HUMA Committee Report

Following this interim report, the Committee plans to continue its study of grants and contributions as set out in its terms of reference. The Committee plans on tabling its final report with recommendations and a request for a comprehensive government response in June. Obviously, many of the recommendations will build on the observations that we have made in this interim overview. In addition, as we proceed, the Committee will try to discover answers to several issues that have been raised but where we do not have enough information up to this point. Hopefully, the next month will give us adequate time to explore these issues, but even with this, some of these questions may well require further study — either by us or by our colleagues who serve on other committees of the House of Commons. The Committee also hopes that the Auditor General in his ongoing study of grants and contributions might factor some of these questions into his work.

In order to spend government funds more effectively, HRDC has been creating partnerships to lever additional money for the programs that it funds through grants and contributions. In some of these partnerships, funds are fully delegated and operate at arm's length from the Department. These include the Labour Market agreements with the provinces and the Employability Assistance for Persons with Disabities Program. Other partnership arrangements consist of shared funding programs under the auspices of the federal government. Human Resources Development Canada participates in both types of partnerships. Representatives of the Auditor General's Office told us of their concern about both types of partnership arrangements given that the risks of administrative problems are higher. This concern was echoed by the Association of Public Service Financial Administrators and the Canada Employment and Immigration Union.

Several of the instances that have given rise to questions of administrative mismanagement have arisen in instances where the government has formed partnerships with the private sector. Employees at HRDC have been expected to assess the viability of business plans submitted by private enterprises whose incentive for participation has been profit. This has led to some confusion because it is unclear who is the "controlling" partner. If a businessman puts in three-quarters of the investment and HRDC puts in the balance, to what extent should HRDC have the ability to control business decisions driven by the profit motive?

The Committee believes that the government needs a consistent framework for these types of partnership arrangements that assures accountability, clearly defines responsibilities and provides adequate reporting.

As this study has proceeded, we have found it very difficult to get answers to many of our questions because the senior officials who initially had responsibility for designing and implementing the grants and contributions programs had moved on to other jobs. To us, this has shown up as a lack of corporate memory. Current incumbents of senior positions in HRDC's Ottawa headquarters told us that they did not know what actions their predecessors took — or did not take — as well as their results. But they told us more than we asked for about the processes. The former Deputy Minister who ordered the internal audit of grants and contributions in 1999 stated that he did not know about the previous audits in 1991 and 1994. It is appropriate to question whether he should have asked or should have been told. In addition, the Committee wonders whether the failure to apply the lessons from these audits was affected by this. The fact that a program may have disappeared does not excuse the systemic lack of management controls that an audit of that program might have revealed. This has given us considerable frustration as we tried to find out the genesis of the mismanagement in HRDC and to ascertain who was responsible for what, and when.

In the early 1990s many government departments were consolidated into fewer, but larger, operations. In the case of Human Resources Development, the consolidation in 1993 brought together part or all of the departments of Employment and Immigration Canada, Health and Welfare, Secretary of State, Multiculturalism and Citizenship, and Labour Canada. This meant, among other things, that grants and contributions programs that had formerly reported to five different ministers or deputy ministers now report only to one. The current situation raises some questions in the Committee's mind about the change in the level of political and managerial scrutiny that can be brought to bear under these circumstances. As the Deputy Minister of Human Resources Development Canada told us, she is responsible for a $60 billion budget. Grants and contributions are just 5% or $3 billion of this amount. The Deputy Minister also told the Committee that there is no consideration being given to reduce or split off certain elements of the Department in order to serve clients more effectively.

One of the major changes that HRDC has undergone has been the shift in the balance of its work from headquarters to the regions. Certainly, we heard about the advantages of this change — for example, responsiveness to local conditions and clientele, and ability to respond quickly. At the same time, the level of flexibility and discretionary authority of the program officers and local managers has increased. The Canada Employment and Immigration Union told us of their concern that accountability procedures were being diminished in the name of eliminating bureaucratic red tape. The representative of the HRDC employees reminded us that the regulation necessary for accountability should always be upheld even when it may be politically unpopular to do so. Pushing staff to approve projects quickly in order to "get the money out the door" did not necessarily serve anyone's best interest in the longer term. Unlike the case of the senior managers at the Ottawa headquarters, the issue might be whether regional managers have the appropriate experience or have gone too long without a rotation.

The Committee wonders whether the appropriate balance between centralization/decentralization and authority/flexibility has been attained. Notwithstanding changes to the organization and program delivery, it is obvious to the Committee that administrative procedures need to be tightened in order to ensure better control and risk management. There is a need to rebalance these components to serve taxpayers better within the existing organizational structure.

The Committee is fully aware that the role of Members of Parliament varied from one HRDC program to another. The former Deputy Minister of Human Resources Development told us that the Transitional Jobs Fund (TJF) was explicitly designed to allow for, and indeed encourage, Members of Parliament to participate in the process as one way of reflecting the interests of their communities. They did not, however, have that type of involvement in other programs. Our study has provided evidence that the involvement of MPs varied from province to province and region to region. Given the fact that the criteria for the TJF were not very clear, or at the least poorly understood, the involvement of Members of Parliament has, in fact, led to considerable questioning by the public and the news media. The issue is obviously one for debate. The Clerk of the Privy Council told us that he distinguished between a program that was "politicized and there being an involvement of Members of Parliament." The Auditor General of Canada, on the other hand, stated that:

The Clerk of the Privy Council made a commitment that "[w]hatever lessons can be learned from the HRDC internal audit must be applied throughout the public service." In this light, the Committee views its own study of grants and contributions in HRDC as an opportunity to apply to other departments the knowledge that it has gained.