PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 2, 1999

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[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon, ladies and gentlemen. Welcome to another public accounts committee meeting.

As the order of the day priority we have the September and November 1999 Report of the Auditor General of Canada. And if we can get this meeting wrapped up in reasonable time we'll follow that with a steering committee on future business.

Witnesses today are from the Office of the Auditor General of Canada: the Auditor General himself, Mr. Denis Desautels; Mr. Michael McLaughlin, the Deputy Auditor General, Coporate Services; Ms. Maria Barrados, Assistant Auditor General; and Mr. David Rattray, Assistant Auditor General, Audit Operations Branch. Welcome all.

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We'll start with the opening statement, Mr. Desautels, which has already been circulated, I believe. I turn it over to you.

Mr. Philip Mayfield (Cariboo—Chilcotin, Ref.): Mr. Chairman, before Mr. Desautels begins, you mentioned that you wanted to get done in good time. I was wondering, did you have a time in mind for that?

The Chairman: I was hoping that we may be able to wrap up around five o'clock.

Mr. Philip Mayfield: I'll be leaving about 4:20, I'm sorry.

The Chairman: That's acceptable. We may wrap up before five, who can tell. Maybe there are no questions, maybe everyone has read every word and absorbed every word and agreed with every word and we go from there. Let's find out.

We'll turn it over to Mr. Desautels.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman.

My colleagues and I are pleased to have this opportunity to meet again with the committee to discuss this great report we tabled on Tuesday. And we're hoping for a lot more discussion of this report in the weeks and months to come.

Before moving to our suggested priority, I'd like to draw the committee's attention to some of the issues raised in my annual chapter on matters of special importance to Parliament.

This year I concentrated on developments in the public sector, because I think that in a few years' time we will look at the 1990s as a decade of huge change. Over that last decade the government has eliminated its deficit, reduced the size of the public service, opened up the budget process, and is now entering into partnering arrangements with other governments or the private sector to deliver its programs and services.

While significant progress was made during the 1990s in all of these areas, shortcomings still remain. The budgetary process is not sufficiently forward-looking and there is no mechanism in place to encourage an ongoing review of programs. Departmental reporting and management remain excessively oriented toward activities rather than results. Accountability provisions in new governance arrangements are weak and the public service needs to be revitalized.

The changes we've witnessed over the last decade in the federal public service bring important challenges, and these challenges I think need the urgent attention of Parliament. Let me focus on two of these urgent challenges: first, new governance arrangements, and then, the implementation of the financial information strategy.

The federal government is now entering into new governance arrangements with other governments or the private sector to deliver services and programs to Canadians. Whatever the form used to deliver service, when it involves federal resources and authority Canadians have a right to expect accountability and good governance through fair and reliable reporting to Parliament.

Chapter 23 identifies more than 70 new governance arrangements across the federal government involving annual expenditures now totalling over $5 billion. Through these arrangements traditional delivery of government services has shifted to outside organizations that are often not directly accountable to ministers and Parliament. In my view, accountability for them is not sufficient.

I'm not concerned with the existence of new governance arrangements. On the contrary, alternate service delivery mechanisms that are properly implemented offer the promise of more efficient and responsive delivery through arrangements that are more focused, flexible, and client-centred. When designing new governance arrangements, the government faces the challenge of keeping a balance between giving organizations to which it delegates responsibility the freedom to make decisions, and remaining responsible to Canadians for respecting the public purpose of the funds. Further, it should engage parliamentarians in discussing the accountability they expect of these arrangements. The government should develop a framework to address accountability and good governance to guide departments in designing new arrangements.

We believe that credible reporting, serving the public interest, effective accountability, and greater transparency are basic elements of a framework. The committee may wish to examine the accountability arrangements governing some of these delivery mechanisms. Chapters 23 and 24 cover this topic, as well as chapter 5 from the April 1999 report.

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The second urgent challenge that needs the attention of Parliament is the implementation of the financial information strategy, known as FIS. The financial information the government now has is inadequate to serve its needs. It does not tell decision-makers how much their programs are costing on an ongoing basis. If the government doesn't know exactly how much its programs are costing, it's very difficult to make informed decisions on how to deliver certain programs and what user fees it can charge. No large company from the private sector could survive without this basic information. It is the federal government's duty to give itself the same quality of information as the private sector does.

In his 1995 budget the Minister of Finance announced the government's intention to move to the financial information strategy. Over four years later, I still see few tangible signs that the departments are giving this major project the attention it deserves. Several can't even prepare reliable information on time to meet existing requirements. Further details requested by the committee on November 16 will be provided to you, Mr. Chairman, in a letter to be delivered today.

Chapter 21 deals with departmental readiness for implementing FIS. We found that most departments are just starting to focus on FIS despite the fact the target implementation date of April 1, 2001 is less than two years away. We know that when there's a real urgency, federal departments can mobilize. The Y2K issue is proof of that. The Treasury Board Secretariat, overall project manager for FIS, will need to assume a greater leadership role to bring FIS to fruition.

[Translation]

Turning now to Y2K readiness, Chapter 25 reports on final preparations for the Year 2000 computer problem. Over the last 18 months, the government has made significant progress in preparing the computer systems that support critical government- wide functions.

I am satisfied that those systems are now largely ready for the transition to the next millennium. Measures are being put in place for contingencies and national emergencies.

But a word of caution: the government should not be complacent, and must remain vigilant, not only before but also after January 1, 2000.

The committee may wish to consider an early hearing on Chapter 25 to obtain the most up-to-date information from the Treasury Board Secretariat.

I will now briefly touch on the remaining suggestions included in the priorities letter in the order in which they appear in the report.

Chapter 11 examines the management of external user charges within Agriculture and Agri-Food Canada, the Canadian Grain Commission and the Canadian Food Inspection Agency. The three organizations need to improve their management of user charges in a number of areas, including costing their services, assessing the impact of fees, establishing formal appeal processes, and integrating user charges into their strategic planning.

Chapter 14 deals with the national surveillance of communicable and chronic diseases and of injuries which is conducted mainly by Health Canada's Laboratory Center for Disease Control. Our audit found that, in the absence of a national framework for public health, current national health surveillance activities are largely carried out on an ad hoc basis. Key surveillance systems that we looked at were not working as intended.

Chapter 15 provides a case that illustrates many of the issues discussed in Chapter 14. In the spring of 1998, there was a nationwide outbreak of a food-borne disease. We looked at how federal and provincial agencies—Health Canada, the Canadian Food Inspection Agency, which reports to the Minister of Agriculture, and provincial and local health departments—responded to this outbreak. Our examination identified a lack of timely exchange of information to identify the scope of the outbreak and a lack of full cooperation among the agencies involved.

Chapter 17 reports on our audit of Phase II of the Canada Infrastructure Works Program. This audit indicates limited progress in addressing the deficiencies we identified in our 1996 audit of Phase I of the Canada Infrastructure Works Program. From an overall federal perspective, the Program is essentially "running on trust" with little accountability. We found that federal officials did not consistently ensure that practices for selecting projects, controlling public funds and mitigating potential harm to the environment were working adequately.

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[English]

Chapter 27 examines the alternative service delivery program initiated by the Department of National Defence. We looked at 14 completed projects for support services, such as printing, maintenance of buildings, food services, and pilot training. Many of the business case analyses were poorly done, and options were not always adequately assessed.

Chapter 30 is the second in a series of chapters on government contracting practices. It looks at sole-source contracts for professional services and at the use of advance contract award notices, called ACANs, to see whether they conformed with contracting policy and regulations, as well as principles of best value and open access to contracting opportunities. As in last year's audit of sole-source contracts for professional services, we concluded that the process of awarding most of the contracts audited in this year's sample would not pass the test of public scrutiny.

For your information, the Standing Committee on Fisheries and Oceans has called a hearing on December 7 on chapter 20, dealing with the Pacific salmon fisheries. Also on December 7, we will meet with the industry committee to discuss chapter 19, on investing in innovation. In addition, the Standing Committee on National Defence and Veterans Affairs has requested a briefing on December 9 on the chapters related to the Department of National Defence.

That completes my opening statement. My colleagues and I would be happy to answer your questions.

The Chairman: Thank you, Mr. Desautels.

I understand from the clerk that the letter addressed to me by Mr. Desautels, the Auditor General, dated November 30, 1999, has been circulated to all members of the committee, where he was again planning the suggested priorities, which he has covered off in the report he has just given.

Now we'll turn it over to questions. Mr. Mayfield, you're first, for eight minutes.

Mr. Philip Mayfield: Thank you very much, Mr. Chairman. It's always a pleasure to get together with colleagues of the public accounts committee and with the Auditor General and the people there who serve us so capably.

Before I begin to ask questions, I believe one of the purposes of this meeting is to begin to focus in on the chapters we would like to have witnesses come and discuss with us.

The Chairman: We can perhaps get further amplification from the Auditor General on them too.

Mr. Philip Mayfield: That's true.

Just to let you know, on the basis of what reading I have done, the chapters I would be interested in exploring, or at least discussing with the committee, are chapters 12, 14, 15, 20, 21, 23, 29 and 30. Those are the ones I have ticked off that I would like us to look into a bit further.

I want to begin with an old concern of mine—that is, the Department of Fisheries and Oceans. This has been an interesting summer for people on the west coast who are concerned with fisheries. We have been hearing about how the ocean is not sustaining the stocks and we have been hearing about the problem of overfishing. I believe I've asked the question previously about enforcement of fisheries regulations, particularly, enforcing the numbers that have been allocated, who puts nets in and where.

I would like to know, particularly with regard to collecting data from the resources of the ocean that sustain fish stocks, is it your impression that the Department of Fisheries and Oceans really has a clear understanding of the problem there? Do they have a way of perhaps looking at it? Is there a fruitful approach to the problems we have seen in the fisheries on the west coast, sorting out and perhaps solving some of these problems?

Mr. Denis Desautels: I'll ask Mr. Rattray to answer your question in a moment, but I would say first that I agree completely with Mr. Mayfield that the major problem we've identified in this chapter, or close to the major problem, is the lack of good data.

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Proper management of the fisheries, whether they be on the west coast or the east coast, has to be based on good scientific data. Right now there are holes in the data and in the systems to accumulate good data for the scientists to make the right decision, or at least the right recommendation.

I'll ask Mr. Rattray to amplify on that.

Mr. David Rattray (Assistant Auditor General, Audit Operations Branch, Office of the Auditor General of Canada): Really, the approach that is being taken now under the new direction national policy by fisheries is really a good first start in terms of looking at fisheries management, how to sustain the stocks and also have a viable fishery at the same time.

The new direction document is very much based upon consultation and upon data in terms of the fish stocks, the habitats, and the catches that are occurring. I think the biggest challenge to support what we see as a good solid approach from a policy and a framework is actually to gather the data to make informed decisions to move toward a sustainable fishery.

So the short answer is a good framework, a proper perspective on a sustainable fisheries industry on the west coast with respect to salmon, and the major challenge is having the data to know whether or not the program is in fact doing as intended.

Mr. Philip Mayfield: In your audit, in your examination, did you perceive any conflict or competition between those using perhaps commercial data as opposed to biological data for the preservation of stocks?

The reason I'm asking that question is because a few years ago there were decisions made to close back on hatcheries that were supporting chinook stocks. For example, I watched as they cut back a hatchery that was capable of producing about 2 million fish a year, to 10% or less of that. Then, on the basis of it not being economically feasible at those numbers, the place was closed. The justification I heard was that it was more economical to go into sockeye rather than into chinook. It seemed to me that the upper Fraser stocks of chinook were being sacrificed on the basis of a commercial decision. I wonder if my hunches have any roots that go further than the surface.

Mr. David Rattray: I have a hard time answering that question in terms of commercial data versus other data for the management of the fishery in general. It wasn't specifically a focus of what we were looking at, and the trade-off between the two. Basically, what we were saying is that there's a need to get data from the commercial fishing, in which we indicated there are some shortcomings that need to be addressed in terms of catches declared, sample stocks, data taken in terms of the conservation. I would say the major problem is getting the commercial data in a form that can be used against the current policy under the new direction, but we didn't look at the trade-off between those two specifically.

Mr. Philip Mayfield: Mr. Chairman, how much time do I have?

The Chairman: You have two minutes.

Mr. Philip Mayfield: Thank you very much. I'd like to go on quickly from there to national defence.

We had the Department of National Defence before the committee not that long ago as we were talking about problems with equipment they were ordering. The Department of National Defence has spent a lot of time on the front pages of our newspapers. I believe you said this is perhaps the biggest or one of the biggest departments in the federal government. Is their problem a lack of administrative resources in keeping the ship movement? I wonder how to look at this question on the basis of coming up with a fruitful discussion with the Department of National Defence on sorting out the basis of their problems and going on from there. You raise problems of accountability this time, among other things. It's a pretty general question, but in a minute, could you respond to that?

Mr. Denis Desautels: I'll try to do that in a minute.

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I'm asking myself exactly those questions, because we do raise issues in different chapters on what's coming out of the Department of National Defence. We have to sit back and ask ourselves what it all adds up to, and whether there are common causes to all of that and so on.

In this year's report, I think what comes through as the common thread might be that there's a huge implementation gap. There are good intentions on many fronts, whether it's in moving toward alternate service delivery, in the handling of hazardous waste, or in the ethics program. But in going from the announcement of an intention and a policy to really rolling it out completely and well across the system, they seem to be having a lot of difficulty doing that.

Why is that? Again, it's not easy to answer. There could be many reasons. From our perspective, we see that some of the management systems they have in place do lack a certain rigour. Things are often done with expediency in mind, so their own systems sometimes are not necessarily followed as they were intended.

It's a challenge in that organization to implement some of the good policies they said they were going to put in. There's no simple answer as to why that is, but I think it lies in strengthening the management systems, whether they're for equipment acquisition or whether they're for the ethics program and the control programs. If they were more successful at implementation and rolling out their management systems better, I don't think we would necessarily see as many problems to bring to your attention as we've had in the last few years.

Mr. Philip Mayfield: Thank you.

Mr. Chairman, could I just say to you before I give up the mike that I probably won't be here when the steering committee looks at this, but I would like to see the Department of Fisheries and Oceans before the committee. I would like to see them after they've had their meeting with the Auditor General. That's probably going to be the case anyway, but I'm making that plea.

The Chairman: The steering committee will take that under advisement, and we will go from there.

[Translation]

You have eight minutes, Mr. Perron.

Mr. Gilles-A. Perron (Rivière-des-Milles-Iles, BQ): Benoît and I plan to split our time.

The Chairman: Fine.

Mr. Gilles Perron: Thank you, Mr. Desautels, for appearing once again before our committee. Thank you, Madame.

I'd like to continue discussing our armed forces. Your office has produced countless reports over the years, but the situation never seems to improve. It is in that the department cares not a whit about what you or I think? Would that be a fair statement? Does it in fact simply ignore your recommendations? Nothing ever seems to change.

Mr. Denis Desautels: Mr. Chairman, as I was saying earlier, the Department of National Defence has had a great deal of difficulty implementing many of the recommendations put forward, initiatives which were essentially sound ones.

In my opinion, the department has good intentions and wants to manage all of these activities properly and to carry out the mandate assigned to it. We have discussed our reports at length with it and overall, it agrees with our findings and recommendations.

Furthermore, in previous years, the Public Accounts Committee has also prepared reports for the Minister of National Defence and has received from the Minister and from the department responses which overall were very positive.

Where the department has problems, in my view, is with the implementation of its programs and translating its own good intentions into action. Why is this? Well, as I was saying earlier to Mr. Mayfield, the problem is very hard to pinpoint. Everyone has their own personal theory. Some maintain that the problem stems from the fact that the department has both military and civilian members, whereas others point to the unification of the armed forces as the source of the problem. All kinds of theories have been advanced.

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I for one believe that inadequate management systems are at the root of the problem. If better management systems were in place to support the department's military mission, perhaps the overall results achieved would be more encouraging.

Mr. Gilles Perron: unfortunately, you haven't thoroughly convinced me that this is the reason, but no matter. Let's move on to another subject, one which we discussed during one of your previous appearances, namely the Financial Information Strategy.

You seem rather dissatisfied with the pace of progress on this front. What steps are being taken to implement the FIS more quickly? Are some departments still claiming that they don't know how much programs cost? Are they still burying their heads in the sand and continuing to spend our taxpayers' dollars?

Mr. Denis Desautels: Mr. Chairman, as I pointed out in my opening statement, this initiative is a crucial component of sound federal government management. In 1995, the Minister of Finance announced the government's intention to move forward with the FIS, which was first launched in 1989. It's important to follow through with this initiative. By monitoring the situation very closely, the committee could bring some pressure to bear on the parties and ensure that the new strategy is implemented by the target date, namely the start of the 2001-2002 fiscal year. It's a matter of being vigilant. If the committee continues to take this kind of interest in this matter, there is an even better chance that the new system will be implemented by the target date.

Mr. Benoît Sauvageau (Repentigny, BQ): I would like to continue on the subject of DND.

You expressed a number of opinions in several chapters of this report, as well as in previous reports. Last Tuesday, you publicly stated that you intended to do a retrospective study of the comments and recommendations made by you in the past regarding the Department of National Defence. I thought about what you said because your statements are always very serious and give us much food for thought.

You talked about looking back, and that's all well and good, but I like to look ahead. Would it be at all possible for the Auditor General to prepare an annual report on the Department of National Defence, focussing in the process on its overall budget and administration, instead of producing a series of separate reports?

Secondly, like you, I too would like to see the implementation rate for your recommendations increase to 70 per cent. Have you any suggestions to make which might help us achieve this objective?

Finally, my last question concerns sole-sourcing. You mentioned a figure of $5 billion. What would you suggest as a possible solution to the problem of sole-sourcing? In 90 per cent of cases, there could be some competition in the market. What would you suggest with respect to the tender process? Thank you.

Mr. Denis Desautels: I've already said that before the end of my mandate, I intend to do a retrospective study of the Department of National Defence. This is something I intend to follow through on. I hope that it will prove useful not only to the committee, but to all parliamentarians.

Mr. Sauvageau was wondering if it might not be more useful for us to prepare an annual report on the department. Every year, we audit certain areas of the department. We try to cover the entire department over a certain audit cycle. It's impossible for us to conduct a comprehensive audit of the entire department every year, because this would be to great a task.

Mr. Benoît Sauvageau: I'm not talking about doing one every year, but rather about doing a one-time comprehensive audit.

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Mr. Denis Desautels: The retrospective study that we intend to do will provide a good overview of the department's situation from an administrative standpoint. I believe this will be a useful exercise for parliamentarians.

Mr. Chairman, I would add that like any other department, DND must submit its own performance report to Parliament, one that covers all of its activities and measures the extent to which it has met its commitments. We must continue to emphasize the importance of drawing up comprehensive, accurate performance reports.

As for ensuring that more of our recommendations are adopted and implemented, the fact that the committee has requested from departments reports on the number of recommendations that have been implemented is a positive move. If this continues, the percentage of recommendations implemented will increase. In addition to these reports, departments should be asked as well to submit detailed action plans. Similarly, when departments appear before the committee, the focus should be on fairly detailed action plans to implement corrective measures.

If the committee were to focus from time to time on our follow-ups—and we have a chapter devoted to this very subject -I think this would send out a fairly important message to all parties.

Mr. Benoît Sauvageau: Thank you.

Mr. Denis Desautels: You asked a question about sole-source contracts. I don't know whether I have time to answer your query. This is one of the chapters that we recommend the committee consider. If you decide to devote a hearing to this chapter, we could then discuss the problems associated with sole-source contracting.

[English]

The Chairman: Thank you, Mr. Desautels.

We'll now turn to you, Mr. Mahoney. Am I right in saying you're splitting your time with Mr. Richardson, or are you going to take the full eight minutes?

Mr. Steve Mahoney (Mississauga West, Lib.): That's fine. I'll try to get my questions on the record first, and then we're going to do it that way. I didn't realize we were under—

The Chairman: No, we're still doing the eight minutes, unless you want to volunteer to give your time.

Mr. Steve Mahoney: Well, I've been asked to do so by my colleague, so I'll cooperate with him.

Your retrospective report sounds a little bit like memoirs. I didn't think you were at that stage yet. Hopefully you're not. Hopefully we have you around for a while.

Item 4 in your opening remarks, Mr. Desautels, talks about the budgetary process not being sufficiently forward-looking. There's a problem that I see in government if you look too far ahead. For example, the recent economic statement by the finance minister has gone five years into the future and has come up with a surplus of almost $100 billion, and now everybody is all over the government in saying they want a piece of that particular surplus.

I'm concerned that if you get too far ahead in government budgeting, you can't guarantee it. There can be changes that are external to this country that have an enormous impact. We've seen the Asian flu, we know the impact the United States can have if things change, and there are negative outcomes from the WTO that could have an impact. While the future looks great for the time being, with growth of 3% to 4%, no inflation, low interest rates, and all of that, if you go too far into the future, is there not a danger of taking a risk that you may not be able to deliver? Is that not really contrary to your recommendation that we should be more forward-looking in budgeting?

Mr. Denis Desautels: The whole notion here is basically that as part of the budget process you should try to provide a longer-term outlook as to the trends we may be facing, so that if you're making decisions today you're making those decisions with sound information, or with as much information as possible on what might be coming down the road. To catch some of the things that are coming down the road, such as changing demographics, you need more than a two-year or five-year outlook. You need at least a ten-year outlook to be able to discern some of these patterns or other working expenditures.

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Now, of course there's a danger in calling those “budgets”, but we're not calling for ten-year budgets. Let's make that clear. We're calling for scenarios that could be laid out so that people understand what they might expect. But I don't think the government or the finance minister should be in any way held to the realization of those possible scenarios. I think those scenarios should be there to help an informed debate.

This does happen elsewhere. When we met the committee, we explained that in some other countries—Australia, New Zealand, and I think the U.K. as well—there is now legislation calling for this longer-term outlook. So I call them outlooks, not budgets as such. They're part of the information you have when you're discussing the budget.

Mr. Steve Mahoney: But with respect, the term “budgetary process” is the one I zeroed in on. Really, you're talking about better, longer-range financial planning, or financial forecasting maybe even more than planning, because the best-laid plans can go astray with changes that are totally out of the control of whatever government happens to be in office. It's really more of a financial planning or financial forecasting issue. That's what you're talking about, I think.

Mr. Denis Desautels: When you put it in those terms, yes, I would agree. We don't need to get hung up on the actual terminology, but I think the idea is to have good information for the long term.

Mr. Steve Mahoney: The only reason I'm hung up on it is that certain people with other interests might try to hang us on it if we start talking in terms of five- or ten-year budgets that are supposedly cast in stone. I think that's a dangerous thing.

I know my time is limited, but I wanted to ask a couple other questions here. I'll ask both of them, and then you can answer them.

There's the issue of departmental reporting and management being oriented more toward activity than results. I'm curious as to how you measure results in the civil service. You don't measure it through what the private sector deals with, meaning margins, profitability, and perhaps other areas of increased efficiency, etc., so how do you manage that? And when you talk about the public service needing to be revitalized, are you talking about pay increases?

Mr. Denis Desautels: Mr. Chairman, I'll answer the last question first.

When we talk about revitalization of the public service, we're talking about two things generally: recruiting new blood in the public service and worrying about the current demographics of the public service. Also, and maybe more importantly, we're talking about changing some of the systems and practices that are now in place for managing human resources in the public service, because I think they're quite antiquated and inflexible, and they don't lead to good human resource management in this day and age.

I'll ask Mrs. Barrados to answer the question on the departmental reporting.

Ms. Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada): I'll just do that quickly.

On the question about what the results in the public sector are, in the plans and priorities documents that are part of the estimates there is a requirement now to state objectives, to define goals and to define those results. No, they're not the financial results that you'll see in the private sector, but they're what those programs are supposed to be achieving in whatever area you are in government.

When we talk about moving from activities to results, what we're expecting is a report against those objectives stated in those plans and priorities documents. We would expect to see them in the performance reports, instead of hearing how many things you did and how much money you spent. We expect to see the money with those results.

I can go on at great length....

The Chairman: You've used seven and a half minutes, Mr. Mahoney, so why don't you ask another question?

Mr. Steve Mahoney: That's fine.

The Chairman: Okay, you're finished? Then we'll move on to the second round, which is a four-minute round.

Do you have any more questions, Mr. Mayfield?

Mr. Philip Mayfield: I would just like to say, Mr. Chairman, that I would like to see chapter 23, dealing with the question of accountability, and chapter 30, dealing with sole-sourcing. I did have questions, but I'm leaving shortly. I understand the steering committee needs to sit down to look at some priorities, so I'll withdraw with that short statement.

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The Chairman: Okay.

[Translation]

Do you have a question, Mr. Sauvageau? No?

[English]

Mr. Richardson, you have four minutes.

Mr. John Richardson (Perth—Middlesex, Lib.): Thank you very much, Mr. Chairman. I'll try to be as brief as possible.

A few weeks ago we had a meeting with members from Health Canada and the Department of National Defence dealing with a health issue that involved both of the departments in developing some form of protocol and deciding how to execute that protocol in a real-life situation. But what we were apprised of was a series of fumbles and bumbles. Although they had a plan, it was not practised nor executed in a manner that would have made it effective and have the results required.

As a consequence, I'd ask the Auditor General if he would apprise us more of that kind of thing, when a department has a reasonable, strong requirement for some kind of response, like Health Canada would have in many areas within Canada, and when we have Canadians offshore, help them develop those kinds of responses to serious health situations.

I appreciated that, because lives were at stake here, and it was the life of one soldier that brought this to our attention through the Auditor General's report.

Mr. Denis Desautels: if I understand Mr. Richardson's intervention, I think you're concerned about situations where there should be good coordination between either two federal agencies or between the federal agency and agencies at other levels of government, and you would like brought to your attention those situations in which it's very important but it's not taking place.

Mr. John Richardson: I agree with that. You've made some comments here, and I think it's important that they practise. They have to practise for these kinds of things. I know that's the last thing they want to give up their job for, to start practising it, but if they don't practise it, they can't execute it. I felt that was the kind of thing that happened, both with the Department of National Defence and Health Canada. Although they had meetings, they never practised it until it was the real thing in Somalia.

Mr. Denis Desautels: I think in this report you'll notice there are at least two chapters that deal with precisely that kind of situation. We have the chapter on Health Canada surveillance activities, in which we are quite critical of the systems that are in place to do just that. In another chapter we give an example of how the system, which should have worked, did not quite work as it should, and had the consequences that we know about. I think we're trying to pursue those, identify them and bring them to your attention.

Mr. John Richardson: I want to say that your people did identify it. We had a chance to have a crack at it, and I want to thank them for it. I want to thank you for bringing it to our attention again in the report you've tabled here.

The Chairman: Thank you, Mr. Richardson.

Mr. Finlay, you have four minutes.

Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman. Mr. Mahoney asked my first question. I'm going on to another one here.

Is there some contradiction in terms, Mr. Desautels, between the public service needing to be revitalized, the public service renewal, and the fact that many departments are exploring other ways of providing services, that we're doing more with other governments and agencies, and so on? Is there any relationship between those two? Are public servants going to feel that because we contract out things, they're not doing as good a job as they think they're doing or as we think they should do? It seems to me there could be some morale problems here.

You also indicate that we have to do better in the control and reporting on these alternate systems of delivery, and I quite agree with you. I asked a question today in the House with respect to housing, where we've made a deal with a provincial government that seems to me to be then withdrawing the support it was supposed to be guaranteeing.

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Mr. Denis Desautels: I think there is a link between, on the one hand, revitalization and renewal of the public service, and on the other hand, these new ways of doing business. I think the failure to renew some of the systems in the public service, in particular for managing people, has been one of the factors leading to the creation of these other forms of service delivery, particularly, as we've seen in the last two or three years, the creation of some agencies.

I think it's been discussed in this committee that one of the reasons for creating, for instance, the new revenue agency is because of the difficulty in carrying out their mandate under the current structures of the federal public service. They needed more flexibility to be able to hire people, give them the right classification, and be able to react more quickly to their needs. I think the failure to deal with some of these structural issues can be a factor that leads to the creation of some new forms of delivery of government services.

Having said that, I think you will find our chapter on the analysis of these new mechanisms does conclude that there are some difficulties in just about all of the ones we looked at, in one form or another. Among those, of course, is always the difficulty of holding the partners in the arrangement to a satisfactory delivery. When you're delivering with the help of others, I think there have to be ways to ensure the people you're partnering with deliver their end of the bargain properly. That's not an easy thing to do in the kind of world in which we're working.

Yes, there are logical links between all of the issues Mr. Finlay raised.

Mr. John Finlay: I'm interested in the FIS too, the financial information strategy. Do we have an outline of just what that means? Have you done a report in the past, or is there something I can get hold of to understand what that aims at?

Mr. Denis Desautels: Yes, there is, of course, a chapter in this report, but there was also a chapter in 1998 on the same issue. As well, there is documentation available from the secretariat of the Treasury Board that describes the whole project, which could be useful for members of the committee.

The Chairman: Thank you, Mr. Finlay.

[Translation]

Go ahead, Mr. Sauvageau.

Mr. Benoît Sauvageau: It's not a question, but rather a comment.

Mr. Desautels, you've worked with the House of Commons for many years, but I would like to apologize on behalf of the members. There tends to be some excitement in the air as the holiday season approaches and I know that your appearance before the committee is a very important event. I'm not sure what's going on, but please accept our apologies for our lack of decorum.

[English]

The Chairman: Ms. Phinney, you have a question.

Ms. Beth Phinney (Hamilton Mountain, Lib.): People go into the military to learn how to become plumbers, engineers, doctors, etc., while they're in training. Is this where they would get their accountants, or do people who are qualified accountants come from outside and join the military?

A voice: They're all in the military.

Ms. Beth Phinney: They may be in the military. I'm asking where they come from. Do they start in the military and become accountants, paid for by the military, or are they outside sources? Because it sounds like they need a little help doing their.... I'll find out where I found this. You said their business case analyses are very poorly done. I'm not sure, you have some other comments in here. I'm just wondering where these accountants come from.

The Chairman: They can fight, but they can't count.

Mr. David Rattray: They come from several sources, Mr. Chairman. They are people who have joined the forces and continue their education while in the forces.

Ms. Beth Phinney: So they became accountants while they were in.

• 1630

Mr. David Rattray: So they can become accountants while they are in the forces. They can also come through training programs, university programs. They do sign up to commit a certain period of time to the forces and they come out with say commerce degrees or business administration degrees. You also have situations where people who are civilians work in many of these areas. They follow careers to where they've been transferred or to where they've chosen to be transferred from other government departments as civilian accountants going into the broader military structure.

So it's not just the uniformed soldier accountant. I would say that a lot of them in the Department of National Defence are in fact civilians and are qualified professional accountants. They come from other government departments or work their way up through the civilian side.

Ms. Beth Phinney: Would there be some that are qualified auditors?

Mr. David Rattray: Oh, yes. There is a chief of review services, for example. There are base internal audits. They are people who hold either university degrees or registration in organizations such as the institute of internal auditors. Or in fact they are people who hold other designations, such as the three professional designations. The business case isn't always done just simply by accountants; you have economists, statisticians, and others who are equally involved.

Ms. Beth Phinney: I think there are some other problems in there that—

Mr. David Rattray: I was just trying to answer your question in terms of where accountants come from.

Ms. Beth Phinney: Yes. Thank you. That's fine.

Mr. David Rattray: But I won't go any further with that point.

The Chairman: In a follow-up to Mr. Desautels' answer to Mr. Finlay's question about the fact that he had written a previous chapter on the financial information strategy, the clerk will ensure that is delivered to all committee members so that you have it available to you without having to dig through your library of files.

Ms. Beth Phinney: There's another source too.

The Chairman: He'll make sure that all the sources that FIS has are fully available to you.

Mr. Harb, do you have any questions?

Mr. Mac Harb (Ottawa Centre, Lib.): No.

The Chairman: Mr. Clouthier, do you have any questions, s'il vous plaît?

Mr. Hec Clouthier (Renfrew—Nipissing—Pembroke, Lib.): No.

The Chairman: Mr. Desautels, I wanted to ask about FIS—not fish, that's Mr. Mayfield's subject—the financial information strategy. You were concerned that the project maybe has stalled—I think those were your words, or close to it—that it needs to be revitalized, like the civil service. What's the problem?

Mr. Denis Desautels: Mr. Chairman, I would first of all give fairly good marks to the people who have been trying to implement FIS from the centre. There have been some people at the Treasury Board and in the Department of Public Works and Government Services who have been working hard and have already delivered certain of the central systems that are necessary to support FIS.

The major thrust and the main message in our chapter this year is that the departments themselves are late in delivering their end of the system, of the project.

There are a number of reasons for that. I do recognize the fact that departments have had to deal with the Y2K issue. That has in fact absorbed a lot of resources, just getting ready for Y2K. That has had an impact on the implementation of FIS in those departments.

In some ways it has helped, because they used the occasion to get new systems, but the new systems, on the other hand, are basically delivering the same kind of information as the old systems. The new systems that are Y2K compliant are perhaps more efficient from a processing perspective but still produce the same information as the old systems.

Having said all that, I think departments now have to assume their responsibility. They have to, I think, get more engaged in the FIS project and therefore support and respond to the initiatives that have been pushed from the centre by the Treasury Board and by Public Works and Government Services.

The Chairman: The Treasury Board is the central manager. We pushed the Treasury Board under the Y2K issue to take a leading, hands-on control of Y2K. No doubt they are, presumably, doing much and such the same in this one. Has the Treasury Board been reporting on the progress at all, or are you the one who has been left to bring this to our attention?

• 1635

Mr. Denis Desautels: We've been doing our regular follow-up, and we've made recommendations on this in the past. Therefore, as is normal, we will continue to do the follow-up of what we've recommended to you. The Treasury Board has set up a number of internal committees within the government, I think, in order to pursue the whole project and the whole agenda, but I don't think it's been producing reports for let's say outside distribution at this stage. I believe that a hearing on FIS in the near future would be useful.

I would of course link to that, Mr. Chairman, the whole notion of the appropriation system that has to be in place to accompany the new accrual accounting systems that FIS will bring in. If you recall past hearings, the Treasury Board had promised to do some work on that, to produce a paper and get back to the committee.

I think it would be interesting to be able to combine, in a future hearing, an update on the whole progress of FIS and how it's going, as well as a discussion, perhaps, on where we're going with the appropriation issue, as to whether appropriation should be on a cash basis as before or should be changed to an accrual basis as well.

The Chairman: When you're saying the appropriations, you're talking the business of supply tabled before Parliament—

Mr. Denis Desautels: That's correct.

The Chairman: —which historically has always been on a cash basis. We as parliamentarians vote supply, vote cash, taxes collected, to the various departments for them to spend as presented.

With FIS, of course, we will have accrual accounting statements that will show depreciation, which is not a cash expenditure. Right now, there are accounts receivable and accounts payable built into these statements in the public accounts, but they're not built into the cash statements, the business of supply.

Has there been any commitment at all to looking at making the business of supply mirror the FIS initiative? If there hasn't, is it Parliament's responsibility or is it the Treasury Board's responsibility to align the business of supply, the appropriations, with the accrual accounting statements?

Mr. Denis Desautels: Well, I think we've all asked the Treasury Board Secretariat that question. Their answer was noncommittal. They said basically that they had to study it, to do some consultation among parliamentarians and other officials, and then prepare a paper that we could discuss. At this point, the government officials have agreed to study the issue, to look at alternatives and come back with alternatives. I think that's the way things should be. I think they should start the process of looking at alternatives, but I think it should be put to parliamentarians before going, of course, too far down the road.

The Chairman: The Treasury Board should be conducting a survey of parliamentarians and committees such as the public accounts committee to find out how we could introduce this to parallel the business of supply appropriations with the financial statements, so that later, when you're comparing what we intend to do through the business of supply with what actually happened, in the public accounts, the two are of the same format.

Mr. Denis Desautels: I believe, Mr. Chairman, that this is a terribly important question. FIS itself is very important, and it has to be seen as more than just an accounting exercise. It's a new way of managing, and everybody in the public service has to see it that way.

But in addition to that, we will never be able to introduce a new way of managing along one line if the appropriations are in fact kept in a different way, along a different line, because you'll have two systems in place, two sets of books, so to speak.

• 1640

I think the results are that people will manage more to the appropriation basis as opposed to this new FIS accrual method. I think they're both terribly important issues and I think they warrant close scrutiny.

The Chairman: Two sets of books sounds like we're getting too close to the underground economy, doesn't i? Perhaps we should try to stay on one.

Mr. Finlay, you had a question?

Mr. John Finlay: In item 29 in your report, Mr. Auditor General—and I can't remember the details of phase two of the Canada infrastructure works program—you make an interesting statement: “From an overall federal perspective, the program is essentially `running on trust' with little accountability.” In my opinion, politically it was one of the most successful programs the government undertook. I'm wondering whether you would agree with that or if you think the problems with it were overwhelming.

It seems to me that because we asked the municipalities and the school boards and the people on the ground—as I like to say, where the rubber hits the road—what they needed, we got pretty sensible requests, pretty thoughtful requests. We didn't have an argument about how much money we were putting in; it was one-third and one-third. That's what was done. It seems to me that was the secret of the thing being as successful as I believe it was. So I don't say you aren't right about needing a little more clarity, and there were deficiencies, but what's your comment about my view of it?

Mr. Denis Desautels: Mr. Chairman, I'll start answering Mr. Finlay's question and I'll ask Mrs. Barrados to continue.

I do recognize completely that the infrastructure program was a popular program, was well received by all the participants, and in our report we also note that in many respects it was successful. Many processes were implemented. There wasn't too much hassle and things went relatively smoothly. So we do recognize many of these things. However, as we know from the throne speech, we've been told that there is likely to be another form of infrastructure program and we felt there are still things that could be improved in certain aspects of managing such a program.

I'll ask Mrs. Barrados to expand on that.

Ms. Maria Barrados: In the report we certainly recognize that there are many things about this program that work well and that it was a program that was gotten off the ground very quickly. There was a lot of activity. It was a program that was designed to draw on the different levels of expertise, so we clearly recognize that. But any time there is a program like this that has a high volume of activity and also involves a lot of money and different players, there's an expectation of our part that given what the government says it's trying to achieve by this program, there are mechanisms and structures in place so that it occurs.

So this program has a specific objective to be incremental—in other words, new spending on infrastructure. This program had an objective to create jobs. It had a list of things that were to be accomplished, but take those two. Then what we expect as the auditors is to see a program that's designed and an implementation that works toward achieving those and at the end reports on how well they've done on those things. That's the area where we then begin to be somewhat critical, because we don't see the kind of targeting we would expect if that really is the stated objective.

The other part of the report we're fairly critical on is the issue of controlling the moneys and the kinds of things you just have to put in place to control the financial management of these projects. Again, it's not a comment saying that we expect all these things to be done by the federal government. What we expect is that the federal government will assure itself that these things are in place.

An interesting feature of this particular audit is we did this jointly with two provincial audit offices, and their findings are not unlike ours.

• 1645

The Chairman: Thank you.

I think we're going to wrap this up. I have one final question, Mr. Desautels, on your opening remarks in your report where you talk about now that the budget is balanced, now that program review has ended, there is a danger that we may slip back into inefficiencies and lack of productivity, and who keeps the program focused and efficient from this point forward. Could I have your final comments on that?

Mr. Denis Desautels: Mr. Chairman, what I was trying to say there is that in the 1990s we've accomplished a lot. For one thing, we went through program review. Program review was a good exercise, one of the better exercises, of cutting back on government spending, because it analysed each program on its own. It wasn't just across-the-board cuts; it was a more selective kind of approach to reducing government spending. It had a good impact of eliminating a number of programs that were no longer needed, or changing the way in which they were delivered. It was a good healthy process in terms of weeding out a number of expenditures that were no longer needed.

Following program review there was an expenditure management system brought in, which had as one principle that all new initiatives had to be funded from the minister's existing budget. You could only have new initiatives if in fact you found the money through a detailed look at your budget and cutting back somewhere else.

This is really no longer the case now that the budget has been balanced. What we're saying is we should think in terms of finding a way of maintaining the discipline that got us through the 1990s and helped us bring about healthier finances. That's really the intent of those remarks, Mr. Chairman.

The Chairman: I'd like to discuss Mr. Mahoney's concern about the government being held to account to the letter of their projections. What do you think of the idea, given the big concern of course about health care in the future, with the babyboomers becoming old babyboomers and great consumers of health care and geriatric wards and so on, that Health Canada makes its predictions as to the costs of health care in the future, and that HRDC make its predictions as to the cost of pensions in the future? These things seem to be somewhat more carved in stone than the economic predictions of the growth of the economy, which can be left to the finance department. Would it be appropriate, for these departments that know that in the future long term there are going to be major increases in their spending, that they should be starting to publish long-term projections too?

Mr. Denis Desautels: Mr. Chairman, that would be most welcome. I think that would help a lot, and it would even put a little distance between the Minister of Finance or the Department of Finance and these projections, which may be helpful. I think there are a number of ways in which this can be accomplished. You can have other bodies involved in publishing or putting out the kind of information that would be helpful to parliamentarians in looking at the longer-term prospects.

There was one good example of this being done, Mr. Chairman, when there was a review done of the CPP. There was a lot of good information put out as to what the long-term demographics would be like and what the impact of that would be on the CPP. I think that's the kind of thing we're recommending be done on a more regular basis as part of the overall budgetary processes.

The Chairman: Any more questions?

Ladies and gentlemen, I think we'll bring this meeting to a close. It will be followed immediately by an in camera steering committee.

The meeting is adjourned.