:
Thank you very much, Mr. Chairman.
I will be mercifully brief on this. I was not given any instructions as to specifically what the committee would like to hear from me. I have gone through and have read the blues of the investigation to date, and I'll just make some comments on things as they specifically relate to me. Then I'll turn it over to my colleague, who can pick it up from there.
In this committee, when Mr. Williams was the chair shortly after the change of government, the government indicated its intention to bring forward legislation strengthening public service disclosure and to create a new piece of legislation for that. I had worked on that as the chairman of the government operations committee, and we had made a series of recommendations. The Prime Minister at the time, , asked me, as President of the Treasury Board, if I would establish a process and let it be known to the public service that if they had concerns about improprieties within the public service, until such time as there was strengthened legislation in place they could bring it to my office. That was done, I believe, in a presentation before this committee at that time.
I won't go through the chronology of events, because you know better than I the details of the history of this. I want to speak specifically about the actions that were taken by me and by Treasury Board.
We received a package....
I want to clarify just one small discrepancy. Staff Sergeant Lewis said in his testimony here that he'd brought it to our office on February 16. He brought it on February 19. We've had a talk about that, just to acknowledge that it's the case, because all of our records show February 19.
I passed it, according to the protocol we had set up, immediately to the secretary of the Treasury Board. He assigned it to staff; they had a look at it; he then referred it to the Auditor General and to the Deputy Minister of Public Safety and Emergency Preparedness. In the letter he sent to the deputy minister, he said:
I enclose one of three copies of a document which was provided to the President of the Treasury Board on February 19, 2004. The author explicitly asked that the copies be provided to your minister and to the Auditor General. I would be grateful if you would ensure that this copy is delivered personally to your minister.
As you will see from this document it contains a number of allegations, which the President of the Treasury Board takes very seriously, and which he has undertaken to pursue.
That's signed by the then secretary to the Treasury Board, Mr. Jim Judd.
Subsequently, those documents were delivered, and discussions were held with the commissioner, with the Auditor General, and with the deputy minister. From that, the events involving those individuals and the criminal investigation flowed.
I'm here to answer any questions the committee may have.
:
I do. I too shall be brief.
Mr. Chair, thank you for inviting me here today to assist the committee in its ongoing inquiry into the facts and circumstances surrounding the RCMP pension and insurance administration.
I became Minister of Public Safety on December 13, 2003. I was made aware early in 2004 that the RCMP had conducted an internal audit of the administration of its pension plan and that irregularities had been identified. That's the audit that was completed in October 2003 or thereabouts. I was assured that no funds were missing from the pension plan and that an action plan had been prepared and was being implemented to correct the identified irregularities.
It was in late February or early March of 2004 that I became aware for the first time that a member of the force, Staff Sergeant Ron Lewis, was expressing concerns about, among other things, the actions being taken by senior members of the force to investigate these irregularities.
My office received a package of materials, as Mr. Alcock has just indicated, in which Staff Sergeant Lewis outlined his concerns. Records show that on February 26, 2004, the Secretary of the Treasury Board wrote to the then Deputy Minister of Public Safety, forwarding Staff Sergeant Lewis's package of materials and indicating that he, Lewis, had asked that the President of the Treasury Board forward the materials to me, as Minister of Public Safety, and to the Auditor General.
My office raised the concerns of Staff Sergeant Lewis with then Commissioner Zaccardelli, who indicated that the matter would be turned over to the Ottawa Police Service for independent criminal investigation. In fact, later in March 2004, a criminal investigation was begun by the Ottawa Police Service. That investigation continued until the end of June 2005. You have heard from both former Chief Vince Bevan and Mr. Paul Roy in relation to the conduct of that investigation and its conclusions.
As you know, there was then a further internal investigation undertaken by the force, which concluded in September 2006, and of course the Auditor General's review regarding whether adequate action had been taken by the RCMP in responding to the various deficiencies identified in earlier audits and reports. That review was begun in September 2005, shortly after the termination of the Ottawa Police Service criminal investigation, and reported in November 2006.
My overarching concerns in this matter were to ensure that the pension fund, counted on by former members and their families, was secure and being administered properly--which the Auditor General has now confirmed, to a large extent--and to determine whether any of the irregularities identified were the result of criminal wrongdoing. I felt that the independent criminal investigation would get at many of the concerns identified by Staff Sergeant Lewis in the package he sent to me as well as to the Auditor General and to the President of the Treasury Board.
As the minister, from my knowledge of events at the time, I was satisfied with the process followed to deal with this matter. First, concerns were raised within the organization. Second, internal audit processes were activated to determine with greater specificity and detail whether there were irregularities, deficiencies, etc. Third, if corrective action was required, it had to be implemented. Fourth, if the audits also led to a reasonable apprehension that certain conduct may be criminal, then a criminal investigation must be undertaken. And fifth, in addition, the Office of the Auditor General, as we all know, plays a key role in our system of government in identifying deficiencies; non-compliance with laws, rules, regulations and policies; and whether value is gained for money spent. In fact, all these steps were followed in this situation.
In conclusion, let me say that in addition, there are other mechanisms available to those who believe that there has been misconduct or inappropriate action on the part of any member of the Royal Canadian Mounted Police.
With that, Mr. Chair, I will terminate my remarks and be happy to answer any questions.
:
I also have a letter, filed by my lawyers with the chairman of the committee, dealing with procedural matters before this committee, and I also have a copy of my opening statement.
I want to thank you for inviting me to the public accounts committee.
In order to put matters in context from a financial perspective, I wish to give the members of the committee some information. I will briefly review my role as the CFO of the RCMP. Then I wish to discuss the effects of the Public Sector Pension Investment Board, the initial RCMP audit in 2003, and the audit of the Auditor General in 2006. Then I will provide some comments on the RCMP's response to the findings of these audits.
As my area of responsibility as CFO centres on the financial and controllership side of the operation, I will limit my remarks to financial matters only. I will refrain from commenting on the human resources management or the criminal investigation. In any event, those have already been addressed by my colleagues, and if you wish to pursue those further, I am sure you will have more meetings on them.
Since my appearance before this committee on February 21, there have been certain statements made by witnesses appearing before this committee that are irresponsible and calculated to mislead. As they have been made without merit or any substance, I will only address the fairness of those statements in this written opening statement, but again will not comment any further unless members of committee have questions.
I am conscious that I have limited time for my opening statement. Accordingly, I will be leaving a full copy of my opening statement with the clerk of the committee for distribution in both French and English.
As the RCMP CFO and deputy commissioner for corporate management and controllership, I had functional and line accountability for financial management governance within the force. The RCMP's annual budget is $4 billion. There are 1.5 million transactions per year and $1.4 billion in revenue. It is an organization of 26,000 regular and civilian members and public servants. We have 2,732 responsibility centres in headquarters, 4 regions, 15 divisions, and 750 detachments across Canada.
Pension and insurance within the RCMP is the responsibility of the deputy commissioner of human resources and delegated officials within human resources.
On April 1, 2000, Bill , came into effect. It established a new fund, administered by the Public Sector Pension Investment Board, into which pension contributions are invested in financial markets, not only for the RCMP's pension plan, but also for those of the Canadian Forces and the public service.
The Public Sector Pension Investment Board Act also required the preparation of audited financial statements each year, with the audit performed by the Office of the Auditor General. Therefore, the RCMP is responsible under this legislation to ensure that the financial data is accurate so that we can produce unqualified financial statements.
The pension fund asset value on March 31, 2006, was $2.1 billion. The RCMP superannuation account contained an additional $11.3 billion as of March 31, 2006, and yields interest at long-term government bond rates.
All administration costs charged to the pension plan must be approved by the Treasury Board. Each year the RCMP provides Treasury Board Secretariat officials with a submission outlining the cost estimates for pension administration. Treasury Board grants approval to charge specific expenditures based on the broad description provided in the submission. The RCMP has never exceeded the limit authorized by Treasury Board for annual administration expenses.
The RCMP has created charging principles for pension plan administration of expenses. While these are based on Treasury Board's fairly broad charging principles, the RCMP has also prepared more detailed charging principles in a greater level of detail.
In terms of process, all active members have a source deduction for the pension plan from their salary cheques. This deduction is collected by PWGSC, which issues the RCMP salary cheques. PWGSC then transfers the total of these deductions to the RCMP; the RCMP issues the cheques to the Public Sector Pension Investment Board banking agents for investment. The investment fund is completely separate from the pension administrative process.
As the Auditor General noted in her report, after the legislation was passed, the RCMP decided to modernize its pension administration in order to correct the many inaccuracies in the database and to move from a paper to an electronic format. Human resources and, more specifically, its National Compensation Policy Centre were tasked to do the necessary work to accomplish these goals. As part of the work, a decision needed to be made on whether the administration of the plan should be contracted out.
As the Auditor General's report states in the introductory points, “In 2003, allegations of fraud and abuse in the management of the Royal Canadian Mounted Police's pension and insurance plans triggered an internal audit”. These allegations were not directed at the CFO, but rather at officials at the National Compensation Policy Centre within the human resource sector. However, it was the practice that the internal audit reported to the CFO, and as such I was tasked by the former commissioner to conduct an internal audit, and we have done so.
I should also add that the internal audit, as of April 1, 2006--with the new government policy, as a result of Gomery and others--now reports directly to the commissioner.
Following the internal audit, an investigation was undertaken by the OPS, the Ottawa Police Service, and as stated in the Auditor General's report in June 2005, the OPS announced that it had found abuses of the pension and insurance plans, nepotism, wasteful spending, and an override of controls by management.
After the OPS investigation, the Auditor General carried out an audit to examine whether the RCMP had responded adequately to the findings of the internal audit and the OPS investigation, and whether there were additional issues that needed to be addressed. These audits and the OPS investigation identified several problems, which have been detailed in this committee.
With respect to what can be characterized as the financial issues, the Auditor General's report states: “We agree with the Finance Branch's conclusions that the RCMP used a reasonable method to identify, estimate, and reverse inappropriate charges to the pension plan.” As well, the Auditor General confirmed that the $3.4 million identified by the RCMP as incorrectly charged to the pension plan had been fully reversed and reimbursed.
The Auditor General's report further states: “The RCMP made it a priority to identify expenses that had been incorrectly charged to the pension plan. To address improper charges made in fiscal years 2000-01 to 2003-04, the RCMP reimbursed or credited the pension plan by about $1.9 million in 2003-04, and about $1.5 million in 2004-05.”
I submit to this committee that all the financial issues have now been dealt with. The position is supported by the Auditor General's report, which states: “The Royal Canadian Mounted Police (RCMP) has acted to respond to internal audits and the Ottawa Police Service (OPS) investigation.” Finally, the Auditor General's report states: “The following improvements made by the RCMP will help prevent inappropriate charges to the pension plan in the future...”.
In relation to contracting issues, in order to avoid problems that surfaced in this case, namely using Consulting and Audit Canada to circumvent RCMP contracting controls, new controls have been added to which managers in the RCMP must adhere in order to access the services of Consulting and Audit Canada. Managers must first discuss these requirements with an RCMP contract specialist, so we now have checkers checking the checkers.
As noted by the Auditor General's report, “The RCMP has taken measures to strengthen its contracting controls...It is our opinion that these measures are an adequate response to control problems. However, the problems we found were not due to an absence of controls but were due to management overriding controls.”
Our efforts to further strengthen the contracting and procurement process have been recognized by the Treasury Board Secretariat in the 2006 management accountability framework.
With regard to insurance, it has been suggested that the RCMP has wrongly charged the costs of administering the various insurance plans. As the Auditor General's report noted, the cost of administering the plans is about $2 million a year. However, it is erroneous to suggest that these costs should be charged to the RCMP appropriations.
Therefore, this committee should take note that the RCMP is not directly involved in insurance administration. Its role is to collect premiums to transfer to Great West Life. There is also an insurance committee chaired by the deputy commissioner for federal services and central region.
Further, with respect to the question regarding whether the RCMP should pay for insurance administration costs out of its appropriations rather than having such costs funded by plan members as part of their premiums, which is currently the case, I want to clarify that a Department of Justice legal opinion has stated that the RCMP cannot pay for insurance administration out of its appropriations without Treasury Board authority, and we do not have such authority. Treasury Board Secretariat officials agree with this opinion. This is a matter that I have been advised by both the former and current acting deputy commissioner of human resources they are actively pursuing with Treasury Board Secretariat officials.
Although some witnesses who appeared before this committee suggested that the RCMP should pay for the insurance administration costs out of its appropriation, they are wrong. Any change on how insurance administration costs are currently handled would mean the RCMP would be breaking the law and would be in contravention of the Financial Administration Act. I want to be very clear: I would never knowingly contravene the Financial Administration Act.
Now, I want to address a number of statements made about me at the public accounts committee on March 28, 2007. On March 28, 2007, former Staff Sergeant Ron Lewis stated the following:
...the OAG report, in paragraph 9.51, recommended that the RCMP develop charging principles for its insurance plans and review the amounts charged for outsourcing insurance plan administration according to these principles. This is very important: as long as Deputy Commissioner Gauvin is in charge of finance for the RCMP, there will be a conflict of interest, since he was accountable for the violations in the first place. An independent evaluation is required.
At no time did I exercise my line authority in respect of matters that are of concern to this committee. Given these circumstances, the comments of Mr. Lewis can only be termed as erroneous, at best. The CFO does not have responsibility for developing insurance principles. This is a responsibility of human resources, in consultation with the insurance committee, which is chaired by the deputy commissioner of federal services and central region. However, the CFO does contribute to the development of these principles for the pension fund based on Treasury Board pension charging principles.
Further, on March 28, 2007, Ron Lewis stated the following in reference to an Ottawa police investigation, and I quote: “It was turned over to the OPP. They came in and investigated. Nineteen people were either charged criminally or internally; some resigned before they were charged. Included were our chief financial officer, Mr. Gauvin, and our chief human resource officer, Mr. Ewanovich.”
With reference to the OPP investigation, the 19 people Mr. Lewis referred to were regular members of the RCMP, in addition to civilians. I was not the subject of the OPP investigation. I was one of nearly 200 individuals who were interviewed, which is to be expected given that I am the chief financial officer. As I have already confirmed, I received an informal disciplinary letter requiring me to take a day of ethics training. And I did.
Mr. Lewis also intimated that I was the subject of the OPS investigation relating to the events at hand. That is not correct. It is irresponsible for Mr. Lewis to make an assertion without the facts to support it. The fact is that although I was interviewed as CFO, I was one of 238 individuals who were interviewed. To my knowledge, I was never the subject of the investigation.
To conclude, it is a privilege for me to serve in the RCMP and to work every day alongside many highly qualified and dedicated managers and employees--that is, regular members, civilian members, and public servants alike--across Canada, in the best interest of Canadians, and 99.9% of these individuals are committed to doing a good job and supporting each other in terms of efforts, regardless of their category.
Finally, a small and vocal minority are openly opposed to civilians playing any role in the management of the RCMP, and they will go to extremes to discredit civilians' valuable contributions. This week I have discussed this with the commissioner, who stated that any unfair bias against civilians will not be tolerated. It is not only detrimental to the working environment of this great organization, but it undermines the traditional trusting relationships that should normally exist between and among managers and employees within the RCMP.
Thank you.
:
I know there were some concerns about this getting political, but after Mr. Rodriguez's comments, I feel I need to say a few things.
I'm looking at Mr. Sorenson's questions from April 19 and April 21, 2004, and I'll read some of the comments he makes over his four questions. He says:
In fact, it was that commissioner who shut down the initial probe into the possible fraud and abuse of authority within the force. Only after the scandal was made public in the media was the Ottawa police service called in to investigate. [...] Are the Ottawa police investigating the commissioner's conduct as well as the misappropriation of funds?
Later he says:
...the RCMP commissioner's job is to defend and protect past and present members of the force, not to run defence for this scandal plagued government across the way.
The mismanagement of pension funds strongly suggests that the RCMP commissioner has betrayed members of the force and, in so doing, has failed to do his job.
Later, on April 21, he says:
...the Minister of Public Safety was quick to defend the commissioner of the RCMP when questioned about his potential involvement in the misappropriation of $4 million...
It is the duty of the minister to protect and defend Canadians' interests, including 4,000 RCMP pensioners. Why has the minister prejudged this investigation?
The only comment that the minister made at the time was:
...let me reassure everyone in the House that there is no conduct on the part of the commissioner that needs to be investigated.
Over and over again, Mr. Sorenson went directly to the heart of the matter that we are discussing today, which we've been discussing in this committee: RCMP senior management's covering up the issue.
Over and over again, actually, in your further answers to the questions, you said the one comment, and then you just ignored the question and talked about something completely different every single time.
As for Mr. Wrzesnewskyj's comments, it seems that his main argument in this issue is this: why haven't you uncovered all of our Liberal government's mistakes and mismanagement fast enough? That seems to be the main criticism that he has, that we're not doing enough.
We're trying as hard as we can, Mr. Wrzesnewskyj, but there's a lot of mismanagement to find.
My question is for the minister. You said you spoke regularly with the commissioner, but you never spoke with him about this issue, which I find quite astonishing. It was a very serious issue at the time, so why not? Why did he not bring it up with you when you found out about it? Why didn't you ask why he didn't bring it up with you? It seems that it would be a very serious issue.
Of course, part of the issue was the cover-up, which Mr. Sorenson brought up time and time again. Wasn't there a question in the back of your mind that maybe, by not even bringing it up with you, perhaps he was covering it up from even you?