PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, February 11, 1999

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[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon ladies and gentlemen, and welcome all. Today we have two orders. The first is the presentation of the tenth report of the Subcommittee on Agenda Procedure of the Standing Committee on Public Accounts. Pursuant to Standing Order 108(3)(e), we also have consideration of chapter 27, grants and contributions, selected programs in Industry Canada and the Department of Canadian Heritage, of the December 1998 report of the Auditor General of Canada. We have a quorum large enough to hear testimony, but we do not have a quorum large enough to pass motions. We will therefore move straight into the hearing on chapter 27.

As witnesses today, we have with us the Auditor General of Canada, Mr. Denis Desautels; and Mr. Peter Simeoni, a principal at the Audit Operations Branch of the Office of the Auditor General. From Canadian Heritage we have Norman Moyer, assistant deputy minister, citizenship and Canadian identity; and Anne Scotton, director general of corporate review. And from Industry Canada we have Diane Vincent, assistant deputy minister, operations sector; and Michael Binder, assistant deputy minister, spectrum, information technologies and telecommunications.

Mr. Desautels, we will start with your opening statement.

Mr. L. Denis Desautels (Auditor General of Canada): Mr. Chairman, thank you for this opportunity to present the results of our audit of selected grants and contributions programs in Industry Canada and the Department of Canadian Heritage.

There are three main messages in our report. First, the chapter notes how our audits of grants or contributions programs over the past 21 years have produced a long series of consistent and rather disappointing observations. Second, our most recent audit showed that there are significant opportunities to improve the management of the multiculturalism program of the Department of Canadian Heritage and the Ontario-based closure adjustment program delivered by Industry Canada. Finally, we found that Industry Canada could strengthen accountability for performance under its contribution agreements with CANARIE—the Canadian Network for the Advancement of Research, Industry and Education—and PRECARN Associates Inc.—the Precompetitive Advance Research Network. I'll elaborate briefly on these issues.

For many years, we have reported to Parliament on the result of audits of various grants and contributions programs. Going back to 1977, we can say that we found problems in compliance with program authorities, weaknesses in program design, instances of poor controls, and insufficient performance measurement and reporting. In subsequent audits, we have made similar observations. Although we have found specific improvements in some areas in our follow-up reviews, overall we continue to find the same problems each time we audit these programs.

Why have these problems persisted? The answers range from decision-makers not following the government's rules on grants and contributions to poor management or weak management practices. To address this latter problem, our office is developing a performance management framework. The framework will set out our expectations of management, and it will help managers to think critically about their programs. With the help of some departments, we're now working on the framework. We expect to publish it in a future report.

This audit brings attention to a critical management issue, and that is what constitutes due diligence in assessing applications for grants or contributions. Due diligence does not imply exhaustive analysis in all cases. Obviously, the extent of analysis is related to the amount of the grant or contribution. At a minimum, due diligence simply means ensuring that decisions take into account the funding criteria set by the Treasury Board, and that those decisions are based on reliable information.

Let me briefly review our findings.

[Translation]

In the case of the Ontario Base Closure Adjustment Program, which has a budget of $11.7 million over seven years, we found that there was no evidence that Industry Canada exercised due diligence in approving many projects. We found little information on file to indicate that the criteria approved by Treasury Board had been considered.

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In Canadian Heritage, we found significant opportunities to improve the management of the multiculturalism program. In 1997-98, the department made grants or contributions totalling $19 million to 1,000 projects under the program. The department needs to ensure that due diligence is exercised in the approval of grants and contributions and that recipients provide performance information. In about 30% of the files we audited, we could not assure ourselves that the department officials has exercised due diligence in assessing the project.

We are also concerned that the program's performance expectations are ambiguous. The department has not supported the general program objectives with more clearly stated and focused goals and expected results. We found that with only such broad objectives to guide decision making, the program is funding projects that also fall within the mandates of other departments or of provincial agencies.

We also found that Industry Canada could strengthen accountability for performance under its contribution agreements with CANARIE Inc. and PRECARN Associates Inc..

CANARIE's activities are proceeding in three phases. The federal government contributed a total of $107 million through Industry Canada for phases 1 and 2. Phase 3 is in the planning stage at this time.

CANARIE's business plan and operating plan do not include annual performance expectations against which the department could monitor the performance of CANARIE's activities. We noted that there was no requirement for annual updates to these plans or for annual performance reports by CANARIE. Industry Canada does not monitor results achieved annually by CANARIE in a structured way. We also found that Industry Canada was not doing enough to ensure itself that the practices followed by CANARIE in selecting and managing projects meet departmental requirements.

[English]

As for PRECARN, Treasury Board approved the provision of financial assistance of up to $35.4 million over a six-year period for phases 1 and 2. As required by the agreement, PRECARN submits an annual business plan that sets out clear performance expectations. However, we saw no evidence that Industry Canada reviews the plan to ensure that it is in line with departmental expectations, nor does Industry Canada formally approve the plan even though required to do so by the agreement. We also found that the department does not monitor, in an independent way, the results achieved annually.

In summary, there are several issues that the committee may wish to pursue with the departments. First, the committee could ask the two departments to report to it on the specific results expected from each of the grants or contributions programs presented in part III of the estimates, the report on plans and priorities. This would accomplish two things: first, it would clarify and supplement information already in part III by explaining the link between annual expenditures on individual grants and contributions programs and the broad objectives of each department; and second, it would greatly assist with future audit work by our office, on behalf of Parliament, on grants and contributions.

Second, even the best-designed program will fail if due diligence is not exercised. The committee may wish to ask the departments to review their decision-making processes for all grants and contributions programs, to ensure that all funded projects represent value for money to both the applicant and the program. In particular, the departments should ensure that all eligible applications for funding are assessed against the criteria approved by Treasury Board, and that there are periodic audits of all grants and contributions programs. The committee may also wish to ask Industry Canada to ensure that it reviews the accountability arrangements and performance expectations for all its indirect program delivery arrangements, and to assess performance annually.

Mr. Chairman, that concludes my opening statement. Mr. Simeoni and I would be pleased to answer your questions.

The Chairman: Thank you, Mr. Desautels.

We'll now turn to Mr. Moyer from Canadian Heritage for an opening statement.

Mr. Norman Moyer (Assistant Deputy Minister, Citizenship and Canadian Identity, Department of Canadian Heritage): Mr. Chairman, I believe copies of my opening statement have been circulated, so I'll just touch on a few of the highlights of that presentation now.

The Chairman: I will append your opening remarks to the meeting as though they have been read.

Mr. Norman Moyer: I would appreciate that. Thank you.

The Chairman: Okay, we will do that.

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[Translation]

Mr. Norman Moyer: The Department of Canadian Heritage welcomes the Auditor General's Report on the Multiculturalism Program and I am pleased to be here to speak to you about that report.

[English]

I want to talk briefly about the nature of the program and say a little bit about the structure of the program and why it is delivered in the way it is.

This program is one that responds to the basic nature of Canada. It's a program that responds to the fact that we are growing in cultural diversity and the fact that one of the policy objectives that this government has and that governments have successively adopted is to work with Canadians on the integration and understanding of this cultural diversity.

[Translation]

To achieve this, the program is engaged in the work of social development, that is, the process of assisting with technical and some limited financial support, the efforts of ordinary citizens who are working together, on a voluntary basis, to make communities better places to live. Our financial contribution is generally low. The medium size of a Multiculturalism project grant is $10,000, and many of them are much smaller.

Of the approximately 1,000 grants and contributions given annually by Multiculturalism, 80% are provided to small local organizations composed of ordinary people who are trying to ensure that in the face of new social and demographic realities, our communities reflect traditional Canadian values of fairness, tolerance, social justice and equality.

[English]

The multiculturalism program provides financial support through both grants and contributions. Although contributions offer advantages in terms of making funding more contingent on results, grants have the distinct advantage of being less labour-intensive and time-consuming to prepare and monitor. They are also less labour-intensive for the groups we're dealing with, as well as for our own staff. This is particularly important in the case of the multiculturalism program given the large number of projects that are funded, the relatively small amount involved in each funding arrangement, and the reduced level of resources to deliver the program.

There is a very important built-in control factor in the use of grants in the way we do it. Recipients know they are going to have to demonstrate, either in the form of an interim report or a final report, for example, that they have implemented their grant as intended if they want to receive subsequent funding.

[Translation]

In the two years prior to this assessment, the program's managers had undertaken a comprehensive review of the Multiculturalism Program. The department examined the program in its entirety and identified issues similar to those raised by the Auditor General. As a result of the review, the program was renewed two years ago, putting in place a number of changes to address those concerns. For example, the program officers' handbook was developed to provide better guidance to staff, to ensure that they have more precise written instructions on what information needed to be documented in a project file.

[English]

There were three recommendations in the Auditor General's report specifically, and I'd like to react to each of them here.

The first recommendation made by the Auditor General was that the department should further clarify the objectives of the multiculturalism program by defining clear and attainable goals and expected results. We are in the process of doing that. We agree that we want to do it.

We work within the limits of a broadly defined social program in which the objectives must conform or respond to the situation in each community. In recent months, we have worked with our staff in regional offices to expand and clarify the objectives by developing four priority areas of work for the coming year. This year and next year we intend to focus on four areas that are of great importance to the department and, we think, to Canadians.

The first of those is to explain and communicate the value of Canada's cultural diversity. The second is to assist communities in efforts to combat racism. The third is to work to eliminate systemic discrimination, either within federal government institutions or within other public institutions with which we have relationships. Finally, we will focus on helping communities respond to and prevent hate crimes and biased activity in their areas.

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The second recommendation states that the Department of Canadian Heritage should ensure that due diligence is exercised in the review and approval of grants and contributions under the program. We agree that this is essential.

We did our own post-audit following the work of the Auditor General's staff. It showed that the primary problem we have lies in recording effectively in the program files the efforts that have been undertaken by our staff to ensure that criteria have been met. The department agrees with the finding, and it agrees that all multiculturalism funding files should contain full evidence of due diligence in assessing, monitoring, and evaluating projects. We are therefore emphasizing, through our new program reference materials for employees and applicants, rigorous documentation of project assessments. In addition, all multiculturalism program staff across the country have received, and will receive again this spring, training in this regard.

[Translation]

The third and final recommendation of the Auditor General states that the Department of Canadian Heritage should ensure that recipients provide required performance information. This applies to smaller clients and smaller grants, and we agree wholeheartedly. With respect to post-project reporting and compliance procedures, the program often uses split payment funding in order that second payment can be held back if a project is not moving ahead properly. Program staff are now routinely asking funding recipients to provide an evaluation report upon project completion and they are informed that no future funding can be provided without receipt of such a report. The program is committed to monitoring the results of approved grants and contributions in order to analyse and asses their impact and effectiveness.

I will now be happy to answer your questions.

[English]

The Chairman: Thank you, Mr. Moyer.

We will now turn to Industry Canada's Ms. Vincent for her opening statement. Ms. Vincent.

[Translation]

Ms. Diane Vincent (Assistant Deputy Minister, Operations, Industry Canada): Thank you. Mr. Chairman, honourable members of Parliament, Auditor General, ladies and gentlemen, my colleague Michael Binder and I welcome this opportunity to join you today to discuss chapter 27 of the Auditor General's Report as it pertains to programs administered by Industry Canada.

In chapter 27, the Auditor General focused on three Industry Canada grant and contribution programs: the Ontario Base Closure Adjustment Program, the Canadian Network for the Advancement of Research, Industry and Education, and the Pre-competitive Applied Research Network.

As a prelude to our discussions, I would like to give a brief overview of each of these programs.

In the 1994 budget, significant defence industry reductions were announced including the downsizing or closure of a number of military bases across Canada. In Ontario, a flexible, community-based response program was quickly put in place to assist the economies of North Bay, Ottawa, Kingston and Toronto to adjust to the reductions.

The Ontario Base Closure Adjustment Program was designed to maximize community involvement in decision making. This element of community support, along with the need for economic benefits, became paramount in choosing projects for support. Since October of 1994, 19 projects have been supported, including 10 studies, one pilot project and eight implementation projects, for a total commitment of approximately $11 million.

Industry Canada is now developing an evaluation framework for this program, and implementing project audits this fiscal year. The program sunsets this March, and Industry Canada will draw on what is learned from this experience to improve future programs. Moreover, program managers are ensuring that all factors of project assessments are considered and well documented.

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CANARIE and PRECARN are innovative third party delivery vehicles designed to enhance Canada's capacity to innovate through private-public sector research and development linkages.

CANARIE, is an industry led consortium working to develop the advanced Internet infrastructure and applications that underpin the government's connectiveness agenda. To date, CANARIE has fostered research collaboration on over 200 projects aimed at improving Canada's competitive advantage in the global marketplace.

PRECARN has played a key role in the creation of Canada's emerging artificial intelligence and robotics sector. As a national, industry-government consortium, it brings together users, suppliers, developers and researchers in support of a burgeoning sector with estimated annual revenues of $3.8 billion.

Recently completed independent evaluations have shown that both programs are achieving their planned objectives in a cost effective manner. The reports conclude that the government should continue to support these initiatives.

[English]

Industry Canada welcomes the proposal by the Auditor General for developing a performance management framework for grants and contributions programs, and the department would gladly collaborate with the Auditor General in further developing this framework.

As a matter of fact, Industry Canada already has a number of mechanisms in place to govern how programs are to be set up and administered by responsibility centres. All program proposals are reviewed by a board of senior departmental officials—the programs and services board. The board also reviews all project submissions where the recommended contribution exceeds $500,000, while cases below this threshold are subjected to a post-audit.

We appreciate the Auditor General's ongoing contribution. My colleague and I welcome the committee's questions on these programs. Thank you.

The Chairman: Thank you very much.

We'll now turn to Mr. Forseth for the opening round of eight minutes. Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you.

I was interested in some of the comments related to multiculturalism—the program guidelines. One of the opening statements was about a broad general goal of integration of cultural diversity, and I'm wondering what it would be integrated with.

The Chairman: To whom is your question addressed?

Mr. Paul Forseth: It is to the individual speaking from the multiculturalism....

The Chairman: Mr. Moyer.

Mr. Paul Forseth: Those kinds of phrases just roll off the tongue so easily and are used, but what are we really saying here? What are you talking about when you say “integration”? Integration with what?

Mr. Norman Moyer: The best way perhaps to illustrate what we mean by integration is to talk about some of the things we do. We work with groups of Canadians, primarily in communities, who are new to Canada. They may be seeking to understand how the health system or the legal system works, or how the main elements in the established Canadian society function. We'll work with a group from a community like that whose young people may not have easy ways to understand how to contact the social service network—to talk with them, to help them train them. It's to help them understand the way the main structures in society work.

Mr. Paul Forseth: So in many respects what you're talking about is almost a support function for the service delivery of other government departments. You talk about health or immigration. I could say to you that we've been going down this road since 1971. I'm wondering if you have any idea how much money we've spent in total as a country in this specific envelope and if you can try to relate that to what we have really done for Canada.

Considering that a considerable number of economic resources are placed in this area, are we better off? Do you have any measurements of value for dollar? We can always say the contract may have been fulfilled, the people showed up for work, and the local group performed its fiduciary duty with the money it's been given. But where are the deeper audits about value for dollar, looking at whether it's worthwhile to do these things at all? Looking at the overall resources the nation is putting into this area, do we have any pay-off? What are the measures that show this is worthwhile?

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The Chairman: Is that to Mr. Moyer also?

Mr. Paul Forseth: Yes, it is.

Mr. Norman Moyer: I can't tell you how much money the government has spent since 1971 in programming for multiculturalism. We could probably trace that and find it for you.

Spending in the area peaked somewhere around $30 million. It's down to about half of that now on an annual basis. The value Canadian society has derived from that can perhaps only be demonstrated by the record of Canadian society in receiving, welcoming, and integrating new peoples into our culture.

Canada is by far the most successful of the developed countries in welcoming new societies or new cultures within Canada. There are many reasons for that. Most of them are related to the welcoming nature and attitude of Canadian society itself. However, the role the multiculturalism program has played in helping to create the atmosphere in which we welcome new peoples to Canada has certainly been an important part of that.

Mr. Paul Forseth: You've used words like “atmosphere”, “we have a feeling people are welcome”, and so on, but as you know, there are a lot of very good sociological tools and instruments to measure those kinds of things in the community. I'm wondering what tools, from the areas of psychology and sociology, you have been using—on a comparative basis between countries, or looking at societal attitudes and trends, a sense of satisfaction and so on in larger urban areas—to document to Canadians that the money being spent has some actual value.

Mr. Norman Moyer: There are some indicators that are becoming fairly well known that have been built on an international basis. I'll get back to you with more, but there are a couple that stick in my mind. We have looked at the rate at which new arrivals take out citizenship in different countries around the world. Newly received immigrants in Canada have a much more rapid rate of acquiring citizenship compared to other developed countries. We think that's one indication of effective integration of peoples into the country.

We've also looked at the rate at which first-generation new Canadians take up active roles in political life. Canada has a much higher rate of elected officials from first-generation Canadians. I'm not talking about second- or third-generation Canadians; these are people who actually immigrated to Canada themselves who have become active elected officials in Canada. So there is some good empirical evidence that Canada as a whole is very effective in the receipt of new Canadians.

Mr. Paul Forseth: The point I'm trying to get at is when you do a report and make certain assertions, they should be footnoted with the particular university study or Masters degree thesis someone did to perhaps verify what you are doing and tell Canadians we're getting real value for dollar here.

What the Auditor General has said is that in some respects the broadest goals are very vague. You're the expert in the business. I'm wondering if you can suggest how those goals could be tightened up so it's much easier to measure how we're getting along. I would think in the long run one of the major purposes of your effort should be to work yourself out of a job.

Mr. Norman Moyer: There are two parts to the question. We are preoccupied with the question of how to measure more effectively Canadian society's evolution in the direction all of us hope it's going. We are continuing to work with Statistics Canada to try to improve the basis of long-term statistical information that's available to us to understand social trends.

Many of the trends we're working with in our program are the hardest ones to measure. Measuring racial conflict in a community is, I suppose, when you look at headlines, relatively easy to do anecdotally. But it's very difficult to do in a profound sense. We are working on it through research programs and we are supporting research work in this area, but we haven't found a measuring stick that allows us to say this community or that community is progressing well or poorly in the area of racism, or combating hate and violent crime.

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Can we get out of this business some day? As long as Canada continues to be the most open country in the world in terms of receiving new Canadians, we will continue to have opportunities to be challenged in this area.

The Chairman: Thank you, Mr. Forseth.

I'll now turn to Mr. Cardin.

[Translation]

Mr. Serge Cardin (Sherbrooke, BQ): I note that once again in his report, the Auditor General says that for some time now he has been seeing the same shortcomings and repeating the same recommendations. In the case of grants and contributions, this has been going on for 21 years.

I would like to know if the Auditor General feels that the multiplication of indirectly executed programs truly reduces the relevance of the expenditures and accountability of decision makers with respect to the granting of these monies; does it not also bring into question the control that we, the people's representatives, exercise over government programs? I am referring to the grants and contributions programs in particular.

Mr. Denis Desautels: Mr. Chairman, as Mr. Cardin has just pointed out, the government is increasingly calling upon intermediaries to deliver certain government programs. These middlemen can be funded through contributions, grants, or even transfers. Obviously, when we compare this method of program delivery to direct delivery by a department, there are some difficulties, even though, as far as I am concerned, they are not insurmountable.

When we use intermediaries, we must rethink the accountability mechanisms of these parties. Since they are at arm's length from the government, we must have different mechanisms in order to ensure adequate accountability. The same challenge arises in the case of parliamentarians, who must ensure that the use of these third parties for service delivery does not diminish their capacity for general overview of government activities. These difficulties can be overcome, but now is the time to address them because these methods are being used more and more frequently. It's time to think about it.

Mr. Serge Cardin: Third parties are given more and more responsibility for all sorts of programs. This is the case for the Millennium Scholarship Fund. According to your definition, would this be an indirect service delivery?

Mr. Denis Desautels: Yes. In fact, the Millennium Scholarship Fund and the Canadian Innovation Foundation represent another type of service delivery mechanism that has to be well thought out in order to allow parliamentarians access to the information that they require to do their job.

Mr. Serge Cardin: To resolve certain problems, you are suggesting the creation of a performance management framework. Do the departments with which you have discussed this seem willing to go along with it? Have they all adopted the idea of this type of management framework to regulate performance, among other things? Perhaps the other witnesses would also like to answer this question.

Mr. Denis Desautels: Mr. Chairman, the initial reactions have been very positive. Even the departments that we audited this time around have given us encouraging signals. They said that they would be prepared to cooperate and work on this framework, and then to test it in a real environment. We also intend to approach other departments that are very active and that are responsible for large programs so as to test our framework with them. So far, their reaction has been favourable.

Mr. Serge Cardin: Generally speaking, that is obvious. I have not been on this committee for very long, but I have noted that whenever we hear representatives from departments following the tabling of a report, they all say that they are in favour of improvements. But in this case, you have been making recommendations for 21 years, and things don't seem to have improved.

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Should we make an official request to the departments to implement such a management framework, or will they do it voluntarily?

Mr. Denis Desautels: Mr. Chairman, I am realistic enough to know that the framework won't solve all our problems. It would be a useful tool to better manage this activity. However, the use of grants and contributions to a lesser extent, as a means to deliver certain services to the population, involves certain risks. The framework will help, but it would be better if these programs were clearer than they are now.

Mr. Serge Cardin: That is a prerequisite.

Mr. Denis Desautels: Yes.

Mr. Serge Cardin: If we want to evaluate performance, we have to have clear objectives.

Mr. Denis Desautels: As we told the committee last December, we must ask ourselves from time to time if we should use direct grants rather than contributions, since these are part of a somewhat more stringent program. I feel that on the whole, if this can be done without making the system more burdensome, we should favour contributions because this is a mechanism which is easier to control.

Mr. Serge Cardin: Mr. Moyer, you spoke of a key mechanism for comprehensive control. Those receiving grants must prove, for example, through an interim or final report, that they have made proper use of the money in order to obtain future financing. Are the organizations receiving $10,000 grants, which is the median amount, always the same ones? Before giving them another grant, do you carry out a study to ensure that they respected their previous commitments? If there is a high turnover, some organizations might not make a second application, and there might never be an evaluation of how they used the grant that was given to them.

Mr. Norman Moyer: A large number of our clients are repeat applicants and we can therefore ensure a follow-up.

Even in the case of a small grant, for example $10,000, the payment is split and we only award the second half, that is the final payment, after having evaluated their progress.

When we deal with a client for the first time, an officer is responsible for determining whether they are capable of delivering the services, and whether they have established objectives that meet our program requirements.

Mr. Serge Cardin: Does the supervision of hundreds, in fact thousands of different groups requesting grants require a large staff? It must take some time to follow up all of these files.

Mr. Norman Moyer: Yes, for a number of reasons. The number of cases and the complexity of our work mean that we have a certain workload. There is no clear outcome at the end of an antiracism program in a small community. It is difficult to measure what has been done and what can be done; the results are often subtle. Moreover, the next program might not simply be a second instalment. The follow up undertaken by our officers sometimes involves one, two, or even three meetings with those responsible for the group working within a difficult situation in a given community. The nature of a project can also change along the way because of varying circumstances.

Mr. Serge Cardin: I suppose you have enough resources at this time to implement the Auditor General's recommendations.

[English]

The Chairman: Can you answer that final question?

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[Translation]

Mr. Norman Moyer: We have implemented a training program for all of the officers working for us at this time. They have already taken part in the first phase, and the second phase is planned for this summer. Yes, we believe that we have the necessary means to implement his recommendations, after having made a few adjustments, with our present resources.

[English]

The Chairman: Thank you.

Now Mr. Myers, please.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): Thank you, Mr. Chairman.

I wanted to pick up with Canadian Heritage and something the Auditor General said with respect to the performance management framework—the fact that his office was assisting in that development and trying to make things better in that regard. What's your reaction to that, and will you be part of assisting in that process? Is there merit to that management framework?

Mr. Norman Moyer: We certainly will be glad of any kind of work we can do together with the Auditor General's office in this area. Anne tells me that we are already part of a pilot project in that area. Our concern clearly is to make sure the kinds of programs we deliver, which are quite different from some of the programs delivered in economic or technology areas, are taken into consideration when any broad framework is designed. We definitely want to be present as these things are designed and tested, so that the kind of program we deliver will fit into whatever emerges as a broad framework.

Mr. Lynn Myers: And what's the pilot project you're referring to?

Mr. Norman Moyer: Well, apparently there's a pilot project on alternative service delivery that we're involved in.

Mr. Lynn Myers: I think it would be interesting to see the results of that. I think that's very important. It's a good initiative and something that presumably we'd want to monitor over time.

I wanted to go to the Auditor General's position that the five objectives of the multicultural program were vague. I wondered how you reacted to that, and if in fact there are steps you're taking to set clearer goals, objectives, and expected results. What's your reaction to that?

Mr. Norman Moyer: We think, first of all, the five objectives point the program in the right direction and provide good guidance for applicants and for project officers to examine them. We agree they don't go far enough, and we have been working with program delivery staff over the last four months on a set of specific priorities for the upcoming year and year and a half. Those priorities are designed to make those objectives more specific.

But the reality of this kind of program is that on the ground, that officer who's delivering those programs in Lethbridge or in the Maritimes has to interpret a set of objectives for the circumstances in which this particular social or cultural problem is evolving. We will probably never have objectives as specific as would be required to satisfy everybody's top criteria, because we have to respond to situations that are very different across the country.

Mr. Lynn Myers: I wanted also to go to the notion that the phasing out of sustained funding was taking place and there was going to be more project specific funding. Now as I understand it, the target will not be met, and I wondered if there was a new target set for that yet.

Mr. Norman Moyer: We had set three years for the phasing in of that. We will meet that with 90% of the clients in the program. We are now sitting down and working out the possibility of a year's extension for some of the program clients who have shown us that they have real difficulty. Some clients will be able to meet that. Others, I think, will fall by the wayside, because we are determined to get out of that program funding activity for the vast bulk of our clients.

Mr. Lynn Myers: So instead of March 31, 2000, you're saying a year later, perhaps for 10%.

Mr. Norman Moyer: For some clients, that's what it will be.

Mr. Lynn Myers: I see.

If I could turn, Mr. Chairman, to Industry Canada for a minute, I wanted to go back, because I'm interested in the performance management framework. I wanted to get your reaction to that and how you see yourself working in cooperation with the Auditor General in that important area.

Ms. Diane Vincent: Are you talking about third-party delivery, about contributions and grants in general?

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Mr. Lynn Myers: Yes, in general, as a specific overall way of operating.

Ms. Diane Vincent: First of all, I think we are ready to work with the Auditor General in that area. But in the department, as well, we have taken some steps in terms of managing globally those contributions.

Since program review, we don't have many grants programs anymore, and the one we have is more of a contributions program right now. We set up a program and services board of officials in the department, and we review all projects above $500,000 and make sure all the program criteria are discussed in a project summary form.

So at the time we accept a project or recommend it to the minister, we now make sure all the criteria are met. For the ones we don't see—because they are below $500,000—we do a post-audit. So the responsibility centres may have the authority to approve the projects, but the program and services board does post-audits on those projects.

For example, last year we audited 20% of those projects. We try to see before the fact when we have projects above $500,000 and after the fact if there is something we could correct and manage more appropriately. Those are the key things we've done to try to improve our processes.

Mr. Lynn Myers: Thank you.

I wanted to go to the notion of due diligence, and we heard the Auditor General speak of this again today in terms of the importance of that, especially with respect to CANARIE and PRECARN.

Can you speak to that criticism? It seems to me it's a strong one being made and I think we need to hear your side of that.

Mr. Michael Binder (Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Industry Canada): Let me start by making some remarks about this third-party delivery. As the Auditor General himself recognized, it's a different approach to delivering programs. It's an innovative approach, particularly if you want to deliver programs to research and development in a fast-moving information and telecommunications industry, a very competitive industry.

We've spent a lot of time thinking about how to do that. Obviously, in every new innovative approach there's room for improvement. So we recognize the suggestion by the Auditor General and we'll be working with them to see what we can do.

However, I think the AG himself has recognized that you need to develop a different framework. And I will argue that framework is not in place yet, because we set up this approach to get out of micro-managing the industry. We set out to get away from an annual reporting mechanism. We wanted to find a mechanism where government and industry could collaborate, move forward as a team. We wanted to see if we could get consensus among fiercely competitive people.

You have to understand. You sit on a board of directors where you have the telephone companies, the cable companies, the computer companies, and the content in the universities. To get consensus in that forum is very difficult. Yet CANARIE for the last five years has been a very successful experiment with that kind of thing. So is PRECARN.

We wanted to rely on a transparent process where everybody understands the rules of the game, and you don't have to go to the government; you go to peers, who evaluate project specifics.

So we've done all the things we didn't want to do internally, and in addition to all of this, we have our own staff participating on the board of directors in the deliberations and the design of the program. So I can argue that I'm not sure what kind of design for a new performance framework we need, and we'll be interested in devising such a scheme.

However, I'd also like to point out that it is too bad that what wasn't recognized sufficiently is that we've done program evaluation—extensive program evaluation—which is an effective audit that asks the question, when all is said and done, what are we achieving out there in the long term?

I can tell you that I've seen many evaluations in this town. I've not seen too many that were positive, on both PRECARN and CANARIE, as really successful programs. I think what we're facing here is a fine-tuning of a good experiment of program delivery.

• 1625

Mr. Lynn Myers: Thank you very much.

The Chairman: Thank you, Mr. Myers.

Mr. Harb.

Mr. Mac Harb (Ottawa Centre, Lib.): Thank you, Mr. Chair.

The Chairman: I think we're likely going to be moving on to our second round here now, so I'll have to cut you back to four minutes, Mr. Harb.

Mr. Mac Harb: I don't mind that, Mr. Chair.

First, I want to thank the Auditor General and the department reps. My question is to the industry department.

According to program terms and conditions, when the department gives money above a certain level, it will do assessments. There are five out of nine projects that the department has given money to. One would therefore play the devil's advocate and ask what sort of assessment the department did, or what sort of justification it looked for in order to give those five projects extra funding. At the same time, when you do the assessments of those projects afterwards—after you give them the money—what sort of a timeframe are we talking about before you issue a report indicating the results of the assessments of project A, B, C or D?

Ms. Diane Vincent: For your first question, I reviewed those five cases, as well as all the other ones, for the

[Translation]

a maximum amount of available aid. In all cases where the maximum amount was exceeded, these were non-profit organizations. It was also pointed out that these organizations had been found to have very few sources of funding other than government funding. Many of them had been recently created to face a given situation. Such contributions have never been given to the private sector; they have been given to non-profit organizations.

Some grant applications involved studies, that were 100% funded rather than 90%. Generally speaking, when we apply this program, we feel that there are communities or organizations from a given area that are attempting to take charge, and to ensure economic development. We also felt in a general way, that in the case of non-profit organizations, the funding was very limited. In such cases, our contribution was reduced, and we did not necessarily award 100% of the funding. Those were the reasons, at the time, that led us to increase the maximum amounts.

[English]

The Chairman: Did you have a follow-up question, Mr. Harb?

Mr. Mac Harb: I think she's doing well, Mr. Chairman.

The Chairman: Okay, then please continue, Madame Vincent.

Ms. Diane Vincent: Thank you.

In terms of what the timeline is for doing the report on the specifics, we are doing the reports on some of the specific projects right now, and we also audit those cases. These things are usually done after the project is terminated. Many of those were last March, so we are in the process of doing those reports now.

Mr. Mac Harb: Okay. Now I have a very short supplementary question.

I really appreciate the fact that you welcomed the Auditor General's report and that you are going to respond to it. Do you have any timeframe for when you will be able to implement the recommendation as set out by the Auditor General?

Ms. Diane Vincent: Yes, we are in a specific situation with this one. The program will in fact end March 31, 1999, so we gave our managers the comments of the Auditor General. We suggested how they could improve things within the remaining time, and we are still looking at one project. The point is that besides that project, we feel the system we have implemented with the program and services board really recognized the problem in the recommendation from the AG, and that was the lack of documentation. There is a careful check right now—and there has been for the last few months as well—on any project that comes to our attention. So I think that recommendation is valid for OBCAP, but we do it in other programs as well.

Mr. Mac Harb: Thank you so much.

The Chairman: Thank you, Mr. Harb.

Mr. Forseth, four minutes.

Mr. Paul Forseth: Thank you.

• 1630

Mr. Moyer, to go back to Canadian heritage and multiculturalism, the Auditor General says in paragraph 27.63:

The Department of Canadian Heritage should:

· further clarify the objectives of the Multiculturalism Program by defining clear, attainable goals and expected annual results....

I see in this document here that there are five broad program objectives listed. The first one says:

Assist in the development of strategies that facilitate the full and active participation of ethnic, racial, religious and cultural communities in Canadian society.

When you report, some of your reports clearly identify where ethnic, racial, and religious communities are not integrated. You outline what is not done. You then look at the dollars spent in a specific program, and afterwards measure how they are spent. There is the before and the after. That's related to achieving your first program objective.

Then I look at the second program objective, which says:

Facilitate collective community initiatives and responses to ethnic, racial, religious and cultural conflict and hate-motivated activities.

Do some of your evaluations cite specific activities that you have looked at, identify problems of conflict and hate, and cite what has been spent to ameliorate those problems, looking again at the before and the after?

I'll let you respond to those two, although I could go on to describe three, four, and five, asking basically the same kinds of questions about developing very sharp objectives that have some kind of measurement. If Canadians are going to be spending the kind of money we're spending, we really want to feel that spending is worthwhile. You're going to get a lot of public support if you can really document those things in a concrete way.

The Chairman: Mr. Moyer.

Mr. Norman Moyer: We continue to endeavour to have the kind of measurement you're talking about, but I don't want to be unrealistic in pretending that I can come up with an easy yardstick. Along with several other jurisdictions in the country, we work, for instance, with the people in the greater Halifax area on some of the issues of integration and conflict between the population there and parts of the black community. We know some of the programs we are involved in are well received and are being helpful. More anecdotally than in any quantified measurement, we can see progress in that community in terms of resolving some of those issues.

When we get around to measuring the impacts of our program, there are two. First of all, how do you actually measure the degree of racial harmony in a community? It's a difficult social task to do that. Secondly, how much of that do you attribute to our program? We're not the only people who have tried to work on it, so attributing changes in the broad community to one particular set of efforts is very difficult.

We will continue to measure the broad impacts of what we're doing. I don't think, however, that we'll ever find a way to clearly answer the question of whether or not a particular $10,000 grant was responsible for 10%, 15% or 50% of a solution that emerged in a community in northern Saskatchewan in terms of helping those people deal with an issue that occurred in their high schools.

Mr. Paul Forseth: But aren't students in sociology and so on doing those kinds of things all the time? Aren't they trying to develop instruments and measurements in order to look at the before and the after? We have to have some way of assigning dollars. First of all, when assigning need, there are all kinds of projects identifying community needs around, say, crime prevention. It's the same kind of so-called soft stuff.

We have people doing their PhDs and all kinds of other things to get at those kinds of tough, difficult, amorphous topics. They are able to support that somewhat statistically and can also do so through surveys of attitudes by looking at police statistics and a lot of other things.

Despite the difficulties in the last year, has there been any specific study that has looked at the efficacy of any one project? Has there been, say, a master's degree thesis or a PhD thesis that has really zeroed in to see that there was some result for dollars spent?

• 1635

Mr. Norman Moyer: We do project evaluations, but they would not be done at the level of a master's or a PhD thesis.

We do survey what's going on in the academic field and we follow it and use it, but it rarely is focused on one project or one series of activities. It's focused broadly on different mechanisms of intervention. They'll say that the success of organizing community focus groups and involving people in broad discussions has proven very successful in these four or five communities—and we know we're doing that kind of thing—so we will do more of it.

The Chairman: Thank you very much.

Mr. Grose.

Mr. Ivan Grose (Oshawa, Lib.): Thank you, Mr. Chairman.

Ordinarily, I try to use a rifle rather than a shotgun, but quite frankly, in this case I'm going to have to use a shotgun because I would run out of bullets in the rifle long before I had finished.

There are some key phrases here that particularly disturb me:

...over the past 21 years have produced a long series of consistent and disappointing observations.

...in 1977, we found problems...

Although we have found specific improvements in some areas in follow-up review overall we continue to find the same problems each time we audit these programs.

The Auditor General asks:

Why have these problems persisted? The answers range from decision makers not following the government's rules

—and that's pretty easy to do—

for grants and contributions to poor management and weak management practices.

I ran my own business for 35 years, and quite frankly, if you people worked for me and I was disturbed about where a program was going and I asked for a report and got this, you'd soon be working for the government.

Quite frankly, I don't know what to do with this. It reminds me of a commercial phrase: “Where's the beef?” This reply is all fluff, and if you can't do any better than that, then I would rather have you tell me it's impossible to account for the benefits of this program. Fine, that's the ball back in our court; maybe we should cancel the program. That's our problem.

But this is the taxpayers' money, and on two of the programs the Auditor General particularly picked on, you said you have done a fine job. Prove it.

You mention independent audits. Where are they? Am I to take your word for it? I'm willing to, but in view of this report, I find it very difficult. If you have some evidence that the Auditor General is wrong and has been wrong consistently, then tell me. But I'm not willing to accept this, and I consider it insulting to the Auditor General.

You talk about pilot projects—oh, I hate that word, and I've heard it before from other departments. Quite frankly, I think if you have pilot projects going, probably your pilot needs a navigator, because they don't seem to know where they're going.

I'm going to suggest in a motion before we wind this committee up that you rethink this and be back to us in a short while with a report that we can understand and that tells us exactly what the situation is. I am not going to sit here and hear next year this same kind of report, because, quite frankly, I'm going to be here next year just so I get a report from you again.

You say you welcome the Auditor General's comments. I imagine you welcomed them last year, and the year before, and 21 years ago. He now has been welcomed so often he thinks everyone in the world loves him.

A voice: And they do.

Mr. Ivan Grose: It just doesn't do anything. I'm completely unsatisfied. I want a better report than this, and I'm going to try to get the committee to go along with me and have you give us a better report.

Thank you very much, Mr. Chairman.

The Chairman: Thank you, Mr. Grose.

Mr. Paul Forseth: Is there any response to those comments?

The Chairman: Well, we'll maybe get a brief response.

Mr. Moyer and Ms. Vincent, we'll have a quick response from you both if you want to make one. Don't feel you have to, because there was no actual question there, but if you want to respond quickly, you may.

Mr. Binder.

Mr. Michael Binder: It's all very cute. I can table right here, right now, two big evaluations of the two programs, done by an independent body. If that doesn't suffice, I can take you to real product, real output.

I don't know if you heard about CANARIE, or CA*Net 3, which—

The Chairman: Mr. Binder, I don't think we're into my statement versus your statement. I am saying Mr. Grose is dissatisfied, and I think he made that quite clear. He spelled out quite clearly the reasons he is dissatisfied, because for 21 years the Auditor General has been talking about this and the need for better accountability, and he was dissatisfied with the statement that was presented this afternoon. It's the response to that. We don't want to get into a trade-off of your program versus mine.

Mr. Michael Binder: Sorry, Mr. Chairman, but he also asked if there is any point on which we disagree with the conclusion here.

All we have said is that there are two dimensions to this. There's performance monitoring and actual evaluation of the program itself.

• 1640

All I'm trying to say is we have the evidence that the two programs I'm responsible for, CANARIE and PRECARN, have been proven to be very effective programs. I have the documentation for that, so I take exception to that point.

The Chairman: Thank you.

Mr. Moyer, did you have a quick response, or do you want to pass?

Mr. Norman Moyer: No. I think the comment of Mr. Grose and his desire to see improvements in this area are just in fact what we said we're going to do.

The Chairman: Okay, thank you.

Ms. Vincent.

[Translation]

Ms. Diane Vincent: I would like to add that after having prepared his report, the Auditor General always does a follow-up audit. Following his last report on Industry Canada, published in 1995, in which he had found a problem related to the administration of a grants program, he recognized, in his follow-up audit of 1997, that the department had taken the necessary steps to rectify the problem. I already explained the system that we have set in place for that purpose. Whenever the Auditor General makes a report, there's always a follow-up report in which he determines what has been done and points out the improvements that have been made.

In the case of the Ontario Base Closure Adjustment Program, it was felt that the documentation on file was insufficient, and we are attempting to correct this shortcoming. We take very seriously the comments made by the Auditor General.

[English]

The Chairman: Thank you. I was just going to raise that point.

In your opening statement, Ms. Vincent, you talk about Industry Canada now developing an evaluation framework. You're now into innovative third-party delivery vehicles and reports conclude the government should continue to support these initiatives.

Those are laudable things, but when we take a look at the Auditor General's report and your responsibility to ensure that the program is properly managed and monitored...and we're not talking here about whether the program is working well or not; we're talking about whether you as a department of government are monitoring it well. I take a look at what he is telling us, and in paragraph 27.21 he tells us that back in 1994 and 1995 there was lack of due diligence, and now in this particular report he's telling us in paragraph 27.37 that there's little information and assessment against criteria, little evidence that projects represented value for money. He tells us that five out of the nine projects exceeded funding limits with no explanations. We're talking about the control and the supervision and the due diligence that seems to be missing, and we want to know why.

[Translation]

Ms. Diane Vincent: The study of the two projects to which you refer began in 1996. Following the follow-up examination undertaken in 1997 on the administration and management of programs, the Auditor General stated in his report that we had made the necessary corrections. In the case of the Ontario Base Closure Adjustment Program, we learned that the documentation on file was not always complete. We do maintain however that the essential evaluation criteria, that is, the economic spin-offs for the community and community support, were always apparent in these cases.

[English]

The Chairman: Mr. Desautels, Ms. Vincent says this is old news and covered off in previous reports, but you put this in your new report.

Mr. Denis Desautels: Mr. Chairman, I think we should be quite clear here. We looked in Industry Canada at a particular program related to base closures, and we selected a number of grants that were given. The dates are over a certain period of time.

If you look at exhibit 27.3, first of all, case 1 was a project that was completed in 1997 and case 2 was completed in 1998. They may have been started in 1996, but in fact they have a pretty recent history. So that's one thing I would say. I don't think this is out of date; this is relatively recent information.

• 1645

We may have a different interpretation of some aspects of these programs. For instance, the one part that gives me a little trouble is the amount of community support and participation in some of these projects. That is the case in some localities, but not in all cases.

The first case we note here of the United States custom pre-clearance facility at the Ottawa International Airport didn't come from the community as such. As far as I know, it came from the organization itself. I don't think the community had much say in what went into that project. That project alone consumed $2 million out of the $2.1 million that was allocated to Ottawa. So the community involvement is not always as extensive as the program is calling for.

The Chairman: In the area of documentation, I go to 27.40 and quote the Auditor General:

Although the department's review of the support for the claims from recipients was adequate, we found no reports in the files of visits to the sites of the larger projects we looked at. To date, final reports have been prepared for two projects. Those reports included information on the work that was done...but provided no information about the fulfilment of the program objectives and criteria.

So you have nothing in your files to suggest the project has been completed and has accomplished what it set out to do. You didn't even visit the sites, according to the documentation in the file. This is the point I think Mr. Grose and Mr. Forseth are making. We don't dispute that these programs are very worthwhile, but there's nothing in your files to suggest you concur with them.

Ms. Vincent.

[Translation]

Ms. Diane Vincent: I agree when the Auditor General says that both projects could have been completed in 1998 or 1997. When the files are analysed or accepted, we often consult documentation relating to the analysis of the files. In these two cases, it was done in the fall of 1996 and early winter of 1997. I checked those files myself.

With respect to the documentation for these projects, the drafting of the two final reports is finished, and we are at this time preparing four more. We must also point out that some of our 19 projects are feasibility studies and impact studies. Some files deal with projects, whereas others involve studies. We begin by determining the feasibility of a given project, after which it is possible to move to its implementation. Some applicants may also decide not to go ahead with a project. In the case of studies, we are not necessarily required to undertake the same final evaluation. This applies especially in cases where we move to the implementation stage of a project where post-project studies are undertaken.

[English]

The Chairman: We seem to be ships passing in the night, because what we read in the Auditor General's report seems to be quite different from what we're hearing from you.

Also, Mr. Moyer, in paragraph 27.54, the Auditor General points out that 30% of the projects lacked due diligence. You said in your statement that because you fund these same people on an ongoing basis, the first year is maybe not that easy, but in subsequent years you follow through. But in paragraph 27.60, the Auditor General points out that final payments were made even when the project admitted not meeting its conditions. In 27.61 he points out that one-third of files had a late or no final report.

So we just keep shovelling the money in their direction without getting any reports back on whether things are progressing as anticipated. Why?

Mr. Norman Moyer: We have reacted to the Auditor General's report by making sure we collect this information. We found, in some of the files that are part of that 30%, that people were sitting down in meetings with these people, getting their reports orally, and not putting on file the necessary information to reflect the kinds of reports they got back.

Part of the problem we have with this program is that very often the group we're supporting is comprised of five or six volunteers in a small community who have difficulty sitting down and preparing a three- or four-page report—even something very small. Our staff has to work with them to get that kind of report in.

We don't think it's acceptable, though, to have 30% fall into that category, and we are determined that we will have these kinds of reports on those files.

• 1650

The Chairman: But I think you're glossing over it when you say in your opening statement:

As a result of the review, the Program was renewed in 1997, putting in place a number of changes to address these concerns.

The Auditor General says, in paragraph 27.59, that the old program was phased out in April 1, 1997, but you were still assessing under the old rules as late as June 1998. So while the program was phased out, you didn't update your staff training; you were still using the old rules for the new program.

Mr. Norman Moyer: We deliberately had a transition period, so it was necessary to continue with two sets of approaches. In fact we're still in that transition phase. As well, the work that was undertaken to audit this program came one year after very significant program changes and very significant downsizing of the staff in the program. So we are fully confident that as the program gets implemented more completely, we will satisfy much more of the requirements expected.

The Chairman: Mr. Desautels or Mr. Simeoni, were you aware that the program was in transition, or were you thinking that the old one had stopped and a new one was starting?

Mr. Peter Simeoni (Principal, Audit Operations Branch, Office of the Auditor General of Canada): I believe in the first meeting we had with program staff they explained that they were in a transition period. We took that into account. We tried to audit the old files according to the old rules and the new files according to the new rules, and what we found is what we published. But the problems remain.

The Chairman: Not the new files under the old rules?

Mr. Peter Simeoni: No.

The Chairman: And it's not appropriate that there be new files under the old rules.

Mr. Peter Simeoni: No.

The Chairman: Okay.

Mr. Cardin.

Mr. Serge Cardin: Ça va, merci.

The Chairman: I still have a few questions.

Mr. Forseth, do you have some questions?

Mr. Paul Forseth: Just one follow-up.

A comment was made in regard to the example of a small community group. Something was said about perhaps providing an oral report and their difficulty in maybe writing out a one- or two-page letter with some statistics. Maybe they were doing some community counselling or something like that and they couldn't count how many clients they had actually seen in a six-month period.

If they can't complete those basic kinds of reports, I wonder how did they ever have the ability to successfully complete the application form in the first place to be able to get the money or the project? To get the program in the first place requires some sophistication, to justify to somebody—unless there's a Santa Claus running around handing out money, handing out money to political favourites or something, and I don't think that is happening. I hope not.

I find that to be a highly inconsistent statement. Obviously, there are some criteria to outline a project and get some money. Then certainly, if they can do that, they must be able to provide some kind of report at the back end.

The Chairman: To add to that, how can they complete the project if they're not capable of filling out a report?

Mr. Norman Moyer: No. These groups are capable of filling out those reports. If I implied they weren't capable of it, I was wrong. What happens is they're frequently already thinking about the problem that's coming at them today in their community, and when our officer is in there saying no, we need a report on the situation you were dealing with last year, it's sometimes hard for us to get it. We need to do better in getting that. But it's not that they're not capable of doing it. These are people who are facing real situations that are difficult in their communities, and they're looking to tomorrow more than to filling out the reports we need.

Mr. Paul Forseth: But isn't the evaluation component part of what's designed and contracted to do up front?

Mr. Norman Moyer: Absolutely, and in most of the cases it is done, even by small groups, and all of these groups, with some help from our staff, are able to do that. It's one of the things we're focusing on getting done.

The Chairman: But it seems to me we're getting the impression, rightly or wrongly, that there's a cosy relationship between the program officers and these organizations that apply for grant money, where the program officer, who, as you say, Mr. Moyer, is obviously attending these meetings, says, “I've heard enough, I'm satisfied”, and walks away and nothing ends up in the file. I also think of Mr. Binder's programs, CANARIE and the other one, where you have an observer status on the board, but the testimony I heard today would suggest it's more than observer status on the board. That is not the intent of the granting program and the way you have your agreements with these arm's-length organizations. They are supposed to provide you with the documentation, saying “we are meeting the criteria”. It's not supposed to be this cosy relationship.

• 1655

We will hear from Mr. Moyer and Ms. Vincent. Then we might hear from the Auditor General.

Mr. Norman Moyer: I didn't mean to imply there was in any way a cosy relationship.

The Chairman: We're getting the “maybe”. I'm not saying there is; I'm just saying the impression has come across that way.

Mr. Norman Moyer: What happens is our program officer will sit down with an applicant and go through what is required, including the report from a previous project. We'll ask for that report and outline what's needed in it. The project applicant will talk primarily about the problem they're facing today and how we can get on with the next one. In those 30% of cases, we need to do better by ensuring that we do not go on with the next relationship until we have the program report. This is where we're going with our staff.

The Chairman: Mr. Binder.

Mr. Michael Binder: Beside paragraph 27.64, in the AG's own words in the margin, it says “Indirect delivery arrangements require special accountability measures”. I think we've heard that already from the AG, and we agree we need to develop those special accountability measures. We are working on that.

I think there's a misunderstanding about what “indirect delivery” is. It's to get the government from micro-managing this particular program. How you do accountability here is a question that has not been resolved, and we have some debate. In this particular program, we're trying to avoid all the problems you've been referring to in some other programs.

I really think we need to approach this new mechanism, which is brand new; it's only been around for two years. I don't want to be tainted with semi-historical baggage here that you keep referring to, but I think it would be a mistake for us not to recognize that we are trying, as a result of this baggage, a new approach to contributions. I can tell you that by all measurements we've done to date it's been a very successful approach.

The Chairman: I don't think the committee is in any way, shape or form averse to a new approach, to ASD and other ways of delivering services. But Industry Canada sat down and developed an agreement between themselves and these program deliverers, CANARIE being one of them, and said this is what our relationship is going to be. Then you set the agreement aside and developed a new, more informal relationship through observer status on the board.

I would like to find the Auditor General's comment. What's the potential for conflict of interest in that type of scenario, rather than following the documented processes that have been set out?

Mr. Denis Desautels: I suppose in theory there's always a possibility, but I think that can be avoided quite easily. On the PRECARN and CANARIE arrangements, as far as we're concerned.... Particularly with PRECARN, we're not very critical of the arrangement itself.

The Chairman: But is it documented the way it's supposed to be arranged?

Mr. Denis Desautels: Yes, but I think with PRECARN, for instance, they've provided for certain things to be done and certain information to be produced for Industry Canada, but in this case it's more that Industry Canada is not taking full advantage or carrying out completely what is called for in the arrangements. So the arrangement itself, in that case in particular, seems quite sound.

We've said in our report we have to work, in terms of finding proper accountability mechanisms for these new indirect delivery arrangements. It's not impossible; in fact, I firmly believe if we do this successfully we'll probably end up with better accountability than we used to have, even with the direct delivery arrangements.

The Chairman: That's provided the system is followed through and is properly documented in the files.

Mr. Denis Desautels: I want to be clear here that we're not insisting on documentation only for the sake of documentation. It might come across that way at times, but there's a lot of documentation in these files I'm told, and for the things that get done there is usually evidence in the file. If there's absolutely no evidence in the file, it's really difficult to conclude that all of that was done, if it's simply not documented.

• 1700

So documentation is usually more evidence that something was in fact done—an important thing.

The Chairman: Does anybody else have any more questions?

Mr. Finlay.

Mr. John Finlay (Oxford, Lib.): On page 6, Mr. Moyer, you point out that we now have a comprehensive new internal publication called Program Evaluation Framework, and in the next bullet you have:

In the two years prior to the AG's assessment of Multiculturalism, the program had initiated and undertaken its own comprehensive review which identified issues similar to those raised by the AG. As a result of the review, the Program was renewed in 1997, putting in place a number of changes to address those concerns. For example, the Program Officer's Handbook, was developed to provide better guidance to staff.

I wonder whether the Auditor General, Mr. Chairman, has any comments on these, or whether he's examined these, or whether he's related them in any way to his report, because it seems to me there's something there that we should recognize.

Mr. Peter Simeoni: These are documents that they were in the process of developing at the time of our audit. They had not come into use yet. The program evaluation framework that we obtained in July was a draft. Even so, once these documents are finished and in the hands of staff, in our view they should reflect the program design in the first place. The kinds of things you'd expect to see in a program evaluation framework should in fact also be in the assessment criteria for the grants and contributions applications. We'd like to see those ideas, the results they try to measure in the evaluation framework, actually in the upfront process and not at the back end when everything is said and done.

So we encourage these efforts by the department to provide staff with the tools they need to do their jobs. We think there's an opportunity to integrate the program using that program evaluation framework from one end to the other, and we would hope the department would take advantage of that opportunity.

Mr. John Finlay: But Mr. Moyer says here that the Program Officer's Handbook was developed to ensure that they had more precise written instruction on what information needed to be documented in a project file, which is what you just said about the program evaluation framework. Is it or is it not? Are these two documents complementary, or has there been a big gap, in your opinion?

Mr. Peter Simeoni: They weren't available for audit at the time—

Mr. John Finlay: So you haven't had a chance to—

Mr. Peter Simeoni: As part of our work we would pick up the draft documents, and we were aware of them, but since they weren't in use, it wouldn't have been fair to us to audit using them. We're glad to see they've been finished since then.

Mr. John Finlay: Maybe Mr. Moyer has some comment on how useful they have been.

Mr. Norman Moyer: We believe they go a long way to meeting the concerns the Auditor General raised and our own preoccupations with the way the program is delivered. We are now rolling them out. They have been the subject, as I said, of a first series of training sessions and will be subject to a follow-up set of training this spring. So our sense is that we are in fact equipping our staff with the kinds of program guidance materials they need to meet these concerns.

Mr. John Finlay: Thank you.

The Chairman: I think we have the questions all done. We'll now call for a closing statement by the Auditor General.

Mr. Denis Desautels: Mr. Chairman, I think this particular chapter focuses on two departments and some of their grants and contributions programs, but as we said, it illustrates a longer story. It basically emphasizes the fact that grants and contributions programs are difficult to manage and have certain risks. I think we all agree on how these particular programs that we've talked about today can be improved, and everybody seems to be on the same wavelength.

Personally, I would really welcome broadening this discussion at some point to the whole area of grants and contributions, to what makes sense as a tool from a public policy perspective and from a public administration perspective.

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There are about $15 billion worth of grants and contributions paid out in a year outside what is called the statutory programs, which are more along the lines of the EI and so on. But if you take those out, there are still about $15 billion a year in grants and contributions that are paid out in non-statutory programs. So there's a lot of money going through this. The programs we discussed today are just two departments among a much larger population.

As I mentioned before, there are some organizations in the federal government that have really managed to do this quite well, and I'm thinking in particular of the granting councils. They handle a fair bit of money and they've developed really good approaches to analysing applications and approving them and so on. So there are some good examples around.

I think it would be useful if we could somehow broaden the discussion to look at the bigger picture and the bigger public policy question.

The Chairman: Let's see if we can do that one day.

I'm going to call the open part of this meeting to a close. We're going to move in camera quickly. I know some people have some travel arrangements that they want to avail themselves of, so we'll go in camera right away.

[Editor's Note: Proceedings continue in camera]