HUMA Committee Report

Throughout our hearings, many witnesses cited insufficient staff as a factor in HRDC’s administrative shortcomings. We were told that Program Review contributed to a situation where HRDC employees were forced to cut corners. Management’s preoccupation was ‘to get the money out’ and, as a result, project officers ended up undermanaging their files. Cutbacks in staff left project sponsors uncertain about the status of their projects. A senior officer of a national non-governmental organization, Ms. Diane Richler, stated that:

Sometimes that would mean we sent in an application and it wasn’t clear who got it or whose desk it was on or where it was sitting. We wouldn’t hear back. We wouldn’t know if something had been approved or it hadn’t been approved. On occasion, we’ve actually received a cheque before we received notice that the projects were funded. In other times, we would send in a project proposal and we would never hear whether in fact it had been considered or not.

We recognize the importance of well-trained staff, but as our interim report noted, training is not a panacea. Newly acquired skills undoubtedly help workers to become more productive. However, if there are not enough employees to do the job properly, the job will not be properly done. Many witnesses suggested that HRDC should bolster the number of employees involved in project administration and financial management. The Committee believes that adequate staffing is critical to success in restoring good administration in HRDC. The 1999 internal audit report recommended that HRDC review the required competencies and current levels of staff training. HRDC has indicated that it is committed to ensuring that it has the right number of trained employees in place to manage grants and contributions better.

However, the Committee is not convinced that staffing issues have received the attention they warrant. While the Action Plan identifies several measures to upgrade and augment staff responsible for administering grants and contributions, it is unclear from HRDC’s main estimates for 2000-01 or the first Progress Report on the Action Plan that it has secured the necessary resources to fund the human resource-related actions required for good administration.

We recommend that:

8. HRDC should treat staffing needs, including training, as one of its highest priorities to enhance administration of grants and contributions. Moreover, the acquisition of additional financial resources to meet these needs should be identified immediately and secured from HRDC’s existing budget, and recouped through supplementary estimates.

9. HRDC should provide the necessary training to project officers to permit them to educate and assist third-party project sponsors in terms of departmental expectations, and program rules and guidelines.

B. Applying Eligibility Criteria Consistently and Transparently

Openness and fairness in the application of program criteria are essential to proper program administration. All of HRDC’s grant and contribution programs have established program criteria designed to help these initiatives achieve their intended objectives. Unfortunately, in some instances these eligibility criteria are too vague and/or unknown to individuals for whom the programs are designed.

Although no longer in existence, the Transitional Jobs Fund (TJF) was one program that seemed to be devoid of well-defined and publicized eligibility criteria. According to information provided by HRDC, four key criteria had to be met if a proposal was to be eligible for TJF funds. To identify and recommend projects, regional and local officials gave priority to areas that had a UI/EI regional unemployment rate of 12% or more. Officials also exercised judgement to designate, as eligible for funding, regions containing pockets of high unemployment, regions containing groups with persistently high unemployment and regions involving a strategic investment that would have positive spin-offs for surrounding areas that had high unemployment. Remarkably, the terms and conditions for the TJF were silent on the definition of "high unemployment."

HRDC officials assured the Committee that regional offices informed MPs of these selection sub-criteria. We cannot support this claim because the Committee found no evidence that HRDC was able to apply the eligibility criteria for the Transitional Jobs Fund equitably across the country. The public, especially potential project sponsors, was not adequately informed of the program’s criteria. We believe this to be particularly germane in the context of identifying eligible sub-regional areas in EI/UI economic regions with an unemployment rate below 12%.

We recommend that:

10. HRDC should ensure that eligibility criteria governing access to all of its programs are clearly identified, adequately communicated and applied equitably across the country.

C. The Role of the Community and Members of Parliament in Project Approval

Although some of the government’s critics allege that HRDC grants and contributions were dispensed to achieve political ends, proof supporting this allegation has never been provided to the Committee. All members of this Committee oppose using public funds for partisan purposes.

The Committee recognizes that direct political involvement in HRDC’s project selection process can potentially create a conflict for parliamentarians, whose role is to hold the government accountable. Although currently limited to a very small number of programs, the direct involvement of Members of Parliament in the selection of HRDC projects can undermine this responsibility. Consequently, we believe that MPs’ input in the project selection process should remain advisory.

Given the nature of the programs that are administered by HRDC, the Committee recognizes that it is necessary to adopt different approaches to achieve the appropriate level of accountability that is required to properly administer grants and contributions. The Committee has considered, for example, broadening the decision-making process to include community-based project advisory groups. This approach captures a broader community interest and greater transparency, two important ingredients for enhancing accountability. The Coalition of National Voluntary Organizations told us that "[t]here’s a huge infrastructure out there that we are not tapping into … I think a lot of times we’re confusing the political process and decision making with what really works at the local level." "The broader the representation, the better" was the message delivered to the Committee during its roundtable meeting on the role of MPs and others involved in project selection.

Members of Parliament undeniably possess an important understanding of, and knowledge about, the communities they represent. The Committee would like to see these assets applied in establishing community-based project selection advisory groups across the country. These advisory groups should encompass broad representation and focus their efforts on high value projects, especially those delivered by for-profit sponsors where the risks appear to be the greatest.

Of course, the activities of community-based project selection advisory groups must be sensitive to the arrangements that are already in place, such as Labour Market Development Agreements and regional bilateral agreements with Aboriginal groups.

We recommend that:

11. This Committee explore the feasibility of establishing project selection advisory groups in communities throughout the country.

D. New Governance Arrangements and the Role of Third-parties

Over the years, HRDC has increasingly relied on third-parties to deliver grants and contributions. By harnessing the interests of community stakeholders, this model is thought to be an effective way to deliver a myriad of measures to a diverse client base like that served by HRDC. This approach also encourages a greater investment in Canadians, but it requires new accountability structures to ensure that public funds are properly administered. Respected observers of government told the Committee that we are now in an era of distributed governance and this necessarily requires an acceptance of what Professor Gilles Paquet of the University of Ottawa called "soft accountability." Old accountability structures must be modified and the government in general, and HRDC in particular, must accept that there is no single accountability response. In short, HRDC needs to accommodate various levels of accountability. In doing so, we recognize that many of HRDC’s partners — voluntary organizations, businesses and other levels of government — are also accountable to their own constituencies. In an overwhelmingly vast majority of cases, HRDC grants and contributions are properly administered and spent. Ultimately, this is what Canadians expect and the Committee must try to ensure that HRDC has the structures in place to meet this expectation.

In a recent audit on new governance arrangements, the Auditor General of Canada expressed concern that the government is not using a consistent framework for accountability. The report identified several weaknesses and noted that there was a need for clearer responsibilities, greater transparency, stronger mechanisms to protect the public interest and better reporting. In his appearance before the Committee, the Auditor General said that better management and accountability can flow from better agreements "I think that if agreements with partners are well thought through and if enough effort is invested in those agreements, you can end up with quite a satisfactory result. If you don’t do it well, the risks are much higher than they would be if you were running the program yourself."

The Committee believes that a range of accountability structures should be used to help ensure that funds delivered through HRDC are properly spent. Each accountability structure would depend, for example, on the type of measure being funded, the partnership involved and the results to be achieved. Better decision-making structures, such as the one discussed in the previous section, need to be developed. And in the case of government-to-government partnerships, accountability could be strengthened through better reporting and auditing requirements.

We recommend that:

HRDC should put in place more comprehensive contribution agreements that outline performance expectations, financial rules and penalties in the event of non-compliance.

HRDC should utilize the necessary financial expertise, whether internal or external, to assess and approve financial proposals and business plans.

HRDC staff should apprise all project sponsors of the importance of meeting the objectives and outcomes of grants and contributions, their obligations under contribution agreements and the consequences of failing to meet these.

HRDC should consider imposing a moratorium on providing funds to project sponsors who do not comply with the terms and conditions of their funding arrangements.

In negotiating agreements under what the Auditor General of Canada calls "collaborative arrangements," HRDC (and other government departments) should ensure that each party receiving federal funds is subject to clearly defined and enforceable requirements to report on, evaluate and audit this spending.

E. An Appropriate Balance Between Decentralization, Flexibility and Control

This Committee understands the need to strike a balance between the requirements for sound financial administration and the need for responsiveness to local circumstances. The need for caution in this regard was expressed by the Auditor General who warned about the danger of increased red tape. In his appearance, Mr. Arthur Kroeger, a former senior public servant, reinforced the position that it is important not to over-compensate for what has happened in the administration of grants and contributions. He warned of the danger of increasing the "burden on large, large numbers of voluntary organizations, most of which have very thin resources….[I]f the political reaction is overdone…you're going to get an administrative overload…too much money transferred to red tape and overhead to the detriment of the recipient organization." He also commended the value of collaboration at the local level to ensure that programs worked well for the community. Representatives of national voluntary associations, Mr. Al Hatton, and Ms. Diane Richler, spoke about the hardship experienced by the voluntary sector due to the increase in requests for information that was delaying payments and consuming the time of employees. Dr. Gillian Kerr pointed out that "the way funders panic is that they clamp down and they ask a whole lot more questions of the agencies and the whole system freezes."

HRDC has shifted much of its work from headquarters to the local regions. The level of flexibility and discretionary authority of the program officers and local managers has increased. The aim of this exercise was to make the administration of grants and contributions more responsive to local conditions. At the same time, it risks fragmenting the management of the programs and makes uniform supervision difficult. The need for additional measures to manage this change was recognized recently when the Human Resources Investment Branch was split into two parts — one dealing with grants and contributions run from headquarters and another to manage those administered regionally. The Committee believes that the appropriate balance between decentralized and headquarters operations has yet to be achieved. At the same time, the Committee wonders whether the decentralization has not, in fact, been a regrouping that has centralized program administration in regional head offices rather than moving this to the local level (i.e. Human Resource Centres of Canada).

We recommend that:

HRDC should not reverse the decentralization of its grant and contribution programs to regional offices. The objectives of sound administration, transparency, and accountability can and should be addressed within the context of regional and local operations that are best able to respond to local needs.

HRDC should ensure that organizations receive money according to their grant or contribution agreement in a timely manner. The Department should guard against over-compensating for the shortcomings found in the 1999 internal audit with a reactive return to unnecessary red tape.

HRDC should strengthen its internal lines of reporting and monitoring to ensure that the delegation of administration and management to regional offices and headquarters is balanced with appropriate measures to ensure accountability.

By 1 June 2001, HRDC should report to this Committee on how it has struck a balance between decentralization, flexibility and control.