, I think, to have the kinds of details the member is asking for, which I think are very appropriate to be asking for, but to have done that kind of analysis and to produce those figures in nine days, they couldn't have done it.

That's the issue we're raising here. The depth of analysis to be able to determine the prices wasn't there; it wasn't done. That's why there were very large categories with an amount put beside it. It was a rough estimate, as we saw, even though there was $3 million paid back. On the final accounting of that, we don't have that.

Mr. Janko Peric: Okay. Thank you.

The Chair: I think I hear you saying, Madam Auditor General, that you can only audit the information you see; you can't audit information you don't see. You're flagging that as a problem with the contract.

Thank you very much, Mr. Peric.

Monsieur Bachand, autres questions?

[Translation]

Mr. Claude Bachand: Mr. Chairman, I have one last question about intelligence agencies.

First, I would like to read your recommendation:

The government should assess the level of review and reporting to Parliament for security and intelligence agencies to ensure that agencies exercising intrusive powers are subject to levels of external review and disclosure proportionate to the level of intrusion.

If I understand correctly, the more an agency can probe in depth into the lives of public citizens, the greater its disclosure obligation should be. Is that what you mean?

Ms. Sheila Fraser: That is correct. I will ask Ms. Therrien to give you further details on the current disclosure requirements.

Ms. Jocelyne Therrien: Mr. Chairman, we did in fact make two points: first, that there is a wide range of review models, and second, that it is important that the level of review be proportionate to the level of intrusion. That is the analysis that we suggest.

In terms of disclosures, we refer more specifically to the CSE commissioner who, despite having a broader review mandate, has chosen to provide what we consider to be more limited information in his annual report. He only covers the legal aspect.

» (1710)

Mr. Claude Bachand: From what I understand, in order to protect citizens and to provide a certain amount of control, you're saying that the more intrusive an agency is the more information that agency should disclose. If I were to suggest that Parliament provide more monitoring, would that be consistent with your recommendation to the effect that there should be greater disclosure? Would it not be important that Parliament monitor these types of organizations?

CSIS and other organizations like it are always a big problem for us, as parliamentarians. The other day I read a very interesting article on National Defence and the lack of parliamentary supervision over this type of department. It seems to me that we members of Parliament are far from being able to monitor these departments and agencies that are collecting information. I would even say that they are completely out of our reach.

Therefore, if I were to suggest adding the recommendation that Parliament increase its monitoring of these organizations to your recommendation that disclosure should be proportional to the degree of intrusion, would the two be compatible?

Ms. Sheila Fraser: Mr. Chairman, I will give my reply in two parts.

First, increased disclosure on the part of surveillance agencies to Parliament would imply that parliamentarians would have more information. Of course, for these organizations, issues of national security—that may be discussed during public hearings, for example—pose a problem.

I believe that the government is currently, in one of its committees, studying Great Britain's model, which may be more appropriate for issues of national security and the monitoring of these organizations.

Mr. Claude Bachand: So you wouldn't object to Parliament increasing its monitoring. You would agree with that idea?

Ms. Sheila Fraser: Of course.

Mr. Claude Bachand: Very well, thank you.

[English]

The Chair: Merci, Monsieur Bachand.

Now we'll go to Mr. O'Brien again for five minutes.

Mr. Lawrence O'Brien: To get this down to some kind of fine tuning, seeing that we have a bell in two minutes or so, if I were to buy an aircraft—for which I don't have $50 million—if I had $50 million and wanted to buy a Bombardier Challenger 604 and I chose to start negotiating today for an aircraft exactly like the one the government has, or both, do you feel that I might be able to get that aircraft cheaper than $50.5 million?

Do you have any facts as to exactly what the outlay would be from Bombardier to the private sector, in competition, when dealing with other potential companies for a similar type of aircraft?

Ms. Sheila Fraser: Mr. Chair, obviously we don't have that information, but that's not really the point we were trying to make. The point is, I would presume that before Mr. O'Brien bought an airplane, he would establish that he actually needed an airplane and that he needed that kind of airplane.

It's like saying we are going to buy an automobile. Do I want a van because I have three kids, or do I want to buy a sports car because I don't want them in the car with me?

What your needs are, and what is best suited to your needs, is the issue. The price is obviously a consideration, but I think the greater consideration is the analysis to show what the department actually needed. Then we would have expected, of course, based on that analysis, that there would have been rigour as well in determining what the cost would be.

It's almost terrible for me to say, but the cost is maybe a bit of a secondary element. They might have actually determined, based on need, that they needed a bigger airplane or more airplanes, but that analysis wasn't there.

Mr. Lawrence O'Brien: Then the aspect of cost wasn't obviously very much of a priority for you and your team. It's maybe a priority for Canadians, but it may not be a priority from where you came from.

» (1715)

Ms. Sheila Fraser: To me, $100 million is a significant purchase. I would have expected to see more analysis and more thought. To have conducted this purchase in nine days is certainly surprising.

The Chair: All right. Thank you.

There's a bell, but as we all know, we're one minute from the House. We'll have time to finish this meeting with Ms. Fraser to 5:30.

I believe Mrs. Gallant has a comment. I'll take the chairman's last opportunity, at the end of the meeting, before it ends, to ask three or four questions, but I'm going to go back to Mrs. Gallant first.

We'll go to me, and then to Mr. Stoffer. It's Mrs. Gallant's turn now.

Oh, I'm sorry, it's Mr. Stoffer. I didn't see you, Mr. Stoffer.

Mr. Peter Stoffer: Thank you, Mr. Chairman.

I was sitting here, Lawrence, when you said “if I had an aircraft”, and I wrote a little ditty for you.

If I had two aircraft,
I'd fly them in the morning,
I'd fly them in the evening,
All over this land.
I'd do it in nine days,
And I would do it my way.

I haven't finished yet, but I'll send you a copy of that.

You have to think sometimes.

Madam Fraser, is there any aspect of the security organization, after the new legislation, the anti-terror bill, that you would not be permitted to audit or to have a look at because of national security concerns?

Ms. Sheila Fraser: No.

Mr. Peter Stoffer: Everything is available to your eyes, if you so desire.

Ms. Sheila Fraser: That's right. There are, of course, certain documents that are highly classified. Certain members of my staff had to go through special procedures in order to be able to have access to them, rather than only the normal security.

In most cases, though, we would not in fact have to look at those kinds of documents to do the kind of work we're looking at. Certainly, the agencies requested that they go through that procedure. We have done that, so we have no limitations on what we can have access to.

Mr. Peter Stoffer: You've also reiterated, on several occasions, that this contract was done in nine days. Specifically, what does that mean? Is it from the time they phoned the company and said they needed two jets, write up a contract, and they'd pay for it? Does that include from the very initial contact of the purchase to the very end when the money was delivered? Was there more time involved in terms of prior to and after the contract?

Ms. Sheila Fraser: In fact, the supplier presented a proposal to government on March 18--it's in paragraph 10.52--and indicated that they were making this offer. It was valid until March 31.

Mr. Peter Stoffer: So is it fair to say that the initial aspect of this purchase didn't come from the government; it came from the supplier?

Ms. Sheila Fraser: That is correct.

Mr. Peter Stoffer: Did you see any evidence that indicated somebody may have called the government and said, “If you could make this kind of offer...?”

Ms. Sheila Fraser: We don't have any evidence of that. We saw the proposal coming in and then instructions given to complete the purchase.

Mr. Peter Stoffer: Correct my ignorance again, but in all your studies of previous departments, have you ever heard of other companies coming to government and saying, “We have this great offer, where if you buy it before Friday we can reduce the price”, or something of that nature? Is that common practice?

Ms. Sheila Fraser: I can't really respond to that. I imagine it goes on. I imagine the government receives unsolicited proposals. But I would have expected that for $100 million we might have followed procedures a little more.

Mr. Peter Stoffer: So to reiterate, it was done nine days from the time they contacted the government.

Ms. Sheila Fraser: That's correct.

Mr. Peter Stoffer: That's pretty fast. They take 12 years to get the Sea Kings replaced. You'd think they could do that pretty quickly.

Ms. Sheila Fraser: In its response, the government talked about an expedited process.

» (1720)

Mr. Peter Stoffer: So we're technically in a standoff. The government has said, “We didn't break any rules. We did it our way, more or less.” You're saying it had rules and procedures it didn't follow. So right now we're in bit off a stalemate. Is that right?

Ms. Sheila Fraser: I'll leave it up to the committee. We have gone through the various rules we believe should have applied and shown evidence that they were not applied. We've also presented the government's arguments as to why certain exceptions were granted, and we indicate that we do not feel it gave us sufficient documentation to prove that.

Obviously, it is now up to the committee to perhaps ask the government for its version of this and have an exchange on it.

Mr. Peter Stoffer: Thank you.

The Chair: As I indicated, there will be opportunities to raise these kinds of questions with the Minister of Defence in the very near future.

We still have lots of time. I have two or three points and questions, and I know Ms. Gallant has another question.

I have a couple of comments and a couple of short direct questions, Madam Auditor General. First, I think you handled some fairly loaded political questions here, and that doesn't surprise me--I've been in politics for 23 years. I think you indicated where you were being asked to comment on something that's clearly not your role to do, and appropriately so.

I'll make this a rhetorical question. I wonder if it wouldn't be useful to have a little refresher for members when they come to a committee, a brief statement from you at the start, or even something in writing, just as a reminder of what your mandate is and what it clearly isn't. You're not a policy-maker; your staff are not policy-makers. It's not your job to second guess the purchase of these Challengers, and you've indicated that.

You very clearly indicated that your role is to question why the government didn't follow its normal procedures. I think members on all sides of the House would want you to ask that question, and you very appropriately asked it.

You indicated a couple of times to Mr. Stoffer that you were asked to get involved in the sponsorship scandal that's had so much press and has so rightly concerned all of us as Canadians. You indicated it was an internal audit done by the government that first brought problems to light and that the government asked you to become involved subsequent to that and you did--you carried out more work. I know from reading the work you have done that you feel there now has to be a public inquiry to see that work through.

You've indicated that in the latest defence contract, which was referenced here today, there are some problems. Am I correct that I heard you say the internal audit has functioned well and has caught some problems there--it might have caught them quicker, one would hope--and that possibly, if requested, you could become involved there as well?

I appreciate those comments.

I just wanted to ask you a couple of questions before we go to Ms. Gallant, and then we'll be out of time. Mr. Stoffer asked how an individual MP might request that you become involved in auditing, and you indicated you wouldn't pick that up on the basis of one MP. I think we can all appreciate that, as members of Parliament. We all might be tempted, from whatever side of the House, to go on what one might call “political fishing expeditions”, and that's certainly a theoretical possibility that you would have to guard against.

But I want to pursue the question. How would an individual member take up his or her concerns and in what venue would they find greater support, which might result in your office deciding to become involved? That's my first question.

The second question would be around DND contracts. I wonder how many in the last year or two you've audited. There was a fairly general statement that there were an awful lot of problems with DND contracts. I have to tell you that's not been my experience. My riding is London--Fanshawe. We have General Dynamics, which produces the LAV, the world-class personnel carrier. The government bought a number of them; they export them around the world, a first-class product. I'm not aware of any problems whatsoever. I wonder if you were aware of any problems vis-à-vis that equipment.

But just to get a little bit away from the politics of this and get to the facts, I wonder how many contracts you have audited in the last year or two and how many problems you have encountered there.

Then I'm going to go to Ms. Gallant, and then we're going to go vote.

Ms. Sheila Fraser: Thank you, Mr. Chair. I appreciate your suggestion. I think it might be helpful if we do explain up front to members of other standing committees. We're very used to working with the public accounts committee, which I think appreciates our role and our work more. I do think that is a good suggestion, and we will take it under advisement.

I'll just make one comment on internal audit. I am a very strong proponent of internal audit. I think it's important that departments have a strong function that can do the oversight checks and balances within the management framework and that people not look to the Auditor General to be doing audits. I think it's important that that be part of the normal management. There are many strong internal audit groups across government. We are in fact now doing an audit of that function, which we will be reporting later on this year.

As to individual MPs and their concerns, I do encourage MPs to write to us. Rather than conducting an audit...we do take the requests seriously, and I guess I should say that sometimes just a phone call will help move certain things ahead. We do take very seriously, though, if MPs have a broader concern on systems, practices, areas they would like.... We would encourage them to go through a standing committee. If an all-party committee asks us to do work, generally we will work that into our schedule.

On the DND contracts, I'll ask Ms. Loschiuk to respond.

» (1725)

Mrs. Wendy Loschiuk: Thank you.

Mr. Chair, I believe the question you were asking was, how many have we audited in the last year? In 2003 our work really centred on two contracts, this one and then the current work we are going to be reporting on, the CF-18, which is a multi-billion dollar expenditure. That is where our focus has been.

The Chair: You obviously haven't had an opportunity or haven't felt the need to audit a lot of defence contracts, which is the point I was trying to make. I just think it's important for our Canadian Forces that we understand that DND does some pretty decent procurement. Yes, there are problems around certain contracts, but I just think we ought to be a little careful--

Ms. Sheila Fraser: Yes, and as some of us have said today and we've noted in the report as well, there is a very rigorous system. If that system is followed, I think we will have a good contracting procedure.

The Chair: Thank you very much.

We're almost out of time. I'm going to give the last very brief question to Ms. Gallant and then I'll conclude.

Ms. Gallant.

Mrs. Cheryl Gallant: Thank you, Mr. Chairman and through you, Madam Auditor General.

Paragraph 10.139 mentioned that “powers to review security and intelligence agencies vary widely”, and that is the purview of this review.

Later on, in paragraph 10.144, you mention that the RCMP “is not subject to reviews aimed at systematically determining its level of compliance with the law and ministerial direction.” Later on it says that if an issue or complaint gets to a commission, the chair has access to what is referred to as “relevant material”, that “her power to access information is not specified in the legislation”, and that “the legislation does not provide for the random access to RCMP files and operations” other agencies would allow. Is that what you were referring to with respect to inconsistencies, and is that an area you feel Parliament should be looking at and amending legislation on?

Ms. Sheila Fraser: That is certainly one of the inconsistencies we noted, that the commissioner for public complaints against the RCMP does not have the same kind of role of oversight as exists, for instance, for CSIS. But over and above those individual differences between those two types of oversights, there are other organizations that have no oversight at all, as we noted in the report. Customs has an intelligence activity, for instance, and there is no oversight of that.

I'm not in any position or in any way wishing to say that is inappropriate, but we just noted that all of these intelligence agencies and bodies have very varying degrees of oversight, and even within the oversight there are many differences. We thought it would be appropriate to bring this to the attention of Parliament, and Parliament might want to conduct a review to ensure that the current situation is appropriate, or if changes are needed, that they be done.

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

We have about one minute to get to our duties in the House or our whips will be upset with us.

Let me again thank you and your staff very much for appearing today, for handling, I think, a difficult issue with great dexterity, which we've come to expect of you. Thank you again on behalf of Canadians for the excellent work you and your staff are doing.

» (1730)

Ms. Sheila Fraser: Thank you.

Our pleasure, Mr. Chair, and I'll be writing to you on the report of next week.

The Chair: I appreciate that.

Thank you very much.

The meeting is adjourned.