PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 15, 2001

• 1539

[English]

The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, ladies and gentlemen.

We have a quorum to hear testimony in evidence, but we don't have a full quorum to pass motions. I have a couple of housekeeping motions that I would like to introduce and have passed today if possible, so if we do have a full quorum of nine members, I will interrupt the proceedings at that time to put the motions to the committee.

In the meantime, the order of the day, pursuant to Standing Order 108(3)(e), is consideration of chapter 14, “Canadian International Development Agency—Managing Contracts and Contribution Agreements”, of the October 2000 report of the Auditor General of Canada.

Our witnesses today are, from the Canadian International Development Agency, Charles Bassett, senior vice-president; Nicole Mendenhall, director, internal audit, performance review branch; and Maurice Lepage, director general, contracting management division.

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From the Office of the Auditor General, we have David Rattray, Assistant Auditor General, audit operations branch; John Hitchinson, principal, audit operations; and Paul Morse, director, audit operations.

Without further ado, Mr. Rattray, we'll turn it over to you.

Mr. David Rattray (Assistant Auditor General, Audit Operations Branch, Office of the Auditor General of Canada): Thank you, Mr. Chairman, and thank you for this opportunity to present the results of our audit of CIDA's management of its contracts and contribution agreements.

Joining me, as you said, are John Hitchinson, principal, and Paul Morse, director, responsible for the CIDA audit.

[Translation]

CIDA is responsible for managing about $1.8 billion of Canada's international assistance. Approximately $700 million of that amount goes to Geographic Branches for programs aimed at countries in Asia, Africa and the Americas. Most of this amount is spent through contracts and contribution agreements with third parties, referred to as Canadian executing agencies, to deliver development assistance projects.

Another $260 million is spent by the Canadian Partnership Branch for grants and contributions to support partner organizations that are responsible for the planning and implementation of their own programs and projects.

[English]

We found that, with some exceptions where CIDA used a competitive process in its geographic programs for selecting executing agencies, the process was properly conducted. However, we also observed instances when contracts did not comply with the Treasury Board contracting policy or the government contracts regulations. These involved inappropriate sole-sourcing, contract-splitting, and non-compliance with the contracting policy for former public servants in receipt of a pension.

We also found that an authority framework similar to that for the contracting process is not in place for CIDA's contribution agreements. This is important, because in 1999-2000, 45% of CIDA's geographic branches' expenditures were through contribution agreements, compared with 43% through contracts.

The terms and conditions for grants and contributions related to the geographic programs are very general and provide no direction on how and when to use contribution agreements. They include a provision that contributions are to be approved in accordance with regular departmental procedures and authorities; however, exceptions can be dealt with internally by CIDA. Consequently, CIDA's use of contribution agreements to select executing agencies often varied from its stated internal policies and practices. CIDA can select executing agencies by means of contribution agreements, which are in effect the same as sole-source contracts, which would not be permitted under government contracts regulations. This was the case in about half of the contribution agreements we examined.

In 1998 we conducted an audit of CIDA's implementation of results-based management in its geographic programs. CIDA had adopted the concept of results-based management to change the agency into a more results-oriented and learning organization. We found that progress was evident, but uneven.

In this audit we examined CIDA's contracts and contribution agreements to see how well they support results-based management and meet CIDA's operational needs. We found that many of the issues we raised in 1998 concerning results-based management resurfaced. In many instances, contracts and contribution agreements do not yet provide sufficient support to results-based management. They contain unclear or unrealistic expected results, or do not provide for monitoring of and action on changes to assumptions that are critical to project success.

To get a large project planned and approved, tendered, contracted, and operationally planned can take anywhere from one to five years. It involves considerable expense and effort on the part of both CIDA and the host country partner. Given this large investment in resources and the short-term cost associated with cancellation, it is difficult for CIDA to decide to cancel the agreement when results are not forthcoming. CIDA does not build into its management of project agreements any formal requirement or mechanism for off-ramps—that is, a decision to proceed or withdraw.

On a more positive note, we observed that CIDA project officers attach considerable importance to monitoring the agreements under their responsibility. They commonly use monitors under contract to review and report on progress, and they insist on receiving reports from Canadian executing agencies as required.

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[Translation]

Our examination of agreements in the Canadian Partnership Branch found that CIDA obtains reasonable information on the financial health of its Canada-based partners for its Voluntary Sector program. However, limited information is received on projects that were funded, on the amounts spent on them, and on results obtained. CIDA bases its funding primarily on historical levels rather than on partners' performance.

We also observed that more meaningful and accurate information on the Canadian Partnership Branch is needed in CIDA's performance Report to Parliament.

[English]

Our chapter contains a number of recommendations aimed at tightening up the management of CIDA's contracts and contribution agreements. CIDA has responded positively to our observations and recommendations. The committee may wish to discuss with CIDA the specific steps it is taking to deal with the issues raised.

Mr. Chairman, that concludes my opening statement, and we would be pleased to answer your committee's questions.

The Chair: Thank you, Mr. Rattray.

Mr. Bassett, before we turn to you, as I mentioned at the beginning, when we have a full quorum—and we do have a quorum of nine—we're going to turn to a couple of motions that are currently being circulated by the clerk in both official languages.

The first motion deals with a report of the Subcommittee on International Financial Reporting Standards of the last Parliament. It was not possible for the subcommittee to report to the full committee, and for the full committee to report to the House, prior to the election being called.

You also have a copy of the minutes of the subcommittee, which has been distributed by the clerk. I draw your attention to the last part of the last paragraph, which says

...the Sub-Committee recommends that the Report, as amended, be considered by the Standing Committee at a subsequent meeting during this Parliament or at the beginning of the next Parliament.

We do have some time available next week when we could consider the report, but in order for either report to come before the committee, we need a motion to request that it be brought forward. Therefore the motion reads:

That, pursuant to Standing Order 108(3)(e), the Committee consider the Report adopted by the Sub-Committee on International Financial Reporting Guidelines and Standards for the Public Sector on October 16, 2000 as recommended by the Sub-Committee to the Standing Committee on Friday, October 20, 2000, and

That the evidence adduced by the Committee and Sub-Committee in relation to this matter during the Second Session of the 36th Parliament be deemed adduced by the Standing Committee in the current session.

The Clerk of the Committee: Mr. McNally is not a member. I haven't received the sheet from the whip's office for him yet.

The Chair: We'll turn to Mr. Bassett, then, for his opening statement, and we'll see if we can get Mr. McNally formally part of this committee.

Mr. Bassett.

Mr. Charles Bassett (Senior Vice-President, Canadian International Development Agency): Thank you, Mr. Chairman.

[Translation]

Good afternoon, ladies and gentlemen.

[English]

Thank you for this opportunity to address the committee. I'll make a few brief comments, and I look forward to answering members' questions afterwards.

As you all know, international cooperation is as complex as it is challenging for many reasons. The fact that our projects take place in developing countries with often minimal infrastructure and institutional capacity means that the political and economic context for our work changes constantly.

[Translation]

The need to act in partnership with many other players, including both the recipient countries and other donors, is part of the challenge. The success of any CIDA project depends not only on a strong buy-in from local communities and governments, but also on their capacity to deliver. It also depends on whether other donors are successful with their own development cooperation efforts.

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[English]

The sudden loss of a key resource, a significant contraction in a country's budget, an inability to make necessary changes to policies or regulations can have a major effect on a project. Such factors have tremendous impact on the end results of our work and our ability to achieve anticipated results.

That being said, CIDA is always looking for better and more effective ways to deliver aid and increase its impact on people's lives. We will continue to improve those elements that we directly control and that can leverage our ability to influence policy reform in recipient countries.

I'd like to outline some of the measures CIDA is taking to improve our accountability to Canadians.

[Translation]

On a strategic level, we are bringing greater focus to the sectors in which we work. Last fall, Minister Minna announced a plan to concentrate more of CIDA's program in the areas of health and nutrition, basic education, HIV/AIDS and child protection.

[English]

Focusing on fewer key areas will help in several ways. It allows us to better concentrate our aid efforts and to apply the lessons learned from past experience to improve effectiveness. When we work with other donors in a specific sector, we can leverage our investment.

We are also improving the quality of our program delivery. For example, we've reviewed our contracting process and made significant changes. I'm pleased to note that the Auditor General has commended CIDA for making its selection process for competitive contracts more fair and transparent.

[Translation]

We have also made some progress at applying results-based management to the contracting process. This is a real challenge, but we will continue to make improvements.

[English]

We are implementing results-based management at the program level. We are also beginning to reap the benefits of our new integrated information systems in improved data collection and coding.

Ultimately this will help us work at a more strategic level to both improve results and our ability to report on those results to Parliament and Canadians.

We are strengthening our scientific and technical staff and recruiting the experts we need to develop sound policies, conduct proper analysis, and better manage projects and programs.

[Translation]

Together these and other actions will allow us to better plan, manage and report on our results.

[English]

We will continue to look for other improvements. For example, we are, as the Auditor General has suggested, revisiting our traditional approach of having CIDA and outside experts design projects in detail and then asking others to deliver them. Instead, we are exploring with executing agencies having them do both the design and delivery of the interventions. This will minimize their learning curve in the implementation stage, maximize the use of their development know-how, and lead to a project design that the executing agency feels more confident about implementing.

[Translation]

In closing, Mr. Chairman, I would like to say that CIDA welcomes the Auditor General's reports.

[English]

We welcome their positive comments on our progress and their recommendations for improvement. Like our own internal audits, they provide us with performance information to better deliver our programs.

Thank you, Mr. Chairman.

The Chair: Thank you, Mr. Bassett.

We will now turn back to the motions that have been circulated.

I read the first motion. Do we have a quorum, Madam Clerk?

The Clerk: Yes, we do.

The Chair: We have a quorum, okay. I'm not going to read the motion again. It has been moved by Mr. Mayfield and seconded by Madam Jennings.

(Motion agreed to) [See Minutes of Proceedings]

The Chair: The second motion is again of a housekeeping nature: that the clerk of the Standing Committee on Public Accounts be authorized to purchase gifts for presentation by the committee on official functions.

This has been moved by Madam Jennings and seconded by Mr. Mayfield.

(Motion agreed to) [See Minutes of Proceedings]

The Chair: Thank you so much. We'll now move to the questions.

Mr. Mayfield, you have eight minutes, please.

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

I'd like to begin by thanking Mr. Rattray and the officials from the Auditor General's department for being with us again. Also, Mr. Bassett, you and your officials, I welcome you and thank you for being here today.

The Auditor General has raised some questions in his report, which I'd like to have you speak to. For example, it's mentioned that a $6.3 million contract was awarded to install hydro poles and other equipment in Mali and the company did not meet pre-qualification guidelines, including foreign ownership, minimum score on the evaluation grid for relevant experience. I'd like you to explain why those qualifications were not met, please.

Mr. Charles Bassett: Mr. Chairman, this project dates back to about 1995-96. The process in force in CIDA in those days was a two-stage process that no longer exists, in which an initial request went out asking for people who were interested in participating in the project, tendering on the project, to submit a proposal. Those preliminary proposals were then assessed and submitted to the minister. The minister had the authority to choose a short list from that list of qualified proponents to ask them to make a detailed proposal.

That is the process that was in effect in those days. That process has been discontinued since Minister Boudria actually announced changes to it in 1996, the end of 1996, as I recall.

Mr. Philip Mayfield: It seemed to me, Mr. Bassett, that the minister in the House, in a response with respect to the ownership of a reputable auditing firm, confirmed that Transelec was in fact in conformity with the rules. So there is a matter to be dealt with there.

Mr. Charles Bassett: Right. I was coming to that. There are in fact two issues. At the time the three parties were selected to bring in detailed proposals, one of them was in fact Transelec and there were two elements highlighted by the Auditor General. The first is the fact that they did not meet one of the sub-requirements of the pre-qualification. There was a requirement to indicate domestic experience of the same nature as the project called for and international experience in the same area. The firm had not filled out one of those two sub-headings.

The project officer at the time was well aware of the fact that the firm in fact had the international experience because they had already undertaken projects for CIDA. The project officer decided that this in fact was an oversight. And given the fact that even without receiving any points for that sub-component, the technical ranking of this firm put them second in the list of seven initial firms, the decision was made to go ahead and overlook this oversight.

Technically that was wrong. This mistake occurred and should not have occurred.

Mr. Philip Mayfield: I'd like to turn to the Auditor General's report. You're not the Auditor General, so I'm not quite sure how to address you, Mr. Rattray, but you know who I'm talking to.

Mr. David Rattray: I'm the Assistant Auditor General.

Mr. Philip Mayfield: Thank you very much.

We've had an explanation from Mr. Bassett and we've read the report. I'm wondering how you would describe what happened in relation to the report and now to what Mr. Bassett is saying to the committee, sir.

Mr. David Rattray: Thank you, Mr. Chairman.

I'd like to ask Mr. Hitchinson, the principal, to outline the points we were making.

Mr. John Hitchinson (Principal, Audit Operations, Office of the Auditor General of Canada): I think the description by CIDA that something was overlooked is correct and that it shouldn't have happened is correct. It was a mistake that was made.

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The way to have dealt with it would have been, at that point.... You can't just change the rules part way through. If one wants to change a requirement, one has to change it for all the players. So what happened, as CIDA says, was wrong.

Mr. Philip Mayfield: This means that there was really not a fair playing field for some companies. Is that correct?

Mr. John Hitchinson: In effect, yes, because one company did not meet....

Mr. Philip Mayfield: The project has been completed. I'd like to know if the management review, the performance review, the closing report, the bilateral project closing report and the audits are things that could be made available to the committee. Would you do that, sir, please?

Mr. Charles Bassett: Sure.

Mr. Philip Mayfield: Thank you very much.

CIDA's terms and conditions for grants and contributions related to the geographic programs are due for renewal in March 2001. Is the new framework in place now? If not, when will it be? Will this renewal include a framework that clarifies how and when contribution agreements will be used? Could you explain any changes?

Mr. Charles Bassett: Yes, Mr. Chairman, there already is in place a framework for contracts. What the recommendation of the Auditor General referred to was a similar framework for contribution agreements, which we did not have. We indicated in the report that we would have such a framework ready by the spring of this year, and we're still on schedule for that. We expect that we will have it finished by the end of May, the beginning of June. It will be a framework for guiding decision-making by project officers in contribution agreements, which will be a similar document to the one that we have for contracts.

Mr. Philip Mayfield: Thank you.

The Chair: Thank you, Mr. Mayfield. Mr. Shepherd, please.

Mr. Alex Shepherd (Durham, Lib.): Yes, thank you.

I'd like to maybe focus on the pre-qualification of contracts. What does that involve? I know you're talking about adequate experience. That would mean presumably experience in the field that they're contracting in within Canada or within other jurisdictions, or possibly previously with the Canadian government. Would that be correct?

Mr. Charles Bassett: Yes.

Mr. Alex Shepherd: What other pre-qualifications would that involve? Would it involve their financial stability? How do you investigate the aspect that they are financially stable and reputable?

Mr. Charles Bassett: I'll ask Maurice Lepage if he would answer. He's the expert on this subject.

Mr. Maurice Lepage (Director General, Contracting Management Division, Canadian International Development Agency): Typically, in a pre-qualification you would ask an entity to provide you with similar projects they have done in the past. It can be both locally—that is, in Canada—or abroad. We also ask for a statement, normally from their financial institution, saying that they are financially viable. We normally also, in a pre-qualification, examine what type of personnel they would propose and who they have on hand, and you make an assessment as to whether they have the technical qualifications. It is before and above all a technical pre-qualification with a financial sub-component.

Mr. Alex Shepherd: If they'd dealt with another branch of government originally, would you contact that branch of government and ask those contracting parties whether they've been satisfied with the contractor?

Mr. Maurice Lepage: Normally that would not be the case. Normally we assess proponents strictly on what they have provided, what they have declared in their proposal.

Mr. Alex Shepherd: I have a contract here. It's a company called Aquasphere Technologies Incorporated. You granted them a $500,000 contract to clear water hyacinths in the Nile River. It's clear to me in investigating this that the previous contract this company had was with Heritage Canada and that some of the subcontractors, one in particular, who actually did most of the work never got paid. Would that be of concern to you?

Mr. Charles Bassett: We probably would not know about that. It would be a concern if we knew.

• 1605

Mr. Alex Shepherd: Even though this person, as I understand it, has tried to put you on notice that in fact the Canadian companies have not been paid, and have sought court action in Canada for recovery from this company, you awarded them another $500,000 contract.

Mr. Charles Bassett: Each contract is actually awarded on the strength of the bid that is put in by the companies. There is a new regulation that came into effect about four or five months ago, that if in fact an organization owes money to some other branch of government, that has to be deducted from any payments that are made on a new contract. But it isn't an impediment for them getting another contract.

Mr. Alex Shepherd: I understand. I've had the opportunity to read the correspondence from the one company to the other company, and back and forth, and it's pretty clear to me that the company that got the contract has no intentions of paying. Even though they admit they have past liabilities, they have no intention of paying them.

It's pretty difficult for me, dealing with Canadian taxpayers in Canada, to try to explain to them why it is that these people continue to get contracts from the federal government when they're not paying Canadian contractors.

In fact, in this particular case, as I understand it, the machinery and equipment was owned by the subcontractor and this was the only thing that really justified him getting the new contract. He didn't actually have any of this machinery and equipment himself.

Mr. Charles Bassett: I don't know in this particular case how the request for proposals was formulated. But the whole issue of getting feedback on previous performance is a very difficult and touchy issue. In fact, we have a paper we are considering in CIDA now as to options in relation to assessing previous performance. The problem is that most people are not prepared to put in negative reports because they're afraid they will be pursued through the courts. With the amount of time this takes up, they feel it's just not worth it. So it's very difficult to get people to say this performance was inadequate because of the time it takes.

Maurice is just pointing something out to me.

Mr. Maurice Lepage: Possibly I could explain.

Mr. Charles Bassett: Oh, yes.

Mr. Maurice Lepage: When a contract is with CIDA, before we release the final payment we ask the contractor to sign a declaration to the effect that they have paid all of their subcontractors and all of their personnel. Therefore, for the contracts in which CIDA is involved we have this declaration before we release the final payment. However, if there is money owed on another transaction with another government department, there is no central recording system that indicates that this money is owed.

We have, on occasion, had subcontractors who have indicated to CIDA that money was owed. Therefore, what we have done is we have retained the final payment, held back the final payment until the issue was resolved with the subcontractor.

Mr. Charles Bassett: That's only in our projects.

Mr. Maurice Lepage: In our projects only.

Mr. Alex Shepherd: So can I give you this evidence? I know there's a judicial thing going on, but I'd presume that this contract hasn't been completed yet. Would you give me some kind of assurance that you'll do a holdback if that in fact is the case?

Mr. Maurice Lepage: If the money that is owed is owed under one of our contracts, yes, we can.

Mr. Alex Shepherd: This was Parks Canada.

Mr. Maurice Lepage: If it's with Parks Canada, we cannot.

Mr. Alex Shepherd: I thought you originally said another branch of government.

Mr. Maurice Lepage: Of CIDA.

Mr. Alex Shepherd: But you will undertake to ensure that their covenant that they're paying their contractors now is valid?

Mr. Maurice Lepage: Under our contracts.

Mr. Alex Shepherd: Do you simply accept their declaration, or do you investigate in fact whether subcontractors have been paid?

Mr. Maurice Lepage: Normally we accept their declaration until proven differently. If we have one individual or one subcontractor who states that they have not been paid, then we do an investigation, we explore.

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The Chair: Thank you, Mr. Shepherd.

It seems rather strange to me that CIDA would hold back money payable to a subcontractor but wouldn't hold back money payable to another department of the government. Perhaps somebody wants to pursue that.

We'll turn, on the second round, to Mr. Peschisolido for four minutes, please.

Mr. Joe Peschisolido (Richmond, Canadian Alliance): Mr. Chair, let me begin by apologizing to you and the whole committee for being late. No disrespect was intended.

The Chair: You won't be the first person, nor the last.

Mr. Joe Peschisolido: All right.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Just the first person to go on record.

Mr. Joe Peschisolido: Fair enough.

In going through the points in chapter 14 of the Auditor General's report, he brought out quite a few good questions. The concern I have is, how can we fix them? In particular, I want to turn to paragraph 14.113 of the report, which states that some contract splitting occurred.

I'm worried that you have important guidelines and rules about government contracts that are being ignored. This is bad for the Canadian government, and in particular, the credibility of CIDA, because for any agency, particularly one such as yourself, credibility is very important. What steps are being taken to ensure that this sort of activity stops?

Mr. Charles Bassett: This was the only item in the report on which we ended up having a disagreement with the Auditor General, because we understand the point he's making, but we feel that if you go through all the paperwork, the request for proposal we issued on this states very specifically that we were looking for a number of individuals to do this work and that we would sign contracts with individuals.

In the end, in a couple of cases, two of the individuals who won worked for the same firm. We were not looking to have contracts with firms but with individuals, so we signed a separate contract with each individual. It is the Auditor General's view, and I understand where he's coming from, that because they both work for the same firm, it should have been one contract and therefore we split it.

That was absolutely not the intention. It is clear in the documentation that we were looking for individuals, and we felt that this is what we did. So we did not feel that we had split the contract.

There are, in fact, very clear guidelines in the contracting rules and procedures in CIDA against contract splitting.

Mr. Joe Peschisolido: What aspect of the Auditor General's rationale do you believe doesn't follow?

Mr. Charles Bassett: It's because he sees this as a contract with the firm and the members of the firm, whereas we felt that our intention all along had been to have contracts with individual people.

Mr. Joe Peschisolido: Okay.

Mr. Charles Bassett: It's a technical interpretation. On everything else, we agree.

Mr. Joe Peschisolido: All right.

As a further question, the report also discovered that CIDA had entered into 10 non-competitive contracts with former public servants who were receiving a pension. I think here you would agree that this contravened CIDA's delegated authority.

First of all, do you agree with that assessment, and if so, what specific measures would you be taking?

Mr. Charles Bassett: In fact, as you'll see in the report, we had already discovered that we had done this. We discovered two cases in which we had a contract with a former public servant in receipt of a pension. Because of that, we decided we had better find out whether we had any more. We went through all 3,000 of the individual contracts that we had with people and discovered another eight in which we had a contract with a former public servant in receipt of a pension.

It's much more difficult than it would appear to know that you're doing that, because there is no central registry of information that tells you that the person you're contracting with is a former public servant in receipt of a pension.

In the case of say a former member of CIDA's staff, we would know, simply because we would know the individual as a member of our staff. But with somebody who worked for another department of government, especially if they're now working with a firm and were proposed by a firm, there is no way we would know that.

• 1615

We accept entirely this observation. We have since gone back to Treasury Board and we have declared our mea culpas. I don't know if we've had remission or what we've had, but we've had something.

What we've done is we've introduced a procedure in which we ask every individual we contract with now to sign an affidavit that they are not a public servant, a former public servant in receipt of a pension.

The Chair: Mr. Bryden, you have four minutes, please.

Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Lib.): CIDA gives grants and contributions to a large number of charities, some based in Canada, some with branches in Canada but with head offices abroad—all of these charities delivering programs and projects in foreign countries. My question is to the Auditor General. How does an Auditor General determine that these charities are actually spending the money CIDA gives them in the way that CIDA expects?

Mr. John Hitchinson: I assume that you're talking about the sort of non-governmental type of organization, as opposed to charities.

Mr. John Bryden: Yes, but a lot of them are charities.

Mr. John Hitchinson: We don't audit CIDA's partners. What we look for is to see to what extent CIDA itself is following up with its partners to know that the partners are doing what CIDA expects the partners to be doing. For example, we would not go out and audit Care Canada ourselves, or OXFAM, or that sort of thing.

Mr. John Bryden: So then the question comes to CIDA. How does CIDA know that these charitable organizations are actually spending the money in proper fashion? Obviously, the Auditor General can't tell.

Mr. Charles Bassett: We have a number of mechanisms. First of all, on all of these organizations of a significant size, we do what we call an institutional review. On average, every three years we do a thorough examination of the way the organization operates, what its decision-making process is, what its policy framework is, what its management procedures are, its financial operating procedures.

We do a financial stability examination of the organization. We also have project monitors who do spot checks on projects from time to time so they go into whatever country the organizations are operating. In many of these countries, we have CIDA staff who are working in embassies or high commissions around the world. They also do some local spot checks. We have an internal audit and evaluation branch that will do spot evaluations. In particular, if there are areas where we feel we may be running into some difficulty, then we will ask for an audit to be carried out just to confirm or deny that there are difficulties.

So it's an array of mechanisms like that, and I can't think of organizations that would go more than three years before they get a thorough assessment. If there are problems, then it's done more often.

Mr. John Bryden: The Solicitor General's office just tabled legislation this very day that looks at bringing certificates on Canadian charities that may be financing terrorism abroad. Is this something that has been a concern to CIDA in the financing of international charities? And does CIDA have in place or is it cooperating in any way with the Solicitor General's office to track, to look at, the charities that CIDA is dealing with in this context?

Mr. Charles Bassett: It hasn't been a problem so far, but the answer is yes, we do have close contacts with the Solicitor General's department. We do use their information in any case where we have a new partner coming forward. Then we do the checks.

Mr. John Bryden: Thank you.

The Chair: Thank you, Mr. Bryden.

Mr. Mayfield, you have four minutes.

Mr. Philip Mayfield: Just to clean up one little item from the last question I asked about the framework, I was wondering if you would be able, sir, to provide the details of that framework to the committee. I would appreciate that.

Mr. Charles Bassett: I will send you immediately the one on the contracting process. Then when it's finished, we can send you the one on the contribution agreement.

Mr. Philip Mayfield: I'm sure the committee clerks would be happy to receive that. Thank you very much.

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In his opening remarks Mr. Bassett commented that CIDA has made some progress at applying results-based management to the contracting. In the audit conducted by the Auditor General's office, it was found that of 12 non-competitive agreements examined—where a contract plan was required—eight did not address either the selection method or the type of executing agency to be used. I guess that means about 67% of the agreements failed to make the basic criteria required.

Since that audit was performed, Mr. Bassett, could you tell the committee how many non-competitive agreements have been submitted and how many of those have met the criteria set out by the Auditor General?

Mr. Charles Bassett: I don't have the actual numbers at hand. I can tell you what we have done.

First, perhaps I should go back and say that basically we develop a contracting strategy for most projects of any size. The difficulty we've been getting into is that when you have project officers and contracting officers who have done a number of projects of a similar type, they tend to take for granted that they know how they're going to do the contracting. Then that is not put on the file because they've done it about seven, eight, nine times before. They go on the same procedure, so it's not on the file. So in fact you cannot find a contracting plan.

One of the things we've done is to reinforce the standard instructions that these things have to be put on file. There has to be a document trail you can follow so you can see what happened. We have reinforced in what we call the “road map”—the guide that officers use as to how they do their work—that a contracting plan should be carried out. We have commonly done it for the larger projects and we are now doing it for the smaller projects as well. We've reinforced to officers that it has to be put on the file.

Mr. Philip Mayfield: So you've reinforced, but can you reassure the committee that in fact there is follow-up to be sure that that reinforcement is taking place, that in fact the new regime is being followed through, and that the new requirements are being fulfilled?

Mr. Charles Bassett: Well, we probably haven't had enough months elapse yet to have a sufficient number to be able to get a worthwhile reading, but I would say to you, yes, sir, we will do a follow-up and make sure. And we can report back on how that is working out.

Mr. Philip Mayfield: Yes. It takes a while for that momentum, I suppose, to stop and change with the new order, but it seems that—

The Chair: Mr. Rattray has a comment too.

Mr. Philip Mayfield: I'm sorry. Yes, thank you.

Mr. David Rattray: Mr. Chairman, perhaps I can help on that and just remind the committee that we do have the two-year follow-up practice that we do. Certainly in the recommendations we've put forward, and in some of the other suggestions, that's part of what we will be looking at and coming back and commenting on. So while CIDA may do an interim report, it still rests with us to come back and report to Parliament.

Mr. Philip Mayfield: Good. Thank you very much. I have other questions, but I'll ask them later.

The Chair: I think we'll be coming back, Mr. Mayfield.

Ms. Jennings.

Ms. Marlene Jennings: Thank you, Mr. Chair.

Thank you, Mr. Assistant Auditor General, and thank you, Mr. Bassett.

I want to come back to this little one—Mali—with the hydro-electric.

The Chair: Can you give the reference for that?

Ms. Marlene Jennings: It's in chapter 14, page 22.

The Chair: Thank you.

Ms. Marlene Jennings: When Mr. Mayfield was asking about it and you said that there was an issue on the evaluation grid, that one of the sub-criteria required—it was either international or domestic experience, I forget which one—

Mr. Charles Bassett: Both, actually.

Ms. Marlene Jennings: Both...but one of them was not filled out.

Mr. Charles Bassett: That's right.

Ms. Marlene Jennings: Because whoever it was who was evaluating it knew the company actually had the experience, and I guess they assumed that it was just an oversight. Even though they were awarded nothing on that particular item, they still came out ahead of everyone else.

Mr. Charles Bassett: Well, they were second, actually.

Ms. Marlene Jennings: Second.

Mr. Charles Bassett. Yes.

Ms. Marlene Jennings: Okay. Were any points accorded on that item?

Mr. Charles Bassett: No. They got zero on it.

Ms. Marlene Jennings: They got zero on it. And they came out second?

Mr. Charles Bassett: Yes.

Ms. Marlene Jennings: But they got the contract?

Mr. Charles Bassett: Well, that was at the pre-qualification stage.

Ms. Marlene Jennings: Okay. So they were qualified. They were allowed to be qualified.

Mr. Charles Bassett: They were allowed to be qualified.

Ms. Marlene Jennings: How many companies were there with fewer points that were also qualified?

Mr. Charles Bassett: Yes, three companies went forward.

• 1625

Ms. Marlene Jennings: And they came in second.

Mr. Charles Bassett: They came in second, so the first, second, and the one behind them—

Ms. Marlene Jennings: Okay. Then my question is for the Auditor General. Knowing that this company had experience, I have a problem with why the bidding process, or pre-qualification process, would have had to be stopped and re-started, obviously alerting this company, hey, you forgot to fill this out.

Do you see a possibility in that kind of situation to be able to allow the company to correct...? I don't see that it put any other company in an unequal position. I really have a problem understanding that. That's like telling me, well, you have an exam; you have five sections on the exam you have to fill out; each one is worth 50 points, so you're talking about 250 points; you didn't fill out one of them; you still came in second, but we're not going to give you the trophy. To me, it means if you had filled out the one section, you would have come in first probably.

The Chair: Mr. Rattray.

Mr. David Rattray: Mr. Chairman, we would like to talk to this case. I think—

Ms. Marlene Jennings: Yes, please, because I'm having a hard time understanding that. If the rules or regulations don't allow for them to do that, why shouldn't we change the rules or regulations to allow that? How does that create an unequal playing field?

Mr. David Rattray: Mr. Chairman, Mr. Hitchinson would like to talk to that in terms of what we're seeing in the files.

Ms. Marlene Jennings: Please.

Mr. John Hitchinson: Thank you very much.

The requirements were that, for experience, firms that were going to express interest at the pre-qualification stage had to have similar experience, I think it was, in a developing country in the past five years. Transelec did not in the past five years, so that's why they were given the zero.

Ms. Marlene Jennings: Okay.

Mr. John Hitchinson: They had a previous CIDA contract sometime in the 1980s, the latter part of the 1980s. I'm not sure exactly when.

The reason why it's important is that other potential bidders would look at that five-year rule and say, we don't meet it; we won't come forward. So what no one knows is how many other potential bidders stayed away, because they looked at five years and said no, we don't qualify; we won't come forward.

Ms. Marlene Jennings: Okay.

Mr. John Hitchinson: That's why it is important.

Ms. Marlene Jennings: Thank you. Well, the five-year thing wasn't mentioned, so I have to come back to you, Mr. Bassett.

Mr. Charles Bassett: Well, I actually agree with him.

Ms. Marlene Jennings: But I understood you to say that was one you did not agree—

Mr. Charles Bassett: No, no, not that one.

Ms. Marlene Jennings: Not that one.

Mr. Charles Bassett: It was the contract splitting.

Ms. Marlene Jennings: Okay.

Mr. Charles Bassett: I think the point for us is we made a mistake on this one, because at the time the rule was you had to pass all of the sub-elements. You asked what changes have been made subsequently. We have subsequently—I think two years after that—removed the rule that you had to meet the pass mark on every sub-element to one that you had to meet the pass mark on the totality of all of the sub-elements.

Ms. Marlene Jennings: Okay.

Mr. Charles Bassett: If you go into a tendering process with a set of rules, you have to apply the set of rules. If you change the rules on the way as you go along, well, as the Auditor General says, who else is out there that would have been eligible if you had gone in with the new set of rules?

Ms. Marlene Jennings: I have just one little piece.

The Chair: Well, we're already up to five and a half minutes. We'll come back to you.

Ms. Marlene Jennings: Come on. Look who we have here.

The Chair: I know; we'll come back.

Ms. Marlene Jennings: We have virtually nobody. Oh, I shouldn't say that on the record; I didn't say that on the record.

The Chair: That's right; you never acknowledge the absence of any member of Parliament.

Ms. Marlene Jennings: You're right. It's a full room.

The Chair: We don't know who is missing, but there do seem to be some gaps.

Mr. Peschisolido.

Mr. Joe Peschisolido: I'd like to go to chapter 14, page 24, and talk about projects that are in serious trouble. Perhaps I can ask, Mr. Rattray, if you can just go through the procedures and your concerns about how CIDA has been handling this.

Mr. David Rattray: I'll just introduce it and maybe Mr. Hitchinson may want to talk to this as well.

• 1630

One of the issues we found is that in large and complicated projects, it's very important to do the design or the planning and get the expectations clearly set. So the front end of any project is absolutely critical. It's like you're building a building or whatever; you get the cornerstone to it set out properly.

So we felt there was some improvement. Although there was fairly good effort at the front end, we felt there was more needed in terms of improving the setting out of the results.

But more importantly than that, we felt that once the projects began to go through their cycle, there should be a mechanism or a formal requirement—not that long into the project—so that if the assumptions or the results expected were not materializing as they should, there would be the introduction of what we've called “off-ramps” for decisions to possibly withdraw from the project or extract oneself from it. I think that's something we wanted to put forward as a point worth considering.

John, I'm not sure if you want to add to that.

Mr. John Hitchinson: There's not much to add to it. It's sort of natural, I think, to want to keep going on with something once you've started it. But what we'd like to see, as has been said, is something that builds in a little more systematically a “go, no-go” decision so that one doesn't just keep trying to fix something that maybe is not fixable.

Mr. David Rattray: And CIDA acknowledges in their response that they've started to explore this further. I'm not certain at this point exactly how far they've taken that.

Mr. Joe Peschisolido: The reason I asked the question—these goals are laudable—I think as a committee what we have to determine is whether our resources are being used appropriately and efficiently, and if other means could be used in order to accomplish that same goal.

I wanted to talk about these, as you put it, projects in serious trouble, because of the 33 agreements, you've stated that 15 of those had.... That's close to half. Only two, I believe, were cancelled. Do you believe that the off-ramps...? I don't know what the answer is, and—

Mr. David Rattray: Mr. Chairman, I think some of that came in the opening statements, where—

Mr. Joe Peschisolido: And I apologize once again.

Mr. David Rattray: —we were talking about the design and somehow having the executing agency being more closely linked to that, as opposed to the current practice that we described in here, which is often a project officer and a contractor who've been asked to design a project and compete for limited funds. One has to state results in a more competitive fashion. Then certainly when people go to contract against that you're not going to try to say the results are laudable and a stretch. You're going to try your level best to meet those when you compete for that contract.

So at the beginning of the project, there's a fair amount of incentive built into stretching maybe beyond the maximum capacity to deliver on the results that are initially laid out. So as you go through the projects, for various circumstances—the complexity of the country, the infrastructure, the statement of the results to be achieved—you have several of them that are running into difficulty in achieving the results as written down and as put into the contract.

What we're saying is there could be a more formal mechanism to put this into the contract and have an off-ramp or a review mechanism in place to say, okay, it's time to halt.

Mr. Joe Peschisolido: One of the problems that could occur, and has occurred in a few situations, is whenever you have an agency dealing with local individuals, there's a whole issue of corruption. Would the guidelines that you're advocating only apply to the Canadian agency that is making the decision whether or not to continue, or do they also apply to the Canadian agency and its relations to the other local entities with which it's contracting?

Mr. John Hitchinson: When we talk about the concept of the off-ramp, we're really suggesting that it should be the agency.

Mr. Joe Peschisolido: The agency, CIDA?

• 1635

Mr. John Hitchinson: The agency, CIDA, dealing with its executing agency should part-way in basically say okay, we're 18 months into the project, we've spent whatever amount of money, where are we at? Is it worth continuing on all this?

One of the things that it should include is a built-in mechanism for an off-ramp—almost like a separation agreement or a pre-nuptial—providing you with a means for getting out of this. Presumably if the Canadian executing agency is into a series of arrangements with locals or with other suppliers, there would be some mechanism to cover what's going to happen if we have to cancel the project. But right now that doesn't exist, so it makes it very hard to even talk about starting that kind of review.

The Chair: Thank you very much. These pre-nuptials on common-law agreements might be interesting. We could talk about that later.

Mr. Charles Bassett: Could I...?

The Chair: Oh, sorry. Yes, Mr. Bassett.

Mr. Charles Bassett: Thank you, Mr. Chairman.

First of all, the suggestion of the off-ramps for us is an extremely helpful one. I think we make trouble for ourselves as an agency, not only with the Auditor General but with the results generally, because we do tend to be too optimistic about the results we can achieve within the timeframe. If there's one thing you learn about development, it's that it takes a heck of a lot longer than you ever think it's going to take. So we need to be more realistic upfront in terms of the definition of the results we want to achieve and the time it's going to take us.

I would like to go to two of the examples in the report where the report is obviously a snapshot in time. The Egypt environment project was seriously behind schedule and was in fact not looking as though the pilot project was working out very well. It also raised questions about its sustainability. In fact, what has happened since then is that we put the legislation in place—or the Egyptians have put the legislation in place. We are now ahead of where we expected to be, but this is a year and a half later. Because once we got over that first hump, it then started to go smoothly and it's been going very quickly since then. We can do 18 projects and we had 67 proposals.

The same thing has happened on the Mali mortgage. We are now producing loans, and a year ago it looked as though we were going nowhere with that project.

The Chair: Thank you, Mr. Bassett.

Ms. Leung, please.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chairman.

I want to thank the Auditor General, and Mr. Bassett for his presentation.

I have travelled to Asia. I have seen some of CIDA's projects. They are extremely successful and appropriate, I want to say. But I'd like to ask.... I understand that CIDA's terms and conditions for grants and contributions are due for renewal this year, March 2001.

Mr. Charles Bassett: Yes.

Ms. Sophia Leung: Is that already complete?

Mr. Charles Bassett: It is in fact before the next meeting of the Treasury Board.

Ms. Sophia Leung: Okay. I also want to make sure it's available to us.

Mr. Charles Bassett: Sure. Absolutely.

Ms. Sophia Leung: I am interested because there's a comment by the Auditor General that your selection process is sometimes inconsistent. Perhaps the new policy will correct that.

Now, the second part of my question—

Mr. Charles Bassett: If I may say, it's the combination of the document that we will have completed in May or June, together with the renewed terms and conditions.

Ms. Sophia Leung: Good. With regard to the second part of my question, I'm very interested in your performance evaluation project, because recently I was on Team Canada, and I actually witnessed.... I know you did support the Chinese national judges college. It's an excellent project. You are supporting it for five years and for $5 million and it's a good investment—a lot of training, etc. But I'd like to know, who does the evaluation? Is it CIDA? How can we know what we invest in that project and what kind of performance there is? A lot of it is difficult to evaluate qualitatively. I'd like you to answer that.

• 1640

Mr. Charles Bassett: Madam Mendenhall runs our whole evaluation and audit section.

Ms. Sophia Leung: That especially is of interest for the Canadians in Parliament, because we are very concerned. The project is aimed at improving human rights and improving the legal system.

Mr. Charles Bassett: Yes.

Ms. Sophia Leung: It's a big project. I'd like to know. Maybe you don't have time to answer everything, but I'd like to know.

Mr. Charles Bassett: Nicole.

Ms. Nicole Mendenhall (Director, Internal Audit, Performance Review Branch, Canadian International Development Agency): Thank you.

The evaluation that was conducted here, to my knowledge, did not come from our shop per se. It was done through the actual project evaluation—that is, the program undertook to have an evaluation of the project itself. I am not familiar with the details, but we can find out for you.

Mr. Charles Bassett: It is an independent evaluation. It's a contract with an outside evaluator, so it's not carried out by CIDA staff.

Ms. Sophia Leung: Okay.

Mr. Charles Bassett: It is an independent evaluation.

Ms. Sophia Leung: Good. That's most objective. But I think it's very important actually applied to any of those big projects we support. I always like to know what we have achieved to the goals we set out, especially in the area of human rights and their concern. I don't think I have received a very clear answer.

Mr. Charles Bassett: Yes.

The Chair: Ms. Leung, will you permit me to rephrase the question? She's looking for outside evaluations.

Ms. Sophia Leung: Yes.

The Chair: In the area of human rights, is progress being made for the investment that Canadians make, and is that being documented so that we can demonstrate to Canadians that our investment overseas is having an effect?

Am I correct, Ms. Leung?

Ms. Sophia Leung: Yes.

Mr. Charles Bassett: It's a different story in different countries and the progress is uneven. So what we do is we try to do an aggregation of the evaluations of different projects and different programs.

There are clearly areas where progress is being made. One of the examples I used recently concerned the Russian who was accused of espionage up in northern Russia and whose case was eventually thrown out in court. When it was appealed by the Russian secret service, it was also thrown out by the high court. In fact the judge in both those cases had been trained in Canada. Two different judges had been part of the program that we have for training Russian judges, which is similar to the one we have for training Chinese judges.

You have a series of examples like that across different countries, of where clearly things that would not have happened five years ago are now beginning to happen. Five years ago he would have been in jail and they would have thrown away the key, and today he is.... I was going to say a free man. It's all relative, I guess. He can't leave Russia, but he's not in jail.

Now, we've done a lot of work over the years with the judges in Zimbabwe. You could not say that things have moved forward there at all. So it is patchy, but we do evaluations and we do have a centre in CIDA that occupies itself only with issues of human rights and democratic development, and which does pull together all of the information and all the lessons learned, and does try to chart the progress that is being made.

Ms. Sophia Leung: Thank you.

The Chair: Thank you very much.

Mr. Murphy, please.

Mr. Shawn Murphy (Hillsborough, Lib.): I have a question, Mr. Chairman, for Mr. Bassett.

You talked about the evaluation and the results monitoring that goes on in the different projects. Are there any actual audits? Is there a financial audit done sometimes on these projects?

Mr. Charles Bassett: Yes.

Mr. Shawn Murphy: I know the Auditor General audits your department, CIDA, but it doesn't audit the actual projects. Do you do an audit in all these cases? Can you elaborate?

Mr. Charles Bassett: We have a fairly elaborate process of audits, of monitoring, of evaluation. And there are times when we think we're crazy, because we think we have a problem on a project, so we'll have an audit carried out, and because we're transparent we put it on the web, and the next thing is we're having parliamentarians say how can CIDA people be so incompetent. So it's sort of a double-edged sword. But that's what we do.

• 1645

When we think we have a problem, we have an order carried out. One of the examples that came out last year was a project being carried out, I think, by the Mennonite Development Committee, which is a tremendous development NGO, and they alerted us to the fact that they felt there was some fraud going on in the project. So we had a full investigation carried out, and in fact discovered that there was fraud. We took steps to recover the money and get the project back on track. But the audit was initiated by the project manager's saying, I think something is going wrong here.

So we routinely do that, and we have monitors on all of our projects of any size. We have a monitor that will do a report, an assessment of the performance of the executing agency. We have a financial risk assessment unit within CIDA, which does financial assessments and looks into questionable cases. So there is a full range of instruments that we use routinely to make sure we know where the money is going.

Mr. Shawn Murphy: I have another question, Mr. Bassett—through you, Mr. Chairman—on your policy regarding former civil servants. This perhaps is more of a suggestion than a comment, but I would like your reaction. Could you not just have it in your contractual documents that this is prohibited, so if it were there and if they did use former civil servants, there would be a financial penalty? Would that not stop all those actions?

Mr. Charles Bassett: It is permissible to have a contract with a former public servant in receipt of a pension, but it's under certain very strict rules. You need to know that in order to know whether you apply those rules. They cannot have a double dip. So it's a question of how you get at the information to know that the person who has been assigned to you by a firm you have contracted with is in fact a former public servant in receipt of a pension.

Mr. Shawn Murphy: Right now, the onus is on you to find out. Would it not be wiser to put the onus on them?

Mr. Charles Bassett: That is the change we have just made. We require them to sign an affidavit, either that they are or that they aren't.

The Chair: Thank you, Mr. Murphy.

Mr. Mayfield.

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

I'd like to begin by saying to Mr. Bassett and his colleagues that it has been a pleasure to discuss these issues with you in such a frank and open way. I want to thank you for that.

I want to raise a question out of the heading of 14.37. CIDA didn't always comply with the Canadian Environmental Assessment Act. The Auditor General states that for each project CIDA requires a preliminary environmental assessment form to be completed in the design stage, and this completed screening must be filed with the public registry. The Auditor General also found that in 41% of those cases CIDA was not complying with this requirement. I want to ask the Auditor General, or one of his people, whether this environmental reporting has been improved, and if it has been improved, is it a little bit, quite a bit, or entirely? How much?

Mr. David Rattray: Mr. Chairman, I'd like to correct one item under paragraph 14.39. It was in fact an internal audit of CIDA that looked at the environmental assessment requirements, it wasn't ourselves. We're relying on an internal audit that detected in 41% of the cases examined non-compliance with the CEAA.

Mr. Philip Mayfield: Thank you.

The Chair: But the point is that a large number did not comply, so what's the answer to that question?

Mr. John Hitchinson: It's too soon for us to tell whether the increased emphasis CIDA has put on this has resulted in more and better compliance. This is one of the items we will have to go back and look at when we do our follow-up in a couple of years.

Mr. Philip Mayfield: I'd like to come back to you, Mr. Bassett, and ask for your reaction to that question.

• 1650

Mr. Charles Bassett: This was a real wake-up call for us, because we clearly were not doing what we ought to have been doing under the Environmental Assessment Act. As a result of this internal audit, which was carried out because somebody inside CIDA felt there was a problem—and indeed there was—we introduced a new process and a new procedure in June or July of last year. Since then our own figures indicate we have 100% compliance, and the basic rule that Minister Minna has applied is no compliance, no approval.

Mr. Philip Mayfield: That's commendable. Thank you very much, sir.

The Chair: Thank you. Madame Jennings.

Ms. Marlene Jennings: Thank you.

I read in the report that in some of the projects there needed to be capacity building on the part of the local agencies, whether they be governmental agencies or NGOs, in order to ensure the project would be able to continue and would achieve the required results. How has CIDA been seeing that a component of the project is there to ensure that when there is the assessment to see whether or not the capacity exists—whether it's in Peru or in an African country or an Asian country, for example, in one of the developing countries—if the capacity is not there, to ensure there is a part of the project to deal with that and make regular assessments to determine, before it's all turned over, that the capacity is in fact there?

Mr. Charles Bassett: There are a number of different ways of dealing with the issue of sustainability, but it is one of the basic principles of getting involved in a development program. If it's not going to be sustainable in the longer term, you shouldn't get in there and do it in the first place.

The point the Auditor General was making particularly was that we do not make it a clause in our contract process, and we accept that point. Just having it in as a clause is no guarantee that you're going to get sustainability, but it's a useful additional step to be taking.

Sometimes you have written into the contract that in the last two years the executing agency has to take the steps necessary to ensure sustainability. Sometimes you don't do it that way. Sometimes you will do a mid-term evaluation to assess the progress and then the sustainability. Sometimes you revisit the original project plan and change it so as to address better the issue of sustainability.

Typically what can happen.... Let's say you're doing a hydro project in the country, and you're training a number of people to carry out these activities after you leave, but once they get trained, they're picked off by the private sector in the country itself. You've lost all the people, so you start all over again. Those are the things we run into, but the bottom line is that by the time we get out of there, we really need to be sure we've left the indigenous capacity behind to maintain that project.

Ms. Marlene Jennings: And how are you doing?

Mr. Charles Bassett: We do it by revisiting the original—

Ms. Marlene Jennings: No, how are you doing, not how are you doing it.

Mr. Charles Bassett: It comes down to capacity building. You have to build the capacity.

Ms. Marlene Jennings: Yes.

Mr. Charles Bassett: It may be the institutional capacity of an organization—

Ms. Marlene Jennings: No, Mr. Bassett, excuse me. I understand that. I'm asking, how are you doing? How is CIDA—

Mr. Charles Bassett: What progress are we making?

Ms. Marlene Jennings: —doing? Are you achieving that? Pretty much? Not as much as you'd like?

Mr. Charles Bassett: It's never as much as we like. We think we're doing better than we were, and certainly the suggestion the Auditor General is making about including it in the contract is useful. We believe we are making progress. There are fewer and fewer cases where we find that the project has fallen flat on its face after we left.

• 1655

It's very interesting, Mr. Chairman, because last week I was talking to some people in Guelph University who have worked on CIDA projects, some of them since the seventies. We had a project with them in Ghana in the 1970s to create the Ghana Agricultural Research and Development Institute. when Ghana fell apart in 1979, nearly all of these people, who formed a CIDA-funded project, left. Lots of them came to Canada, some went to Australia, or they went to the U.K. There was an assessment of this project in the early 1980s, and it was a failure because there was virtually no institution left.

In 1995 the professor who had initiated this project went back and reassessed it. Of course, over the years Ghana has gotten its act together. This institute is one of the most respected institutes in Ghana, and 80% of the original people are back with the institute.

What we don't do is visit projects fifteen years later. We are locked into the mentality that the five-year spending framework creates, so we try to make sure we finish in five years. We should be going back after ten years and after fifteen years to see how we are doing.

Ms. Marlene Jennings: So why don't you?

Mr. Charles Bassett: Well, we're going to start.

Ms. Marlene Jennings: That's great, because that's a wonderful story.

The Chair: Thank you very much.

I notice from the Auditor General's report and his opening statement, Mr. Bassett, that he was talking about a number of things—and I'll just quote from his opening statement:

However, we...observed instances where contracts did not comply with the Treasury Board Contracting Policy or the Government Contracts Regulations...sole-sourcing, contract splitting...

We see in his report that former civil servants are getting reports, and that people who are contractors who don't qualify are being allowed to proceed down. It would seem to me that in a simple managerial process you should have had a checklist. Also, for the environmental issues that you're now aware of, I think a proper managerial framework would have been picking these up on a checklist basis as applications for contracts are approved. You are spending $1.7 billion. That's almost exactly 1% of the total revenues of the Government of Canada. All I can say, first of all, is that I'd like to thank the Auditor General for bringing these points up. I know you're going to say you've addressed most of them now, but why does the culture allow these things to happen in the first place?

Mr. Charles Bassett: In the Auditor General's report he says that the contracting is properly done for the most part, but there were exceptions. The cases that are brought forward are the exceptional cases.

I think it's important to note that in the case of the public servants, that was in fact found by a management check. It was found by an internal check that said something had gone through there.

The Chair: But my point is.... Let's take the environmental one and this one of the civil servants with a pension. These are standard Treasury Board rules that have been around for a long time. The environmental policy was one of your own that's been around for a long time. The management and policing of your own policies and government policies just didn't seem to happen.

Mr. Charles Bassett: Well, in most cases it does happen. I guess the point I'm making is that there is obviously some small number of exceptional cases in which they're not happening.

The Chair: But I think the Auditor General's was a statistical analysis or a sampling. Is that right, Mr. Rattray?

Mr. David Rattray: That's correct, Mr. Chairman.

The Chair: So perhaps a lot were not found.

Mr. Charles Bassett: That's quite possible, and what we have to keep doing as we get new people in is make sure we update the training, train the new people, and ensure that the rules and regulations are in place and that things are modified as the rules change.

The contracting guide that I mentioned earlier was completed in May 2000. We will have the one for the contribution agreements by about the same time this year. It's just a constant effort to make sure you upgrade your controls, your management practices, and your training of your employees.

The Chair: The work you do around the world is quite often in environments where the rule of law perhaps is not respected to the same degree as it is in Canada—and I'm talking here about corruption, bribery, and so on. I know one particular firm that used to bid for CIDA contracts no longer bids for CIDA contracts because of the process. They cannot be competitive because they will not participate in bribery and corruption.

• 1700

We now have rules whereby it's no longer a tax deduction for businesses to bribe people, and it's now a criminal act here in Canada. What are you doing as an agency that spends a lot of our tax dollars in countries where, as I said, the rule of law is not respected as much as it should be, to ensure that bribes are not paid and to ensure that, to the best of your ability, the money is spent fruitfully and productively?

Mr. Charles Bassett: As you mentioned, Mr. Chairman, the whole issue of corruption is one of the most difficult ones to deal with. The biggest single way we avoid it is to almost never transfer money, so there is no money that changes hands. What we do is provide goods and services. Our contracts are with Canadian executing agencies. We do our contracting with them, and they deliver services, they deliver projects, they deliver products of a training nature, of a capacity-building.... But they're all done in an environment where you really don't have to pay anybody off to do anything.

The Chair: Yes, but let's say you're paying a Canadian contractor that you engage to provide these goods and services. Now, as I said, the people I know no longer participate and bid for CIDA contracts because they cannot be competitive. They feel they're not competitive because they will not participate in this process, which is now illegal here in Canada. So since you're paying the Canadian contractor to deliver these goods and services in a country where bribery and corruption perhaps is endemic, how are you policing it to ensure the Canadian contractor is abiding by the laws of Canada?

Mr. Charles Bassett: Well, we ask them for declarations. But we are rarely involved in the kinds of projects where you would have to pay a bribe in order to achieve your results. In the eighties, a lot of the development activities used to be major construction: dams, hydro-electric schemes, railway lines, roads. We do almost none of those now, and have not done any of them since the late eighties and early nineties. Most of what we do now is capacity building, it is training, institutional development, governance, children's issues, social development, and education. They're not the kinds of areas that lend themselves to requiring bribes in order to achieve your objectives.

But we still do monitoring. We still do very rigorous financial auditing of all of the transactions so that we follow where all the payments go. There are those mechanisms in place.

The Chair: Well, I'm glad to hear you're into capacity building. The World Bank, as you know and as many people already know, now recognizes that good governance has to be improved and developed, because any hard project—dam building and so on—really does not benefit the community in the long term if the economy is continually bled dry through corruption.

The fundamental underpinning to the development of any society that's going to thrive and flourish in this complex technological world we live in and that they want to join is to prevent the economy from being bled dry so that we can provide and they can provide education, health, and so on, to their own population. So I'm glad to hear your focus has now come around to capacity building.

In that vein, I think on behalf of all Canadians, I would ask you to pass on to the minister our recognition as Canadians that we have a role to play in helping the developing world and that we appreciate what CIDA is doing in that area. We will continue to monitor through the Auditor General, of course, to ensure that it's being done productively and efficiently.

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I think it's gratifying for Canadians to know we are trying to do our piece to help those in many parts of the world. I've had the opportunity to visit some parts of the world where poverty on a scale unimaginable here in Canada, on a scale that cannot be fathomed by people in Canada, is the ordinary daily life of millions of people. So on behalf of all members of the committee, I ask you to continue on behalf of Canadians to ensure that our money is spent wisely and well, and that we have after fifteen years good news stories to report.

Are there any more questions? No?

The meeting stands adjourned until 3:30 p.m. next Tuesday, when we shall be considering chapter 11 of the October 2000 report.