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37th PARLIAMENT, 3rd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Thursday, February 19, 2004

0905

The Chair (Mr. John Williams (St. Albert, CPC))

Mr. Vic Toews (Provencher, CPC)

The Chair

Mr. Vic Toews

The Chair

Mr. Vic Toews

The Chair

Hon. Joe Jordan (Leeds—Grenville, Lib.)

The Chair

Hon. Joe Jordan

The Chair

Mr. Vic Toews

The Chair

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada)

The Chair

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.)

The Chair

0910

The Chair

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Odina Desrochers

The Chair

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, CPC)

The Chair

Mr. Paul Forseth

0915

The Chair

Ms. Sheila Fraser

The Chair

Mr. Jean Ste-Marie (Legal Advisor and Assistant Auditor General, Office of the Auditor General of Canada)

The Chair

Mr. Paul Forseth

The Chair

Mr. Paul Forseth

The Chair

Ms. Sheila Fraser

The Chair

Mr. Odina Desrochers

0920

The Chair

Mr. Odina Desrochers

The Chair

Ms. Sheila Fraser

The Chair

Mr. Odina Desrochers

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Paul Forseth

Ms. Sheila Fraser

The Chair

Mr. Gerald Keddy (South Shore, CPC)

The Chair

Mr. Gerald Keddy

The Chair

0925

Mr. Gerald Keddy

The Chair

Hon. Joe Jordan

The Chair

Mr. Dennis Mills (Toronto—Danforth, Lib.)

The Chair

Mr. Dennis Mills

The Chair

Mrs. Marlene Jennings

The Chair

Ms. Sheila Fraser

0930

The Chair

Mr. Ronald Campbell (Assistant Auditor General, Office of the Auditor General of Canada)

0935

The Chair

Mr. Ronald Campbell

The Chair

Mr. Ronald Campbell

0940

The Chair

Mr. Shahid Minto (Assistant Auditor General, Office of the Auditor General of Canada)

The Chair

Mr. Shahid Minto

The Chair

Mr. Shahid Minto

The Chair

Mr. Shahid Minto

The Chair

Mr. Shahid Minto

0945

The Chair

Mr. Shahid Minto

The Chair

Mr. Shahid Minto

The Chair

Ms. Louise Bertrand (Principal, Office of the Auditor General of Canada)

0950

The Chair

Ms. Sheila Fraser

0955

The Chair

Mr. Ronald Campbell

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Ms. Kathy O'Hara (Deputy Secretary to the Cabinet, Machinery of Government, Privy Council Office)

The Chair

Ms. Kathy O'Hara

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

1000

The Chair

Ms. Kathy O'Hara

1005

1010

1015

1020

1025

The Chair

Ms. Kathy O'Hara

1030

The Chair

Ms. Kathy O'Hara

The Chair

Ms. Kathy O'Hara

The Chair

Ms. Kathy O'Hara

The Chair

Ms. Kathy O'Hara

The Chair

Mr. Vic Toews

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

1035

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Alan Tonks (York South—Weston, Lib.)

The Chair

Mr. Paul Forseth

1040

Ms. Kathy O'Hara

Mr. Paul Forseth

Ms. Kathy O'Hara

Mr. Paul Forseth

Ms. Kathy O'Hara

Mr. Paul Forseth

Ms. Kathy O'Hara

Mr. Paul Forseth

1045

Ms. Kathy O'Hara

Mr. Paul Forseth

Ms. Kathy O'Hara

Mr. Paul Forseth

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Gerald Keddy

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Odina Desrochers

1050

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Kathy O'Hara

Mr. Odina Desrochers

Ms. Kathy O'Hara

Mr. Odina Desrochers

Ms. Kathy O'Hara

Mr. Odina Desrochers

Ms. Kathy O'Hara

Mr. Odina Desrochers

Ms. Kathy O'Hara

Mr. Odina Desrochers

Ms. Kathy O'Hara

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

1055

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Hon. Joe Jordan

Ms. Sheila Fraser

Hon. Joe Jordan

Ms. Sheila Fraser

Hon. Joe Jordan

Ms. Sheila Fraser

Hon. Joe Jordan

1100

Hon. Joe Jordan

The Chair

Hon. Joe Jordan

The Chair

Ms. Sheila Fraser

1105

The Chair

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

1110

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

Mr. Shahid Minto

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

Ms. Judy Wasylycia-Leis

Ms. Kathy O'Hara

1115

Ms. Judy Wasylycia-Leis

Ms. Kathy O'Hara

The Chair

Mr. Vic Toews

Ms. Sheila Fraser

Mr. Vic Toews

Ms. Sheila Fraser

1120

Mr. Vic Toews

Ms. Sheila Fraser

Mr. Vic Toews

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

Ms. Kathy O'Hara

Mrs. Marlene Jennings

Ms. Kathy O'Hara

Mrs. Marlene Jennings

Ms. Kathy O'Hara

Mrs. Marlene Jennings

Ms. Kathy O'Hara

Mrs. Marlene Jennings

1125

Ms. Kathy O'Hara

The Chair

Mr. Dennis Mills

Mr. Shahid Minto

Mr. Dennis Mills

Mr. Shahid Minto

Mr. Dennis Mills

Mr. Shahid Minto

Mr. Dennis Mills

Mr. Shahid Minto

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

Mr. Shahid Minto

Mr. Dennis Mills

Mr. Shahid Minto

Mr. Dennis Mills

The Chair

1130

Mr. Gerald Keddy

Ms. Sheila Fraser

Mr. Gerald Keddy

Ms. Sheila Fraser

Mr. Gerald Keddy

Ms. Kathy O'Hara

Mr. Gerald Keddy

Ms. Kathy O'Hara

Mr. Gerald Keddy

The Chair

Mr. Odina Desrochers

1135

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

The Chair

Mr. Joe Comartin (Windsor—St. Clair, NDP)

Ms. Kathy O'Hara

Mr. Joe Comartin

Ms. Kathy O'Hara

Mr. Joe Comartin

Ms. Kathy O'Hara

Mr. Joe Comartin

Ms. Kathy O'Hara

Mr. Joe Comartin

1140

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

The Chair

Mrs. Diane Ablonczy (Calgary—Nose Hill, CPC)

1145

Ms. Sheila Fraser

Mrs. Diane Ablonczy

The Chair

Mrs. Diane Ablonczy

The Chair

Ms. Sheila Fraser

Mrs. Diane Ablonczy

The Chair

Hon. Joe Jordan

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

1150

The Chair

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

The Chair

Mr. Alan Tonks

Ms. Kathy O'Hara

Mr. Alan Tonks

Ms. Kathy O'Hara

Mr. Alan Tonks

Ms. Sheila Fraser

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

1155

The Chair

Mr. Alan Tonks

The Chair

Ms. Sheila Fraser

The Chair

Hon. Shawn Murphy (Hillsborough, Lib.)

Ms. Sheila Fraser

Hon. Shawn Murphy

Ms. Sheila Fraser

Hon. Shawn Murphy

Ms. Sheila Fraser

Hon. Shawn Murphy

1200

Ms. Sheila Fraser

The Chair

Mr. Jason Kenney (Calgary Southeast, CPC)

Ms. Sheila Fraser

Mr. Jason Kenney

Ms. Sheila Fraser

Mr. Jason Kenney

Ms. Sheila Fraser

Mr. Jason Kenney

Ms. Sheila Fraser

Mr. Jason Kenney

Ms. Kathy O'Hara

Mr. Jason Kenney

1205

Ms. Kathy O'Hara

Mr. Jason Kenney

Ms. Kathy O'Hara

Mr. Jason Kenney

Ms. Kathy O'Hara

Mr. Jason Kenney

The Chair

Hon. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)

Ms. Sheila Fraser

Hon. Maurizio Bevilacqua

Ms. Sheila Fraser

Hon. Maurizio Bevilacqua

Ms. Sheila Fraser

Hon. Maurizio Bevilacqua

The Chair

Hon. Joe Jordan

Ms. Sheila Fraser

1210

Hon. Joe Jordan

Ms. Sheila Fraser

Hon. Joe Jordan

The Chair

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

The Chair

Mr. Joe Comartin

1215

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

Mr. Joe Comartin

Ms. Sheila Fraser

The Chair

Mr. Vic Toews

1220

Ms. Sheila Fraser

Mr. Shahid Minto

Mr. Vic Toews

Mr. Shahid Minto

Mr. Vic Toews

Mr. Shahid Minto

The Chair

Mr. Vic Toews

The Chair

Mr. Vic Toews

The Chair

Mr. Vic Toews

The Chair

1225

The Chair

Ms. Marlene Jennings

Ms. Sheila Fraser

Ms. Marlene Jennings

Ms. Kathy O'Hara

Ms. Marlene Jennings

Ms. Kathy O'Hara

Ms. Marlene Jennings

The Chair

Ms. Marlene Jennings

The Chair

Ms. Marlene Jennings

1230

The Chair

Ms. Marlene Jennings

The Chair

Ms. Marlene Jennings

The Chair

Ms. Marlene Jennings

The Chair

Ms. Marlene Jennings

The Chair

Mr. Dennis Mills

The Chair

Mr. Odina Desrochers

The Chair

Mr. Dennis Mills

Ms. Sheila Fraser

1235

Mr. Dennis Mills

Ms. Sheila Fraser

Mr. Dennis Mills

Ms. Sheila Fraser

Mr. Dennis Mills

Ms. Sheila Fraser

Mr. Dennis Mills

The Chair

Mr. Joe Comartin

Mr. Shahid Minto

Mr. Joe Comartin

Mr. Shahid Minto

The Chair

Mr. Alan Tonks

1240

Ms. Sheila Fraser

Mr. Alan Tonks

Mr. Shahid Minto

Mr. Alan Tonks

Mr. Shahid Minto

Ms. Sheila Fraser

Mr. Alan Tonks

Ms. Sheila Fraser

Mr. Shahid Minto

Mr. Alan Tonks

Ms. Sheila Fraser

Mr. Alan Tonks

The Chair

Mrs. Diane Ablonczy

Ms. Sheila Fraser

Mrs. Diane Ablonczy

Ms. Sheila Fraser

Mrs. Diane Ablonczy

Ms. Sheila Fraser

Mrs. Diane Ablonczy

Ms. Sheila Fraser

Mrs. Diane Ablonczy

Ms. Sheila Fraser

Mrs. Diane Ablonczy

The Chair

Mrs. Marlene Jennings

The Chair

Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Ind.)

1245

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

The Chair

1250

Ms. Kathy O'Hara

The Chair

Ms. Kathy O'Hara

The Chair

Mr. Odina Desrochers

The Chair

Ms. Sheila Fraser

The Chair

Mr. Vic Toews

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 004

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, February 19, 2004

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Mr. John Williams (St. Albert, CPC)): Order. Good morning, everybody.

This is a different kind of meeting we're having this morning. We have a full agenda and we'll be going for four hours. I think we will have a five- or ten-minute recess around 11 o'clock, and lunch will be served later on. I'd just like to caution everybody that there are many cameras around, so I'd prefer it if you would make sure you're off camera when you're having your lunch.

Before I actually introduce the witnesses, we all recognize the Auditor General of Canada, of course, Madam Fraser. She is going to make a brief statement on tabling some documents.

I will ask you to table these documents at this point in time, Ms. Fraser.

Mr. Toews, you have a point of order?

Mr. Vic Toews (Provencher, CPC): I do, Mr. Chair.

In view of the fact that the cabinet is being investigated in the course of these hearings, I want to draw to your attention the fact that there are privy councillors on this committee. It's an obvious conflict of interest to have individuals of the Privy Council, when we are investigating the Privy Council, here on the committee. It violates the rules of natural justice and due process.

Mr. Murphy, Mr. Jordan, and Mr. Lastewka are all privy councillors and we are investigating the Privy Council. This is not appropriate. Those three members should withdraw from this committee.

I would ask those members to withdraw. If not, I will be bringing the appropriate motion to that effect.

The Chair: Thank you very much, Mr. Toews.

I believe the Speaker did rule that the names had been adopted by the House before we entered into this particular investigation. I think perhaps your point on conflict of interest is something that has to be raised in another forum. As the Speaker has ruled that these names were adopted by the House as members of the committee, I do not believe I have the power to ask for their removal.

I believe you did ask for their voluntary removal or withdrawal.

Mr. Vic Toews: That's correct.

The Chair: Therefore, that's for the members to take under their own advisement. I will confirm my ruling after having discussed the matter with the clerk.

Mr. Vic Toews: Thank you.

The Chair: Thank you, Mr. Toews.

Mr. Jordan.

Hon. Joe Jordan (Leeds—Grenville, Lib.): Just on that point, I think TV cameras do funny things to politicians. The Speaker, I thought, ruled very clearly on this.

The Chair: So did I, Mr. Jordan.

Hon. Joe Jordan: I find it strange that this motion is coming from a member who isn't even a member of the committee. This committee membership was adopted by unanimous decision of the House, and I don't think those kinds of theatrics are very helpful when we're trying to move forward in getting the facts out to Canadians.

The Chair: Mr. Toews.

Mr. Vic Toews: In fact, Mr. Chair, I am a member of this committee. I understand that I've been assigned to this committee by my party, and I will be a member of this committee. So I am raising this in that context.

The Chair: As of today, Mr. Toews is sitting as a substitute, although it may be changed in the future, I believe.

Madam Fraser, you have some documents that we are awaiting, please.

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada): Mr. Chair, I believe we've just provided the committee with a letter with additional information that was requested at your committee's meeting on February 12. I would like to point out that at that meeting you had asked us to identify individuals who had authorized certain transactions outlined in the report.

On Friday, February 13, I provided you with the names of the officials who were identified by title in chapter 3 of my report. The identity of these individuals is publicly available information. However, other individuals were not identified by title in the report, and we must respect their privacy as well as the confidentiality of our working papers. Therefore, I believe we should not provide their names to the committee. It would be more appropriate for the committee to obtain this information from the government.

To help facilitate this, we contacted the three crown corporations in question and asked them to provide the information directly to the committee. I understand that the committee has received some responses.

I hope you can appreciate that we cannot provide the information beyond that either contained in the report or publicly available. Many of the questions may therefore need to be addressed to government representatives.

Thank you.

The Chair: Thank you very much, Madam Fraser.

I have received a letter from the Old Port of Montreal. It being a federal crown corporation responding to a request of Parliament, I had thought that we would receive it in both official languages. We did not. The clerk has been able to have it translated, and it therefore is available for distribution.

We've also received a letter from Canada Post--again, from a federal crown corporation, in one language, addressed to the Parliament of Canada. It will have to be translated before it is distributed, and it will be distributed at the next meeting, which will be Tuesday. In the meantime, we will be communicating with Canada Post that they should know the simple rules.

Madam Jennings.

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Given the public interest in the workings of this committee and in our hearings, I would ask if there would be unanimous consent that notwithstanding the fact that one of these documents is not in the other official language, the members would be prepared to see it distributed.

The Chair: Okay.

Madam Jennings is asking if there's unanimous consent to waive the rule that documents tabled before this committee must be in both official languages. Is there unanimous consent?

Some hon. members: Agreed.

¿ (0910)

The Chair: With that unanimous consent, it therefore shall be distributed.

In the meantime, we'll communicate with these two institutions, reaffirming what they should know, that they can't send these things in one language only.

[Translation]

Mr. Desrochers, please.

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Mr. Chairman, I can well understand the Auditor General telling us that some names cannot be revealed, but we need to keep in mind that the President of Treasury Board came to us in a hurry on Tuesday morning to assure us that potentially, everyone whose name came out in the committee's work would be protected. I find it difficult to understand why we are being told that these names need to be considered confidential, whereas the President of Treasury Board has told us from the beginning that he is willing to cooperate and do everything necessary to give us access to names and lists. I find it strange that we are being told this morning that certain names are confidential. I understand what you are saying, Ms. Fraser, but I find it hard to understand the Treasury Board president's point of view.

[English]

The Chair: Thank you, Mr. Desrochers.

Madam Jennings.

Mrs. Marlene Jennings: Mr. Chair, I'd like to speak to the issue that MP Desrochers has raised.

The Auditor General, if I understood her statement correctly, did not say that these names should remain confidential. The Auditor General did in fact state that this was part of the Auditor General's working document and therefore the personal identity of the individuals who held the titles that were mentioned in the Auditor General's report and statements should come from government.

The Prime Minister has pledged that the government will provide all the information. Therefore, once we have the titles of all of the personnel in these crown corporations, for instance, I would suggest that this committee direct our request directly to those corporations and ask them to provide us with the specific names of the individuals who held the titles at the time covered by the audit of the Auditor General.

The Chair: Thank you, Madam Jennings. On that same basis, we did actually do that, as we are distributing these letters. But there are also some government names, and since I did make a request to the Auditor General, I'm therefore to ask if this committee would accept a motion that we ask the government to provide the information that I specifically requested from the Auditor General. Is that agreed?

Some hon. members: Agreed.

The Chair: The clerk will look after that.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: I move that motion and I hope that the President of the Treasury Board will respond.

[English]

The Chair: Okay. It is proposed by Mr. Desrochers.

So the clerk will follow through and obtain the information from the government departments.

Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, CPC): We've adopted that motion, but I want to now go back and question the Auditor General about her statement and the underlying rules around that.

The Chair: I'll let the Auditor General speak for herself.

Mr. Paul Forseth: I'll pose my question first.

I would like to get at what you have said about the fact that information perhaps should come from the government, and perhaps as far as protocol is concerned, that might be appropriate. But I also want to know on what basis of law are you saying to us, as the committee, that we cannot require of you even your working documents? If this committee chooses to go that far, I would assume that every last scrap piece of paper you have in your offices, if we wanted to take the time, should be produced to this committee if we specifically ask for it. I'm wondering what the real foundational basis is. This committee has asked you to do something and you've said, “Well, it would be preferable if it came from government”, which probably is true, but I also think you should substantiate that approach to the committee by some kind of substance as to the legality of it. My feeling is that you may be uncomfortable giving that material, but the committee has asked for it and it's therefore beyond your choice to make that option.

¿ (0915)

The Chair: Madam Fraser.

Ms. Sheila Fraser: Mr. Chair, I mentioned two issues. First is the privacy of the individuals concerned. All people who are named in our reports, even by title, are shown in advance what is going to be said about them. For people who are involved in transactions, that is not done, so we have not followed what we would consider a normal process. As well, we have to respect the confidentiality of our working papers because we have many working papers that contain classified information. We could have information that is considered secret, and we do not go through a whole vetting of that.

I would like to ask my legal counsel, Mr. Ste-Marie, to give you perhaps a verbal explanation, and we will be glad to provide the committee with something in writing.

The Chair: Mr. Ste-Marie.

Mr. Jean Ste-Marie (Legal Advisor and Assistant Auditor General, Office of the Auditor General of Canada): Thank you.

Mr. Chairman, I want to say that what the Auditor General has said is exactly true in the sense that our audit papers contain other documents. For instance, we have documents that have solicitor-client privileged material in them, we have documents that have protected commercial information, and we also have documents that have cabinet confidences in them. So obviously these documents cannot be shared.

The Chair: We dealt with cabinet confidence yesterday in the House, but we do have to ensure that we do not trample on people's rights. There is a Privacy Act that does protect people. Therefore, we should be careful when we do proceed. I'm not saying we can't proceed, but let's be careful when we proceed.

Mr. Paul Forseth: I have a supplemental question to follow up.

The Chair: Okay, very quickly, Mr. Forseth, please.

Mr. Paul Forseth: I've heard from legal counsel and I've heard that advice, but it does not answer the question I asked. Certainly, if the committee chooses to proceed on a particular file and if there is a solicitor-client privilege and the Auditor General has that file and has that material, then that privilege has already been breached.

Next, if there's a document that would be considered a cabinet privilege, then we could proceed at that time to exclude those particular pieces of paper. To say we might have something in a file that would indeed be private or confidential does not exclude the general principle that would ever limit the authority of this committee to do whatever it has to do to get to the bottom of particular information.

Perhaps I come from a little experience in this procedure. In the court system I was somewhat in the same position of interviewing a lot of clients in divorce proceedings, what was subject to cross-examination and so on.

I'm just saying that perhaps the Auditor General could look at that question and come back a little later. I would be very reluctant to ever accept what I've heard so far as limiting what the committee could go after.

The Chair: I think you're likely right in saying that we are not limited, Mr. Forseth, but we accept by prudence. There are such things as rights and so on.

I have Mr. Desrochers and Madam Jennings, but Madam Fraser would like to say a word.

Ms. Sheila Fraser: Mr. Chair, I would just like to point out that we have tried to ensure that the committee gets the information it is requesting. It's not that we are trying to block this in any way.

We, the office, contacted the crown corporations in question and asked them to provide the information to the committee.

I really do believe it is more appropriate for the committee to receive the material directly from its source, not from an intermediary such as us. I don't know that we have all of the procedures in place to start re-vetting information, and what should go and what shouldn't. I think the departments are much better able and the government is much better able to provide that information.

We also offered in our letter, if the committee wishes, to give you an assurance that the information that is being provided by those crown corporations corresponds with what is in our files.

The Chair: Mr. Desrochers, s'il vous plaît.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, we did not get the names that we wanted this morning. Unfortunately, we need to work within the constraints imposed on us. However, with respect to the request we will be submitting to the government, can we set a deadline so that we can be sure that things do not drag on? They already have all the information. I could not imagine that they would not have it. We have to be sure that when we come back next Tuesday we will start to get information. If not, we are going to be beating around the bush and we will not make any progress.

¿ (0920)

[English]

The Chair: I will ensure, through the clerk, Mr. Desrochers, that the information is received on a timely basis. I think I'm correct in saying it was only--

[Translation]

Mr. Odina Desrochers: Tuesday would be a reasonable deadline, Mr. Chairman.

[English]

The Chair: I think I'm correct in saying it was only yesterday morning that these agencies were asked to provide the information.

Am I correct, Ms. Fraser?

Ms. Sheila Fraser: That's correct.

The Chair: So two of them actually responded on the very same day.

That was quite prompt, I thought. The others have not been so prompt. I can assure you, I will do what I can to have that information for you on Tuesday--with no promises, but I will do what I can.

[Translation]

Mr. Odina Desrochers: I want the word “Tuesday” to be in the letter, Mr. Chairman.

[English]

The Chair: Okay, I will specify Tuesday. I think it should be done before then.

Madam Jennings.

Mrs. Marlene Jennings: Thank you.

I appreciate the Auditor General's more complete explanation and the actions the Auditor General has undertaken to ensure that the committee's request is indeed complied with in full--the assurance that once the information is provided to the committee from the various original sources, if I can put it that way, the Auditor General's office will ensure the information is complete.

At the same time, I would have to support what Mr. Desrochers has requested on the basis that we all know the procedure is that once the Auditor General has completed the audit of a government agency, a government department, or a program run within a government department, what one would call an interim report is to be provided to the department or the agency in order for that agency or department, if it be government, to comment on the recommendations and findings.

Therefore, when Mr. Desrochers asked for a definite timeline, saying Tuesday should be more than sufficient, I agreed with him. The Auditor General's report has been in the hands of these crown corporations for some time now; therefore, these crown corporations should be in a position to provide us, almost instantaneously, with the names of the individuals who held the positions that have been identified in the Auditor General's report.

The Chair: Thank you very much, Madam Jennings. As I said, the clerk will ensure that information is communicated to them.

Mr. Forseth, do you have an intervention?

Mr. Paul Forseth: Yes. I was just wondering if the Auditor General could provide the names of those who are in that CCSB unit.

Ms. Sheila Fraser: I don't believe, Mr. Chair, that we were specifically asked for those names in our letter. Again, I don't think we would have them in our files. I would suggest the members may wish to ask the representatives of Public Works, who will be following us immediately, for that information.

The Chair: Thank you.

Mr. Keddy, and then Mr. Jordan.

Mr. Gerald Keddy (South Shore, CPC): I have a question, Mr. Chair, on the motion passed on the witnesses being called. That motion in no way interferes with our ability to call other witnesses, does it?

The Chair: We haven't adopted any witnesses at this point in time.

Mr. Gerald Keddy: Okay, but I want to be very clear on the motion that came from the government side that we just passed.

The Chair: The motion we passed was about the crown corporations that have not responded to the request to give us the information I had asked from the Auditor General last Thursday, which was additional information. It was not a witness list; it was just information I had asked from the Auditor General.

She at first thought she could provide it. On reflection she said they'd prefer to obtain it directly from the government. I have now asked the clerk, because we've agreed, to contact the appropriate government departments and obtain the information that I specifically asked of the Auditor General last week.

It is not a witness list. There has been no determination of any witnesses at this point in time.

¿ (0925)

Mr. Gerald Keddy: Thank you.

The Chair: Mr. Jordan.

Hon. Joe Jordan: Mr. Chair, I just want to point out to the committee that we've just witnessed a feeding frenzy at the table where these documents were put down. I'm going to come back to this later.

We have to be very careful about throwing out people's names, because there's this big machine out there assuming that if someone is mentioned, they're part of this thing. I think we have to revisit some of the processes and procedures we're using here. I don't want to make a big point of it now. But these people may or may not be witnesses. We have no idea whether they're involved. But there's this big sponge out there waiting to absorb these names, and I think we have a responsibility to be very cautious about how we release the names, especially of people who are now private citizens.

We're going to have that discussion later on. I just wanted to point out the frenzied activity over there to get their hands on these names right now.

The Chair: Absolutely. Prudence is important as we proceed.

Is there anything else on this issue?

The matter is closed.

Mr. Mills, you wanted to be recognized.

Mr. Dennis Mills (Toronto—Danforth, Lib.): I'll take advice from you, Mr. Chair, when I can give notice of my motion.

The Chair: You can give it now.

Mr. Dennis Mills: I would like to put forward a motion:

That this Committee invite the Ministers and Deputy Ministers of Public Works and Treasury Board, for the period covering the sponsorship program, to appear as a panel to discuss their Ministerial responsibilities; and

That, on February 26, 2004, the time provided is unlimited, only to be interrupted by question period, so that all questions can be answered and the issue can be dealt with expeditiously.

The Chair: If you can deliver that to the clerk, he will have it translated and circulated in both official languages. On the assumption that it goes out tomorrow, we can debate the motion on Tuesday.

Now, getting to the main part of the business today, the orders of the day are pursuant to Standing Order 108(3)(g), chapter 3, the Sponsorship Program; chapter 4, Advertising Activities; and chapter 5, Management of Public Opinion Research, of the November 2003 report of the Auditor General of Canada, referred to the committee on February 10, 2004.

We have a list of witnesses here.

From the Office of the Auditor General, we have Ms. Sheila Fraser, the Auditor General of Canada; accompanied by Mr. Shahid Minto, Assistant Auditor General; Mr. Ronald Campbell, Assistant Auditor General; and Louise Bertrand, Principal.

From the Department of Public Works and Government Services, we have Mr. David Marshall, Deputy Minister; from the Treasury Board of Canada Secretariat, Mr. Jim Judd, Secretary of the Treasury Board and Comptroller General of Canada; and from the Privy Council Office, Kathy O'Hara, Deputy Secretary to the Cabinet, Machinery of Government.

We're not going to have our normal five-minute opening statement. I understand the Auditor General will take 45 minutes to an hour to present her report. I'm suggesting--I actually had it in my mind--that it would be followed by the Privy Council Office and then Public Works and the Treasury Board.

After the first two presentations I will then ask the committee, should we deal with the first two presentations and bring the other two back later on, or do we want to have all four? We'll leave that decision open at this point in time.

Madam Jennings, you have a point?

Mrs. Marlene Jennings: I'm fine.

The Chair: Okay.

Without further ado, Madam Fraser, I turn it over to you.

Ms. Sheila Fraser: Thank you, Mr. Chair.

[Translation]

Thank you, Mr. Chairman. I would like to thank the committee for giving me this opportunity to discuss the details of the Sponsorship Program, which is dealt with in chapter 3 of my annual report.

As you have mentioned, I am accompanied today by Shahid Minto and Ronald Campbell, both Assistant Auditors General, and Louise Bertrand, Principal.

Before I go over some of the key observations in chapter 3, I would like to offer the committee some background to our audit.

As you all know, in March 2002, my office was asked by the then Minister of Public Works and Government Services to audit three contracts totalling $1.6 million that had been awarded to Groupaction. That audit report, presented in May 2002, revealed significant shortcomings at all stages of the contract management process.

The nature of the findings were such that we undertook a government-wide audit, which is reported in the November 2003 report that was tabled in the House on February 10, 2004.

Our audit examined the management of the Sponsorship Program by the Communications Coordination Services Branch up to August 31, 2001, when Communication Canada was created by the amalgamation of CCSB and the Canada Information Office. We examined the subsequent management of the program by Communication Canada to March 31, 2003.

We selected a sample of sponsorship projects and reviewed them in detail. Further, we selected a sample of transactions involving payments by CCSB to crown entities, including crown corporations. Through an order in council, we were also able to audit selected sponsorship transactions at Canada Post Corporation. We audited the way both CCSB and the crown entities managed the transactions.

Our findings are disturbing. The non-compliance with contracting rules extended beyond PWGSC and into five major crown corporations and agencies. My colleagues will explain in more detail how the Sponsorship Program functions as well as certain cases where sponsorship funds where transferred to crown corporations, which will give you a better understanding of our concerns.

We had three major concerns: first, a lack of respect for the parliamentary process; second, widespread mismanagement of the program; finally, the payment of commissions for moving money from one government entity to another and with little evidence of value added.

¿ (0930)

[English]

Not only was there no respect for the rules, there was also disrespect for the parliamentary process. Parliament was not informed of the program's real objectives and was later misinformed about how the program was run. The parliamentary appropriations process was bypassed when money was transferred to crown corporations under this program.

My colleagues will now discuss some key observations and specific transactions that we audited. I would like to ask Mr. Campbell to take over, please.

The Chair: Mr. Campbell.

[Translation]

Mr. Ronald Campbell (Assistant Auditor General, Office of the Auditor General of Canada): Thank you.

Mr. Chairman, before discussing the details of our findings I would like to briefly comment on the control environment within which the Sponsorship Program operated.

In Results for Canadians - The Management Framework for the Federal Government, the Treasury Board states that departments and agencies are responsible for ensuring that they have adequate management frameworks to achieve results and manage resources. This means, among other things, that they must maintain robust internal controls and be vigilant to detect any early conditions that could lead to a control failure.

[English]

The sponsorship program operated in a weak control environment: procurement and financial activities were handled within CCSB, a branch of Public Works, with little oversight by Public Works' central services; communications agencies and events to be sponsored were selected by only a few individuals; and the same individuals who approved the projects also approved invoices for payment.

Roles and responsibilities were not segregated to eliminate, as far as possible, any opportunities for fraud and misstatement or an override of controls by management.

There were no written guidelines. Written guidelines can be a key tool for delivering any program consistently, fairly, and transparently. They can provide clear criteria for eligibility, set out the conditions attached to financial support, and, in this case, provide guidance on levels of sponsorship funding.

We noted that the sponsorship program operated with no guidelines from its inception in 1997 until April 1, 2000, resulting in ad hoc selection and approval of projects and decisions on levels of sponsorship funding.

Mr. Chair, your committee may wish to ask government officials for further details on the control environment and why it was allowed to operate in this manner.

Now I would like to discuss some of the issues that were reported in the sponsorship chapter. My colleagues will discuss in a moment cases where sponsorship funds flowed to crown corporations. I would like to highlight issues on how the sponsorship program was run within Public Works and Government Services.

I believe the members have a handout. I'm not going to cover every single point in the handout, but I am going to speak to the main issues, which are selecting the agencies, awarding the contracts, selecting events, deciding on the levels of funding, and ensuring value for money.

¿ (0935)

The Chair: Mr. Campbell, you're talking about this deck of slides, I believe, which is entitled “VFM Audit of Sponsorship, Advertising, and Public Opinion Research”. Am I correct?

Mr. Ronald Campbell: Yes.

The Chair: Does everybody have a copy of this document?

Mr. Ronald Campbell: I would like to remind the committee of the objective of government contracting. It is supposed to enhance access and encourage competition and fairness, and it is to result in best value to the crown or an optimal balance of overall benefits.

In selecting the agencies, I would like to point out, Mr. Chairman, that it was the same organization, CCSB, a branch of Public Works, that was also responsible for the selection of agencies as reported in chapter 4, the chapter on advertising. In both sponsorship and advertising the rules were broken. In some cases in advertising we saw no evidence of a competitive process at all.

Once agencies were selected, contracts were awarded to those agencies. Again, the rules were broken. For example, all suppliers on the list were to be given the opportunity to submit proposals. We saw no evidence that this was done. In fact, we saw no evidence of a rationale to support decisions to award specific contracts to specific agencies.

With regard to the selection of events, we expected to find documentation in the files that would include an assessment of how the event would contribute to the program objectives. We expected to see an analysis of the potential to provide federal visibility, and we also expected to see how the recommended funding level was arrived at for each event.

Mr. Chairman, we found serious weaknesses. In most cases we found no criteria or assessment of the merits of the project and no rationale to support decisions to sponsor specific events. Often there was no information on file about the event or its organizers and no discussion of the visibility that was expected to be achieved. We also saw no rationale or documentation showing why proposals were declined or why decisions were changed.

With regard to deciding on levels of funding, Mr. Chairman, in the sample sponsorship files we audited, not one had any documented rationale to support the level of funding provided. We would have expected that management would have reasonable assurance that funding was used for the intended purpose and that post-mortem reports were reviewed against the objectives and expected results outlined in the visibility plans.

Mr. Chairman, we found that visibility plans were poorly done or not completed at all. The files showed little documentation of what was actually delivered. Work had been subcontracted without competition, and contracts had been amended without documentation that showed why. There was a lack of compliance with relevant financial authorities.

Mr. Chairman, the findings contained in this report are consistent with those of our May 2002 report on the three Groupaction contracts. There was little evidence that the government received the visibility it had paid for. Verbal agreements were used where we would have expected to have found appropriate documentation. As committee members may remember, we reported in 2002 that the retired executive director had informed us that this was how business was done while he was responsible for the program.

In our review of files, we found it impossible in most cases to determine why an event was selected for sponsorship, how the dollar value of a sponsorship was determined, or what federal visibility the sponsorship would achieve.

As an introduction to the cases my colleagues are going to discuss, I'd like to refer the committee to the top of page 10 in chapter 3 of our report, where we indicate that a representative of the company L'Information essentielle told us that the executive director of CCSB had verbally committed the government to funding $7.5 million. There was no business case. There was no contract between the government and that company and no other documentation or exchange of correspondence between the government and the company to reflect these commitments. The representative of L'Information essentielle told us that he was instructed to contact VIA Rail and Canada Post for portions of these funds. The remainder of funds would be transferred through a number of communications agencies.

Now, Mr. Chairman, my colleagues are going to explain to you how this was actually done.

¿ (0940)

The Chair: Mr. Minto.

Mr. Shahid Minto (Assistant Auditor General, Office of the Auditor General of Canada): Thank you, Mr. Chairman.

Mr. Chairman, I'm going to try to explain the arrangements by which significant public funds were used to sponsor two television series--Maurice Richard and Le Canada du Millénaire. Perhaps the best way to understand these fairly complex transactions is for the members to look at this chart, which is our cashflow chart.

The Chair: Is that this one here, which starts, “Maurice Richard Series”?

Mr. Shahid Minto: Absolutely, sir.

Along with that we have a deck giving some highlights that I will use in my discussion.

The Chair: I think I have the deck, but I'm not sure if I have the....

Mr. Shahid Minto: And it says “Maurice Richard Series” too?

The Chair: “Maurice Richard Series 1998-2000”. Is that what you're saying?

Mr. Minto, we'll just wait until everybody is satisfied that they have the document.

Mr. Shahid Minto: I think it's stapled to the back of this, if I can interject, Mr. Chair.

The Chair: If you can tell us which one you're referring to, Mr. Minto....

Mr. Shahid Minto: Mr. Chairman, I'm going to be using both the cashflow chart and the slides. The slides start with “Funding method” under “Maurice Richard”. With your indulgence, I'm going to go through both of these.

Let me start by saying that for this series and the other television series I'm going to talk about later, we are not questioning the artistic merits of the series. We do note, however, that CCSB did not have a definition of what the deliverables were going to be, nor did it analyze the value of the visibility the government received.

Our main concern that I'm going to talk about today, however, is with the method of funding this organization. If you look at the flowchart diagram, you will note that the government used 10 contracts with four communication agencies, an agency of record, plus two crown corporations, to transfer $4.7 million to the private sector company. The private sector company is L'Information essentielle, which is on the right, and the government entity is on the left. The three government entities, CCSB, VIA Rail, and Canada Post, which provided the funding, had no contract with the ultimate recipient, L'Information essentielle.

CCSB used some very generally worded contracts with the four marketing companies it provided the money to. These are the people in the middle of the flowchart, Lafleur, Media/IDA Vision, Groupe Everest, Gosselin, etc. According to a spokesperson of L'Information essentielle, the four communication companies or agencies that provided him with the funds—which you can see from the chart were moved across to the company—had no contracts with this company, nor did they do any work for it. A total of $438,000 in commissions was paid for moving this money from the government to the ultimate recipient, with very little evidence of any value added.

Mr. Chairman, none of these communication companies was selected through a proper process. During an audit of CCSB, we saw absolutely no documentation for the reasons for selecting L'Information essentielle as the producer of this particular series, or for the level of funding to be provided here. There is no exchange of correspondence, no written proposal, no definition of deliverables, no information on what portion of the total costs were being paid by the government, and, ultimately, no evaluation of the results.

Mr. Chairman, we have some specific concerns about the actions of the two crown corporations, VIA Rail and Canada Post. VIA Rail—and this is at the top of the chart—advanced almost $1 million to a private sector company based upon a verbal agreement with the executive director of CCSB. PWGSC did not have sufficient money in its appropriations, apparently.

Mr. Chairman, you will recall that the appropriations provided by Parliament to departments are for specific purposes, specific entities, and specific time periods. Borrowing or loaning funds between government entities to get around these specific results is the circumvention of parliamentary control and authority, and that is what happened in this particular case. The payment of almost $1 million to L'Information essentielle by VIA Rail—and I'm still at the top of this chart—was without a contract and was not supported by a business case or any written analysis of the costs and benefits.

What surprised us further, sir, was the process used to reimburse VIA Rail by CCSB, because VIA Rail had already paid L'Information essentielle this money. It required the issuance of a fictitious contract by CCSB, a fictitious invoice by VIA Rail, and the involvement of a communications agency, which received $112,500 for simply moving money between the two government entities. VIA Rail did not report this transaction to its board or audit committee.

Mr. Chairman, I now move to Canada Post. Our concern with Canada Post was that Canada Post made a total payment of $1.625 million to L'Information essentielle for the same series, without a business case or without a signed proposal or a clear contract. This payment was made strictly on the basis of an invoice. This was clearly in violation of Canada Post's own sponsorship policy.

Mr. Chairman, this concludes my discussion on this particular case.

¿ (0945)

I would like to now move to the next case, which is Le Canada du Millénaire. I would request members of the committee to use the same chart, the cashflow chart, that we have and the attached text that goes with this.

Mr. Chairman, we have the same fundamental concerns here about no business case, no analysis, and all of those things. But once again, our main concern is with the unusual method chosen by the government to provide $1.7 million of funding for the series. You will note that the producer of the series is the same again.

The Business Development Bank, BDC, at the top of the cashflow chart, Mr. Chairman, if you look at the two contracts, paid a total of $250,000 to L'Information essentielle without a contract. There was no business case or analysis in support of this payment. CCSB then paid $125,000 to L'Information essentielle through communications agencies, who received $18,750 in commissions, with very little evidence of any value added. This was a money transfer.

The Chair: When you say “very little evidence”, was there some evidence or no evidence?

Mr. Shahid Minto: Mr. Chairman, I don't know how much a postage stamp costs or how much it costs to take a letter over. There's nothing in the file to show there was value added.

The Chair: That's the type of.... Okay. Thank you.

Mr. Shahid Minto: Let me be very specific. There is nothing in the file to show any value added.

After the first $125,000, CCSB transferred another $125,000 to BDC, to the same communications agencies, who again received $18,750 in commissions. BDC then turned around and transferred the money to L'Information essentielle. BDC issued artificial invoices to Media/IDA Vision to facilitate the transfer of these funds.

Mr. Chairman, BDC had no contract with CCSB, the source of the funds, the communications agencies who facilitated the transfer, or L'Information essentielle. BDC is in the middle and has no contracts with either of the players.

BDC officials approved invoices for payment to L'information essentielle for amounts in excess of the delegated authority.

Mr. Chairman, we did not audit the last line in great detail, but we also note that the Canada Information Office made a contribution of $1.2 million for the series. According to the ombudsman's public report--the CBC ombudsman's report--they did not receive any visibility as one of the sponsors of this program.

Mr. Chairman, my colleague will talk about a third case, and ultimately we'll be ready to answer questions.

The Chair: Madam Bertrand, s'il vous plaît.

[Translation]

Ms. Louise Bertrand (Principal, Office of the Auditor General of Canada): Thank you, Mr. Chairman.

I would now like to give you some details on our observations about another case. This was the stamp creation contest that Canada Post took part in.

Our particular concern in that case is that the Sponsorship Program provided approximately $521,000 that was used to finance Canada Post's commercial activities.

I would like to draw your attention to the bottom of the diagram, which shows that the CCSB, the Communications Coordination Services Branch of Public Works and Government Services Canada, provided $600,000 to the Lafleur and Media/IDA Vision Inc. agencies. As you can see, the two agencies charged commissions of $78,261 and transferred the difference of $521,739 to Canada Post. If the CCSB had given the funds directly to Canada Post, the commissions of $78,261 would not have been paid to the agencies.

Moreover, we found that out of the $521,739 received from the CCSB, Canada Post paid $516,000 to Lafleur, even though there was no contract with the Lafleur agency. We are concerned by the commissions paid to transfer money that was going to the Lafleur agency in any case.

At the top of the diagram you can also see that the CCSB had two contracts with Lafleur for a total of $114,740 to design concepts and come up with a visibility plan for Canada Post's partners and prototypes. Canada Post told us that it did not receive products from the Lafleur agency for the contest on behalf of the government.

I already told you that Canada Post had paid Lafleur $516,000. That amount was paid, among other things, for design activities, production of prototypes and to find partners. We found that Canada Post and the CCSB both bought similar products from the Lafleur agency. So there is a risk of double payment. We provided this information to Canada Post and Public Works and Government Services Canada.

We are also concerned by the fact that there was no documentation to support Canada Post's decision to take part in this event. For example, no cost-benefit analysis identified the objectives of the project, the budget or the expected results.

Moreover, Canada Post did not follow its own sponsorship policy. Once again, we found that there was no written agreement between the CCSB and Canada Post, or between Canada Post and the Lafleur agency, as already mentioned.

We also found that Lafleur and Media/IDA Vision Inc. were not selected through an appropriate selection process by CCSB. That was also the case with respect to the selection of the Lafleur agency by Canada Post.

In closing, we questioned whether this sponsorship activity was worthwhile, given that Canada Post is already under an obligation to show the “Canada” word mark every time it uses its brand image, as required by the Treasury Board policy on the Federal Identity Program. Canada Post informed us that the attendance of ministers at various ceremonies and frequent use of the “Canada” word mark did produce greater visibility.

That concludes my presentation, Mr. Chairman.

¿ (0950)

The Chair: Ms. Fraser.

Ms. Sheila Fraser: Thank you, Mr. Chairman.

As I said in my presentation, the conclusions of our 1997 to 2001 audit are troubling. Significant amounts of money were spent and we found very little evidence that the government got value for its money. Rules were broken and the role of Parliament was not respected.

I would like to point out that the government took action with regard to several of these issues when Communications Canada was created in September 2001. From that time on, despite the fact that problems persisted, we found that the management of the sponsorship files had improved with regard to, amongst other things, the selection and approval of projects, the analysis of the sponsorship amount granted for each event, the enforcement of contract conditions and due process with regard to the relevant authorizations.

Furthermore, a new Sponsorship Program was announced in December 2002, with an implementation date of April 1, 2003. We have not yet audited the new program.

As you all know, on December 13 last, the government announced that the Sponsorship Program would be eliminated and that Communications Canada would be dissolved by the end of this fiscal year.

¿ (0955)

[English]

In closing, I would like to draw the committee's attention to the recommendations contained in our report. I believe they will be important in the government's effort to ensure that these types of problems do not occur again.

For example, the government should continue to ensure that any operating units established to undertake new activities do so with proper control, accountability, and transparency; that parliamentary appropriations are respected; that any transfers of funds between government entities are conducted with transparency and efficiency; that relationships between crown corporations and government departments are maintained at arm's length; and that public servants understand their obligations and comply with the Financial Administration Act.

Mr. Chair, I trust that this presentation has given the committee a better understanding of how the sponsorship program operated and of our concerns. We would be pleased to answer any questions you may have. Thank you.

The Chair: Does Mr. Campbell have a closing statement as well?

Mr. Ronald Campbell: No.

The Chair: Thank you very much, Madam Fraser.

Before we get into the questions, it had been my intention that we would now hear from the Privy Council as to how a program like this could get going. After the presentation by the Privy Council Office, I would then ask the committee whether they want to hear the other two presentations or go into questions at that time.

With the committee's indulgence, I will then ask Kathy O'Hara from the Privy Council Office to please come forward and make her statement.

Monsieur Desrochers.

[Translation]

Mr. Odina Desrochers: Does this mean that all the witnesses will come back for questions? Will we have a full panel?

[English]

The Chair: We will decide that when we get to it, Mr. Desrochers. As I said, we have four presenters. We want all of the information. The Prime Minister has committed, and the government has committed, that no stone shall be left unturned.

I want to give the opportunity for members to ask all the questions they want. We have the Auditor General plus three departments here for presentations this morning. After the presentation by Ms. O'Hara, we will then ask the committee if we want to close off presentations at that time and go into questions or if we should have four presenters and then the questions on Tuesday. I will entertain the debate after Ms. O'Hara. We'll have that statement first.

Ms. O'Hara.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, I simply want to avoid the funnel effect.

[English]

The Chair: No. We will continue on. This is not a single meeting on one particular issue. We will continue on until we have the questions answered and the issue resolved. You will have lots of time for questions, Mr. Desrochers.

Ms. O'Hara.

Ms. Kathy O'Hara (Deputy Secretary to the Cabinet, Machinery of Government, Privy Council Office): Mr. Chair, you should all have a copy of the deck that I will speak to.

The Chair: Does everybody have the deck?

Ms. Kathy O'Hara: It's called “Machinery Issues”.

The Chair: It's just being distributed as we speak.

Does everybody now have a copy of “Machinery Issues”?

Madam Wasylycia-Leis.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Will there be copies for the committee members?

À (1000)

The Chair: Does everybody have a copy of “Machinery Issues” in the language of their choice?

Ms. O'Hara, please commence.

Ms. Kathy O'Hara: Thank you, Mr. Chair.

As the outline on page 1 of the deck indicates, I was asked to provide an overview to the committee in three areas. First is the process for the creation of government bodies. The particular example we were asked to look at was Communication Canada. Second was how branches or units in departments were created, looking particularly at the creation of the communications coordination services branch. Third was how programs were created.

As I will point out in the presentation, the machinery of government unit in the Privy Council Office deals almost exclusively with the first question, the creation of new government bodies. But we have attempted briefly, in the last two pages of the deck, to deal with the other two questions.

Turning to page 2, government bodies are created within a framework established by parliamentary statutes, which you are familiar with. There are a number of departmental statues that provide enabling mandates for departmental ministers. An example would be the Department of Health Act. There are specific agency acts that establish agencies and provide more focused authorities and duties. An example of that is the Canadian Food Inspection Agency Act.

Some statutes provide the government with the flexibility to move in the machinery area. For example, the Ministries and Ministers of State Act allows for the creation of ministers of state. The Public Service Rearrangement and Transfer of Duties Act allows the government, through orders in council, to transfer powers and authorities across government agencies.

There are other statutes that set out the requirements that government organizations have to follow. Some examples of those are the Financial Administration Act, the Public Service Staff Relations Act, the Access to Information Act, and the Privacy Act.

When we create new entities, orders in council have to be passed to ensure that the bodies meet the appropriate requirements laid out in these statutes.

As you know, the Prime Minister is responsible for the overall organization and structure of government and assigning ministerial mandates and responsibilities.

On page 3 we tried to outline some examples of the kinds of organizational changes the machinery of government becomes involved in. They can range in complexity. Sometimes the machinery is essentially moving a function or an existing structure from one department to another or from one portfolio to another. For example, in 1995 the coast guard was moved from the Department of Transport to the Department of Fisheries and Oceans. The Canada Information Office, as you know, moved from the Heritage portfolio to the Public Works and Government Services portfolio in 1998.

Sometimes the machinery renames or changes the mandate of the organization, as has been discussed before. That's what happened with Communication Canada in 2001. It had previously been called the Canada Information Office. It was also given a new mandate because it absorbed the CCSB.

We can also create new authorities. For example, the Parks Canada Agency was established in 1998 as a separate agency with its own human resources regime.

Further down the range of the spectrum of complexity you can create a new department or agency by combining or separating existing structures. Examples are changes to the Human Resources Development Canada department, and the creation of the Department of International Trade, which just happened December 2003.

From time to time, new functions of government have to be established through a departmental statute. A good example of that is the creation of the Department of Environment in 1971. You also have examples where units were eliminated, such as the disbanding of Communication Canada on December 13, 2003.

We were asked to provide a quick overview of the process we would use in thinking through that kind of range of organizational changes, so page 4 illustrates the process we would go though.

À (1005)

Obviously, the amount of time and the complexity of each stage would depend on the nature of the change being made. But by and large, every organizational change we'd make would go through these stages: first, the identification of the need for an organizational change; second, the development of the proposal of the new structure; third, the approval of the new structure; and finally, the implementation.

Turning to page 5, needs identification is driven in large part by policy drivers. We can cite many examples where the rationale for the creation of a new agency or new organization is really driven by a policy objective. The example we give here is Industry Canada, which was created in 1993 out of a desire to bring together all of the government's microeconomic policy levers and put them all in one department. So that's what was done in 1993.

Conversely, you can have operational drivers. It wasn't so much the case in the creation of PWGSC in 1993. The driver wasn't policy. It was more the drive for efficiency by bringing together many of the government's common services into one department, which had previously been split between Public Works and the Department of Supply and Services.

As we say here on this slide, the timing can vary. We make machinery changes at any point in the cycle. Not surprisingly, in times of transition in fact we tend to have more machinery changes, but we want to make the point that they happen throughout the cycle.

The source of the need is actually quite varied, as slide 6 illustrates. One example, obviously, is a new prime minister at the time of transition. Often a minister identifies a need for an organizational change. Sometimes it is directly linked to a policy proposal, and the machinery is a way a policy proposal is going to be implemented. So it is dealt with through a memorandum to cabinet as well as a letter to the prime minister, because the creation of the new units is a prerogative of the prime minister. So while a policy proposal could be approved or recommended by a cabinet committee, it's only the prime minister who can approve the machinery change.

Sometimes, as you know, machinery changes emerge from parliamentary processes. The example we cite here was the work of the Standing Committee on Canadian Heritage, which recommended a department of communications and a review of Telefilm Canada's mandate.

Sometimes organizational changes emerge from royal commissions. A more recent one was the health council, which was recommended by the Romanow commission. Quite a while ago, in 1962, the recommendations of the Glassco commission actually led to the creation of the Public Service Commission and the Treasury Board Secretariat.

Often organizational change requirements are identified within departments and central agencies. Once the need is identified--and as I said earlier, it's driven by a policy need, by an operational need--proposal development can take a variety of forms. Sometimes a proposal requires extensive consultation with stakeholders and Canadians. A good example of that is the consultations happening around the creation of the Canadian Public Health Agency. If the machinery proposal is linked to a policy proposal, as I said before, it would be described and outlined in a memorandum to cabinet and therefore would be the subject of interdepartmental discussions.

Sometimes, as I discussed earlier, they emerge from parliamentary discussions. An example we found was the creation of the National Aboriginal Council on Species at Risk, which actually emerged from the committee consideration of the Species at Risk Act.

Often federal-provincial-territorial discussions are required. Again, an example would be the Canadian Public Health Agency, which has intergovernmental implications.

Finally, when we talk about analysis, that's the kind of analysis that my group in the Privy Council Office performs. It's very much that a proposal gets developed and then our job is to perform what we would call a challenge function--analyze the proposal and ensure that it is in fact grounded in the legislative framework of the department. In other words, they have the powers to perform what's being proposed. We review structural options: what is the right structure for the proposal, that the need has been identified. What is the best way to respond to it in machinery terms? Sometimes our response will be that machinery isn't the answer; policy is actually the answer rather than new machinery. Often it's useful to look at how other jurisdictions have approached the same kind of machinery challenge, and we look at precedents in this area.

À (1010)

Moving to the approval process, it very much depends on the nature of the machinery change. At a minimum, it involves a decision by the Prime Minister, which is sought through a recommendation from the Clerk of the Privy Council and necessary orders in council. Often, as required, as I noted before, it may require cabinet approval and policy and funding approval, because the machinery is actually linked to a policy proposal. Quite often it will also require legislation, and many machinery options or proposals require Treasury Board approval. We can't, through orders in council, move funding around, so if we merged organizations or moved functions from one organization to another, for example, it would require Treasury Board approval to actually move those resources around.

The next page is on implementation. We go through two possible routes for actually implementing the machinery. One, as I mentioned, would be through the introduction of legislation. We need to do that when there are new powers to be granted to the organization by Parliament. In other words, it's not an existing body whose mandate is already established in the statutory framework; it's actually a new body that requires new authorities by Parliament. That then leads to parliamentary approval, royal assent, as I said before, a Treasury Board process. Once that's in place, as you know, parliamentary oversight would then happen through the main estimates and the supplementary estimates process, and also through the annual cycle of reports on priorities and planning and the departmental performance reports.

In other cases, many times we actually don't need legislation to create the new entity; it is created through orders in council. We use the PSRTDA, the Public Service Rearrangement and Transfer of Duties Act. That's the statutory basis for doing the orders in council and making the changes legal. This then, again, requires, as I said before, a Treasury Board process that would lead to parliamentary oversight.

From time to time we actually have a blend of these two tracks. We create the organization through the orders in council under the Public Service Rearrangement and Transfer of Duties Act and then subsequently follow up with statutory legislation. So, for example, in 1993, orders in council were used to create the new Department of Human Resources Development Canada, and subsequently legislation was passed. The same thing will be required for many of the machinery changes that were made in December 2003.

That's a very brief overview of the general process. If I turn to Communication Canada in particular, what I want to do, as is referenced on page 10, but particularly on the flowchart on page 11, is talk about the evolution in the communications function in government, which has grown quite considerably over the last 30 years. This is an area where you see a trend in the machinery: it's been towards consolidation of functions. The functions were spread out in different areas and began to be, over the years, particularly in the late 1990s, focused on improved service to citizens and the notion of single points of access. More and more Canadians can go to one place to get all the information they need about government programs, however they want to access the information: in person, over the phone, and increasingly, of course, through the Internet.

I'll quickly try to walk through the chart on page 11. For example, on the origins of the Canada Information Office, there originally was, in the heritage department portfolio in 1993, a program called the voluntary action program. Its mandate was to promote increased understanding of Canada through the voluntary sector. It was actually in the old Secretary of State department, and when Canadian Heritage was created in 1993, that program moved into Canadian Heritage.

À (1015)

The 1996 Speech from the Throne indicated that the government wanted to help Canadians better understand each other, and the machinery manifestation of that Speech from the Throne commitment was the creation of the Canada Information Office in July 1996 under the Canadian Heritage portfolio. It was based on the voluntary action program. In fact, what happened was the government used the Public Service Rearrangement and Transfer of Duties Act to modify the voluntary action program's terms and conditions as the basis to create the new Canada Information Office. It had a mandate to inform Canadians about the federal system and to promote Canadian unity.

Subsequently, two years later, the CIO, the Canada Information Office, was moved from the Canadian Heritage portfolio to the Public Works portfolio. This is very much linked to this increasing trend that I mentioned earlier to try to consolidate communications activity. It was also linked to the creation of the ad hoc cabinet committee on government communications, as the government was attempting to organizationally become more strategic about the delivery of government communications.

Even though this is about Communication Canada, let me just flag that the branch I'll talk about later, the communications coordination services branch, which is in Public Works, was created about a year before the move of the CIO to the Public Works portfolio.

Moving down to 2000, again, you get another example of the trend towards increased coordination, increased consolidation. CAPORD, the client advisory and public opinion research directorate, in June 2000 was moved to the Canada Information Office, and that moved some public opinion research and the fairs and exhibitions program of the government into the Canada Information Office.

In August 2001, two changes happened. One was that the CCSB--the communications coordination services branch--was brought into the CIO. Within two weeks, although it took effect on September 1, 2001, CIO was renamed and became Communication Canada. It brought together a wide range of government communications activities: the 1-800-O-Canada line, the canada.gc.ca Internet site, sponsorships, advertising, and public opinion research. But an important point about this particular machinery move was that procurement of communications services stayed with Public Works Canada and did not move with Communication Canada. As you can see, the last action on the slide was the decision on December 13, 2003, to disband Communication Canada.

As I said, I'll talk briefly about how departmental units are created because it is not something that PCO and the machinery of government unit deals with. Ministers are accountable for their departments and for their structure. Ministers and deputies determine the internal structure they want to use for their departments. Of course, the management accountability regime has to be consistent with the statutory legislation, such as the Financial Administration Act, and all the regulations and policy that are laid out by the Treasury Board.

Deputy heads are delegated organizational authority up to the EX-3 level, so deputies are able to manage a reorganization as long as it's just up to that level, the EX-3 level. They require Treasury Board approval, and this is usually achieved through a Treasury Board submission, if they want to create or abolish EX-4 or EX-5 positions or change the responsibilities of those positions; if they want to change the number of executives in the organization; and if they want to abolish senior assistant deputy minister or ADM positions, or even change their responsibilities and classifications.

À (1020)

Ministers and deputies largely have an internal ability to reorganize as they wish until they hit this threshold of changes at the EX-4 to EX-5 level, in which case they require Treasury Board approval.

I will speak briefly. The deputy of Public Works may want to speak more to this.

The branch was created within the department in 1997. It was part of an internal reorganization that brought together another unit, which was called the advertising and public opinion research sector, and some responsibilities that had been handled by the Canada Communication Group, which had been privatized. This slide gives you some examples of the kinds of functions that branch performed as a result of bringing those together.

Turning to how programs are created, again, the development of programs is done by departments. I can speak to two different kinds of programs.

You can think of a program that flows from a policy decision, that reflects a policy decision. It requires a memorandum to cabinet, because the policy itself has to get approved. Once the policy is approved and the program is funded, then the department and the minister take the mechanism to Treasury Board to get approval of issues.

You can have cases of programs being created that are not really driven from policy; they are reorganizations of existing programs. There isn't any new funding. In other words, the minister did not have to go to cabinet to get a policy approval, didn't have to go to cabinet to get funding approval, but it still requires Treasury Board approval to move the resources around. As I mentioned earlier, we can't do that through an order in council, so it gets done through a Treasury Board approach.

If I can bring you back to page 11, if we think about the sponsorship program, it's important to note, as the Auditor General said last week, it actually wasn't a program--what we consider a program--until December 2002. That's what happened toward the end of this chart. Communication Canada actually proposed the program. Until then it was part of a broad range of communications activities. Originally, going back to 1996-97, it was handled by what I talked about earlier, a unit called the advertising and public opinion research sector. This was a unit in Public Works that in 1997 merged and was moved into the CCSB, so when CCSB was created in 1997, the sponsorship activity moved into CCSB. Then, as you can see from the chart, in August 2001, when CCSB itself moved, the sponsorship activity moved with it to the CIO. Up until December 2002, when the program was created, it was part of a cluster of communication activities that were handled by those three: first the sector, then the branch, and then the CIO.

Mr. Chair, those are my comments on the machinery. If you agree, I'd like to conclude with some comments on cabinet confidences, because I know that issue was discussed on Tuesday.

À (1025)

The Chair: Okay.

Ms. Kathy O'Hara: I'd like to essentially formally inform the committee that the Clerk of the Privy Council has spoken with both Prime Minister Martin and former Prime Minister Chrétien. Both the Prime Minister and Mr. Chrétien have indicated that they will consent to the disclosure of existing cabinet confidences from their respective ministries, from the creation of the Canada Information Office in July 1996 onwards, in response to requests made by this committee in connection with its consideration of the Auditor General's government-wide audit of sponsorship, advertising, and public opinion research.

Before cabinet confidences can be disclosed to this committee, an order in council must be issued to authorize this disclosure. This is currently being prepared and it will be issued in the very near future. We're optimistic that it will be passed today so that we will have the authority to start disclosing cabinet confidences and we'll be in a position to receive the committee's requests for the documents they would like to review.

I just want to flag--and this has come up earlier this morning--that our sense is that hopefully many of the documents the committee will be asking for are already translated, are already in a bilingual format, so we'll be able to transmit those very quickly. Some likely were written in either French or English and obviously would have to be translated. Mr. Chair, we're in your hands as to whether the committee would want us to have the documents translated first and then sent to the committee or whether we would send them, when you ask for them, in the language they've been written, with the translation to follow as quickly as we can.

Thank you, Mr. Chair.

À (1030)

The Chair: Thank you very much, Ms. O'Hara. If it is your desire to table a document in one official language, perhaps you can tell us how big that document is, how long you would expect it to take to translate, or if you would like to get the permission of the committee to use one language instead of two.

On your report, I thought we were going to receive the types of documents that were required in order to get these approvals rather than just the hoops that the programs and decisions have to go through, which you have laid out for us this morning. But you've given us absolutely no indication of what information you require in order for these decisions to be made, such as business plans, business cases, strategic plans, budgets that are mandatory in order for decisions to be made. Perhaps you can provide that information to us by Tuesday.

Ms. Kathy O'Hara: I can answer the question now or on Tuesday, if you like.

The Chair: Okay, you can answer it now.

Ms. Kathy O'Hara: Again, I'll have to speak from the Privy Council Office perspective and very much focus on the creation of a unit as distinct from the subsequent steps where I think business plans are in fact part of the process. When we receive a proposal--and that was the second stage of our process--generally we get an identification of why there is a gap in the existing machinery. In other words, there's a new policy proposal or a new program that a department is proposing, or a new function that is to be performed, and the case has to be made that there isn't existing machinery that can perform that function. That's the first test.

The Chair: That case is made in writing?

Ms. Kathy O'Hara: It's sometimes in a combination of notes that we would get from the department. Often it happens through discussions between the machinery of government staff and the staff of the department. If it is a proposal that's linked to a policy proposal, there's a memorandum to the cabinet that would explain that. It would be a combination of sometimes in writing, sometimes through discussion that it becomes clear that there's a gap in the machinery that needs to be filled. So that's the first test. It may not always seem that way, but our initial reaction is to push back new machinery because the ideal would be to do it within existing machinery.

The Chair: So what you're saying is, there's no actual requirement that there be, in writing, a business plan, a budget, a business case or anything like that?

Ms. Kathy O'Hara: No, not to create the unit. I think what you will find when you talk to my colleague from the Treasury Board later is that when you get to the Treasury Board approval stage you get into those kinds of documents, but the actual creation of the unit doesn't involve the preparation of a business plan.

The Chair: Well, we may have some questions on that.

Committee, I'm somewhat in your hands. As I said, we have four presenters available. We have the Auditor General, and we also have the Treasury Board and the Department of Public Works. We've heard from the Privy Council Office.

My question is, do we want to cut off the presentations now and have some questions, or do we want to have the four presenters first?

Mr. Toews.

Mr. Vic Toews: I think we're keeping the Auditor General and her staff waiting here. They've come out. They need to be questioned at this time. If there are other questions that might arise from what we're examining, we can call them later. I don't think it's appropriate to keep the Auditor General and her staff waiting in this fashion. We should have them back and hear from them so that panel members can question her and her staff now.

The Chair: Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: I don't quite share that opinion, because we have all the actors before us. We have the person who denounced the situation and we have three people who are trying to explain how the system worked. The table is big enough, and I think that we are in a position to ask questions. Therefore, I would like to ask one of the panelists.

Furthermore, Mr. Chairman, if I understood correctly, she has documents, but they're not available in both official languages. Is that correct?

[English]

The Chair: No, the documents have not been tabled. It may be that when we request documents they may be in one language and not in two, but I've asked that if it's a huge document--

[Translation]

Mr. Odina Desrochers: It's always been, Mr. Chairman, that...

[English]

The Chair: Just a minute. I've asked that if it's a huge document they give us a reason why they do not feel they can get it translated in a timely fashion. It is the desire and the intention, and normally the rule, that everything tabled is in two official languages. I'm sure the Privy Council Office will do everything they can to abide by that. We'll only be able to waive it if the committee agrees.

Mr. Desrochers.

À (1035)

[Translation]

Mr. Odina Desrochers: Mr. Chairman, you know that I insist on having all documents in both languages, but since we want the information as soon as possible...

[English]

The Chair: No, no. We're not stopping--

[Translation]

Mr. Odina Desrochers: Some people will create unnecessary delays, Mr. Chairman, by refusing to have the document translated.

[English]

The Chair: That is not the issue I'm asking you about at this point in time, Mr. Desrochers. I'm asking this: do we cut off the presentations after two, or do you want to continue and have four presentations?

[Translation]

Mr. Odina Desrochers: I prefer to continue.

[English]

The Chair: Remember, if we have only two, I expect the Auditor General will be coming to all the meetings we have, as she normally does. Therefore, I do not want to just say the time has expired, that's the end of the questions. If we feel the witnesses have to come back, they will be back.

So we have to be methodical. We have to be prudent. We have to proceed carefully.

Is it the desire of the committee that we cut off the presentations at this point in time at two?

Mr. Tonks.

Mr. Alan Tonks (York South—Weston, Lib.): Mr. Chairman, I have been impressed by the flow that we are starting to get in terms of the issues that are being defined. We might want to question the next deputant who's coming in on whether the processes were followed with respect to the EX-4s and the level of the creation of that department. I would suggest that we at least hear the next deputant, because what we have heard naturally follows.

That would be my feeling.

The Chair: I think it's the wish of the committee, and my desire too. I think we have a lot of information on the table that we need to digest at this point in time. As we move forward, after we see how this program came out of cabinet, then we want to see how the public works department handled it and how the Treasury Board supervised it.

Is it agreed that we cut off the presenters? Therefore we can excuse Public Works and the Treasury Board, because they will not be called today.

Some hon. members: No.

The Chair: No, it is not agreed. So we'll just keep them around.

Okay. At this point in time we're going to move to questions. I would ask the Auditor General to come back to the table and Ms. O'Hara to remain, but I'd also ask the Treasury Board and the Department of Public Works to remain in the room. They may be called later. Thank you.

We have the normal list here. The first round is eight minutes. We'll start with Mr. Forseth, followed by Mr. Desrochers, Mr. Jordan, Ms. Wasylycia-Leis, then Mr. Toews, Madam Jennings, and so on. Mr. Murphy wants his name on the list.

We'll have a short break around 11 a.m. to 11:15 a.m.

Mr. Forseth, you start with the first eight minutes.

Mr. Paul Forseth: Thank you.

I'd like to talk about the CCSB and its predecessor. The Auditor General essentially says this unit broke all the rules. Specifically, they said “We noted the sponsorship program operated with no guidelines from its inception until 1997”. I'll have some discussion about how it operated afterwards, where the Auditor General says they did not audit, but it says “resulting in an ad hoc selection, approval of projects”, and so on.

I'll ask Kathy O'Hara if she had any knowledge about the level of approval for CCSB and its predecessor. Did they have Treasury Board approval or was this all a creation inside a department?

We know how badly it operated as far as the required rules go, but it looks to me like it was not a mistake. It was the design—a design for plausible deniability, a design to cut corners and to not really let anybody know what's going on, a design only to get something done pretty quickly.

I just want to know how much approval was given. Through the process you've described of how CCSB was created, it looks like the shortcuts were taken not by mistake but by design.

À (1040)

Ms. Kathy O'Hara: Again, this is an issue where my colleague from Treasury Board is better placed to speak to this, and also my colleague from Public Works Canada.

As I said in my presentation, in the machinery of government in the Privy Council Office, we don't deal with the approval processes for branches. That is not part of my remit. My remit is the CIO, the creation of the CIO, and subsequently Communication Canada, but not the branch itself.

Mr. Paul Forseth: Okay. You're saying the creation of CCSB and its predecessor was totally an internal creature of Public Works and Government Services.

Ms. Kathy O'Hara: Yes, that's right.

Mr. Paul Forseth: If we look for accountability, at that time it would have been the minister responsible who was in charge of his department, so to speak.

Ms. Kathy O'Hara: That's right. It was an internal organizational issue.

Mr. Paul Forseth: Okay.

I just want to refer to the Auditor General. She talked about the later part of the program that was not audited. It was the more recent program.

I recall attending a meeting in Vancouver about the new so-called program. They were actually going to tell MPs when some local spending was going to go on. I received at least seven or eight of these e-mails, asking me if I had any concern about such and such a program. I answered every one of the e-mails, asking specifically how much it would be, what would be the nature of the program, would it be a sign, or a booth with summer students, whatever. I never got an answer to any one of my e-mails on that program. I wrote it up and put it on the desk of the minister. I never got an answer from the minister. I put that on his desk in the House of Commons.

I am suggesting that the last program should also be audited, because it appeared to be no better in operation than the area the Auditor General did audit.

But can you tell us, Kathy O'Hara, since the program has been cancelled, how is the government communicating? Since you look at the overall operation of creation and the elimination of programs, what's going on to replace this program? How are we going to carry on so that we're not going to get into another big boondoggle?

Ms. Kathy O'Hara: Orders in council have just recently been approved to deal with the disbanding of Communication Canada. Many of the functions in fact will return to Public Works Canada, things like the 1-800 line, canada.gc.ca, and two or three smaller functions.

Let me say, getting back to an earlier point I made about coordination and coherence, that since government on-line was moved to Public Works, the hope is that there will be synergies by putting those sets of activities in the same department. To strengthen strategic management of the function, two or three smaller units will be transferred to the Privy Council Office. These orders in council take effect on April 1.

Mr. Paul Forseth: It sounds to me like the CCSB and its predecessor was a rogue unit that was created by design to have plausible deniability. It's like creating a plumbers' unit to go out and fix the leak of the ship of state in Quebec...to do it quickly and spread the money around where two or three individuals felt they should do so, without program justification, with no real plans, as described, and obviously for dubious results. And it appears the only result is that we've insulted a lot of Quebeckers in the core effort by flying the flag or with the one-upmanship game: if there was a Quebec flag, well, we had to put a Canada flag up beside it.

So the whole concept in the first place appeared to be very dubious, and then all the activities around it appear not to have followed any government structure or plan, as you've described.

Does the PCO have any rules about the internal creation of a subunit within a ministry? Are there any general guidelines about that? That looks like what happened here with CCSB.

À (1045)

Ms. Kathy O'Hara: Just the requirements I discussed in my presentation, which is that when we create the departmental unit, obviously the orders in council are passed that require the organization to fall under, for example, the Financial Administration Act, the Public Service Employment Act, the Public Service Staff Relations Act--all of those pieces of legislation the departmental unit must abide by. So obviously the same thing would apply to units within that unit.

Mr. Paul Forseth: But this plumbers' unit never followed any of that, and when the Auditor General asked them about it they said that's the way they operated. That was their authority. They didn't have to follow the Financial Administration Act. That was their justification. They said “That was our mode of operation”.

So I say it wasn't by mistake--when the Auditor General outlines all the shortcomings--it was the design of the program to circumvent Parliament, to circumvent all the rules you say are in place.

Ms. Kathy O'Hara: Again, what we do when we create the department is pass orders in council that require the department to abide by all that legislation, and if units within it aren't abiding by it, then we have a problem, as the Auditor General has pointed out.

Mr. Paul Forseth: Okay. My time's up.

The Chair: Mr. Tonks.

Mr. Alan Tonks: Mr. Chairman, on a point of order, the line of questioning Mr. Forseth has embarked upon really takes us to the point I was talking about just prior, that you really are talking about understanding whether Treasury Board approvals were given or not and whether there was a deliberate attempt to circumvent that in the creation of this unit.

That's why, Mr. Chairman, we are asking questions of the wrong.... In my opinion, it should be Treasury Board. We should have had them on to answer those questions.

The Chair: They will come on, Mr. Tonks.

On your point of order, I think it's important for all members to know and understand how the machinery of cabinet works. I'm already concerned that we have testimony suggesting that things are done verbally, decisions are made ad hoc, and perhaps an order in council emanates from that. But the order in council may not reflect the discussion that was done verbally, and we're running the government on the back of a cigarette package. That's not good enough. We surely would have to have, I would have thought, the documentation on the table to substantiate an order in council. That was the type of information I was looking for.

Mr. Alan Tonks: Mr. Chairman, when I raise a point of order, I don't think the editorial comment you just gave as chairman is objective, nor does it contribute.

The Chair: The point of order, Mr. Tonks--

Mr. Alan Tonks: It was a matter of process that I raised. It didn't need that kind of comment.

The Chair: We have the issue that we have to understand how this program got up and running. That's what we're trying to do. We have to be slow. We have to be methodical. We have to hear from the Treasury Board--and we will hear from the Treasury Board--

Mr. Alan Tonks: With great respect, Mr. Chairman, if you do not have a complete process, then what we are doing is fishing for answers, as opposed to directly asking the people who are accountable to give those answers.

The Chair: We will get the Treasury Board.

Mr. Alan Tonks: Well, I would suggest we do that.

The Chair: The committee has made a decision that we will hear from them next.

Mr. Keddy and Ms. Wasylycia-Leis.

Mr. Gerald Keddy: With respect to what Mr. Tonks is saying, I think the job and the role of committee and committee members is to have the opportunity to question whichever witnesses come forth, and if there is a witness here, regardless of whether Mr. Tonks thinks she's the most important witness in the room, every member at the table deserves an opportunity to ask questions if they have questions for that witness.

The Chair: That's why, unfortunately, it's going to be a fairly slow process, because we want to ask all the questions to the witnesses before us, and we're proceeding that way.

Mr. Alan Tonks: Mr. Chair, I thought we were just trying to expedite, not take a slow process.

The Chair: Well, we're trying to--

Mr. Alan Tonks: I'll bow to your direction on that one then and the wisdom of the opposite side.

The Chair: There's an old phrase: more haste, less speed. We'll try to go down the middle on that one.

Are there any further points on this point of order?

We're going to move now to Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman, Ms. Fraser, Ms. O'Hara and Mr. Minto.

Ms. Fraser, the Privy Council Office has just made a nice presentation. In your opinion, in this whole sponsorship affair which implicates Communication Canada, were the rules respected or were they basically ignored?

À (1050)

Ms. Sheila Fraser: Mr. Chairman, the report says that we did not find a frame of reference for the program. In addition, based on the documentation we consulted, we noted that the program itself, as a program, was not created according to the normal process.

Mr. Odina Desrochers: Ms. O'Hara, as far as you know and according to everything you have read in the Auditor General's report, did the program's implementation totally contravene your own guidelines?

[English]

Ms. Kathy O'Hara: They wouldn't be my directives, just to clarify. They wouldn't be the Privy Council Office directives. I think the issues that are at play are not ours.

I think it's an interesting issue the Auditor General raises: we keep calling this a program when it actually wasn't a program.

[Translation]

Mr. Odina Desrochers: But what do you think about it?

[English]

Ms. Kathy O'Hara: In other words, from 1996-97 it was part of a broad range of communications activities in Public Works Canada. There was a framework for the broad activities, but there wasn't a particular framework for these particular activities.

As I understand it--and again this is the disadvantage of my not being from the department--they used a number of communications vehicles to achieve the mandate, and sponsorship activities was one of those vehicles.

[Translation]

Mr. Odina Desrochers: But Ms. O'Hara, there are a number of references to cabinet decisions and Treasury Board as well. There must have been some structure or delegated signing authority. Given what you have learned from the Auditor General's report, and given your normal procedures, are you not in a position to say whether there was a lack of consistency somewhere? According to your records, who signed off on this?

[English]

Ms. Kathy O'Hara: Well, there would have been Treasury Board submissions signed by the minister that would have dealt with the funding for sponsorship, for example.

I think what's emerging is that there aren't...and we'll be producing these documents.... The submissions were broader; they--

[Translation]

Mr. Odina Desrochers: You say that these submissions were approved by Treasury Board. Did you see Minister Robillard's signature on them?

[English]

Ms. Kathy O'Hara: What happens with Treasury Board discussions is that the Treasury Board submission is signed by the minister who's responsible for the program--that's the proposal. The decision that comes out of a Treasury Board meeting is actually signed by the assistant secretary of the relevant sector in the Treasury Board itself. So the signature of the President of the Treasury Board doesn't appear.

[Translation]

Mr. Odina Desrochers: But she approved the submissions, even if she did not sign them.

[English]

Ms. Kathy O'Hara: That's right. The Treasury Board committee would have approved the Treasury Board submission, but the way the Treasury Board communicates decisions is by a Treasury Board decision signed by the relevant assistant secretary.

[Translation]

Mr. Odina Desrochers: So she had been informed about the program.

[English]

Ms. Kathy O'Hara: All Treasury Board ministers would have seen the relevant Treasury Board submissions, if that's your question.

[Translation]

Mr. Odina Desrochers: Thank you.

Ms. Fraser, you said that you encountered some problems with Canada Post and VIA Rail. I would like to know whether you were provided with information on delegation of signing authority, such as who would be required to approve amounts of $100,000, $200,000 or $500,000.

Ms. Sheila Fraser: Yes, Mr. Chairman. From each crown corporation, we obtained the delegation of signing authority structure, and audited the transactions concerned in light of those.

Mr. Odina Desrochers: Ms. Fraser, who at VIA Rail and Canada Post would have signing authority for amounts like those that are mentioned, $400,000 and $500,000? Would it be the president?

Ms. Sheila Fraser: Mr. Chairman, I would ask the committee to put those questions to the crown corporations concerned.

À (1055)

Mr. Odina Desrochers: Does that mean you are not in a position to disclose the list of those who have signing authority in those crown corporations?

Ms. Sheila Fraser: That is correct. I would prefer that you obtain that information directly from the crown corporations.

Mr. Odina Desrochers: Thank you, Mr. Chairman. Thank you, Ms. Fraser.

[English]

The Chair: On that issue, Monsieur Desrochers, do you wish to ask the committee to request that information from the crown corporations?

[Translation]

Mr. Odina Desrochers: Yes, because this morning we received two letters. The first was from Canada Post, and unfortunately in English only. I believe that Mr. André Ouellet, who is a francophone, could have made the effort to write the letter in both languages. We also received a letter from Canada Ports Corporation. Mr. Pelletier said he was eager to testify before us.

Therefore, Mr. Chairman, I believe it would be useful for the committee to have the list of people with signing authority in each of the crown corporations concerned by our current study. This would help the committee see its way more clearly.

[English]

The Chair: There's a motion. Before there's any debate on the motion we need consent to move the motion.

Some hon. members: Agreed.

The Chair: You've heard the terms of the motion. Do you agree with the motion?

Some hon. members: Agreed.

The Chair: That's agreed, so that's an order of the committee.

Merci beaucoup, Monsieur Desrochers.

Mr. Jordan is next, please, for eight minutes.

Hon. Joe Jordan: Thank you, Mr. Chair.

Madam Fraser, I want to touch on an issue you raised in one of the media interviews after the tabling of the report, and that's the issue of perspective. I want to preface my comments now by saying that when I talk about perspective, I'm at risk of being perceived as trying to minimize this. I want to say up front—and I think it's one of the things the committee is struggling with—that we are going to have to digest a huge amount of material to even get in the position to ask intelligent questions.

The committee has agreed to extra meetings, so I think we're going to get down that road. But I appreciate the material you've provided and the detail your staff went into on the flowcharts. I think a picture is worth a thousand words, and those were very useful.

I'm going to remind you of a quote from Sun Media on October 5. It said:

Fraser cautions that not everything new she learns is bad news for taxpayers, that the vast majority of public servants are honest, hardworking and dedicated to what they do. “The fact that there is an (independent) auditor general who can make these criticisms of government is a sign of how healthy our democratic society is.”

Is that a quote you agree you made?

Ms. Sheila Fraser: I cannot confirm it, but I agree fully with that comment.

Hon. Joe Jordan: Would it be fair to say that to complete that loop you make criticisms and recommendations, but really the rubber hits the road in terms of what the government does with that?

When you originally put your report together you were quoted in the media as saying you were angry. When you tabled it in February you said you reread it and you were angry again.

Do you have an opinion on the appropriateness of the government's response to your recommendations? Has the government acted appropriately in their steps? I'm not asking you to comment on the outcome, but at this stage can you think of anything else the government could do to move this agenda forward?

Ms. Sheila Fraser: The comments that were made were correct. I would say the transactions we are talking about are few. This is not pervasive throughout government. But it does not mean that because there are few of these they are not deeply disturbing, very troubling. The transactions we showed this morning should be of concern to everyone, quite frankly. There should not be one transaction like this.

Hon. Joe Jordan: I agree. But what about the government's response?

Ms. Sheila Fraser: We have obviously expressed the view that we take this extremely seriously, and I believe the government has responded as well. The Prime Minister certainly indicated that he is taking this seriously. I think the courses of action that have been announced by government indicate that sentiment.

I think it will be up to the committee to determine if anything additional needs to be done.

Hon. Joe Jordan: Madam Fraser, I am going to refer to an article from the journal, Critical Perspectives on Accounting. Now, I will say that this journal obviously doesn't sit on the newsstand beside the AutoTrader or Golf Digest, because I've never heard of it before. It is a peer-reviewed journal.

Again, I want to be very careful, because my view is that your office—not now, but at some point, because it is part of what we are doing here—will have to look at resources, as you said yesterday, and in terms of mandate, because it is becoming clear to me that for whatever reason crown corporations are not covered by the Auditor General. I don't buy the arguments I've heard suggesting that they need to be separate. I think this particular situation suggests to me that they need to be under that umbrella. This isn't a criticism of your office; it is a criticism of how much attention this gets. The room full of people here today is a good thing, because it is reconnecting people to how the government spends money.

This particular article is called, “'Biggest Scandal in Canadian History': HRDC Audit Starts Probity War.” Essentially, what it is saying is that a soft audit of a few programs in HRDC, and some phraseology around that, caused people—not you—to extrapolate and come up with this billion dollar boondoggle, based on that soft data. I will quote from this document, and I will table it for the committee if it wants a copy. This is a direct quote from this peer-reviewed journal. It says: “It will be recalled that the review of some 17,000 individual awards of grants and contributions found that about $6,500 was still owing to the government.” That is not $1 billion—it says $6,500. It continues: “Overall, the legacy to the taxpayer of the audit scandal is that new procedures for management control will add about $50 million annually to HRDC's costs....”

I don't want to present this out of context. What I want to say, though, is that the Auditor General's office, through a soft audit, starts a snowball down the mountain. The Auditor General's office got out of that boondoggle, when you said at committee—I'm not sure it was you, as I don't think you were there at the time—that the minister's response to the concerns was it was given tacit approval, and that was the end of it. Nobody ever went back and closed this loop, so out there in the public domain is this billion dollar boondoggle. I'll tell you, the thing that concerns me is that we have a process in which we spent $50 million to save $6,500. I'm just hoping we don't find ourselves in a program like that today.

The numbers that are being thrown around now are—

An hon. member: Not with Joe's help. Not the statement—

Á (1100)

Hon. Joe Jordan: Mr. Chair.

The Chair: Mr. Jordan has the floor. Would you please respect Mr. Jordan having the floor?

Hon. Joe Jordan: What I am saying is that the numbers that are being thrown around here are serious, and I agree with you. The thing that strikes me most here is the design elements to this thing, which makes it look like these weren't mistakes made randomly. This thing had forethought; people planned it. That's what bothers me.

But I will draw attention to an article by one of your provincial auditors. It says here that the auditor in New Brunswick said New Brunswick reported a $1 million surplus for 2002-2003, and the auditor in New Brunswick said no, it is actually a $104.9 million deficit.

I will close with this, to come back to a sense of perspective. The HRDC scandal—and if we accept the worst-case scenario here of $100 million, those two scandals are still less than the money involved in this one. So while we are dealing with taxpayers' money, and while we have to take that seriously, which the government is, I think it is important in a politically charged environment to keep a sense of perspective in terms of the scope and scale of this thing.

I agree with you that one of these transactions is disturbing; it is very clear that people intentionally broke the law. I am not saying they were bureaucrats. We will find that out, but it has yet to be determined.

I just wanted to make those comments.

The Chair: Thank you, Mr. Jordan.

Ms. Fraser, you wanted to respond.

Ms. Sheila Fraser: Mr. Chair, I think there are just some points of information and perhaps explanation that I can give.

First of all, on the issue of crown corporations, we do financial audits and special examinations of many crown corporations; I believe we do about 40 crown corporations. So we are not, contrary to what may have been said, excluded from crowns; on the contrary, a decision is made crown by crown.

On the question of the article that was raised, I'm not sure, but I think I may know the article. There are some people who disagree quite vehemently—and I suspect the author is one—that we should have an audit beyond auditing the financial statements in the public accounts of the Government of Canada. The mandate that was given to us to do the kinds of audits we are presenting was a mandate given to us by Parliament in 1977. Obviously, if Parliament wants to change our mandate, we will respect whatever Parliament does.

But I take exception to the question of soft audits. There was a very rigorous audit methodology applied here, and I can tell you that my team has checked every transaction in enormous detail. To start talking about soft audits, quite frankly, I think is a bit much.

On the HRDC issue, I would add that we did a follow-up audit in the fall of 2001. We reviewed the actions the department had taken in response to the earlier audit. We concluded they were making satisfactory progress, but we too raised a concern about the controls and the amount of paperwork being requested and suggested that perhaps the department had gone a little too far the other way.

So we had raised that issue. I think we may even have raised it in the initial audit, but we certainly raised it in the 2001 audit.

On the question of New Brunswick, I obviously can't comment. That is an opinion on the financial statements of the government. I think it is quite different from the issues we are dealing with today.

Á (1105)

The Chair: Thank you very much, Ms. Fraser.

Ms. Wasylycia-Leis, please. You have eight minutes.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

First let me put on the record, Mr. Chairperson, that I think Canadians are pleased that the Auditor General has been so frank and direct about the scandal we're dealing with, and pleased, I'm sure, that she has revealed the extent of this scandal by using such words as “shocked”. I don't think anyone should have to apologize, and I resent the kind of subtle attack that is taking place here today by my Liberal colleague.

I think that in fact this does not sound like members of the government who are willing to cooperate fully to get to the bottom of the scandal. It sounds more like a court of law, where the government is on the defensive and trying to attack the Auditor General in various ways. I resent that, Mr. Chairperson. I hope it's not indicative of how Liberal members across the way are going to treat the serious issues.

To come to my questions, I appreciate that we need to go to the government and to crown corporations for the specific names of individuals referenced in your report. I'm looking for some direction from you—and perhaps I should look elsewhere—about how we get at the names of MPs, or at least an MP mentioned in your report. I'm referring to section 3.61 and the reference to an MP who intervened in a particular case. Is that a name you can reveal, or should we in fact be raising this in House proceedings or in the House directly?

Ms. Sheila Fraser: Mr. Chair, my suggestion would be to ask the representatives of Public Works who will be appearing. They will be able to tell you if they are able to provide that information, or how to obtain it.

Ms. Judy Wasylycia-Leis: I suppose in the interests of goodwill it might be reasonable to expect that the MP might volunteer his or her name in this context.

Second, Mr. Chair, I would like to ask the Auditor General about the issue of the five crown corporations and agencies that are referenced in the report. Does the fact that you've listed the five mean you've ruled out any other crown corporations and agencies, that you've checked thoroughly and there's no other evidence to be dealt with or any other questions pertaining to crown corporations and agencies?

Ms. Sheila Fraser: Mr. Chair, we audited the transactions of several crown corporations. I'm just trying to find where we actually list them. I believe we did 10 or more. In paragraph 30 of chapter 3, we note that we did all transactions of payments from CCSB to the Business Development Bank, Canada Mortgage and Housing, the Canadian Tourism Commission, the Old Port, the National Arts Centre, the National Capital Commission, and VIA Rail. We also, as we mention in paragraph 31, audited transactions of Canada Lands, Park Downsview, and the Royal Canadian Mint.

Á (1110)

Ms. Judy Wasylycia-Leis: In other words, you did an extensive investigation of crown corporations and agencies and determined there were five major ones involving real questions that had to be addressed.

Ms. Sheila Fraser: As I mentioned earlier, we took the transactions that were at CCSB. We started from Public Works and then worked out into the crowns. If we have not mentioned a crown or a case, it indicates that we had no issues with the way the transactions were done.

Ms. Judy Wasylycia-Leis: If you did in fact pursue the line from CCSB to crown corporations and came up with five problem areas, presumably then the others were without problems.

Ms. Sheila Fraser: For the transactions we looked at, they were without a problem.

Ms. Judy Wasylycia-Leis: With respect to all these middle companies—the middlemen, the ad agencies, the PR companies—did your research include talking to ad agencies and inquiring from them about their role in this whole process?

Ms. Sheila Fraser: We did meet with the ad agencies, or representatives of them. I would ask Mr. Minto to give you more detail on what we did with them.

Mr. Shahid Minto: Thank you, Mr. Chairman. As you know, our mandate does not extend beyond the government. We followed the dollars. In this case, at the end of the audit, when the audit was completed, because these few parties were involved, we went to them for what we call third-party clearance. We informed them of what we were saying about the thing. I have to say that we did not learn anything new in our discussions with them.

Ms. Judy Wasylycia-Leis: I appreciate that.

Based on that, Mr. Chairperson, I would assume you would want to add to our list of possible witnesses representatives from these ad agencies.

I have a question pertaining to what happened after your 2002 audit and then the announcement of a reformulated program. It's similar to the question asked by my Conservative colleague.

My sense of the revamped program is that all the government was doing was protecting its rear end. They were turning to MPs with these reams of recommendations for sponsorships, just wanting a blessing so that they could proceed in the same old way.

Perhaps other fundamental changes took place, but I sure didn't get a feeling of confidence based on that approach. My question is, will you at some point do an audit of the program between December 2002 to the point when it was eliminated or concluded?

Ms. Sheila Fraser: As I mentioned earlier, we did not audit that program. I will certainly consider the request; I don't know that it will be done quickly. But we will, in all likelihood, come back at some point in the future to do a follow-up on certain of the issues we've raised—for instance, on advertising or others—to see that corrective action has been taken. We will certainly consider the other.

Ms. Judy Wasylycia-Leis: My last question—I know my time must be almost over—is to Ms. O'Hara. You talked a lot about the origins of programs, which happen sometimes through oral discussions and exchanges between staff. Do you have any minutes of any oral discussions that took place around the whole transformation from the Canada Information Office to Canada communications centre—or office, or whatever—and is there anything you could table with the committee pertaining to discussions on that whole matter?

Ms. Kathy O'Hara: On the first point, let me be clear. I talked about departments being created, not programs. I don't want to give the impression that it's all done orally. There is a lot of written material. But I just want to make the point that there are discussions that happen, some of which are reflected in documents but not all. But on programs themselves, there is documentation on that.

With respect to the CIO, the movement to Communication Canada, that was an organizational move that required an order in council. So there's all the documentation we have on the analysis of the move, the request for the move, the approval of the move, and then the subsequent orders in council to achieve that, all of which, if the committee requests, we can provide.

Á (1115)

Ms. Judy Wasylycia-Leis: I would move that, if we need to, or just request that we do that.

Ms. Kathy O'Hara: Maybe I could clarify on the English-French issue that I think the vast majority of what we have will already be bilingual. For example, when you ask for memoranda to cabinet or records of decision, all that will be bilingual. There are briefing notes that aren't.

The Chair: We'll deal with that. We'll deal with the exception, if we have to deal with the exception. We expect that the bulk of it will be in both languages. Thank you very much.

We're now moving on to round two, which is four minutes.

Mr. Toews, please.

Mr. Vic Toews: Thank you very much.

I appreciate the Auditor General making time to come here today.

I want to talk a little bit about the comment my colleague from the Liberals, Mr. Jordan, made in terms of perspective. The perspective that I see, and that most Canadians see, I think echoes your words, that there was a deliberate misleading of Parliament. None of the communication agencies were selected through a proper selection process. There was questionable value of sponsorship. One comment made by your colleague, Mr. Minto, was, well, other than the value of the postage stamp, we didn't see much value. There was no contract. There was no written agreement. Goods received by Canada Post on behalf of the government were in fact not received. There was no business case for participation in an event, no post-event analysis. There was non-compliance with established policy. Essentially, there was no value.

Then I look at the Canada Post sponsorship program here, the document that has been referred to us, and I look at some of the money flow, specifically the money flow from CCSB to Lafleur and Media/IDA Vision--check all, an amount of $600,000 to Lafleur and Media/IDA Vision. They take their cut of that, presumably for no value received to anyone. It goes on to Canada Post--$521,000, down from $600,000. Then, interestingly enough, who does it go back to? It goes back to Lafleur and some other organization.

I find this astounding. Looking at this, if there's no value added for the money received, the skimming off of $80,000-plus--did you ask anyone why there would be this circuitous route to Lafleur, to Canada Post, and then back to Lafleur? It seems to me just to be laundering money.

Ms. Sheila Fraser: Mr. Chair, I'd just like to make the point on the first question that I think these are deeply disturbing because these transactions are so unusual in government. This is really not the way government works, and that is what makes them so disturbing.

We did try to understand the “why”--why money would have been moved this way and transferred through these agencies. We found no plausible or reasonable explanation for it, and we came to the conclusion that it would appear that the transactions were designed to hide the true source of the funds and to pay commissions.

Mr. Vic Toews: Excuse me, the transactions were designed....

Ms. Sheila Fraser: They appeared to be designed to hide the true source of the funds--rather than the communications branch, CCSB, just dealing directly with a producer or directly with an event, or into a context like this, the money would flow through this circuitous route and through crown corporations. We can't understand that, quite frankly.

Á (1120)

Mr. Vic Toews: Speaking as a former prosecutor...when you talk about making a design to obscure the origin of funds, you're talking about money laundering. That's what we used to talk about when we talked about these kinds of things. Isn't that the sort of street language we're talking about?

Ms. Sheila Fraser: I'll leave those terms up to you, sir.

Mr. Vic Toews: Thank you.

The Chair: Thank you very much, Mr. Toews.

Now we'll go to Madam Jennings, please, for four minutes.

Mrs. Marlene Jennings: Thank you, Mr. Chair. Four minutes...you know I need much more than that.

The Chair: We all need much more, Madam Jennings.

Mrs. Marlene Jennings: Yes.

Thank you very much, Mrs. Fraser and your colleagues, for the presentation you gave. I really do think it has clarified, in imagery, what happened and who are the parties involved in what happened.

Ms. O'Hara, I thank you for explaining the machinery of government. You say the sponsorship was not a program until 2002, and I assume that at that point there was a memorandum in place, prepared by the Minister of Public Works, to justify and identify the need, and that there was an analysis prepared in order to demonstrate the need for these sponsorship moneys to be put into an actual program. So one would expect that there would be cabinet documents directly relating to that, authorizations from the deputy minister to the minister, from the minister to cabinet, minutes of discussion of the memorandum, and then a decision to authorize or not. Am I right?

Ms. Kathy O'Hara: Yes. My understanding in this case is that it was done through a Treasury Board submission because there was no new policy. So I just want to clarify that--

Mrs. Marlene Jennings: So it was Treasury Board.

Ms. Kathy O'Hara: Yes. There isn't a memorandum to cabinet.

Mrs. Marlene Jennings: That's fine. However, prior to 2002, according to what we read in the Auditor General's report, it operated as a branch. It's called--I have the name here--CCSB, which is the communications coordination services branch. I think that's the name. Is that correct?

Ms. Kathy O'Hara: That's right.

Mrs. Marlene Jennings: When one creates a branch, I assume there is an analysis. There are moneys that have been approved--$40 million a year. There has been a decision that the $40 million will be administered by a particular department--in this case, Public Works and Government Services Canada. At some point, within that department, there is someone who says that money will be administered by this branch, which already exists and is already administering certain programs, or that money will be administered by an entirely new branch that will be created. Am I correct?

Ms. Kathy O'Hara: That's right. It's easier just to move within the department.

As I mentioned in my presentation, sponsorship and a number of activities moved from one branch in PWGSC in 1997. They created this new branch, called CCSB, and sponsorship just moved with it. I assume what you'll find from the department is analysis of the move, but a number of programs just moved from one branch to another.

Mrs. Marlene Jennings: So you're saying that the services branch to which the $40 million was given always existed outside of the organizational structure of Public Works. When we look at the organizational structure that is given to us, we see Public Works and Government Services Canada, the minister, deputy minister, associate deputy minister, and then a series of branches, services and so on, and we see, outside the box, CCSB with an arrow that goes directly to the deputy minister. So you're saying that CCSB, prior to the $40 million being approved and sent to Public Works for sponsorship, already existed out of the box. Is that what you're saying?

Á (1125)

Ms. Kathy O'Hara: The new branch was created in July 1997. I believe you're right that organizationally it was outside the box. The funding moved from the other branch to this branch. I'm not sure what you mean when you say it existed before. The money was already there in the other branch, and then it moved to CCSB when it--

The Chair: We'll have to follow up on that at a later time, I'm afraid.

Mr. Mills, please, four minutes.

Mr. Dennis Mills: Thank you very much, Mr. Chairman.

Ms. Fraser, thank you very much for being here.

I'd like to ask Mr. Minto some questions. Who created the Maurice Richard series? Usually in a half-hour series there's a minimum of five, possibly six, minutes of advertising. Who coordinated those advertising spots for each half hour of programming? Do we know who got the fees for organizing those advertising spots that appeared in those half-hour segments? On the trailers at the end of each program in this series, do we know if any of the crown corporations were mentioned as some of the organizations that made the series possible?

Mr. Shahid Minto: I would like to draw the attention of Mr. Mills to the top of page 10 of the English version of our chapter. The question was about who created the series. The only indication we have is that a representative of the company told us he had approached the executive director of CCSB and said he had three series and asked whether the government would like to sponsor them. He was given verbal assurance, “No problem, we'll do it”. Other than that, we have no documentation about a business case or why or what was going to happen with it.

I think your other question was about who coordinated the advertising spots.

Mr. Dennis Mills: Who were the advertisers who coordinated them?

Mr. Shahid Minto: Again, looking at the documentation within the department, there is no documentation that shows us that any analysis was done of what the government expected in the way of advertising or sponsorship. No work was done at the end to see what they actually got and what was the impact.

There is no question that some of the crown corporations... If you look at the series, they did say “sponsored by”.

Mr. Dennis Mills: Oh, they did. So they did get some credit for their contribution.

Mr. Shahid Minto: Absolutely. But the issue for us--

Mr. Dennis Mills: There's a perception that they didn't get any credit for their contribution.

Mr. Shahid Minto: We said up front that we did not measure, nor did anybody else, what was achieved and what we got.

Mr. Dennis Mills: How many more minutes do I have, Mr. Chairman?

The Chair: You have a minute and a half.

Mr. Dennis Mills: Mr. Minto, at Advertising Standards Canada there's a Canadian code of advertising standards, where they deal with all of the standards related to advertising agencies in our country. Did you have a chance to review the standards and the fees advertising agencies normally get for placing ads or being agents for creators or the prime customers?

Mr. Shahid Minto: Mr. Chairman, not in the context of the sponsorship chapter, but when we were doing the advertising chapter, we were aware of that and we had discussions around it.

Mr. Dennis Mills: How did you find the fees these agencies were getting in relation to the industry standards?

Mr. Shahid Minto: Mr. Chairman, if I could just clarify, the fees these agencies were getting, which are listed here, were commissions for transferring the money, not for advertising. Lafleur Communications, for example, already had the contract as advertiser for VIA Rail, so any production costs were billed separately and would have gone to VIA Rail. So this is not for production costs relating to advertising.

Mr. Dennis Mills: My final question--

The Chair: That was your final question, Mr. Mills. Your time has expired.

Mr. Keddy, please, four minutes.

Á (1130)

Mr. Gerald Keddy: Thank you, Mr. Chairman.

I would like as well to thank the Auditor General for being here this morning. I expect we will see her a fair amount in the coming weeks.

I have three specific questions. First of all, you noted that there is a separate non-governmental bank account used for all deposits and payments that went to the RCMP. I believe it was stated that there was over $500,000 in this account. This is in complete contravention of the Financial Administration Act. That's a concern all on its own. But was there any indication of similar accounts set up on behalf of any of the advertising firms, whether it was Groupaction, Everest, or Gosselin, all of the other firms?

Ms. Sheila Fraser: Mr. Chair, I'd just like to clarify that, yes, there was a separate non-government bank account, which was in violation of the rules and procedures. Obviously the various communications agencies would have their own bank accounts, but these are private companies, and it is entirely appropriate, to be expected, that they would have their own bank accounts.

Mr. Gerald Keddy: I understand that. The difficulty comes in trying to find out, whether it be $100 million or $60 million, exactly where it went.

Ms. Sheila Fraser: Perhaps I could just clarify this. The $100 million--and I think this may be in response to Mr. Mills as well--is an estimate we did of the moneys that were paid to the communications agencies for both commissions and production fees. There were services delivered for some part of that, but we are unable, first of all, to separate between commissions and production fees. And I don't believe anybody has that information, quite frankly. Because there is no documentation to give any evaluation, it's very hard to know the value of the services received.

So I wouldn't want people to say that the whole $100 million was paid for no value. There was some value received for some of the production fees.

Mr. Gerald Keddy: I understand. Thank you.

Now, I was out of the room for a moment, so this may already have been asked of Kathy O'Hara in terms of the evolution. I'm amazed that somehow this whole sponsorship program only existed in 2002, when we know that variations of it existed all the way back to 1993. There were just slight name changes as it progressed up through government. So it's still the sponsorship program.

Under the Canadian Heritage portfolio from 1993 to 1996, and then under the Public Works portfolio in 1998, can we have a list of names of everybody who was associated with that file at that time?

Ms. Kathy O'Hara: Who were running the program?

Mr. Gerald Keddy: Yes. Who was the program leader? Right down to the secretaries, who touched it?

Ms. Kathy O'Hara: So you want the names of people who were running the voluntary action program from 1993 to 1996.

Mr. Gerald Keddy: Absolutely--every one of the steps, every one of the boxes you laid out all the way up to Communication Canada in 2001 and when it became the sponsorship program in 2002. It's everybody who touched it: every civil servant, every government official, every member of the Liberal Party,

My last point, Mr. Chairman--

The Chair: You've made your last point, Mr. Keddy.

Mr. Desrochers, quatre minutes.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, I have the distinct impression that the list of questions asked of my colleague may be quite long.

In theory, the Sponsorship Program was created to ensure the Government of Canada's visibility. Let's not pretend that this program was perfect. If that were the case, we wouldn't be debating this issue before the Public Accounts Committee. However, many of the dealings involve monies that went from Public Works through advertising agencies and ended up in the hands of crown corporations. In fact, these amounts were not even used for...

Look, I'm in a position to tell you about this. I spent 16 years in the communications field and I know that when there's an exchange of advertising services and there is a request for 10 or 12 per cent, the supplier is usually responsible for that. Furthermore, if you need an agency, you give out another commission. But in this case, Ms. Fraser, we've noticed that the program itself has become a solution for advertising agencies, that have been able to collect many commissions unrelated to the goals of the Sponsorship Program.

Á (1135)

Ms. Sheila Fraser: This is a difficult question. It is obvious that the transactions that we have described involved commissions paid out in exchange for few or no services. For instance, we found no documentation allowing us to know how the different activities related to an event sponsored by the government met the objectives of the program. I believe in fact that there are many questions that need to be asked in order to find out why these commissions existed and if some of these activities met the objectives of the program.

Mr. Odina Desrochers: Have you questioned the advertising agencies that are involved in what is being referred to as the sponsorship scandal?

Ms. Sheila Fraser: As my colleague stated earlier, we did meet them. It is part of our auditing process to indicate to every group or person named in a report what we are saying about them. We met with them to show them the texts that referred to them. We asked them to advise us of any objection or of any new facts there may have been, but there were none.

Mr. Odina Desrochers: In your opinion, would it be a good idea to invite the advertising agency representatives to come and speak to us, so they can explain why supporting documents went missing and why they didn't do their work, real sponsorship work?

Ms. Sheila Fraser: I would like to remind the committee that my job is to audit compliance with the federal government's laws and procedures. I have neither the mandate nor the responsibility to audit the actions of communications agencies or others who provide services to the government. Essentially, the report deals with the actions of the officials and managers in charge of this program. It would be inappropriate for me to start auditing the agencies.

Mr. Odina Desrochers: May I ask another question, Mr. Chairman? It is a very brief question.

Did you meet with Messrs. Lafleur and Gosselin, and all these individuals whose names are mentioned regularly, or did you, rather, question other people within the agencies?

Ms. Sheila Fraser: My team met with representatives of these agencies. I would point out to the committee that there has been a change in the ownership of some of the agencies. So, we met with the representatives of the corporate entities named in the report.

Mr. Odina Desrochers: Thank you very much.

The Chair: Thank you very much, Mr. Desrochers.

[English]

Mr. Comartin is next, please, for four minutes.

Mr. Joe Comartin (Windsor—St. Clair, NDP): Thank you, Mr. Chair.

Ms. O'Hara, I want to go back to the question Ms. Wasylycia-Leis asked. When CCSB was terminated, was there a series of meetings that led up to that termination, specifically in late November and December 2003?

Ms. Kathy O'Hara: There was not a series of meetings. There were discussions in advance of December 13, and then the decision was taken on December 13.

Mr. Joe Comartin: Was that discussion recorded in the minutes of any meeting or in any correspondence?

Ms. Kathy O'Hara: I'll try to find something. I'm not sure there is any recording, but we'll find what we can.

Mr. Joe Comartin: Who was involved in the discussions?

Ms. Kathy O'Hara: These were discussions that took place on the transition of government.

Mr. Joe Comartin: But who was involved in the discussions?

Ms. Kathy O'Hara: They were members of my team, the machinery of government, and others from the Privy Council Office. It was part of the transition discussions, so there were also representatives from the new Prime Minister's Office.

Mr. Joe Comartin: Mr. Chair, perhaps we could just note that I'll be asking that any correspondence or minutes that came out of those discussions be part of the information that's forwarded to this committee.

Mr. Minto, on the discussion you had with the ad agencies when you met with them, did you get access to their files? I'm thinking now of time dockets, contracts, minutes, correspondence, or anything. Did you get access to their files?

Á (1140)

Ms. Sheila Fraser: Mr. Chair, I repeat that we do not audit those, and we had no access to any of those things.

Mr. Joe Comartin: Ms. Fraser, let me echo the salutations you got from the rest of the committee. We really do appreciate the work you've done and your presence here today.

In the letter you gave us this morning from Mr. Ouellette at Canada Post, he indicated in the second-last paragraph that as of yesterday the board had approved an independent audit. Can you tell us when Canada Post would have received your recommendation? He indicated that you recommended that. When would he have received that recommendation from you?

Ms. Sheila Fraser: It is mentioned in our report, Mr. Chair, that because of some of the concerns we had over the transactions, we recommended that there be a full audit done. This would have been discussed at Canada Post. I'm not sure of the exact date, but I would suspect it was September or October of last year.

Mr. Joe Comartin: That's of 2003?

Ms. Sheila Fraser: It's 2003, yes.

Mr. Joe Comartin: Was it a specific recommendation that they conduct an independent audit?

Ms. Sheila Fraser: Yes. Well, there was a specific recommendation that they conduct an audit. I can find the exact text where we recommended that they conduct an audit. At that time, they were agreeable to that.

Mr. Joe Comartin: They were agreeable or they were not?

Ms. Sheila Fraser: They were agreeable to that.

Mr. Joe Comartin: Do you have any reason why they didn't proceed with that until yesterday?

Ms. Sheila Fraser: I have no knowledge of that. You would have to ask Canada Post.

Mr. Joe Comartin: Those are all the questions I have, Mr. Chair.

The Chair: Thank you very much, Mr. Comartin.

Ms. Ablonczy, please, you have four minutes.

Mrs. Diane Ablonczy (Calgary—Nose Hill, CPC): Thank you, Mr. Chairman.

To the Auditor General and her officials, reading the reports that we received today from your office, I'm just struck by the litany of wrongdoing.

The parliamentary secretary talked about the HRDC billion-dollar boondoggle, in which the government's own audit showed that 97% of money that went out the door from that program was without financial controls or financial tracking--97% in HRDC. Yet here I'm just amazed at what you found.

You found that Parliament was circumvented. In fact, that's mentioned twice in the remarks today. You talk about fictitious contracts, fictitious invoices, and that VIA hid a transaction from their own board, from VIA's own audit committee.

You talk about “unusual” methods of funding. You say the Business Development Bank issued artificial invoices, that the Business Development Bank approved invoices they did not have the authority to approve.

You said that sponsorship money was taken improperly from another government agency. Lafleur got thousands for funnelling government money to Canada Post, which was a crown corporation that then turned around and gave the money back to Lafleur.

You said that Canada Post was given government money to support its commercial operations. I'm sure competitors of Canada Post that are paying good taxes to the government will be really happy to know that it's their money helping Canada Post to better compete against them.

You said there is possible double payment. In fact, you mentioned that twice. You said that none of the companies were selected properly–none.

You said that Parliament was not informed of the program's real objectives and was later misinformed about how the program was run.

You said the parliamentary appropriations process was bypassed. Parliament is supposed to decide how the public's money is being spent. You said that was totally bypassed. That's just today. I haven't even read it out of the report you tabled last week in seven or eight volumes.

I just find this completely and utterly incredible that in Canada, a first world democracy run by this Liberal government for ten years, this kind of thing could be placed before a parliamentary committee.

My question to you and to your officials is this. Is there something that we don't know about how this was authorized? I mean, obviously, all of this could not have happened without a lot of people being involved. You're not giving us names today, and I understand why you feel that's not your role to do so. But in your view, in your findings, in your review of the few documents that were available, could this have happened without any elected people knowing about it?

Á (1145)

Ms. Sheila Fraser: Madam Chair, I hope the committee can appreciate that I can't speculate or answer those kinds of questions. Our audit is an audit of the respective rules and procedures, essentially, by civil servants

I think you have very eloquently summarized our report, that rules and procedures were not followed. There are a few very disturbing cases and there are, as I have said, many questions that remain unanswered. The government and the Prime Minister would certainly agree with that. The public inquiry, I think, is the mechanism to get the answers to those questions.

Mrs. Diane Ablonczy: Well, I know Canadians hope that will happen.

When I look at these cases that you laid out for us, and especially cases 1 and 2, the Maurice Richard series and also Le Canada du Millénaire series, what jumps off the page of your flowchart is an outfit called L'Information essentielle. It received over $4 million in the Maurice Richard series, and it received five separate allocations of funds, including one for over $1 million in this Canada millennium series that went to the Business Development Bank.

The Chair: Sorry, do you have a question? You're going to run out of time.

Mrs. Diane Ablonczy: My question is, what is L'Information essentielle? Who are the principals? Who are these people?

And then, Mr. Chairman, I have a motion I'd like to read at the end of the Auditor General's answer.

The Chair: I'll take the Auditor General's response first.

Ms. Sheila Fraser: I should tell you that the representative we met from L'Information essentielle is Mr. Scully. He was very cooperative and came to us to volunteer the information that we have in the report.

Mrs. Diane Ablonczy: That's someone else we probably need to hear from.

Mr. Chairman, I would like to move that all cabinet documents pertaining to the establishment of the sponsorship program in 2002 be tabled with the committee. I think we need to get the more recent dealings on the table as well. So I'd like to move that motion, please.

The Chair: Okay. It's been moved. Do we have leave to accept the motion? Do you want to deal with it on Tuesday?

There's no leave to deal with the motion at this point.

Hon. Joe Jordan: We have a steering committee coming up for it.

The Chair: Yes, but people are at liberty to make motions at any time. We have Mr. Mills'. Ms. Ablonczy has made a motion. If we waive the 48-hour rule, we can deal with it. Is the 48-hour rule being waived?

An hon. member: Agreed.

The Chair: Is it agreed that we deal with the motion now?

Madam Jennings.

Mrs. Marlene Jennings: May I propose an amendment?

The Chair: You may.

Mrs. Marlene Jennings: I agree with Madam Ablonczy that the cabinet documents directly relating to the creation of the program in 2002 should in fact be tabled before this committee. But I would like cabinet documents approving--whether it was in 1996, 1997, and I believe it's the fiscal year of 1996-97--$40 million of taxpayers' money, government revenues, to be used for sponsorships. I would like those documents to be tabled as well.

The Chair: Perhaps I can edit it and say that “all cabinet documents pertaining to the sponsorship program, its creation in 2002 and before, be tabled with the committee”. Is that agreed?

Some hon. members: Agreed.

Á (1150)

The Chair: Okay.

Mr. Comartin.

Mr. Joe Comartin: I'm not sure why we're stopping at 2002. Why are we not bringing it right to the end of the program? That's what he just said.

The Chair: Well, no, my editing was “the creation of the program in 2002 and all cabinet documents pertaining to the sponsorship program”.

Mr. Joe Comartin: Actually, Mr. Chair, what you said was “before”.

The Chair: Okay, I apologize then. Let's just make it “all cabinet documents pertaining to the program and including specifically its creation as a program in 2002”.

Are we ready for the question? All those in favour?

(Motion agreed to)

The Chair: Next on the list is Mr. Tonks. You have four minutes, please.

Mr. Alan Tonks: Thank you, Mr. Chairman.

The intent of my questions to Ms. Fraser and to Ms. O'Hara is based on the inferences that have been drawn and on the allegations that the so-called laundering of money was through an architecture of government that was deliberately intended to circumvent parliamentary oversight. I think it's important that we establish whether that is true or not.

My question is first of Ms. O'Hara.

In the mechanics of establishing the CCSB--and you may reply that probably this is more within the purview of Treasury Board--in your chart on page 9 the procedure was taken as in (a) the introduction of legislation through Parliament, parliamentary approval, royal assent, the Treasury Board process, or as in (b), which was an order in council, Treasury Board process, etc. In either stream, was there any less presumption of parliamentary oversight in terms of checks and balances, fail-safe monitoring of the program and so on?

Ms. Kathy O'Hara: CCSB wasn't created through either stream. The deck on page 13 describes how CCSB was created and it was the product of an internal reorganization, inside the department.

Mr. Alan Tonks: Okay. Now, if that was the case, was there anything untoward about that? Did the trigger occur with respect to those circumstances under which it would be required to seek Treasury Board approval vis-à-vis anything reorganized above an EX-3 or EX-4, or was that trigger circumvented?

Ms. Kathy O'Hara: I'm sorry, I don't know the answer to that question.

Mr. Alan Tonks: I'd like to ask that question of Treasury Board. I think it's very germane to the motivation behind this.

My question is to the Auditor General. In terms of parliamentary oversight--and I'd like to think I'm learning something from last night--a fundamental part of parliamentary oversight is the review of the estimates. In the review of the estimates with respect to the fiscal year 2001, was there anything that flagged a problem with the issues related to this program within Public Works and Government Services Canada? Was there anything that brought an audit into them?

Ms. Sheila Fraser: Mr. Chair, I can't unfortunately respond to that. I don't know what questions may have been raised during the review of the estimates. That's not something we looked at when we did this audit.

Mr. Alan Tonks: Okay. Sorry, Mr. Chairman.

The Chair: You're just about out of time.

Mr. Alan Tonks: I was just going to try to make a point for how important it is to have the estimates as part of parliamentary oversight, but we'll leave that.

Á (1155)

The Chair: That's right. As anybody who participated in the discussion last night would appreciate....

Mr. Alan Tonks: I think the Auditor General would like to respond to that.

The Chair: The Auditor General wants to respond, yes.

Ms. Sheila Fraser: In the report, the point we're trying to make is that the sponsorship program, even though it was called as such, was never established, that we can determine, as a program per se, and that was one of our questions.

It appears to have been in the communications budget of the Department of Public Works, and in fact we make reference in the report to additional funding that was approved by the Treasury Board. This is in paragraph 3.15, where it says there was increased funding for communications activities.

You may want to ask the public works department or the Treasury Board Secretariat if there is any indication anywhere that this sponsorship was actually part of those communications activities, because it was never set up as a program per se.

So even though people called it a program, it was really in a general communications budget.

The Chair: Thank you very much, Ms. Fraser.

Thank you, Mr. Tonks.

Mr. Murphy, please, four minutes.

Hon. Shawn Murphy (Hillsborough, Lib.): Mr. Chair, I have a number of questions on the whole issue of comptrollership and the role of the internal auditor in this issue. And I have one question...and perhaps it has to be answered by Mr. Campbell. Mr. Campbell indicated in his statement that there was a statement made that someone was promised $7.5 million from government and it would be funnelled though a number of different ad agencies. My first question is, who was that person and who does he work for?

Ms. Sheila Fraser: We were informed of that by Mr. Scully of L'Information essentielle. The case you're referring to is the Maurice Richard series.

Mr. Scully met with the then executive director of CCSB. There was a verbal agreement that the Government of Canada would fund this program.

Hon. Shawn Murphy: Was the executive director at the time Mr. Tremblay?

Ms. Sheila Fraser: Mr. Guité.

Hon. Shawn Murphy: So Mr. Guité agreed to give L'Information essentielle $7.5 million, funnelled through different organizations?

Ms. Sheila Fraser: That's right.

Hon. Shawn Murphy: So there are two witnesses to start with, Mr. Chairman.

I have a question for the Auditor General. I want to talk about the whole issue of comptrollership and internal audit.

As you know, government is big business. We have about $180 billion going through the coffers every year. We're dealing with a very serious situation. I would classify it as a train wreck. You've indicated that this is not the way government works, but in this case this is the way government did work.

You would expect both in the line departments and in the crown corporations a certain level of governance, whether it be through the minister to the deputy minister to the departments, or in the crown corporations, the directors to the general manager. You would expect the proper governance, the oversight, the checks and balances to be in place so that (a) this wouldn't happen, and (b) if it did happen, it would be caught immediately and the corrective actions would be taken very quickly--correct the action and recover the funds. This wasn't present in this case.

To give you an example, in the VIA Rail and Maurice Richard situation, there was $750,000 received from Lafleur Communications. When the accountant or comptroller at VIA Rail got this cheque, which wouldn't have been in accordance with the Financial Administration Act, and I don't think it would have been in accordance with the policy of VIA Rail, wouldn't it have raised all kinds of red flags? Wouldn't there have been all kinds of sirens going off as to what was going on there?

Another example is the millennium series. The BDC got $125,000 from Lafleur Communications and then it gave that same $125,000 to L'Information essentielle. Those are situations that you would expect on the first line the accountant, the comptroller, would catch and would not allow to happen.

To give you an example, at the Royal Bank of Canada they have a lot of employees, tens and tens of thousands. A lot of money goes through it, and I can't see these things happening.

Secondly, there's the whole role of the internal audit. I know you're not the internal auditor. They have their own separate internal audit departments. Every year they present internal audited statements. Should this not have been caught either by the comptroller or by the internal auditor? And if not, what do we have internal auditors for?

I'm really perplexed as to how the systems weren't there to catch this.

Â (1200)

Ms. Sheila Fraser: Mr. Chair, I think Mr. Murphy's questions are excellent. For the details of why these things were allowed to occur, I think discussion with some of these entities would be more appropriate.

What I would say is that in many cases, audit functions will look at broad systems and practices to ensure there are no gaps in systems and practices, to ensure the transactions are flowing through as they should. Many of these are very one-off transactions that just completely bypassed systems and practices. These transactions--at least I can say some of them, with quite definite authority--did not go through the normal systems and practices. These were authorized at very high levels and payments were made directly.

So it's what allows people to bypass systems and practices that are in place that is one of the questions I would hope this committee will try to understand. I think internal audit does do its job. The proof is that we are here today because this all started with an internal audit--in Public Works, quite frankly. We wouldn't be here today if the internal audit hadn't done that initial audit in 2000.

Again, regarding comptrollers, I think you'll have to ask the people about the specifics of each transaction and what explanations were given. I know some of the explanations were not totally transparent, some of the descriptions on invoices and things like that. So did people really understand what was going on? I'm not sure. And how well did people really know how the money.... I'm not sure people realized all that was going on, under what conditions those things were being paid. Obviously, some people did, but I would hope that's something this committee and the public inquiry will get to--why do systems get bypassed and how is it possible for that to happen?

The Chair: I'm sorry, Mr. Murphy, but we are significantly over time.

We'll have to move on to Mr. Kenney, please, for four minutes.

Mr. Jason Kenney (Calgary Southeast, CPC): Thank you, Mr. Chairman.

My first question is for the Auditor General. In paragraph 3.15 of chapter 3 you say that the Treasury Board approved increased funding for Public Works communications activities, etc. When was that, and by how much?

Ms. Sheila Fraser: Give me a minute and I will get my staff to find that.

Mr. Jason Kenney: While you're looking into that....

Ms. Sheila Fraser: I actually have it. It was in December of 1996. It was funding for 1996-97, 1997-98. It was $17 million. That was the increase, I believe.

Mr. Jason Kenney: But it appears that the funding envelope for the sponsorship program was in the range of $40 million per annum.

Ms. Sheila Fraser: As I stated, there was no specific program for sponsorship. This was part of the communications activities of Public Works. I don't have the information. The Treasury Board Secretariat or Public Works might have the information as to what that total envelope was.

Mr. Jason Kenney: What I'm trying to get a handle on is, how could the Treasury Board authorize an increase for a program about which Parliament had not been informed and about which proper controls were clearly not in place? What sort of information would Treasury Board have had before it in order to make this authorization?

Ms. Sheila Fraser: I believe, Mr. Chair, that should be asked to the Treasury Board Secretariat.

Mr. Jason Kenney: Then, Mr. Chairman, I'd like to shift to Madam O'Hara.

I have a question about the fiscal aspect of government machinery. You say in your presentation, on page 14, that a program is created by cabinet decision, followed by Treasury Board approval, based in part on a funding consideration.

What role, if any, does the finance department play in that Treasury Board approval or the cabinet decision? Presumably, the finance department, as the coordinating body for the government's fiscal policy, has something to say about funding decisions at Treasury Board or at cabinet, does it not?

Ms. Kathy O'Hara: Certainly, for memoranda for policy proposals that go to cabinet, that's absolutely right.

Often, for Treasury Board--again, Mr. Judd would be in a better position to speak to this. Certainly, the source of funds is something the finance department has to play on.

Mr. Jason Kenney: You would say that, as a matter of course, if a funding proposal came before Treasury Board or cabinet for the creation of the sponsorship program, or an additional allotment for that program, the finance minister would be briefed on it, would be aware of it, and a memo would be going forward to Treasury Board and/or cabinet under his name.

Â (1205)

Ms. Kathy O'Hara: I really can't speculate what goes on in the Department of Finance in terms of briefing the Minister of Finance about items going forward.

Mr. Jason Kenney: Generally speaking, the finance minister sits on the Treasury Board, attends Treasury Board meetings, and has an integral role in the approval procedure.

Ms. Kathy O'Hara: The Minister of Finance is often the vice-chair of the Treasury Board. I think you need to speak to the deputy minister, the Secretary of the Treasury Board, on attendance of meetings and that kind of thing. Being at PCO, I'm not privy to that.

Mr. Jason Kenney: Is it fair to say that the finance department should be concerned about how public money is being spent?

If money is being blown out the window without proper controls, without Parliament being informed, one could generally assume that if the machinery of government is working, the finance department or its minister might raise this concern at cabinet or Treasury Board. Would that not be the normal function of how it works?

Ms. Kathy O'Hara: The Minister of Finance tends to speak to macroeconomic policy. These are issues that tend to be dealt with by the President of the Treasury Board and departmental ministers themselves.

Mr. Jason Kenney: Mr. Chairman, I just find it shocking that the vice-chair of Treasury Board should have been ignorant about all of this and allowed an increase in funding for a program that Parliament wasn't informed about.

The Chair: Okay, thank you, Mr. Kenney. Your four minutes are up.

Mr. Bevilacqua, please, you have four minutes.

Hon. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.): Thank you very much, Mr. Chair.

First of all, Madam Fraser, I want to thank you very much for the excellent work you've done. Everywhere I go throughout this country, people appear to really appreciate, I should say, your sincerity and the way in which you answer questions in a frank manner.

I took great pleasure in reading your quite lengthy report. Once I got through the charts and the numbers and all of those things, what really came down to me, as a member of Parliament representing the people of Canada, is that essentially this is an issue of trust. That's what it really comes down to: people trusting government, people trusting the institution.

The issue I want to raise with you is the following. Given the measures the Prime Minister has announced, the striking of the public accounts committee immediately--and the chair will remember that, as well as all members around this table do--the independent commission of judicial inquiry, the appointment of a special council for financial recovery, and providing access to cabinet documents, which is an innovation that I think speaks to the fact that there's a sense of openness that we want to get to the bottom of this... Given these measures, do you trust that the Prime Minister of Canada wants to get to the bottom of this and hold those responsible for the mistakes that were made?

Ms. Sheila Fraser: Mr. Chair, I'm sure the committee will appreciate that I cannot respond directly to that question. I would say, as I have said before, that I believe the Prime Minister is taking this very seriously and has taken serious measures to address the concerns that were raised in our audit.

Hon. Maurizio Bevilacqua: Do you agree with the measures we have taken?

Ms. Sheila Fraser: The measures taken are up to the government to decide—how they are going to respond to our concerns. We recommended there be some kind of independent review. How government wants to do that is up to government to decide.

Hon. Maurizio Bevilacqua: But the measures we have taken are in line with your recommendation, are they?

Ms. Sheila Fraser: Yes.

Hon. Maurizio Bevilacqua: Thank you.

The Chair: Thank you, Mr. Bevilacqua.

Mr. Jordan, please. You have four minutes.

Hon. Joe Jordan: Thank you, Mr. Chair.

Madam Auditor, someone once told me, if you're in a hole, quit digging. I want to just clarify the point I was trying to make. The point I was trying to make—and the term “soft audit” was in reference to the thing, and we've had exchanges over the years, and I cherish those; I do—is that I think one of the things, independent of the perspective thing....

I dropped that shovel; I'm out of that hole.

One of the things that concerns me is that the level of knowledge your staff has stops with your mandate, which I think is quite limited—limited to the extent that you can't even go into the crown corporation stuff. You have to deal with their auditors. Is that correct? You audit their audits?

Ms. Sheila Fraser: For many of the crown corporations we are the auditors, so we can have access. For a crown corporation such as, for instance, Canada Post, we are not the auditors. We received an order in council in order to be able to conduct the audit of those transactions.

Â (1210)

Hon. Joe Jordan: In this particular case, my point—which I guess I made badly—was, this is a mess; this thing is a hornet's nest. But we don't want to paint the entire...

Let me just leave that for a minute. I want to ask what it would take to extend your mandate over the crown corporations, and in addition, how much liaison you have with the RCMP. It strikes me that they pick it up once it goes external. Is your information and your expertise and your knowledge and understanding of the nonsense that went on here somehow passed on to the RCMP, or do they have to reinvent the wheel? How does that connection work?

Ms. Sheila Fraser: First of all, on the issues of changing our mandate, our lawyers would be able to give you a better explanation than I, but it would certainly require legislation added to the Auditor General's Act or to the Financial Administration Act or others. There would have to be some legislative action taken.

On our relationship with the RCMP, like anybody working in the public service, I have a duty to report instances where I believe there may be wrongdoing. I do not have to have proof of wrongdoing, but if we suspect wrongdoing, we have to report it to the appropriate authorities. If we come across something in our audits that we believe appears inappropriate and could be an instance of wrongdoing, we report it to the RCMP. They then conduct their own review to decide if they will conduct an investigation or not.

After we did the initial audit of the three contracts to Groupaction, we referred those cases to the RCMP. After their review, they decided to do an investigation. We also met with them last summer or fall to inform them of the findings of our audit, because they had broadened their scope, at least from what was reported in the press. I believe the department had also referred other cases to them, and we wanted to ensure that the RCMP knew the information we were going to be providing.

We do not provide our files or our working papers to the RCMP. I believe they have a responsibility to make their own case, if you will; they can't use evidence from others.

Hon. Joe Jordan: I'll just end with this. I apologize if I left you with the impression that I was questioning the credibility of the work of you or your staff. That wasn't what I was intending to do.

The Chair: Thank you, Mr. Jordan.

Mr. Desrochers, s'il vous plaît, vous avez quatre minutes.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

I know, Ms. Fraser, that you have to comply with certain rules, and that you cannot reveal certain names. However, in chapter 5, you say that a number of departments purchased the same multi-client surveys. For example, a survey which cost $27,000 was purchased by 10 different departments, for a total of $270,000. That means that these 10 departments purchased it. Could you tell us which departments purchased the same study 10 times, a fact you referred to in your report?

Ms. Sheila Fraser: Once again, Mr. Chairman, I would like you to ask this question of the government's representatives. I think they should be able to answer it for you.

Mr. Odina Desrochers: You mentioned that there were 10 such departments. Can you not give me the names?

Ms. Sheila Fraser: I cannot answer the question without doing some consultation first. As I said, there is also an issue of confidentiality.

Mr. Odina Desrochers: But this does not involve individuals; it involves departments.

Ms. Sheila Fraser: I do not have that information with me, in any case. I will look at this with my legal counsel. If I can give you that information, I will do so immediately; however, I would suggest that you ask the same question of the government's representatives.

Mr. Odina Desrochers: We have been asking this question in the House of Commons for at least a week now, but we have still not had an answer. So, you will understand why I am trying to get this information from you, Ms. Fraser.

That is all for the moment, Mr. Chairman.

[English]

The Chair: C'est fini? Merci beaucoup.

Mr. Comartin, please. You have four minutes.

Mr. Joe Comartin: Thank you, Mr. Chair.

Madam Fraser, one of the biggest concerns I've heard expressed by my constituents is about the transgressions it appears the RCMP have engaged in. The committee, I think, is clearly going to want to pursue that specifically.

I'm wondering if you can help the committee with regard to this independent bank account. Were you able to ascertain what financial institution that bank account was at and who had signing authority on the account? I understand you will not divulge names, but can you tell us whether, other than the RCMP, there are any sources we can go to to determine who had signing authority?

Â (1215)

Ms. Sheila Fraser: I'm not sure if we have that information. It would have been RCMP officers who had signing authority over it.

Mr. Joe Comartin: You were able to determine that from sources within the RCMP?

Ms. Sheila Fraser: Yes.

Mr. Joe Comartin: All right. Just to follow up—and I don't know if she's going to have to come back for this—Mrs. Bertrand has made reference to double payments, both in the stamp program and in the RCMP anniversary program. Again, I think it would be helpful if you could give some suggestions to the committee as to where we go looking for witnesses and evidence as to whether in fact there were double payments in either of those cases.

Ms. Sheila Fraser: In both of those cases, Mr. Chair.... If you take, for instance, the stamp one, it would appear that Public Works, through Lafleur, paid for concept design and a visibility plan, and yet Canada Post paid for the same thing. I would think those two organizations should be able to give some illumination to the question.

Mr. Joe Comartin: All right. So we have the two crown corporations and Lafleur. Is there anybody else we can get information from?

Ms. Sheila Fraser: And the Department of Public Works.

Mr. Joe Comartin: I have a final question, Mr. Chair, on the issue I think Mr. Mills raised of the commissions versus production fees.

Would you have expected there would have been documentation showing the difference in moneys paid for those two purposes—that is, that this amount of money is for commissions and this amount of money is for production fees, that it should have shown up in contracts, or in some memos, or in some written fashion?

Ms. Sheila Fraser: We would have expected as a minimum that certainly there would have been clear contracts for production fees, that there would have been contracts as well setting out how commissions were to be paid and on what, and that the invoices after that would have clearly separated those two items, yes.

Mr. Joe Comartin: In that regard, you indicated that you audited eight crown corporations or agencies and you've only identified five that are of concern. Can I assume that the other three in fact did have contracts that showed the difference between what was being paid for commissions and what was being paid for production fees?

Ms. Sheila Fraser: I don't know that we can confirm that, but we found nothing that we believed of significance that should be brought forward to Parliament's attention.

The Chair: Madam Fraser, it's an important point that Mr. Comartin has raised. Would you actually be able to confirm whether the contract process was adhered to with these other ones?

Ms. Sheila Fraser: We will give you the information. It may be simply that there were few or no transactions. I'll give you more information as to what we meant by that particular comment.

Mr. Joe Comartin: So it may mean that those other three were simply not involved.

Ms. Sheila Fraser: It may mean they were not involved, or there was one minor transaction that wasn't of any significance. I will try to clarify for the committee what our comments meant.

The Chair: Thank you, Ms. Fraser.

Mr. Toews is next, please, for four minutes.

Mr. Vic Toews: Thank you.

Dealing specifically with the Maurice Richard series, 1998-2000, there was a total of $438,000, almost half a million dollars in commissions paid to communications agencies to move money, with little indication of any value added. Those are the words of your testimony here today. The communications agencies had no contracts with the ultimate recipient, L'Information essentielle.

So we have CCSB, a government agency, transferring $3.4 million in six separate transactions to five different agencies in various combinations. So sometimes it was to Lafleur alone, other times to Lafleur and Media/IDA Vision, etc. You've outlined those very well for us. There are no contracts between the communications agencies and L'Information essentielle.

Then the statement was made in your testimony that there were contracts between CCSB and the communications agencies, but there was no mention that the money was to be paid to the ultimate recipient, L'Information essentielle.

I would like you, if possible, to produce those contracts between CCSB and the actual agencies that illustrate or support these transactions and to briefly summarize what those contracts stated, if they didn't state that the money was essentially to be moved to L'Information essentielle.

Â (1220)

Ms. Sheila Fraser: If the committee has no objection, I request that you ask Public Works to provide those documents to you. They should have copies of all of that information; it does not come from our audit files. But I will ask Mr. Minto to briefly summarize what those contracts and invoices said.

Mr. Shahid Minto: If I can just take a minute here, you have to go back a little earlier in the sponsorship process. For example, for the most part, the sponsorship money was used for fairs, festivals, and sporting events. In that context, there was a sort of standard contract used by the department. The contract said that in order to find an event to sponsor, somebody would get around 12% commission. Then if it was more than $25,000, another company called Media/IDA Vision, which was the agency of record, would also get involved to do the management, and they would get 3%. In addition to that, if there was any production required there would be another contract for production, for which the commission was going to be 17.5%.

Public Works took the same contract that was used for those people and applied it to transfers between government entities, or to L'Information essentielle. So if you read those contracts--I'm just looking at the Maurice Richard series for a minute--each one almost looks like Groupe Everest found a sponsorship for $650,000, so they got their commission for finding it. Then the next one, Gosselin, found a sponsorship for $575,000, and they got a commission for finding it. But they're all the same thing. They're all related to L'Information essentielle and they're all related to the same cities.

As we know from the chapter and from our discussions with the representative of the company, he had already negotiated a deal with the executive director of Public Works, so those people didn't find the sponsorship, yet they used the same standard instrument to transfer the money over.

I just want to say that for advertising there are different contracts.

Mr. Vic Toews: So just to summarize, they were paid commissions for finding companies to do the work, but in fact those companies had already been found.

Mr. Shahid Minto: That is the best information we can get from the files.

Mr. Vic Toews: Who signed off on these contracts?

Mr. Shahid Minto: When you ask for the contracts it will become obvious. Representatives of Public Works signed them. The names are there.

The Chair: Mr. Toews has a motion.

Mr. Vic Toews: I would like to make a motion, in view of the Auditor General's comments, that we want to receive those contracts directly from the Public Works department. I move that we request those contracts--

The Chair: Which contracts?

Mr. Vic Toews: In the Maurice Richard series specifically, any of the other contracts that were between CCSB and other agencies, and any of the other documents that have been outlined for us today. I could do separate motions, but--

The Chair: I think your motion is to include all the contracts between Public Works and the sponsorship program branch with institutions and organizations mentioned in the Auditor General's presentation.

Mr. Vic Toews: That's correct.

The Chair: Are we all agreed on that?

(Motion agreed to)

Â (1225)

The Chair: Now we'll go to Madam Jennings.

[Translation]

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

I want to go back to the establishment of the branch within the Department of Public Works in 1997 and to the fact that it was completely outside the department's organization chart. You said, Ms. O'Hara—or perhaps it was Ms. Fraser—that in December 1996, Treasury Board approved a $17 million increase in the budget of Public Works for communications purposes through the sponsorship program. Is that correct?

Ms. Sheila Fraser: It was for communications activities. There was no mention of sponsorships as such.

Ms. Marlene Jennings: Thank you for that clarification. So it was for communications purposes. That was in December, during the 1996-97 fiscal year which ended on March 31, 1997.

We read on page 13 of your text, Ms. O'Hara, that at some point in 1997 the branch was established within Public Works and Government Services Canada. That was in 1997—we are not given the exact date—and you say that the purpose of this branch was to combine some of the areas of the department responsible for advertising and public opinion research, as well as some responsibilities that formerly had come under the Communications Canada group. You also gave a few examples of some of the activities that came under the mandate of this new branch.

So this was an internal reorganization. Someone decided that some internal activities should be reorganized, including sponsorships. Who would make such a decision normally, and what work, documentation or analysis could we expect in order to justify such a reorganization of activities within a new branch?

[English]

Ms. Kathy O'Hara: The deputy minister would be responsible for any documentation and material that was prepared for the deputy minister of the day.

[Translation]

Ms. Marlene Jennings: I believe Mr. Ran Quail was the deputy minister at Public Works and Government Services Canada, was he not?

Ms. Kathy O'Hara: I believe he was.

Ms. Marlene Jennings: He was the deputy minister at the time this new branch was established to combine a number of existing activities, including sponsorships.

I would of course suggest, Mr. Chairman, that the committee invite Mr. Ran Quail to appear before it so that we may obtain some clarifications about this matter. Do I still have a minute left?

[English]

The Chair: You have 30 seconds.

[Translation]

Ms. Marlene Jennings: Thank you.

[English]

I don't want to make light of this.

[Translation]

However, I'm looking at the entire system of control and oversight set up by the government, within Public Works, and I hear the Auditor General saying that there was quite a sophisticated financial management control system designed to get around all the government's procedures. It reminds me of when I was a child and we had to do housework on Saturdays at home. When we were finished, we got an allowance and we wanted to go to the store to spend it on chips or something else. We always asked one of my sisters to go for us and we were prepared to pay her for that, but our parents always said we could not do that. They told us to go ourselves.

[English]

The Chair: Madam Jennings.

[Translation]

Ms. Marlene Jennings: I'm coming to my question.

I did not harass you at any time this morning, even when the chairman told you that you had 30 seconds left. I would therefore ask you to show me the same courtesy.

Â (1230)

[English]

The Chair: We will not have a debate across the floor, please.

[Translation]

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

When people disregard clearly established rules that they are supposed to know because their job description states that they are responsible for enforcing those rules, do you expect that they...

The Chair: A very brief answer, please.

Ms. Marlene Jennings: I have not finished my question, because I was interrupted.

[English]

The Chair: Okay, Madam Jennings, you're now up to six minutes. I gave you a significant amount of latitude to ask the question, with a little bit of overtime, and I think we're stretching even the latitude a little bit long.

[Translation]

Ms. Marlene Jennings: I agree, but you will agree as well that part of the six minutes was used up by members opposite, who interrupted me several times.

The Chair: A very brief answer, please.

Ms. Marlene Jennings: I have not finished my question.

[English]

The Chair: Well, we may leave that for another time.

Now we're going to go to Mr. Mills. Mr. Mills, please, four minutes.

Mr. Dennis Mills: Thank you, Mr. Chairman.

The Chair: Is there a point of order?

[Translation]

Mr. Odina Desrochers: At the rate we are going, Mr. Chairman, it looks quite obvious that we will hear from only some of the witnesses we called today. Moreover, as far as I know, the steering committee is supposed to meet after this meeting.

Since we will not have the information from the other two witnesses, I would like to have the steering committee meeting postponed until next Tuesday, after our meeting, so that we have an overview of the evidence from the witnesses we were supposed to hear today in the context of the work of the Standing Committee on Public Accounts.

[English]

The Chair: Mr. Desrochers, we may have a steering committee after this meeting and a steering committee after the one on Tuesday as well, so it's not really a point of order.

Mr. Mills, please, four minutes.

Mr. Dennis Mills: Thank you very much, Mr. Chairman.

Ms. Fraser, in your report, in chapter 3 on page 3, you identified that the sponsorship program covered 1,987 events across Canada. I say “across Canada” because there's a perception out there that most of this activity was in Quebec. I know for a fact that there were many events in this total—lots of them—that were in every region of our country.

You mentioned that out of the $250 million, $100 million went for communications agencies for production fees and commissions. I hope we can then deduce from this that $150 million out of the $250 million went directly into all of those organizations across Canada for festivals, tourism projects, and sporting events. I know for a fact that we used some of this money for the papal visit in Toronto and for the family farm tribute, and those kinds of things.

We also know that there were production costs necessary for physical signs and banners and posters and aprons, or whatever happened to have the federal presence or wordmark on it. How is it that we cannot separate those real production costs from the actual commissions, because those are real, hard costs? Those are real services that were performed and are linked to those 2,000 events that happened.

Ms. Sheila Fraser: Mr. Chair, I would just like to add one comment and one point of clarification to what Mr. Minto was talking about earlier on the commissions that were paid. They were for identification. They were also for management of the program, because CCSB decided, if you will, to also use these agencies to manage all of this program, so they were to ensure that the signs were put in place—

Â (1235)

Mr. Dennis Mills: Verification.

Ms. Sheila Fraser: And the visibility was given according to contracts, so there was a management aspect as well, which was given to the agencies.

Mr. Dennis Mills: Right.

Ms. Sheila Fraser: This is an estimate we did. Based on my understanding, the Public Works systems do not give that kind of breakdown. I think you would have to ask Public Works for more information, and it may be the way the billings were done, that the information is—

Mr. Dennis Mills: I hear you, Madam Fraser, and I realize I have a very short amount of time. But you can understand that there's a perception in the media and in the community out there that $100 million went out the back door here, when in fact there were real production costs related to signage in all of these events? I mean, we realize and we admit that there were flaws and mistakes, but I really think we have to separate the good work that was done from work that was flawed and stained.

Ms. Sheila Fraser: We have certainly said that there were services rendered for some part of that $100 million, be it production fees or the management of those activities.

Mr. Dennis Mills: Thank you.

The Chair: Thank you, Mr. Mills.

I think we're going to get into a wrap-up situation here.

Mr. Comartin, you had one question. Mr. Tonks had a question, and Mr. Toews. Madam Ablonczy has a short intervention. Then I think, if the committee is agreeable, Mr. Bryden will have an intervention, and of course don't forget the chair. That's pretty well how we're going to wrap this up.

Mr. Comartin, please.

Mr. Joe Comartin: Thank you, Mr. Chair.

I actually have two questions, but they're along the same lines. I think, Mr. Minto, they're both to you.

I'm concerned about having the ad agencies come forward and allege, or take the position, that in fact they were the ones who made the contacts before Public Works and the producer of the program were involved. I'm thinking specifically of the Maurice Richard one.

I'd like to know what specific points you can make that say, no, they did not know that Public Works and the producer were directly involved before any ad agency was involved. That's the first one.

Then, on the follow-up with regard to the meeting you had with the agencies, again, I'm concerned about documents beginning to surface as we question them more. I want to know if you pushed them hard as to whether they had any documentation, and how they responded. Either they didn't have it or they wouldn't give it to you.

Mr. Shahid Minto: Thank you, Mr. Chairman.

Mr. Chairman, our source of information about who made the first contact really is the representative of L'Information essentielle. We quote him as having told us that he approached the executive director, Mr. Guité, and then made the arrangement. We really provide that information, above our observation, just so you know where it was coming from.

The second one is linked to the first, if I could just go there, on the question of documentation. Mr. Chairman, our audit concentrated on the documentation of the files of the government departments and agencies. We did not audit the contents of the files in the other companies in the private sector.

It is entirely possible, and perhaps some people sent documents or created documents in the private sector. I have no idea, but we have no trace of those in the government's files. That's what the chapter says. The chapter says the files were so bad.

Earlier, Mr. Mills had raised the issue of why we can't split between commissions and production. It's because documentation is bad.

Mr. Joe Comartin: I understand that. I understand it's not in the government files. My question really was, when you were talking to them, did they give you any indication...? I'm talking about the agency now, Mr. Scully or whoever else you talked to. Did he indicate that either they had written information notes, contracts, whatever, or they did not? Did you get any indication from him in that regard?

Mr. Shahid Minto: Let me deal with Mr. Scully. Mr. Scully was very clear that there was absolutely no exchange of documentation. We asked him if there was any paper that he had with Public Works. He had sent a feasibility report and things later, but there was no trace of that at Public Works offices.

When we went to the marketing companies, sir, yes, a couple of them were surprised that the government did not have the information in its files, but that was the extent of it. We did not have the mandate to request data from there.

The Chair: Thank you very much, Mr. Minto.

Mr. Tonks, you had a brief intervention?

Mr. Alan Tonks: Yes, I have a question for the Auditor General.

With respect to the CCSB and the example that was used and the circumstances around the VIA Rail transaction, was there any trigger that occurred with respect to the transfer? You had indicated there was not $1 million budgeted with respect to that part of the program. Is there a magnitude, is there a quantitative trigger, that occurs where Treasury Board, or the deputy minister or someone, has to give approval?

Â (1240)

Ms. Sheila Fraser: Mr. Chair, under government contracting, in all payments no one should be certifying a payment unless they are sure there is money within their appropriation to do that. That's a basic rule. So there should have been no commitment made to fund a program if the funds weren't already available within the appropriations of the department.

The reason we were told VIA advanced the money was because Public Works told them they did not have the money within their budget.

I would just add that when we go through our process, we validate all of the facts with the people concerned. All of the facts of these cases have been confirmed with the crown corporations involved.

Mr. Alan Tonks: May I ask what date that occurred, Mr. Chairman?

Mr. Shahid Minto: What occurred, sir?

Mr. Alan Tonks: The VIA--

Mr. Shahid Minto: The transaction? I think they said March 2000.

Ms. Sheila Fraser: No, for the Maurice Richard transaction, as we note in the case, the payments were made in January. The first one was made in January 1999, and there were others in September 1999.

Mr. Alan Tonks: And this was to VIA?

Ms. Sheila Fraser: This is the Maurice Richard one, that's right.

Mr. Shahid Minto: If I could just add, there were two sets of dates. VIA gave the money in January 1999 and it was reimbursed in March 2000 from CCSB.

Mr. Alan Tonks: Right. And that wouldn't have flagged a problem at that time? This was prior to the internal audit that Public Works did, was it not?

Ms. Sheila Fraser: Quite frankly, Mr. Chair, I don't think anybody knew about this. Treasury Board wouldn't know about a payment that VIA Rail is making to L'Information essentielle.

Mr. Alan Tonks: I see.

The Chair: Ms. Ablonczy, please.

Mrs. Diane Ablonczy: Thank you, Mr. Chairman.

To the Auditor General, after the internal audit in 2000 showed that the sponsorship program had some very serious problems, and/or after your audit in 2002 saying that every rule in the book was broken, have you seen any evidence that the individuals responsible for this were identified and fired or sanctioned in any way?

Ms. Sheila Fraser: I think that's a question, Mr. Chair, that you will have to ask of the Department of Public Works.

Mrs. Diane Ablonczy: But you don't have any evidence?

Ms. Sheila Fraser: I know there was an administrative review that was undertaken, but the results of that and what happened you will have to ask the department.

Mrs. Diane Ablonczy: When we talked about sponsorship moneys going to advertising firms, how many of these firms were involved?

Ms. Sheila Fraser: We could count them. In the cases we indicate there are five or six of them.

Mrs. Diane Ablonczy: How much of the money in the sponsorship program, what rough percentage, went to these five or six firms?

Ms. Sheila Fraser: I do not have that information.

Mrs. Diane Ablonczy: Can you provide that information? Was it half or three-quarters?

Ms. Sheila Fraser: I have no idea. You will have to ask the Department of Public Works. They might be able to find that information. We don't have that information.

Mrs. Diane Ablonczy: All right, thank you.

The Chair: Thank you, Ms. Ablonczy.

Before we go to Mr. Bryden, I have one issue that I wanted to raise. In terms of the response from Canada Post this morning, in response to the question I had asked about who had been participating in this, all we've had is that the president has said, “I will come and testify and answer all questions”. I still believe it's pertinent, since all others are providing information, that we ask Canada Post to provide the same information. I'd like someone to move that.

Mrs. Marlene Jennings: So moved.

The Chair: It is moved that Canada Post be required to provide the same information as requested in the public accounts meeting of Thursday, February 12, 2004.

(Motion agreed to)

The Chair: The clerk will advise Canada Post accordingly.

I believe there is consensus around the room that Mr. Bryden, an independent member of Parliament, can ask some questions.

Four minutes, Mr. Bryden.

Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Ind.): Thank you, Mr. Chairman.

I want to try to get some perspective on what I've been hearing. I'm particularly interested in the examples given of transferring funds in an improper manner involving the crown corporations. I wanted to ask you, in terms only of the crown agency officials involved, how serious are these irregularities in comparison to other lapses in appropriate financial management that you have encountered in the audits of other departments and other programs? How serious is it? Are we looking at the type of wrongdoing that you describe where you might have to make reference to the RCMP, or is it something you've seen before across other programs and departments?

Â (1245)

Ms. Sheila Fraser: Mr. Chair, I would point out that there are very few of these transactions. We have reported in here all of the transactions for which we believed we had significant concerns. But I take them very seriously when I see payments made of close to $1 million, if not a $1 million, on the basis of a telephone call and then fictitious contracts and invoices after that to recover funds. This should not, I think everyone will agree, happen. So it's not simply a disrespect of certain rules and regulations. I think this is much more serious than that.

Mr. John Bryden: Let me then rephrase it, because I've been around a long time with respect to audits and finding irregularities in government transactions. Let me put it really bluntly. With the crown officials involved--and we know there are other problems, and we certainly have to probe them--whatever these crown officials did in the context of these programs, is it wrongdoing that's so unusual and so serious that they should be severely disciplined? Are we looking at a potential severe discipline? Or are we even looking at the potential that you need to make a reference to the RCMP? I take it the answer to the latter is no.

Ms. Sheila Fraser: The RCMP has been advised of all of these cases. It has already been conducting an investigation. We have not made a specific referral of any case to the RCMP.

I take these issues seriously. I think what consequences are to follow is up to government and even perhaps up to this committee to recommend.

Mr. John Bryden: Let me try once more. In the context of the crown officials involved, have they done something that's so serious in comparison to your experience in other departments and other programs that it's of a scale of 9 out of 10 as opposed to 3 out of 10? This is something really serious. I know we all take it seriously. We take any misspending or any impropriety in the bureaucracy very seriously. We all do. But how serious is this in the general scale of things?

Ms. Sheila Fraser: Mr. Chair, I think that determination should be made by people who have a good understanding of the cases but also hear the explanations of those officials, because quite frankly, sometimes people make really stupid decisions and get caught in a really bad situation and then dig themselves in deeper, to use Mr. Jordan's term. So I think before people actually determine consequences, there needs to be an understanding of what motivated people to do things and why they did things and other circumstances around that, which the audit obviously can't give, and I'm not in a position to do that.

Mr. John Bryden: Madam Fraser, you have still not answered my question. You have not given your judgment on how serious this is from the benefit of your great experience of encountering this type of wrongdoing or impropriety.

Ms. Sheila Fraser: I take this extremely seriously.

Mr. John Bryden: All right. We all do. Thank you, Madam Fraser.

The Chair: Thank you, Mr. Bryden.

I have some questions for Ms. O'Hara. As I said at the beginning, I was a little concerned about the deck you brought to us, which was on the hoops and process the government goes through, but what I really wanted was in essence the kind of document that a cabinet committee or the cabinet needs in order to set up a new program.

For example, if they're going to set up a new program, do they require...? There must be some kind of policy, a check box to say we need this, this, and this. What is normally required? Do you require, for example, a business case, a political analysis, a business plan, a strategic plan, a budget, a multi-year budget? What kinds of checks do you go through to gather the information you want to present to cabinet to say there's a recommendation by a particular minister that a new program be instituted?

I want to see that. I also want to see what happened with the sponsorship program, which was a program but wasn't a program. The cabinet seemed to be involved, but it wasn't a program; therefore, it didn't need to have documentation. But it seems to be that some authority was coming out of cabinet and we don't know what. Hopefully the documentation will provide some answers to that, and then we may actually have to call some ministers if we find out that a lot of it was done verbally. We may have to ask the ministers specifically to tell us what they recall.

But can you provide that? Can you give us a summary, Ms. O'Hara, or do you need to provide it at a later date?

Â (1250)

Ms. Kathy O'Hara: It's probably better if I provide you the actual documentation that indicates what is required in a memorandum to cabinet when a minister is bringing forward a program proposal. I would assume that Treasury Board has similar guidelines for what's required for a Treasury Board submission. We can provide both of those.

The Chair: It's important that the nation understand that if they're going to be asking for a large number of taxpayers' dollars, in this case $250 million of taxpayers' funds, there should be a formal process of we need this, we need that, we need something else, and a full analysis. There must be a policy manual on that, and you're going to provide that to us.

Ms. Kathy O'Hara: Yes.

The Chair: I'd appreciate that.

We also need to know about the discussions, and we've asked for those documents.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: On a point of order, Mr. Chairman. The fact is that many motions have been put forward by the opposition. Could you remind us of them, so that we have a clear idea of everything that has been requested?

[English]

The Chair: We have transcripts that do that quite well, Mr. Desrochers. I'm not sure I would rely on my own memory to be able to do that. Because of the nature, those who have the responsibility for producing the transcripts can ensure that the transcripts of the public accounts committee get priority over others so that they can be produced, hopefully, by the next day. Is that achievable, Mr. Clerk? There aren't that many committees sitting at the moment. Perhaps when the clerk reviews the blues, he can jot down these motions. He has to because he has to follow up. Perhaps he can advise all the members at the same time.

We normally have some closing remarks by the Auditor General.

Ms. Sheila Fraser: Mr. Chair, this completes the review of an audit. But I suspect that this is not the end of our appearances before this committee. So I would thank the committee for their interest, and I look forward to future hearings.

The Chair: Thank you.

Mr. Toews.

Mr. Vic Toews: Just on that point, Mr. Chair, the auditor is coming back.

The Chair: The auditor is coming back, have no fear.

The public accounts committee audits the auditor sometimes.

To the Treasury Board and Public Works, who have not been called, we expect you to come forward on Tuesday.

The meeting is adjourned.