PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, December 3, 1997

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[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon, everybody. The orders of the day are, one, pursuant to Standing Order 108(3)(e), consideration of the 1997 annual report of the Auditor General of Canada; and two, pursuant to Standing Order 108(3)(e), consideration of a draft report on chapter 17, “Human Resources Development Canada—A Critical Transition Toward Results-Based Management”, from the April and October 1997 report of the Auditor General of Canada.

Today we welcome as our witnesses Mr. Denis Desautels, the Auditor General of Canada; Mr. Raymond Dubois, Deputy Auditor General, Audit Operations; and Michael McLaughlin, the Deputy Auditor General, Corporate Services. Good afternoon, gentlemen.

Mr. Desautels, I understand you have an opening statement.

Mr. L. Denis Desautels (Auditor General of Canada): Yes, Mr. Chairman, I have a short opening statement. Of course, my colleagues and I are pleased to have this opportunity to meet again with your committee.

Before moving on, Mr. Chairman, to our suggested priorities, I would like to draw the committee's attention to some of the challenges that are highlighted in my annual report chapter on matters of special importance for Parliament. One of the most important issues mentioned in that chapter is the rapid emergence of new organizations that deliver services traditionally offered by the government. The almost unprecedented changes now unfolding in the structure of government present some important challenges that we think can and must be met.

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Those new arrangements can bring important benefits, and I would like to make it clear that we do not oppose these changes. What concerns us is that accountability may get lost, and Canadians must be assured that the public interest and their tax dollars are always protected. Parliament must remain able to scrutinize these new entities and ensure that public money is well spent and that health and safety are protected.

The 36th Parliament has an important role to play in overseeing those changes and holding the government to account. This committee may therefore wish, over time, to examine the accountability arrangements governing some of these delivery mechanisms.

In the few minutes remaining I would like to touch briefly on the chapters included in our priorities letter. As usual, I'll deal with them in the order in which they appear in our report.

Chapter 24 notes that since its inception in 1935, the Prairie Farm Rehabilitation Administration has adapted its role to the changing needs of the prairies and has become a key player in delivering many federal agricultural programs, at a cost of approximately $70 million per year. Resources have been cut back recently, and the branch can no longer continue to try to please everyone.

A clear strategic direction has been lacking. One result of that is that local offices have not been given sufficient guidance as to which activities merit involvement by branch staff, so clients in some districts receive services that clients in other districts do not. The branch needs to clarify its strategic direction and priorities in order to direct its efforts to the areas of greatest need and most in need, and do a better job of demonstrating its results.

The committee may wish to review the branch's plans to address issues raised in that chapter.

[Translation]

Chapter 25, Mr. Chairman, covers all activities relating to the processing of refugee status claims. A major overhaul of the process was carried out in 1989 and legislative changes followed in 1993 and in 1995. Despite all these efforts, the results remain very disappointing. Refugee status claims are still not handled quickly, equitably and efficiently. A review of the entire process is needed to establish realistic expectations in terms of speed and efficiency.

Loans with a total value of $11.2 billion were guaranteed through the Small Business Loans Program (SBLA) between April 1993 and March 1997. Chapter 29 notes that the SBLA program will incur an estimated net loss of $211 million for loans issued between April 1993 and March 1995. The Report identifies instances where loans totalling in excess of $250,000 were made to related companies. The Department has recently announced a review of the program and the Minister has introduced legislation to extend the Small Business Loans Act for one year to March 1999. This presents a very timely opportunity for the government to clarify the objectives of the program, introduce more rigour into its administration and perhaps make it more relevant to the current economic environment. Your committee may wish to consider the results of our audit of this important small business program.

Chapter 30 deals with the inspection of insurance and pensions by the Office of the Superintendent of Financial Institutions (OSFI), a very important player in the financial services sector. It examines and monitors financial institutions for financial soundness and compliance with legislation. While OSFI is not a big organization, if it does not do its work properly, policy holders, depositors and pension plan members could suffer from undue losses and public confidence could erode. The chapter acknowledges that OSFI is highly regarded by the insurance industry and by its provincial and foreign counterparts. We noted that OSFI has made significant progress in developing the regulatory framework; however, it must address important gaps in order to meet the needs of the future. In particular, OSFI needs to strengthen its human resource management practices, its risk assessment processes and its communications with regulated entities. OSFI's plans to address these issues may be of interest to the Committee.

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With 40,000 employees in about 800 offices across the country, Revenue Canada is one of the largest federal departments, collecting about $850 million and disbursing about $425 million each working day. Chapter 31 identifies several opportunities to improve financial management and to generate several million dollars in interest revenue. Many of Revenue Canada's systems are cumbersome, labour-intensive, disconnected, not easily accessible and in need of significant modernizing.

[English]

Chapter 32, Mr. Chairman, expands on the messages in chapter 31 dealing with revenue analysis. It does this by reviewing the capability of the Department of Finance and Revenue Canada to perform the analysis necessary for understanding fluctuations in GST revenue movements.

Overall, Revenue Canada needs to assign more attention and a higher priority to financial management. The department has a number of initiatives planned or under way to strengthen aspects of its financial management regime. Your committee may wish to review both of these chapters.

Finally, I'd like to draw the committee's attention to the follow-up work that we did on hazardous waste, which is reported in chapter 35. Two years after our May 1995 report, a full inventory of sites is not yet completed, and only an incomplete estimate of the cost of cleaning up these sites has been disclosed to Parliament. This information is needed, in our view, to ensure that the high-risk sites posing the greatest risk to public health, safety, and the environment are among the first to be remedied. These costs could be significant and could have an impact on the government's financial situation.

As you know from yesterday's announcement, the Minister of Labour has taken action to address some of the issues raised in chapter 26 on the Canada Labour Relations Board. The government has also introduced Bill C-19, which, in our view, should deal with our concerns on organization, performance, and leadership. However, the issues raised in the chapter merit some monitoring by your committee.

There are obviously many other subjects in the report that may also be of interest to the committee, including specific issues such as the awarding of a duty-free shop licence by Revenue Canada and the authority issue related to Agriculture and Agri-Food Canada's safety net programs.

Mr. Chairman, that competes my statement. We would be happy to respond to questions.

The Chairman: Thank you, Mr. Desautels. Before we get into questions, I would like to give a note of my personal appreciation to the hard work that you and your staff and colleagues do on behalf of the public accounts committee and indeed parliamentarians and all Canadians. So we appreciate the work of your office very much indeed.

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

The Chairman: Mr. Mayfield, please, for eight minutes.

Mr. Philip Mayfield (Cariboo—Chilcotin, Ref.): Thank you very much, Mr. Chairman.

I would like to in part reiterate your comments, Mr. Chairman, to the Auditor General and his staff. I very much appreciate the nature of the reports and their completeness. Beyond that, I appreciate the willingness of you and your staff to talk to me about things that I don't understand even after reading it. You must understand—I presume you do—that I come at this as a layman for the most part, looking at issues with questions and not even understanding the....

This is what I want to ask about. With regard to Revenue Canada, it seems from your report and from what one hears talking to others who deal with Revenue Canada on a professional basis that this could be looked at as a department on the edge of chaos, at least. They have computer systems that do not meet their needs or give them the information they want. They're dealing with administrative problems that do not have the proper legislative back-up. The legislation is perhaps too far behind the administrative schedule.

Are these problems that you would generalize in this way, sir?

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Mr. Denis Desautels: Mr. Chairman, I'd like to be very clear that in our work we have not concluded or indicated in any way that the department would be on the edge of chaos. Revenue Canada is a big department, and we cite some numbers in terms of the volume of receipts that it handles, the number of people it employs—over 40,000—and the number of offices it has.

And it has gone through significant change in the last few years. An example of that was the merger between customs and excise and the revenue side, which was not an easy merger to achieve because in many ways they're very different businesses. Revenue Canada has also had to absorb the delivery of certain social programs, such as the child tax benefit and the GST credit. In many ways, it's a department that has been challenged in terms of its workload and what it has to achieve.

So I think it should not be surprising that we would find things that need fixing. In our view, the things that need fixing are genuine, and I think generally the department would agree with our assessment.

We also perhaps have a level of expectation of Revenue Canada which, in my view—and I think this is appropriate—would be higher than the expectations for most other departments because, as we said, it does handle a huge amount of cash and it therefore requires systems that are appropriate for that kind of business, systems that protect the assets it is handling and ensure that sound processes are always in place to keep things in balance and totally under control.

It's a big department and it has a difficult job, so it's not surprising that we would find issues to report to you. At the same time, I think we have to be demanding because of the nature of the work that this department does.

Mr. Philip Mayfield: I can appreciate your comment. I guess I'm wondering if they're trying to do today's tasks with yesterday's tools.

Another question that occurs to me—and I have no idea of the answer—is about the relationship between the revenue and finance departments. Is it a creative relationship between these two departments? Are there flaws in the relationship that could be looked at to better improve the performance of Revenue Canada and perhaps of the Department of Finance as well? Do you have an understanding of that in such a way that you'd like to make comments, either supportive or critical?

Mr. Denis Desautels: First of all, Mr. Chairman, in terms of doing today's task with yesterday's tools, we do say that some of Revenue Canada's systems are getting to be archaic and need to be modernized. They have some modern systems, but they also have some systems that play an important role and actually do need to be considerably modernized.

In terms of their relationship with the finance department, things have been set up in a particular way in the Government of Canada for good reason, whereby Revenue Canada is essentially the collector and the administrator of the tax laws and the finance department concentrates basically on tax policy.

At all times there has to be a good working relationship between the two departments, because Revenue Canada could find problems in terms of administration of the Tax Act, in terms of collecting certain revenues, which could have a solution through a change in policy. There has to be a constant constructive dialogue between the two departments as well as a very active and responsive one.

In fact, this is an issue on which we've commented in the past when dealing with specific tax issues, but for your information, we will be doing more work on that in the coming months. In fact, we plan a report that would touch on the relationship between Finance and Revenue Canada next April.

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Mr. Philip Mayfield: It seems to me, sir, that Finance usually gets a seasoned senior minister, and for Revenue often the minister is an entry-level position in the cabinet. Is this a priority that receives less—

Mr. Mac Harb (Ottawa Centre, Lib.): That's an irrelevant question.

The Chairman: Carry on, Mr. Mayfield.

Mr. Philip Mayfield: Is this an area the government perhaps should give some consideration to? Does Revenue Canada get the priority it needs to perform the enormous task it has to do?

Mr. Denis Desautels: Mr. Chairman, I find that a difficult question to answer. In my view Revenue Canada is a most important department. It's Revenue Canada that actually collects the revenues that are necessary for the Government of Canada to operate. I think it has received—and we note that in our chapter, in fact—a fair bit of support from the government generally in funding its needs. It has had, as we show in our chapter, to suffer certain cuts, like everybody else, but on the other hand it also receives special funding for various new programs it has had to put in place, or improvements it has wanted to put in place. I can't cite any problem on that front. Generally, I think Revenue Canada has been given the tools with which to function.

The Chairman: Mr. Desrochers.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): First of all, I want to thank the Auditor General for the report he tabled yesterday which, once again, provides valuable information about the way the government governs.

I have a few questions for you, although I don't intend to address the issue of Revenue Canada in detail. You are clearly referring to a specific case when you say that a licence to operate a duty-free shop has been awarded. Do you know exactly where that occurred? Do you know what province was involved? Did you discover this during your comprehensive audit?

Mr. Denis Desautels: We note in the chapter that this occurred at a border point in Ontario.

Mr. Odina Desrochers: But you have no other details.

Mr. Denis Desautels: Yes, the border point is Windsor, Ontario.

Mr. Odina Desrochers: Fine. Thank you.

Yesterday, quite a few questions were asked about immigration. You say that approximately 35,000 people are waiting for a decision. Have you tried to determine which provinces have the largest number of refugees awaiting a decision and to calculate what it is costing to look after those who have not yet been given refugee status?

Mr. Denis Desautels: Mr. Chairman, if you don't mind, I would like to ask that Mr. Richard Flageole to answer that question, since he is responsible for the file and can provide those kinds of details.

The Chairman: Welcome, Mr. Flageole.

Mr. Richard Flageole (Deputy Auditor General, Office of the Auditor General of Canada): The chapter to which you refer indicates that most claims are filed in Quebec and Ontario. As for the number of cases still pending, the proportions are about the same. It isn't exactly 50 per cent, but I'm afraid I don't recall the exact figure. The number is slightly higher in Quebec. As a general rule, though, I think it's fair to say the pending cases are pretty equally distributed.

Mr. Odina Desrochers: And do you have any idea of the costs associated with the fact that these claimants have not yet been given refugee status?

Mr. Richard Flageole: It was extremely difficult to estimate those costs given the lack of information in departmental data banks. As we indicate in that chapter of our report, we did receive information from Quebec and Ontario with respect to welfare benefits. The figures provided to us by the provinces indicate costs of about $100 million per province for Quebec and Ontario. We were unable to obtain estimates of the cost of legal aid, education or any other type of service being provided to refugees.

Mr. Odina Desrochers: $100 million per province, you say.

Mr. Richard Flageole: Yes, that would be the cost of welfare benefits per province, per year.

Mr. Odina Desrochers: And when did you actually obtain that estimate? You refer to the period from 1989 to 1995. But the $100 million you just spoke of was for what year...

Mr. Richard Flageole: I believe it was either 1995-96 or 1996-97. It's fairly recent.

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Mr. Odina Desrochers: Is it possible to go even further back in time to estimate the total cost, given that the process was overhauled in 1989?

Mr. Richard Flageole: Since 1993, volumes have remained relatively constant. We're talking about approximately 25,000 applications. So, if we assume that the cost was about $100 million per year per province over the past four or five years, we shouldn't be too far off the mark.

Mr. Odina Desrochers: Fine. Thank you, Mr. Chairman.

[English]

The Chairman: Thank you, Mr. Desrochers.

Mr. Pagtakhan, eight minutes.

Mr. Rey D. Pagtakhan (Winnipeg North—St. Paul, Lib.): Thank you, Mr. Chair.

First, with reference to paragraphs 2 and 3 of your presentation, Mr. Auditor General, may I ask if there is a generic model for accountability arrangements that one can look at to guide the committee as we examine such accountability arrangements when provided by the department?

Mr. Denis Desautels: Mr. Chairman, I don't think there is such a basic model that has actually been put forward by the government in terms of guidance for the alternate service delivery mechanisms that are being set up. We can obviously find models in literature or from other sources, but if you're wondering if the government has put forward a model that has to be followed for the various entities that are being set up, there is not a generic model of that sort at this point.

Mr. Rey Pagtakhan: But you have examined some of the accountability arrangements that have been agreed to.

Mr. Denis Desautels: There are some that have already been put in place. In particular, I'm thinking of the Canadian Food Inspection Agency as one of the new agencies that has been put together. I think it has some very interesting arrangements that I find, on the whole, to be quite good, but I can't say that's the model that will be followed for all of the new arrangements. Each one seems to be a little different from the other.

Mr. Rey Pagtakhan: But you're pleased with that particular one so far.

Mr. Denis Desautels: From our perspective, Mr. Chairman, it looked like a reasonably good arrangement. I don't think this committee has examined it as such, but it would be interesting to know if parliamentarians come to the same conclusion on that or on other similar arrangements.

Mr. Rey Pagtakhan: With reference to paragraph 6 of your presentation, respecting the processing of refugee claims, you said the results to date have been disappointing despite the overall review of the process in 1989. You went on to say that perhaps we should review things so that we may want to establish realistic expectations in terms of speed and efficiency.

Why are the results disappointing? Was it because the expectations established at the time were not attainable to begin with? Or were they attainable but not attained despite that, and for reasons other than unrealistic expectations?

Mr. Denis Desautels: Mr. Chairman, from everything we hear, I don't think it's a question of expectations being too high or being unreasonable. The conclusion coming from all quarters seems to be that the system is disappointing. I think that's the conclusion of people who are working on the refugee board, of people in the department, of the commissioners themselves, of other outside observers. The impression we have is that everybody thinks it's not satisfactory.

Mr. Rey Pagtakhan: Is there any common thread as a basis for that disappointment?

Mr. Denis Desautels: Well, they're saying two or three things. They're saying that, one, it takes too long for genuine refugees to receive confirmation that Canada will accept them and will protect them, and that causes a lot of grief for these people.

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Mr. Rey Pagtakhan: If you take that for a moment—timeliness, the speed with which it is processed—is it in any way potentially related to our system of Canadian justice?

Mr. Denis Desautels: I think it could be argued that some of the societal choices Canada has made provide a degree of protection and appeal that you may not find in other countries. That's a societal choice Canada has made, but there are other factors that explain, I think, the lack of efficiency or speed.

As an example, we've mentioned in the chapter some of the turnover at the level of board membership. I think if there was more continuity in the level of members of that board you perhaps would improve the overall functioning of the board to a certain extent.

But it's a combination of things. The process itself is a unique process that involves both the refugee board and the department. They have roles that go back and forth throughout the process.

As we say in the chapter, even when the board has made a decision on certain grounds, the department can overturn the decision later on. There's a complicated interplay between the board and the department. It's a combination of all these factors that explains the situation we find today.

Maybe that's a long answer to your question.

Mr. Rey Pagtakhan: I suppose the number of refugees processed in relation to the number of people processing them, at the department level and later on at the appeal board level, should also play a very critical role.

Mr. Denis Desautels: I'm not sure I understand the question.

Mr. Rey Pagtakhan: Obviously, if there is an overload of applicants—just to take the extreme—in relation to the human resources available at any given level, that would impact on the results, of course.

Mr. Denis Desautels: Yes, it would. I'm not sure of the latest figures, but there have been some vacancies at the board level. They've had some difficulty filling all the posts, which of course impacts on the backlog.

But it's always a difficult thing to balance. Do we have enough members to hear those cases in relation to the volume of cases to be heard?

Mr. Rey Pagtakhan: My last question, then, is that based on the human resources available, assuming that they're all fully occupied by appointees and so on, and the target number for refugees that Canada would like to accept, in a societal decision, and that those two are congruent in terms of absence of disappointment in terms of processing, are you able to make a determination?

Mr. Denis Desautels: I think the determination we're making is that if you accept Canada's societal choices as they are, you would still need to review the entire process as a whole in order to make it more efficient and to really achieve the societal objectives you have in mind.

What we're saying is that tinkering, fixing a piece here and a piece there, doesn't seem to be good enough in this situation. We think it warrants a fundamental rethinking of the whole approach, respecting, obviously, the societal choices Canada has made.

Mr. Rey Pagtakhan: Thank you.

The Chairman: Mr. Bachand, eight minutes, please.

[Translation]

Mr. André Bachand (Richmond—Arthabaska, PC): There are a lot of topics we could discuss, but I'd like to address the one of most interest to me, namely the Small Business Loans Act. This is a development program, particularly in the so-called rural regions of Quebec and Canada. However, as you pointed out, it is also a program that should be reviewed.

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I would like to discuss point 29.64, where you emphasize that Industry Canada must have access to the complete file before compensation can be paid.

A little further on, you say you found a number of cases where the lender had gone beyond what is permitted under the legislation by including additional percentages, inherent costs, or costs to develop a business plan, even though the business plan had been filed by a development corporation. Based on your audit, would you say that is something that occurred frequently, or were these isolated cases?

[English]

Mr. Denis Desautels: Mr. Chairman, could I ask Mr. Flageole to come up again. He's also responsible for that chapter.

The Chairman: You certainly may.

[Translation]

Mr. Richard Flageole: These are cases we came across in what are called application files. We reviewed a statistical sample of more than sixty files, from which we were able to draw very valid statistical conclusions. Out of a sample of sixty-five, if I'm not mistaken, we noted three relatively clear cases. Three cases in sixty-five is a relatively high number for a sample of that size.

I believe the main problem stems from the fact that the legislation is not clear enough. I don't think we have actually said that those businesses have done something illegal. What is important is the intention of the Act. Let me give you an actual example—say a loan made to a dental office. One corporation could be set up to purchase equipment, while another could be set up to purchase furniture and other items; thus it would be possible for someone to obtain two loans.

Mr. André Bachand: Yes, but that is not really what I'm talking about. I'm thinking more of the legislation, which relies on an important intermediary, namely the banks, some financial institutions. That is really the aspect I was focussing on, because I know that some banks charge fees to analyze a file or prepare a business plan, and some even ask for additional market studies to be conducted, even when the various departments involved have received favourable sectoral assessments.

When we talk about banks—not necessarily businesses—who, shall we say, have found a way to beat the system, we're obviously not talking about Industry Canada, which has problems managing or analyzing applications. We're really talking about the main intermediary, which is a bank or a credit union. What I would like to know is just how rare it is for banks to charge certain fees or request additional collateral or guarantees. occurrence.

Mr. Richard Flageole: We noted two things: first of all, that there were considerable variations depending on which financial institutions were involved. We realized that some institutions were doing this a lot more than others.

Secondly, we noted cases where fees had indeed been charged that should not have been, according to the legislation. We noted that some institutions prepared a sort of financing package. In the case of the small business loans per se, no fees were charged. However, as part of the loan package, an institution might decide to open a $5,000 line of credit and charge administration fees of $500, which we felt were excessive in some cases. Let's just say that it varied, depending on the institution involved and the way the loan was set up.

Mr. André Bachand: Basically, you are saying that is not contrary to the Act.

Mr. Richard Flageole: The Act is very clear: no fees should be charged directly. So, in cases where fees had been charged specifically for the loan, that was contrary to the Act. As for those cases where another type of financing was provided along with the loan, the legislation is not as clear about what is allowed and what isn't. However, I think the intention of the legislation is quite clear.

Mr. André Bachand: I see. My point, though, is that your audit clearly turned up a number of cases where financial institutions had not complied with the Act. I realize my time is almost up, Mr. Chairman, but I do think this is an important point.

Mr. Richard Flageole: That's correct.

Mr. André Bachand: I'm sure you know that where regional economic development is concerned, some very serious things can occur. We have seen cases where the lender demanded more guarantees than those provided for in the legislation.

I just want to say, on a personal note, that I spent ten years as an elected representative trying to do regional development, and every time we went to a financial institution with the minimum required under the Act, they demanded additional guarantees. If you were lucky enough to have a rich mother-in-law or father-in-law, you could get a loan.

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And you yourself came across a number of clear cases where the banks...

Mr. Richard Flageole: Yes.

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

[English]

The Chairman: Mr. Grewal.

Mr. Gurmant Grewal (Surrey Central, Ref.): I thank the Auditor General for the 1997 report.

I have two questions. One has been partially answered. It was about the small business loans program.

In chapter 35, about the hazardous waste report, a full inventory of sites is not yet completed and only an incomplete estimate as the cost of cleaning these sites has been disclosed. These costs could be significant and could have an impact on the government's financial situation.

Two questions arise out of it. Why has the full inventory of the sites not been completed since 1995? Second, how much is the approximate cost we are talking about here? You mention it's significant.

Mr. Denis Desautels: Mr. Chairman, I'm not sure if I can answer the question totally to Mr. Grewal's satisfaction, because I really don't know for sure why the department has not completed the inventory of sites. We feel it could have done more. It's not an easy job, mind you, because it's not just counting the sites but also, for each site, arriving at the remedial plan and costing out that remedial plan. I recognize it's not something that can be done overnight, but we feel more progress should have been made since we reported in 1995.

How much does that amount to? We would like to know; and you won't know that until you do a more thorough inventory and for each of the sites that are the responsibility of the federal government you come up with a plan for what you want to do with that site. There are various alternatives all the time as to what you do with a contaminated site. You can fence it off and consider that's enough or you can decide to return it to a greenfield state.

To give you an idea that we're talking about significant dollars, in the notes to the financial statements of the Government of Canada we have an estimate of $2.8 billion of environmental costs. That is only an estimate at this time, but it could impact on future government commitments. We're talking here about amounts that are not trivial but I think fairly significant amounts.

Mr. Gurmant Grewal: And this $2.8 billion would be only a partial amount; it will increase because the inventory is not complete yet.

The other question is on chapter 25, processing of refugee status claims. A major overhaul was done in 1989, followed by legislative changes. I learned the other day that 20,000 refugees are ordered deported in Canada and only 20% of them have been deported. That shows the gravity of the situation and how the system is probably inefficient and not working the way it should be.

Why do you think the department has not been efficient, since the review was done a long time ago, in 1989? What were the reasons given to you, or what did you identify the reasons as?

Mr. Richard Flageole: In the chapter we outline multiple reasons. If we can compare it with a car, I think we have problems with the engine, we have problems with the exhaust system, the carburetor, the wheels, and the suspension. That's why we say we should seriously consider getting a new car rather than trying to fix it.

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Mr. Gurmant Grewal: But it cannot be done before the year 2001 or so.

Mr. Richard Flageole: I think in 1989 they tried something. They really started with a brand-new system, but as they went along I think some problems started to emerge, which, to be fair to the department, might have been difficult to foresee at the beginning. They tried to fix it, every piece.

I think the evidence we have now and the results we have now clearly indicate that there is really a need to review the whole system and maybe to rethink how we are processing these claims. That's really the overall message that we have in the chapter.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): To the Auditor General, I noticed you raised a flag, and I think rightly so, with respect to the new organizations that deliver services traditionally offered by government and the need for accountability and especially health and safety in terms of their protection and so on.

I wanted to pick up on a previous question. That was with respect to the generic model. Do you think that such a model could exist? Would it be such that it could be applied? I thought your answer was a little bit ambiguous in terms of how each area now has something quite unique and therefore maybe a generic model couldn't apply. I'd like you to clarify that if you could.

Mr. Denis Desautels: It may not be possible to have one model that you can apply in every circumstance, but I feel that we could be clearer on the basic principles that have to be met or respected in these new delivery arrangements.

I would have liked central agencies, among others, to be a little bit more, I guess, forthcoming in terms of making it known to the rest of government what they expect in terms of principles that have to be met in all of these new arrangements.

At this time, whenever one of these new arrangements takes place, the department is pretty well left on its own to come up with its model.

I gave the example of the Canadian Food Inspection Agency. That was one particular model.

Now Revenue Canada is planning to change its mode of operation from a department to some kind of agency model. There are very significant accountability issues that immediately come to mind when you think of that. They're doing it basically on their own.

Parks Canada is struggling with the issue in terms of setting up new corporations to look after some of the parks.

Each one seems to be doing it as best it can. I think it would be useful if a central agency, such as either the Privy Council Office or the Treasury Board Secretariat, made known a little bit more clearly what the basic accountability principles are that have to be respected, allowing some flexibility when something maybe gets moved almost outside of government.

One example of something moved almost totally outside of government is NAV CANADA. Again, with NAV CANADA there are still some accountability obligations to be respected, because the minister is still responsible for the safety of the system and for service to the public. Personally, I'd like to see some more central direction. While it won't be a unique model, at least it gives people enough direction as to what government expects under these new arrangements.

Mr. Lynn Myers: Have you had a chance to think through—obviously you have—the clear principles that you think should be looked at? Do you have a list of those? Do you have those provided?

Mr. Denis Desautels: Yes. We've done a fair bit of thinking about that and made presentations on the issue in various government fora. We've done some thinking about what accountability objectives partnerships like that and the other delivery arrangements should meet. So, yes, we have in fact done some work on that.

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The Chairman: Thank you, Mr. Myers.

Mr. Lynn Myers: Mr. Chairman, I think it would be useful to see those at some point.

The Chairman: Yes, I think you're point is very valid. Perhaps the Auditor General would feel that he may have authority to publish his thoughts in a chapter one day.

Ms. Barnes, four minutes.

Mrs. Sue Barnes (London West, Lib.): Thank you, Mr. Chair. I'll proceed with my questions to the Auditor General and to the gentlemen. If Mr. Desautels wishes to go, I'll direct the questions to the auditor responsible for the immigration file and the immigration audit.

I read this audit and your notes, and I saw that not only were there some concerns about the people who need to be deported but are not being deported, there is also concern about the bona fide refugee in Canada who is taking upwards of two and a half years to get his or her status verified in the system. In my opinion, this is as tragic as the reverse part of this balanced approach that immigration and all of us have to work with in this country.

I think the press and many other Canadians hear about the negative side of immigration, but there's a positive movement in accepting the international responsibilities in conventions on refugees in the role that Canada plays here. I want you to address both sides of this equation. In particular, I'd like you to start by outlining some of the problems you see in the current system that impede the progress of bona fide refugees.

Mr. Richard Flageole: Mr. Chairman, the problems we outline in the chapter have a very significant impact on bona fide refugees, for sure. We saw some specific cases of people who have been in a very difficult situation in which they were waiting and waiting for an answer from the board. In some cases, there were things precluding them from getting a job or really getting settled in Canada. The impact on those people is extremely significant. The speed of the whole process will have an impact on those people. We really believe that by improving the system, we can end up being in a situation in which we can give a positive decision to these people very quickly so that they can put things behind themselves and start their lives as new residents of Canada.

You're right that the impact is, in some cases, maybe more difficult for those people than for the people who don't deserve the protection of Canada. We saw some very dramatic cases as we did the audit.

Mrs. Sue Barnes: Is this a significant problem? This is not just an isolated incident. Is this a systemic problem as you see it?

Mr. Richard Flageole: Yes, and all the difficulties that we saw all over the process can have as much of an impact on the bona fide refugees as it can on the other ones. I can give you a very specific example. In the chapter, we make a reference to the cases from Chile. This happened in Montreal about a year and a half ago. At that time, the department—and I think it was probably the way to go—made a decision to treat these cases as a priority, meaning that the waiting line became longer. Again, the bona fide refugees have to wait until all of the other cases are cleared. We see this all over the process.

Mrs. Sue Barnes: You've stated in your opinion, and again here today, that you can't patchwork-quilt this solution. Don't you think there are some measures that the government could go to in order to fix this issue now? Do you really believe we have to wait for the whole new look, as you probably heard yesterday...? Do you believe we should be waiting for the full report and a full review, while not doing anything as an interim measure?

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Mr. Richard Flageole: Maybe I can get back to my example of the car. I'm sure there's a way to fix it for two weeks or three weeks. There are some quick fixes that can be made, but from what we saw, we really believe that over the medium and long term it would be a lot better to have a very good look at how we're doing it and fix it over the long term, rather than trying to get some quick fixes over the short term. We firmly believe that.

The Chairman: Thank you, Mrs. Barnes.

Mrs. Sue Barnes: Thank you.

The Chairman: Mr. Mayfield, you have four minutes.

Mr. Philip Mayfield: Thank you very much, Mr. Chairman.

In the news, we hear about greenhouse gases and the effect on the environment. I think you've raised the issue of the ozone layer threat with ultraviolet radiation and the CFCs that may be a part of that.

Do you know if the federal government has an inventory of its CFCs in stock, which departments have them, how much they have, for how long a term these have been stored, and whether there have been precautions taken so that they are used in the safest way possible? Does the government have a double standard for itself when comparing this to the standard that has been established for private industry?

I've thrown a lot of questions at you, but you understand the direction I'm going in. If you need clarification, I'll be glad to help you.

Mr. Denis Desautels: Mr. Chairman, I'd like to invite Mr. Emmett to the table, if I may. I think he can answer that in no time.

The Chairman: Good afternoon, Mr. Emmett. Welcome.

Mr. Brian Emmett (Commissioner of the Environment and Sustainable Development, Office of the Auditor General of Canada): Thank you, Mr. Chairman. Thank you, Mr. Mayfield.

The figures on inventories in the Canadian economy and in the Government of Canada are a little bit unreliable. The estimate in the report on inventories in the Government of Canada is about 1 million kilograms. My understanding is that there's no central inventory cap that is done on a department-by-department basis.

It's very much like Mr. Desautels was describing on the contaminated sites issue. There is a choice between having a centralized inventory of contaminated sites in order to establish your priorities. The government, in some ways, prefers to do it on a department-by-department basis. It's basically the same with respect to ozone-depleting substances. It's up to each department to manage its own inventories.

Have there been precautions taken? Yes, I think the government has been complying with the letter of the law, which basically requires the production of ozone-depleting substances to stop but allows their continued use. In the report we describe the approach as being minimalist, one that doesn't meet the leadership requirements the government might aspire to.

Is there a double standard? I think formally, probably there is not a double standard in the sense that somebody is obeying the law and somebody is not required to obey the law. But certainly in the report we note that a survey of private sector companies indicated that internal government practices tend to lag behind the best private sector practice.

Mr. Philip Mayfield: Thank you.

Do I have more time?

The Chairman: You have a little bit more time if you have another short question.

Mr. Philip Mayfield: All right, then, I wonder if in this, sir, the government has any intention of centralizing its inventory so it knows what it has. Do you see in the books anything about the direction in which the government is going on this, or is this a matter that you see the committee pushing the government to deal with, perhaps?

Mr. Brian Emmett: I believe the government has indicated it is aware of the problem, and that Environment Canada is considering putting plans in place. But sometimes a little bit of outside impetus is a useful tool as well.

Mr. Philip Mayfield: Thank you, Mr. Chairman.

The Chairman: Mr. Mahoney, you have four minutes, please.

Mr. Steve Mahoney (Mississauga West, Lib.): Thanks, Mr. Chairman.

On chapter 30, the financial institutions, insurance and pensions, I was looking through to see if there were any remarks or involvement with any of the public sector pensions. Is it strictly private? I'm thinking of the pension area now.

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Mr. Denis Desautels: It deals with regulating the private sector pension area. The chief actuary also has a role in terms of determining the state of the public pensions such as the CPP and the superannuation accounts, but in the chapter we focused on the supervisory role for private sector pensions.

Mr. Steve Mahoney: Would your review include investment decisions of pension funds, for example? Would your work get that detailed? You talk in terms of protection for deposits and things of that nature in order to protect the consumer against the bad practices of financial institutions.

I'll tell you where I'm going with this and what I'm thinking about. Some pension funds seem to do very well in terms of their investment portfolio and their growth. In years gone by, governments have tended to use public pension funds as cheap capital pools to build infrastructure or whatever. That is one of the issues, I think, that has caused some pensions to wind up in some difficulty.

I don't know if this review or previous reviews that you might have done have looked at that kind of thing.

Mr. Denis Desautels: Mr. Chairman, our review was a review of OSFI's own work—

Mr. Steve Mahoney: So I understand.

Mr. Denis Desautels: —and how they are organized to carry out their work. OSFI has a whole series of procedures in place to actually carry out the supervision of each of the pension plans, including their conformity to the regulations that govern private pension plans. So in a few words, we did not go back to re-audit what OSFI itself has done with specific pension plans, but that's part of the job they have to do.

Mr. Steve Mahoney: On page 30-7, you said:

The 1995 guide for deposit-taking institutions also covered CDIC's role in the intervention process. In January 1997, the actions of CompCorp, the compensation fund for policyholders of failed life insurance companies, were incorporated into the guide for life insurance companies. OSFI is developing a similar guide for pension plans.

Mr. Denis Desautels: Right.

Mr. Steve Mahoney: That's kind of what I'm getting at. Did you look at any of the details of how that guide is being developed, and is it of concern to the Auditor General, and then obviously to us, as to the efficacy of the investment procedures and the protection of pension funds? Is this the right area or am I totally in another jurisdiction?

Mr. Denis Desautels: No, you're not in the wrong jurisdiction. In carrying out our audit we looked into the various guides and other tools that OSFI is putting in place for monitoring the financial institutions, both insurance and pensions. Before that, a couple of years ago, we looked at the deposit-taking institutions as well. We think that OSFI is going in the right direction and the tools that it's setting up are quite good. In fact, we also contacted people in the financial services industry to get their concurrence with that kind of judgment.

The tools themselves, Mr. Chairman, seem to be quite good. We looked at them. But as we say here, the job isn't finished yet when it comes to the insurance sector.

The Chairman: Thank you, Mr. Mahoney.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: If you don't mind, I'd like to go back to the immigration issue. You were saying earlier that you had some difficulty collecting certain data. Could you tell us how many people applied for refugee status in Canada between 1993 and 1997?

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Mr. Richard Flageole: Mr. Chairman, the statistical data that appear in Exhibit 25.4 indicate that the CIC received some 19,500 claims in 1993-94, 23,000 claims in 1994-95, 27,000 in 1995-96 and almost 24,000 in 1996-97. So, we're talking about more than 95,000 cases over the last four years.

Mr. Odina Desrochers: And there is still an accumulated total of 35,000 claimants who have not yet been given refugee status.

Mr. Richard Flageole: Yes, there are almost 29,000 unfinalized cases at the IRB and approximately 8,000 unfinalized cases undergoing risk of return analysis.

Mr. Odina Desrochers: Based on the figures you gave us earlier, one can deduce that it costs $100 million per year per province to support that number of refugees. So, it is costing Quebec and Ontario half a billion dollars to support these claimants who have not yet been given refugee status.

Mr. Richard Flageole: Those costs are born by the provinces. In the case of refugees who are accepted, however, we would still pay welfare benefits throughout the waiting period. Certainly some way should be found to expedite the process for claimants whose application will be refused and who will be forced to return to their home country. Every week we can shave off the process will obviously translate into certain savings, particularly in the area of welfare benefits.

Mr. Odina Desrochers: Given the current situation, would you say we are really talking about getting a new car? Do you have any idea when that might have to happen? And should we consider changing drivers?

Mr. Richard Flageole: Well, there are various options. The Minister of Immigration has announced that the Advisory Committee given the task of preparing proposals will submit its report at the end of December. At that time, we will have a better idea of what the government's intentions are in that area and the kind of work schedule that may be required.

Mr. Odina Desrochers: Thank you. One last question for me for Mr. Desautels. Have you come across cases in other departments similar to the one you found during your audit of Revenue Canada, with respect to the duty-free shop in Windsor?

Mr. Denis Desautels: No, it is the only case of that kind we came across, Mr. Chairman.

Mr. Odina Desrochers: There are no other cases like that?

Mr. Denis Desautels: No, that is the only case presenting that type of problem that we have come across in all our audits.

Mr. Odina Desrochers: Thank you very much.

[English]

The Chairman: We would like to thank our witnesses for coming along this afternoon. We had some good comments from the members of Parliament, including the one, Mr. Desautels, where you may want to consider turning your thoughts to alternate service delivery in the future—the different options the government has used in the past and the need for accountability to somebody.

I think of NAV CANADA, which has no shareholders. All it has to do is produce an annual report. It does report to Parliament. The minister is not responsible for day-to-day operations. I do have a serious concern about the accountability of some organizations that are being set up. If you feel it is appropriate to advise us or give us some of your thoughts, that would be very much appreciated.

Mr. Denis Desautels: Mr. Chairman, I could, as a first step, at least summarize some of the thoughts we have already put on paper and share those with the committee. It may not necessarily cover all the possible options the government might consider in the future, but at least it will set out what we think some of the basic principles of accountability should be for most of those mechanisms.

The Chairman: I think the committee would appreciate that.

The committee is now going to change subjects, to the consideration of the draft report on chapter 17, but that will be done in camera. Therefore, we will have a short suspension until the room is cleared and then we will continue in camera.

[Editor's Note: Proceedings continue in camera]