NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 5, 1998

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Good morning, colleagues. I'm pleased to call to order this May 5 meeting of the Standing Committee on Natural Resources and Government Operations.

We're pleased today to have with us the Auditor General, Mr. Denis Desautels, and with him, from the Office of the Auditor General, Mr. Jacques Goyer. And from the Treasury Board of Canada Secretariat we have Cheryl Fraser, assistant secretary, labour relations and human resources; and Mr. R.J. Neville, assistant secretary, expenditure management sector.

They are appearing before us today to make a presentation and discuss with us one of several reports issued recently, that being the report on expenditure and workforce reductions in the public service and in selected departments of the Government of Canada. Our committee deals with natural resources and government operations; this is obviously a government operations issue.

We're pleased to have you with us today, Mr. Desautels, and your officials and officials from Treasury Board. We look forward to your opening presentation, and then we'll allow members to ask questions.

Before we start, members, don't run off after we're finished with the Auditor General. We have a short future business meeting to deal with after that.

With that, good morning and thank you for being here. I give the floor to you.

Mr. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman, and thank you for the invitation to meet the committee and discuss chapters 1 and 2 of our April report on downsizing in the public service.

The chapters deal with the management of expenditure and workforce reductions. Chapter 1 discusses the reductions from a broad public service perspective, while chapter 2 reviews how these reductions were carried out in a number of selected departments.

First, it should be noted that departure incentive programs have contributed to deficit reduction by helping reduce personnel costs and the number of public servants. Between 1992 and 1997, 46,000 left with various incentives. Of these, close to 30,000 left between April 1995 and March 1997 as a result of program review decisions. Ministers and senior officials played a key role in making sure departments met their targets for spending cuts.

We've also noted significant improvements since our 1992 audit of workforce adjustments. Many best practices were used and there was general compliance with Treasury Board policies and guidelines. Employees who left with departure incentives were generally treated in a humane and sensitive manner and there were no significant workforce disruptions.

However, the reductions have not been without costs. Using its own payback formula, the government has estimated that between April 1995 and March 1999, downsizing costs will be some $3.2 billion. The net reduction in salary and wages at the end of that period is expected to be in the order of $2.5 billion. This means it's taking slightly longer than anticipated for the government to recoup its costs.

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We noted the government developed a framework and tools to help departments manage workforce reductions. However, one of the tools—the payback formula—was not well understood and was communicated too late, after departments had approved incentives for a significant number of employees.

[Translation]

We also found that departments did not focus enough on the costs of providing incentives for employees to leave or retire, or on finding more cost-effective ways to reduce their work force.

In addition, the extensive use of volunteerism before identifying surplus positions resulted not only in cases of more people leaving than anticipated, but also contributed to increased staff shortages in some areas and a loss of much needed experience and skills.

There are consequences on human resources and operations resulting from the departure of a significant number of people. These need to be addressed. For instance, there are some questions as to whether the remaining work force will be able to cope with the workload and meet program objectives. Rejuvenation and renewal issues facing the public service have also been amplified.

We also raise questions about the strategic management of work force reductions for critical groups where surpluses may exist in some departments but where shortages may exist in others. We found that there is a need to clarify the roles and responsibilities of the departments and central agencies for the management of work force reductions.

Finally, I feel that it is important for Parliament to be aware of the significant costs and impacts of work force reductions. As usual, lessons learned can be useful in that they can be applied to future initiatives. We have called for a full accounting of costs and savings and you will note in paragraph 2.121 of Chapter 2, the Treasury Board Secretariat has agreed to report comprehensively at the end of Program Review, scheduled for March 1999.

[English]

Many of the issues raised in the two chapters are not new but have been amplified as a result of workforce reductions. These issues will require strong resolve and leadership to address them adequately.

This concludes my remarks. We would welcome questions from committee members.

Thank you, Mr. Chairman.

The Chairman: Thank you.

Are there any comments by the Treasury Board delegates? Ms. Fraser, please.

Ms. Cheryl Fraser (Assistant Secretary, Labour Relations and Human Resources Management Division, Treasury Board of Canada Secretariat): I would like to open by saying thank you to the committee for allowing us to come and talk about the chapters that support the view that program review has contributed to rationalization of programs and the associated expenditure reductions have been successfully implemented.

I just want to take a few minutes, if I may, Mr. Chairman, first to review what the government has accomplished from expenditure and workforce reductions, and secondly to review the government plans from here.

First off, what has the government accomplished? We have to remember that workforce adjustment and reduction involves significant expenditure reductions. These have been the most significant since the Second World War. The Auditor General has recognized the magnitude of the changes resulting from program review.

I won't go through the six program tests—they are outlined in the Auditor General's report—but I just want to make reference to the fact that ministers and their officials were asked to submit programs through the six tests when making their decisions for reductions.

The results of the intensive review speak for themselves. By the end of fiscal year 1999 the program review will have saved the taxpayers of Canada approximately $2 billion in program spending, with an ongoing annual saving of $9 billion each year thereafter. By the end of fiscal year 1999 we will have saved the Canadian taxpayers over $7 billion in reduced salary and wage costs, with an ongoing saving of $2.5 billion each year thereafter. Considering it cost the government $3.2 billion for departure incentive packages, this is a very good return on investment.

With this we now have a smaller public service. Over the past year we've seen a reduction of approximately 50,000.

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Treasury Board Secretariat and departments struck a new accountability relationship to carry out the necessary reductions. TBS focused its efforts on developing a framework of tools, policies and authorities in consultation with all of the departments, its stakeholders. Deputy ministers accepted full responsibility and accountability for managing their reductions within the framework.

Also important was the use of the business planning process. This served as a key tool to establish the foundation on which this adjustment challenge was effectively managed and met.

I think it's very important to note—and the Auditor General's report has noted this—that we did treat the public servants who left both fairly and humanely. We offered reasonable and competitive departure packages in a targeted and focused manner. There were no work disruptions and very few involuntary lay-offs.

I'd also like to point out, Mr. Chairman, that when the Auditor General reviewed the Treasury Board Secretariat's overall management and employment adjustment in 1992, a number of recommendations were made for improvements. We listened to these recommendations and implemented measures to address them. I believe this report acknowledges that.

The question is, where are we today? We remain committed to public service reform and the fundamentals of getting government right. We don't deny that the profile and the occupational group distribution of the public service has changed. This comes both as a result of the reduction decisions and the evolution of occupations and new technologies.

To continue to be a leading public service, we must retain, motivate and attract a corps of talented and dedicated public servants. We've been challenged by factors such as these reductions, loss of experienced employees, competition from the private sector on recruitment, criticism of the public service, and lack of attention to human resource management. That's why the government has launched the major initiative called “La Relève”. La Relève has given rise to an unprecedented focus on people who provide service to Canadians.

It includes, for example, the dedication of resources for selective recruitment of certain shortages and key groups. It also includes the implementation of the universal classification standard, which will enhance an employee's capacity to move easily through the public service to gain diversity of knowledge and experience.

In closing, I want to reiterate that we are committed to public service reform. Program review has helped us redefine the business that government is best placed to provide Canadians and at the same time to reduce the cost of delivering services.

We have begun, and will continue to focus intensely on, renewing and rejuvenating the skills of people who provide services to Canadians in order to ensure that we have a vital and effective public service for the future.

I'd like to thank you, Mr. Chairman, for giving us the time to discuss these matters with you. We'd be pleased to take questions.

The Chairman: Thank you, Ms. Fraser.

We thank you both for your presentations. It's great to have those two perspectives.

We'll start the questioning with Mr. Gouk, please, and then to Reg Bélair.

Mr. Jim Gouk (West Kootenay—Okanagan, Ref.): Thank you, Mr. Chairman.

I'd like to clear up a couple of things from the Auditor General's report, chapters 1 and 2.

It was just said that $3.2 billion in incentive packages were paid out. On page 1-24, it lists a number of areas where those incentive packages were paid. Under “Technical Groups”—air traffic control, electronics, and radio operators—it shows, particularly in the case of air traffic control—and I believe that's the AI group rather than the AT; I don't know why that discrepancy is there—virtually everybody that was an air traffic controller got an incentive package to leave.

Now, I know there was the creation of NAV CANADA, which resulted in the transfer of those employees from the government to a not-for-profit corporation, but their pensions were transferred. That's an entitlement, not an incentive. They did get their severance pay, but again, that was a contractual obligation, not a package to convince them to go.

I'd like to know specifically what the air traffic control group got by way of an incentive to go when in fact their job had ceased to exist. What benefit did they get, exactly, that would come under the heading of “incentive”?

Mr. Denis Desautels: Mr. Chairman, I'll ask Mr. Goyer to answer the question.

Mr. Jacques Goyer (Principal, Audit Operations Branch, Office of the Auditor General of Canada): Thank you, Mr. Chairman.

What we're referring to—and I would agree with the honourable member—is that they didn't receive what is called “early retirement” or “pension waivers” and things like that. However, in transferring air traffic controllers to the private sector, or to NAV CAN, the government has paid severance pay at what we call the “lay-off rate”.

I'd like to point out here that when you leave voluntarily, or when you retire, you're entitled to severance pay, but that severance pay is different from when you are deemed to be laid off.

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In our report on NAV CANADA—it's written in chapter 1—we estimated that because severance pay was paid at the lay-off rate, the government had an additional expenditure in severance of $31.5 million out of $112 million.

So we paid severance at the lay-off rate. There's an additional cost or an incremental cost to the government because we paid it at the lay-off rate. Just to show you how significant it can be, say you're 50 and you have 25 years of service. If you leave the public service, you're roughly entitled to half the severance pay, which is twelve and a half weeks. However, if you're going to be laid off, you get 25 weeks. So an additional benefit on severance was received by the people transferred from Transport to NAV CANADA because they were paid at the lay-off rate.

Mr. Jim Gouk: What about the number of buyouts? I realize this might be a hard figure for you to give me, but could you give me some sense of proportion on this? Out of the number of buyouts that occurred, how far down the road would those people likely have left in any case? When you offer a buyout, obviously if somebody who's 35 years old takes a buyout then it's a significant change in their career path, but if you offer a buyout to somebody who's 53 and a half who's going to retire when they're 55 anyway, that's an entirely different picture. Do you have any kind of general sense of the number or proportion of the people who were given buyouts who were close to leaving in any case?

Mr. Jacques Goyer: It's very difficult to precisely answer the question the honourable member has asked. For one thing, there's no mandatory retirement age in the public service any more. That was eliminated in 1986. So even if you are technically entitled to retirement, you don't have to leave. We've seen cases of people who are past 65 or have the right combination of years who continue to work. So there is no longer that obligation to retire. That's case number one.

Two, it's also obvious that what we call attrition has fluctuated a lot during the period that we examined. For example—it's in the chapter—National Defence, at some point in time, had a surplus of pilots. Also, the airlines were not hiring pilots. The turnover of pilots was very low, so they decided to cash out a number of them. But of course the airlines picked up their business, and then suddenly attrition started to increase. Eventually they had a shortage. With peacekeeping requirements and other incentives that were paid, plus an economy that was changing, they ended up with a shortage.

So there are a number of people who retired who were eligible for pension who got incentives, but as I mentioned, there was no obligation for them to leave.

Mr. Jim Gouk: One of the other things—

Mr. Denis Desautels: If I may just add a little note to Mr. Gouk's question, one of the points we raised in our chapters is relevant to your point, I think. The federal government has been offering packages over time to people to retire. Program review is one. Before that, we looked at previous programs. So a lot of people kind of hang around and wait for those packages. So if packages become a fact of life, then normal retirements actually slow down. I think we raised that issue in those chapters, and that should be kept in mind.

Mr. Jim Gouk: Yes, that's a good point.

The Chairman: Ms. Fraser, is this on the same question?

Ms. Cheryl Fraser: Yes.

I just wanted to raise a reminder of the magnitude of the numbers we were looking at as well during program review. It was our belief during program review that attrition alone couldn't achieve the size that was required in reductions just from what we knew. My colleagues at the Auditor General's office are quite right that it's very difficult to estimate.

Mr. Jim Gouk: Yes.

Mr. Chair, I've actually got two more questions. If I don't get them in now, if it comes back, that's fine with me.

The Chairman: You can try for one now maybe.

Mr. Jim Gouk: One of the things you mentioned is departments' initiatives to reduce costs as opposed to reducing staff. I guess there's a generalization that I look at there that says that if you've got ten people doing a certain job and it costs x number of dollars for them to do that and you reduce the cost, then in theory you're reducing some of what they're doing. But if you're saying you're still going to keep them...

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If you reduce the costs without changing the numbers, what exactly is the effective role of those people who remain? I don't know what the numbers are, but if there are 10,000 people and you say you're going to keep the 10,000 people but you're not going to do as much, what has actually happened to the role they're playing? What happens if you're saying you're still going to keep them all, you're just not going to ask them to do so much because that's how you're going to reduce your costs?

Obviously there are other efficiencies you can introduce to reduce those costs. Is there an element of simply doing less but potentially still keeping the people there?

Mr. R.J. Neville (Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat): I have a couple of points.

I think we're trying to state that the original plan when we announced program review was to reduce the expenditures. The focus was on a reduction of expenditures, not on a reduction in the number of individuals or positions. That wasn't the focus. However, one has to be realistic. Approximately 70% of our expenditures in the direct program spending area are attributable to salary costs, so you're probably going to have a reduction.

We left that decision up to departments. It's a question of how DMs use their accountability and the resources at their disposal to make the final decisions.

I think we have to be quite clear that going into this exercise we were looking at a reduction in expenditures, not a reduction in positions. There probably has has to be a correlation, but we left it entirely up to the DMs.

We have business plans, which we have been asking the departments to put forward for a number of years. In those business plans they have been advising us of their intentions and receiving Treasury Board concurrence in order to proceed. Then you of course work through the implementation plan.

What you're seeing today is the result of that process having evolved over the last three or four years, with a key difference from what we may have done in the past, when we were looking at reductions in the number of positions. In this case we're looking at a reduction in expenditures, which obviously has an impact on the number of positions that are available to a deputy minister's resource allocation.

Mr. Jacques Goyer: Just to complete the answer, I agree entirely with what's been said. The focus was on reducing expenditures.

As we mentioned in chapter 2, some departments had options—for example, raising user fees and getting into partnerships with the private sector to get funding. As a result, these departments had more options and reducing staff was less necessary, if you like, in those departments compared with those that just had staff and didn't have any options to sell or have user fees.

Mr. Jim Gouk: Do you want me to try my last one now?

The Chairman: I'll come back to you, Jim.

Reg Bélair, please.

Mr. Réginald Bélair (Timmins—James Bay, Lib.): Thank you, Mr. Chairman.

My first question would be to Ms. Fraser, I guess.

After program review was implemented, it was known that many public servants were laid off, some of them with a fairly high amount of money as a severance, only to be rehired on contract the week after. Is there any truth to this? If it is true, could you give us the difference in dollars saved? That was the object of the exercise.

Ms. Cheryl Fraser: The rehiring question is covered in chapter 2 of the AG's report, and I think the report does identify some particular areas.

From the Treasury Board's perspective, I have to say that we have implemented a very comprehensive post-employment regime policy. Employees resigning from the public service with a departure incentive are not expected to return in any capacity.

At the board we've taken a fairly heavy hand on this departure incentive by making it well known to all public service managers. I believe it was September 1995 that a circular was sent to all public service managers to deal with this issue.

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Mr. Réginald Bélair: Are you saying, Ms. Fraser, that many civil servants were not given contracts after they had been laid off?

Ms. Cheryl Fraser: I think the policy is fairly strict and it's fairly direct. It confirms earlier terms and conditions that post-employment is not to occur. There are terms that—

Mr. Réginald Bélair: Is it a fact, though, they did not get rehired? These are not the stories we've been hearing for the last three years.

Ms. Cheryl Fraser: The Auditor General does highlight some problems in chapter 2. What we're noting is that in 1995—and I believe most of the problems referred to in chapter 2 may have occurred pre-1995—we did go out and try to have a very strong post-employment regime policy instituted. The onus and accountability are on deputies when hiring employees or contractors.

In fact, I believe for those individuals who have been in the public service and are returning as contractors or consultants, there is a $5,000 ceiling on the amount of money they can earn, whether competitive or non-competitive, for the duration of their window period. Also, former public servants in receipt of a pension are subject to fee abatement.

I believe the Auditor General has noted in his report that the controls introduced by the secretariat on post-employment are now working. The report indicated that very few recipients of the incentives have come back as employees. I believe the number is that 1.3% of former employees who received departure incentives were rehired. On a base of almost 50,000, that's quite low.

Mr. Réginald Bélair: I don't think she answered my question.

[Translation]

My second question is for the Auditor General. Have you taken the time to inquire with members about the impact of the reduction in the number of employees and the increase in the workload that that has caused for us? Have you asked the members about that? I tell you our workload has increased by 25 percent, I would say, and there are fewer employees. Have you looked into that?

Mr. Denis Desautels: Mr. Chairman, we have not looked into the impact this has had on the members in particular. We nevertheless made certain remarks on the level of service in certain departments and on the extent to which service levels had been affected by employee departures. Service levels affect everyone who relies on employees, including members of Parliament.

We noted that, in certain departments, there had been a drop in service which we hope will be temporary. Departures have affected service levels in certain instances.

Mr. Réginald Bélair: I have to tell you that we're ultimately the ones who have suffered the consequences of this. Would you be ready to recommend that the government increase our operating budgets?

Mr. Denis Desautels: Mr. Chairman, it would be outside my mandate to make such a recommendation. It's up to the House to decide that.

Mr. Réginald Bélair: Without making a recommendation, you can nevertheless indicate in a footnote that members' workloads have increased. In my particular case, I had to lay off an employee in order to balance my budget. The workload has increased and I've also had to lay off an employee. The impact of employee layoffs has been fairly great.

Mr. Denis Desautels: Mr. Chairman, we talk about the post-cuts phenomenon in our chapters. How do you manage the remaining employees, whose workloads, in some instances, have not declined as a result of the departures, and how do you handle the other problems that this leaves? The government has achieved its main objective, which was to reduce its expenditures, its payroll, but that of course leaves a legacy of certain problems that have to be solved.

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We talk about some of those problems. How to manage those who remain so that they can do the work properly? How do you rejuvenate the public service? We observe that, despite the departures, the average age has not fallen. In fact, it has increased because we have lost a lot of young people. So there are problems that have to be solved. The problem you raise is one of those problems.

Mr. Réginald Bélair: One problem too many, among others, I should say.

My last question, Mr. Chairman, concerns...

[English]

The Chairman: Reg, on your first question—

[Translation]

Mr. R.J. Neville: With your permission, I would like to raise two points concerning your first question.

First, as regards service levels, I should say...

Mr. Réginald Bélair: Are we talking about rehiring employees?

Mr. R.J. Neville: No, no. We're talking about service levels.

Mr. Réginald Bélair: Okay.

Mr. R.J. Neville: For service levels, a number of departments have determined that, in certain cases, there has been an increase in level of service because they have had the opportunity to take a closer look at their programs and to implement re-engineering processes that today enable them to be more effective with fewer resources.

This does not mean that all the departments can take pride in this kind of situation today, but it's a fairly common situation in a number of departments.

I would like to raise a second point. There's the personnel succession that has been announced. This is a federal government initiative designed to restore to the organizations, the departments, a large number of employees who have the qualifications and qualities currently being sought. So some measures have been taken in the wake of the program review which, as far as possible, will help achieve a better Public Service than previously.

Mr. Réginald Bélair: One final question, Mr. Chairman.

Mr. Desautels, my question concerns subcontracting. As you know, in the wake of the reorganization, restructuring, etc., a number of departments have assigned their mandates to agencies or subcontractors. Have you taken the trouble to compare previous costs with the current costs involved in using agencies?

Mr. Denis Desautels: I'll ask Mr. Goyer to answer that question.

Mr. Jacques Goyer: In paragraph 1.60 of our Chapter 1, we talk a bit about the changes in government spending profiles. Although payroll has declined considerably, there has been a significant increase in consultation costs. Although we cannot draw any conclusions for the government as a whole and say whether or not this is justified, we do raise a certain number of questions and feel this trend should be monitored.

We also mention this in the case of temporary help. After observing a decline in temporary help, that is to say staff provided to the government by personnel agencies, we now realize there has been an increase in certain departments. Is this increase temporary? Is it permanent? We know from Treasury Board calculations that this is not always the most efficient option. So we have some questions, but we have not drawn any conclusions on this issue because it is too soon to do so.

You have to realize that the program review lasted four years and that some departments had not finished making their cuts. But these are issues that have to be looked at and this situation must be monitored closely.

[English]

The Chairman: Mr. Neville and then we will continue with the next questioner.

[Translation]

Mr. R.J. Neville: It seems to me it's quite reasonable to require deputy ministers in departments that have undergone cuts to make the appropriate decisions respecting the subcontracting issue. If in their view it is more cost-effective to resort to subcontracting than for the departments to spend money on salaried employees, that's really their decision.

They have been given responsibility for implementing expenditures and they should also be given the power and authority to make decisions for the better management of their departments.

Mr. Réginald Bélair: Ultimately, are we saving money by doing that? That's what I want to know.

Mr. R.J. Neville: We are obviously saving money in particular cases where it can be shown that it is in fact cost-effective. The departments are expected to make decisions accordingly and we will then conduct a review to determine whether they have properly managed the situation.

[English]

The Chairman: Thank you, Mr. Bélair.

We'll move to Mrs. Dockrill. Then we're going to Gerry Byrne and back to Jim Gouk.

Welcome to our committee, Mrs. Dockrill.

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Mrs. Michelle Dockrill (Bras d'Or, NDP): I apologize for my tardiness, but I just can't make that walk in less than a minute and a half.

I'm going to leave it to the panel, Mr. Chairman, to decide who would prefer to answer this question, but it's just a quick question. I'd like to get back to the reduction of personnel. I'd like to know what effect, if any, the reduction has had on maintaining experienced personnel.

Ms. Cheryl Fraser: I think in my opening remarks, Mr. Chairman, I referred to the La Relève initiative. There's no doubt that when you go through an exercise of this magnitude over this period of time, there will be a need to have a very good look at the public service for the future.

A number of initiatives are under way that specifically look at particular groups that may be seen to be “at risk”, at risk from the point of view of looking at numbers for the long term and looking at the skill set required for the long term. We are looking at specific service-wide demographic analyses on a number of groups as a result of the reductions, including the at-risk communities such as the IT, scientific, technology, executive, and I believe communications communities.

We also are looking at the specific needs of the HR community, and from a Treasury Board perspective we are championing this renewal work. The universal classification system, which is due to come in very soon, will be help in that it will be a foundation for a renewed human resource framework and should support a bit more movement around the system for those individuals who have experience but are in different areas of the system.

The bottom line is we recognize there are some groups that need a bit more focused attention. That is being done. Those groups are IT, the scientific, communications, and executive groups, but we are looking at the public service as a whole and working with deputies and departments to make sure they have the people with the skill sets and the individuals required to provide good service to Canadians.

Mrs. Michelle Dockrill: What I hear you saying is that future problems are a result of the reduction. Is that what I'm—

Ms. Cheryl Fraser: Future problems?

Ms. Michelle Dockrill: You're saying at-risk groups.

Ms. Cheryl Fraser: What we're saying is we recognize there are some communities across the public service that require specific attention for renewal, recruitment, and retention, and those groups are getting that horizontal attention. It's not department-by-department attention, but straight across the public service.

Take, for instance, the scientific group. We are looking at that group as a whole, straight across the public service, to ensure we have what is required from that group for the future.

Mrs. Michelle Dockrill: But my question was with respect to the reduction. Is what you're talking about a result of the reduction in personnel?

Ms. Cheryl Fraser: We have to realize that what we're talking about is not only a result of program review. A number of external factors have caused some problem. One of the things is competition from the private sector. In particular groups we have lost a number of people through that competition. I think the IT group has been recently referenced in the media.

Program review, in combination with a number of external factors, has told us that we need to focus on some particular communities or groups. I mentioned that the IT, scientific, executive, and communications groups are areas in which we're doing very specific work to ensure that we have a very qualified and strong public service for the future.

Mrs. Michelle Dockrill: You're still not telling me whether or not some of this is a result—

The Chairman: Perhaps Mr. Desautels can answer your question too, Michelle.

Mr. Goyer.

Mr. Jacques Goyer: I think there's a variety of factors. For example, I can look at auditors. It's been alleged by the Department of National Revenue that there's a shortage of auditors. If you look at this from the work we've done, these auditors didn't leave because of incentives. In other words, they left because there was a market or opportunities outside the public service. The department in some areas, such as large case files, has reported shortages. In other cases incentives have made the turnover rate or the attrition rate trickle. In other cases the total separation rate increased. So it's a variety of factors. You have to look at it almost group by group.

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There's a shortage now in certain areas. There are shortages and they are reported in La Relève. We're talking here about policy analysts, auditors, computer systems people, financial people or mathematicians, statisticians, engineers. There are shortages in some areas, and that's now the challenge of the government. Some of these shortages were caused by the reduction. Some of the causes are the market offering salaries we couldn't offer.

Mrs. Michelle Dockrill: Thanks.

The Chairman: Thank you very much.

Mr. Byrne and then Mr. Gouk.

Mr. Gerry Byrne (Humber—St. Barbe—Baie Verte, Lib.): Thank you very much, Mr. Chairman.

This is actually becoming a more interesting subject as we move on than I had anticipated.

Some 46,000 have left with incentives. I have a couple of questions, and I'm going to table some requests for further information. Is 46,000 the total FTEs that left the federal civil service, or is it just the number that left with incentives? In other words, I'd like to know if casual employees or other contractors are left out of that group. Is that the fundamental number?

Mr. Jacques Goyer: These are the people who left with incentives. This is not the total number of people who left.

You have to remember that for public servants, at least, those entitled to incentives are most of the time the indeterminate employees, the permanent employees. Term employees were touched by downsizing, particularly at the beginning of downsizing in 1995-96, for example, but we have noted an increase now in the use of casual and term employees. That's not necessarily bad. It depends on how long and what eventually happens in the long run.

This is also not the total reduction. You have to understand that in addition to the people leaving with incentives, a number of people left on their own because there's a market, there are opportunities, they want to retire. Some didn't wait for incentives; they just retired.

At the same time, the government hired a number of people: terms, casuals, and some indeterminates. The 46,000 is simply the number of people who received incentives from 1992 to 1997.

Mr. Gerry Byrne: I think that's a very interesting point, because what we're talking about here is providing compensation for people who actually do have marketable skills. That's an interesting sort of element in today's compensation issues.

I was wondering if it would be possible for Treasury Board to table with this committee a briefing document, basically outlining how many were affected by the downsizing and how many people within that scope received departure incentives versus how many received no incentives whatsoever. This would be to clarify that gray area we seem to be talking about. I really want to focus on those with extended service, which are the indeterminate people.

In addition to talking about the determinate staff—the contractors and others—after a discussion on that I really want to zero in on those who are of indeterminate status.

I would also like to request a schedule or chart of those who received departure incentives, how the departure incentives were calculated—as simple as possible without diluting the detail or making it over simplistic, but providing a description of how those departure incentives were calculated—how many people were affected, and the average cost for a departure incentive per employee, including counselling and other non-cash measures. Basically try to put it into a per employee category. I understand there was a difference in the schedule for some employees with 10 years of service and those with 20 years of service, senior executives and regular full-time employees.

I'd also like to get some sort of calculation, because I think those statistics would be readily available, on how many former employees who received departure incentives between 1994 and 1998 were rehired and how many of them actually received a federal government contract for service, which I think is relevant.

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So without asking the question, if an analysis of that particular issue could be tabled to the committee, I would appreciate it. As well, I would like to ask the Auditor General a question that probably could be answered here.

The Chairman: Cheryl, do you have any comments on those requests?

Ms. Cheryl Fraser: We'd be more than pleased to reply. I would just like to draw people's attention to the table on chapter 1, page 32, of the Auditor General's report, which sets out the various departure incentive programs and describes how they may be applied. But if more information is—

The Chairman: Maybe that could be included.

Mr. Gerry Byrne: What's missing here is numbers.

Ms. Cheryl Fraser: Okay.

Mr. Gerry Byrne: That's I think sort of an important point. I would like to know whether the cost of our departure incentive program to the Government of Canada has ever actually been calculated across the board?

Ms. Cheryl Fraser: If I may, Mr. Chairman, there is another document that we would be pleased to provide. It's a copy of the annual report on the federal public service employment statistics. That has some of this information in it as well for the last two years.

Mr. Gerry Byrne: Cheryl, would you be able to boil it down without me sorting through a document?

Ms. Cheryl Fraser: Sure, I'd be more than happy to.

Mr. Gerry Byrne: I'd like to know exactly what the cost of the departure incentive program has been, and how many people were affected by it. By doing that, we can get sort of an average cost per employee.

Mr. R.J. Neville: Before we go any further, if we could, could I ask the clerk to distribute the documentation I brought this morning? It's specific to that question. I think it can answer that at this point, which I think is critical, because you seem to be very focused on that issue. There are two different packages there. There's one of each.

Mr. Gerry Byrne: That's always useful to have. The second question is that—

The Chairman: We'll be hearing from Treasury Board with all these questions.

Mr. Gerry Byrne: Absolutely.

One of the things I think the Government of Canada and the Clerk of the Privy Council wanted to achieve was a better policy-making opportunity for Canadians to receive better governance. The Auditor General has pointed out that basically there is a consequence in terms of policy-makers, staff, being able to fulfil their policy analysis and preparation on the part of the federal government and to deliver the required governance of programs and services.

I guess the task of La Relève would be to work around that and to structure a more efficient and effective public civil service under those particular circumstances.

Within the context and spirit of the Constitution under section 36, it specifically says that all Canadians should receive equal levels of service across the board. Has there been an analysis done of the consequences of program review, of public sector downsizing, on a provincial basis for departments? If so, have the cuts been equally dispersed across the country in terms of regions and into individual provinces within regions? Has there been significant downsizing in certain regions more so than others? Within the regions, has there been significant downsizing relative to that in the other provinces within the region itself? Have you looked at that issue?

Mr. Denis Desautels: I'll ask Mr. Goyer to answer your question.

Mr. Jacques Goyer: The short answer is no, we did not look at the effect of reductions on each of the provinces. What we know is that in some departments, environment being one, the issue of reductions in the provinces coupled with the reductions at the federal level may have triggered some problems. We're investigating some of them in some of the audits we're carrying out.

Mr. Gerry Byrne: I think I need to just make a point of clarification. When I refer to provinces, I don't mean provincial governments. I mean the federal presence in each of the provinces.

Mr. Jacques Goyer: We didn't audit that.

Mr. Gerry Byrne: Do you think that would be a useful field of study for a future Auditor General's report chapter? Under the circumstances of La Relève reattempting to provide better quality service for Canadians across the country to provide a more effective and efficient public service and policy-making shop within the federal government, I would like to know, as a member of Parliament, especially one coming from Newfoundland, what exactly the consequences of the program have been in terms of the federal presence in my particular province, whether or not program review has been shared equally across all provinces, and whether decisions taken by individual departments have had a major net impact on my particular province or others, or other regions within the country. I think that would be a useful initiative, and I think probably Treasury Board has already engaged in that, in terms of a broad overview.

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The principle is fairly clear. All Canadians deserve and should expect equal levels of service in all parts of the country. If the consequences of program review have been such that individual departments acting as individual departments have withdrawn from my province of Newfoundland, for example, into centres like Halifax, Moncton, or Saint John, New Brunswick, and the collective effect of that has been that there's a major downsizing of the federal presence in my province, then I would argue, relative to the maritime provinces, that the citizens of Newfoundland and Labrador, who are Canadian citizens, are receiving a lower standard, a lower access to public services and programs, because it is public servants who deliver those programs and services.

If someone could respond—either Treasury Board or the Auditor General...

Mr. Denis Desautels: I can start, Mr. Chairman.

We have in the past done work on service quality in different departments. The basis for that work was government objectives or policy to provide adequate or improved levels of service to the Canadian public and to measure the level of service they're providing to Canadians, without any distinction to where those Canadians are.

We've reported on that in the not-too-distant past, but this is the kind of work we plan to do again in the future. It's hard to do across the total government at once, but we will be at different points in time looking at that for individual departments and determining to what extent the government is really implementing its policy on service quality and the measurement of the service quality achieved.

I think the concerns of Mr. Byrne should come through in that kind of analysis. Actually I think they should come through if individual departments do the kind of reporting they're expected to do on their levels of service. The first obligation is on departments to report on that. And we see that as an area that would be subject to future work on our part.

The Chairman: Ms. Fraser, on the same question.

Ms. Cheryl Fraser: We quite agree that a lot of this will come through, I think, the business planning process as we have a look.

In general, the statistics I referred to previously on the public service reductions by region in 1995-97 have shown that on average regions have been reduced much the same, except there have been a couple of anomalies in reduction of personnel. Newfoundland is one and New Brunswick is another.

We have to make sure that the reduction of personnel is correlated with service delivery, and that's something I cannot answer today. It would be unfair to conclude that there has been direct correlation with the service delivery to Canadians. That's the point we do not have at hand today, so we would be pleased to come back.

Mr. Gerry Byrne: I'd just like to go on record to say that I am very, very concerned about this particular issue. While there's been equity within the regions themselves, I think we have to take a very, very serious look as to whether or not Canadians are receiving equal levels of service across the board.

For example, when you deal with province of Newfoundland and Labrador, the citizens from Charlottetown, P.E.I., for example, who have to deal with the regional headquarters based in Halifax, have different transportation costs in terms of access to regional managers and the senior executives within various government departments. They have different long-distance telephone rates from citizens from say Goose Bay, Labrador, of my province.

I think what has happened within the regional context of program review is that managers, acting in the best interests of their individual departments, have fundamentally withdrawn from the province of Newfoundland and Labrador in the name of efficiency, not taking into consideration the potential consequence of the disparity of levels of service.

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I repeat that programs and services are delivered by public servants. If you do not have equitable access to public servants, you do not have equitable access to public services. That cannot be understated.

With that said, I think we all have a responsibility to contribute to the national efficiency of the federal government. I'd really encourage further work on that particular basis.

The Chairman: Thank you, Mr. Byrne. Well put.

Mr. Gouk.

Mr. Jim Gouk: As Gerry said at the beginning, it gets more interesting as we go. Each question and response triggers a bunch more.

One of the things that was mentioned during that last round was that there was a reduction of 46,000 FTEs as a result of the incentive program, at a cost of $3.2 billion. That averages out to $70,000 per person. Is that the real average cost of the incentive program over the last five years?

Mr. R.J. Neville: Each case is separate, as you can appreciate, depending on the level. If you have a senior executive—

Mr. Jim Gouk: But an average is an average.

Mr. R.J. Neville: Oh, an average is an average. If you take out just a straight average, it works out to about 49 weeks of pay-out. An average is an average, yes, but I just want you to recognize that some cases are higher than others.

Mr. Jim Gouk: Oh, I realize that. So $70,000 is the average then.

Mr. R.J. Neville: Yes.

Mr. Jim Gouk: Interesting.

When you talk in terms of savings—

Mr. R.J. Neville: By the way, if I could add something, if you were to check the documentation as presented by the Office of the Auditor General, in the private sector there's a range. The range, I believe, is somewhere between 36 weeks and 59 weeks. The federal government's is around 49 weeks. So we're right in the middle of it.

Mr. Jim Gouk: I just found that very interesting.

You talk in terms of reduced costs, like these two charts you've just handed out. For example, in the aviation sector we had the air navigation system transferred to the private sector. You have 2,400 air traffic controllers, 1,300 radio operators, and so on. You paid an incentive to them, so they're part of your figures for the incentive.

When you talk in terms of saving, are you taking into account the fact that in providing this incentive and with these controllers and ROs and so on leaving the federal payroll, the federal government also is now forgoing the airline ticket tax, which used to be the offset they paid for this with? Likewise, when they went into the commercialization of the airports and got rid of all kinds of employees—and that's probably on the incentive program somewhere, too—they forwent the landing fees, which used to be revenues for the government.

Are these lost revenues, a result of the departure of these particular groups, being taken into consideration? Are you just saying we paid x number of dollars per head to get rid of these people and they were making x number of dollars salary, therefore look at how much we've saved?

Mr. R.J. Neville: I think there are two ways of looking at that. First of all, let's look at the employees themselves.

If you look at the salary savings versus the departure program cost, which is one of the two charts we provided to you, you'll see that by year, we have had some savings and we've had some costs. At the end of the four-year period you have salary savings totalling $7.3 billion while the departure program cost a total of $3.2 billion, bearing in mind that we've estimated 1997-98 because the numbers are not finalized but they're pretty close and we've estimated 1998-99 because that's the fiscal year we're in. So there's a savings there in terms of pure salary costs, and the ongoing salary savings are $2.5 billion thereafter, forever after.

That just deals with the salaries of the individuals. We have factored in here the cost to pay for the severance pay and we've factored in the savings in salary costs that we no longer have to pay thereafter. That's the first part.

The second part—and I'm glad you asked the question—is that we have total program review savings. That's the second chart, where we're showing the net costs by year of not only the salary, but the operating and maintenance costs as well. You're seeing that the total savings, after four years of using the same principles, is $26.6 billion and the ongoing total savings is $9.2 billion thereafter.

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If you want to bring the revenues into play, when we do the fiscal framework—that's another level up. Let's talk salaries as one level, total program review cost savings as another level, and then you have the fiscal framework. When the Department of Finance puts the budget together, they factor in the revenues that are lost because of the reductions of workload or changes in program delivery structures. So when you look at the overall budget—we now have a balanced budget—that has been factored into the fiscal framework. So it isn't into the calculations that you're seeing here, because that's specific to the salaries, but it is in the overall fiscal framework.

Mr. Jim Gouk: When we are talking the overall framework, that's all well and good, but we have no way—I don't know if the Auditor General does—to determine the effectiveness or lack of effectiveness of the program. If you say we saved salaries, that's a cost, and we saved O and M—those are all costs. And we paid out so much money for incentives, so we balance those two. There's another factor.

Although you say it's taken into account in the overall fiscal framework, are there break-out figures that give me specifics on the effectiveness of a given program and a given department?

Mr. R.J. Neville: I may have misled you. The numbers you have in front of you for total program review savings, where it shows total savings of $26.6 billion, includes the revenue factors. But over and above that you have the fiscal framework in its broader context, which shows you with a break-even budget at the end of the day. But for the programs you are referring to, ATC to NAV CAN, it has been factored into the total savings of $26.6 billion.

Mr. Jim Gouk: Are there break-out figures available that I can look at to see how effective this is, or do I just accept you saying there's still a saving and therefore it's good? Are there break-out figures that I can look at and say under air navigation system privatization here's how much we paid out, how much we saved, and the revenues we forewent as a result, and here's the net result of that program in that department?

Mr. R.J. Neville: In this particular example I'd have to refer back to the estimates and the specific report on plans and priorities of Transport Canada to see if it's there. I would think yes. I don't have those particular books with me, but there are two documents that should provide that. One is the estimates and the second is the report on plans and priorities. Those are official tabled documents of Parliament and would probably would give us that information.

Mr. Jim Gouk: So you're saying that the answer I want might be out there somewhere.

Mr. R.J. Neville: I would probably say yes, but I'm not completely sure. You're asking a very specific point on a specific program.

Mr. Jim Gouk: But I'm talking about programs in general, and I'm using that as a specific example.

Mr. R.J. Neville: Then I would say yes.

Mr. Jim Gouk: How am I, sitting on this committee as a member of Parliament, supposed to examine and weigh the effectiveness of a program if I don't have figures to back up what you're saying?

Mr. R.J. Neville: I think the information is yes, but you wouldn't find it here. It would be in the specific estimates books in the RPPs. There are 78 of those books.

Mr. Jim Gouk: Delightful.

I have one other thing. It was my original question. This is another route we got on to, and I'm still a little bewildered as to how we are supposed to assess this on that basis.

The incentive program for departures: if you have ten people and you say you have to get rid of three of them so you're going to offer incentives, who's going to take those incentives? It will be somebody who has no marketable skills, whether through fault of their own or otherwise, or somebody with all kinds of marketable skills that are valuable to the department, but they say I can take this package and I'm readily employable because I'm skilled. Is not the incentive program inclined to lead people in that direction?

As a supplemental to that, is there any kind of movement right now, when we talk in terms of concerns for the people who remain and the brain drain and talent drain and all the rest of it...? What programs or ideas about programs do we have to move people towards merit promotions as opposed to seniority or favouritism within the department? What about merit and some method of impartial merit, so that the people who are really good don't have to wait until somebody with fewer skills who is ahead of them gets all his promotions before they get theirs?

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The Chairman: Ms. Fraser.

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

First, I will deal with the question of who got the incentive packages. To reiterate what I said earlier, the deputy ministers have the accountability of determining what their program delivery needs are and what sort of public service they need for those program delivery areas.

In some departments there was an opportunity for people to come forward, because there were a number of generic positions in those departments. The deputy minister had discretion to say whether there could be some interchange and people could have a choice about leaving, but there were many other positions where there was no choice. Also, for people who wanted to leave, it was seen as a requirement to stay for the public service of the future.

So the bottom line there is who left while there was a requirement to downsize, and there were some opportunities when there were generic, standard generalist-type positions across the board to switch and have some choice in who was going to leave. It was up to the deputy minister to determine whether that served the interests of Canadians well and whether it could be accommodated within the long-term vision for that department and what the deputy had set out for the business planning process for that department.

On the second issue of merit, the Public Service Commission is the keeper of merit in the public service. If you wish to delve into that issue further, I would suggest that the president of the Public Service Commission is key. That is how we do our systems now.

A side issue on merit and performance management is that the report on executives... The Strong committee recommended what was called at-risk pay; that is, pay for performance management. I believe that system in the Strong report is due to come into place in 1999. So there will be a direct relationship between the performance of an executive, the results achieved, and some remuneration.

Mr. Denis Desautels: Thank you, Mr. Chairman. I'll make a few quick comments on those questions.

First of all, on the whole question of the use of voluntarism, we discussed that at length in our report. If you go back to chapter 2, paragraphs 2.44 to 2.51, we talk about the drawbacks and some of the risks of that approach. In some cases it can overshoot the mark because more people will ask for the package than you anticipated, and some of the more mobile people in that case could be lost to the organization. So it is a genuine issue.

On Mr. Gouk's first question dealing with the cost per head of the program, I would like to remind the members that a good part of the cost of this program—$3.2 billion—is the pension adjustments, the pension costs. People who leave early without a penalty do cost the pension system a fair bit of money. Over half of the $3.2 billion represents adjustments to the pension system that had to be factored in.

In terms of the general discussion on payback, I feel there's a certain amount of confusion as to what the actual payback is on this program. It all depends on how you calculate it—what you count and what you don't count.

In exhibit 1.5 of our report we show the decrease in the net payroll costs from one year to the next. I think that could be a good basis for determining the net savings each year that have been achieved by this particular program. Our calculations for those two years—I think the savings would be in the neighbourhood of about $2 billion for the first two years, but that will keep being added to in years three and four.

There are so many different way of calculating the payback. You can only calculate the savings attributable to people who have left, but on the other hand there are departments that are hiring new people for new programs. Do you count those or not? That's the subject of debate.

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At the end of the day, our recommendation is that at the appropriate time the government—I presume Treasury Board Secretariat—should carry out a proper analysis of the real results of this program, and I would offer to audit that report as well.

Mr. R.J. Neville: We agree.

Ms. Cheryl Fraser: We agree.

Mr. Denis Desautels: And I think there's general agreement that this ought to be done.

The Chairman: A short comment, Mr. Neville.

Mr. R.J. Neville: I think we agree that we would like to prepare that report at the end of the exercise and make that available.

I'd like to go back to the calculation where you took $3.2 billion, divided it by 46,000 and arrived at an average of $70,000. Maybe for the record we should clarify that the 49 weeks, which is the average, works out to about $39,000 of that $70,000, and the balance is the pension waiver component. We should ensure that's noted for the record.

The Chairman: Thank you, Mr. Neville.

Mr. Jim Gouk: I appreciate it when people put money in my pocket, no matter what division they put it under.

The Chairman: Thank you, Mr. Gouk.

Last question, Mr. Jackson.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): Mr. Chairman, we heard a lot about the universal classification system. The federal government grew like Topsy and ended up hiring people all over the place with all kinds of different compartments. Could the officials bring us up to speed on how many classifications there were, where they're at in that particular exercise, and how it would help the department function better?

Mr. Cheryl Fraser: Mr. Chairman, unfortunately, I'm not prepared for that sort of question today. We'd be more than pleased to come back either in writing or in a formal presentation on the universal classification system.

The Chairman: Ovid, would a written presentation be okay for that question?

Mr. Ovid Jackson: Sure.

The Chairman: Do you have any other questions, Ovid?

Are there any more questions on the table? Seeing no more questions, I will comment that my colleagues' questions today were poignant and stimulating.

I want to thank the Auditor General and Mr. Goyer, Ms. Fraser, and Mr. Neville for appearing today to help us understand better. I think Mr. Gouk is right when he says there is so much that it is difficult for members of Parliament to get their heads around the extensive nature of these matters, but it's very important that we do. We do our best, and it's with your help that we move part-way down that road.

With that, we will adjourn this open session part of the committee. Members, we will start our in camera business meeting in about a minute and a half.

Thank you to our witnesses.

Mr. Denis Desautels: Thank you, Mr. Chairman.

The Chairman: Thank you.

[Proceedings continue in camera]